What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-03 compared with 2022-11-07 · 158 added, 286 removed, 250 unchanged (64% of the section changed)

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All references to annualized generally accepted accounting principles (“GAAP”) rent are rents that each tenant pays in accordance with the terms of its respective lease reported evenly over the non-cancelable term of the lease.

As of November 7, 2022:

As of May 3, 2023:

• we owned 138 properties totaling 17.3 million square feet of rentable space, located in 27 states;

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Business Environment

Since the onset of the COVID-19 pandemic in March 2020, authorities throughout the United States and the world have implemented widespread measures attempting to contain its spread and impact, such as travel restrictions, quarantines, the promotion of social distancing and limitations on business activity.

Generally, year to date 2022 has seen the lifting of most restrictive measures that were implemented during 2020 and 2021.

These measures, and the pandemic generally, have caused significant national and global economic disruption, including disrupted business operations, including those of some of our tenants, and continue to have an adverse effect on demand for office space in the short term, including office utilization rates.

Economic recovery in the United States and various other regions of the world has continued, but may be threatened by the further adverse effects of COVID-19 and more significantly by continuing inflationary conditions, rising interest rates and the impact of ongoing or escalated geopolitical tensions and conflict.

The demand for industrial space has remained strong due to the continuing growth of e-commerce and reshoring of manufacturing operations, but appears to be only partially counterbalancing the adverse effects of COVID-19 on the commercial real estate industry.

However, product delivery delays caused by supply chain disruption, and the apparent national labor shortage, have resulted in inflation and higher costs for both industrial and office construction projects.

Industrial absorption increased on a nominal basis in 2021, compared to 2020, according to research reports, and continues to be strong through the first quarter of 2022, averaging approximately 130 million square feet of absorption each quarter.

Construction activity for the industrial sector remains strong, as year-end 2021 estimates have approximately 500 million square feet of properties under construction with over 30% of that space pre-leased.

Research reports also reflect that the office sector experienced negative absorption for each of the previous four quarters.

Office space available for sublease has increased and is placing downward pressure on office rental rates.

Interest rates remain volatile in response to competing concerns about inflationary pressures and the spread and effect of COVID-19 variants, coupled with the threat of a near-term recession.

The yield on the 10-year US Treasury Note has increased significantly during the first half of 2022 to approximately 3%, which adversely affects interest rates on long-term financing.

After completing the 12th year of the current cycle, some national research firms are estimating that both pricing and investment sales volume would be peaking and the national economy would be slowing in the near term.

Global recessionary conditions may occur over the next 24 months caused in part by inflation, the ongoing COVID-19 pandemic, and geopolitical conditions, although the actual timeline, impact and duration are unknown.

From a more macro-economic perspective, there continue to be significant uncertainties associated with the current economic environment and increasing probability of near-term recession.

The demand for industrial space has continued, largely due to the continuing growth of e-commerce and recent trend of manufacturing onshoring, which appears to have partially rebounded from the adverse effects of COVID-19 on the commercial real estate industry in 2020, 2021, and early 2022.

However, the increased cost of construction materials and product delivery delays caused by supply chain disruptions and related inventory management issues, and the apparent labor shortage we are facing nationally, have resulted in inflation and higher costs for both industrial and office construction projects.

Further, a tightening of available financing, due primarily to higher interest rates, has caused a slowdown in new construction starts throughout the fourth quarter of 2022, as compared to the record breaking third quarter of 2022, which should lead to lower deliveries into 2024.

The industrial market recorded its strongest year in 2021, surpassing 500 million square feet in net absorption and continued to remain strong throughout 2022, absorbing over 350 million square feet.

Construction activity for the industrial sector saw record amounts of groundbreakings in the third quarter of 2022, bringing the total amount under development to over 600 million square feet.

Industrial market fundamentals continued to tighten, bringing the vacancy rate to an all-time low of 3.3% at the end of the third quarter of 2022.

The office sector struggled less in 2022 than 2021, posting negative net absorption of 37 million square feet in 2022 compared to negative net absorption of 59 million square feet in 2021.

Tenants continue to put their space up for sublease to reduce costs, with year-end sublease vacancy totaling 136 million square feet.

Industry expectations are for an increase in office vacancy rates as leases roll over the next few years, which will lead to downsizing and lower renewal rates for spaces currently offered for sublease.

Coupled with tighter credit conditions, we expect to see continued softening of office fundamentals over the next 36 months.

Interest rates remain volatile in response to competing concerns about inflationary pressures, and interest rate increases by the Federal Reserve are expected to continue.

The yield on the 10-year U.S.

Treasury Note has increased significantly since the beginning of 2022 and finished 2022 at 3.88%.

Global recessionary conditions may occur over the next 6-24 months as a direct result of central bank intervention to curb inflation.

We collected 100% of all outstanding cash rents for calendar year 2022.

In the past, we have received rent modification requests from our tenants, and we may receive additional requests in the future.

However, we are unable to quantify the outcomes of the negotiation of relief packages, the success of any tenant’s financial prospects or the amount of relief requests that we will ultimately receive or grant.

We believe that we have a diverse tenant base, and specifically, we do not have significant exposure to tenants in the retail, hospitality, airlines, and oil and gas industries.

Additionally, our properties are located across 27 states, which we believe mitigates our exposure to economic issues, including regulations or laws implemented by state and local governments, in any one geographic market or area.

We believe we currently have adequate liquidity in the near term, and we believe the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial growth strategy.

We are in compliance with all of our debt covenants as of March 31, 2023.

We amended our Credit Facility in 2019 to increase our borrowing capacity and extend its maturity date.

In addition, on August 18, 2022, we added a new $150.0 million term loan component.

We have had numerous conversations with lenders, and credit continues to be available for well-capitalized borrowers.

We continue to monitor our portfolio and intend to maintain a reasonably conservative liquidity position for the foreseeable future.

Other Business Environment Considerations

The short-term and long-term economic implications are unknown, in relation to recent world events, including inflation, supply chain disruptions, labor shortages, rapidly rising interest rates, long term impact of the COVID-19 pandemic and associated government response in addition to any subsequent shift in policy, geopolitical conditions, new regulations or the long-term impact of social and infrastructure spending and tax reform in the U.S.

The short-term and long-term economic implications are unknown, in relation to recent world events, including inflation, supply chain disruptions and related inventory management issues, labor shortages, rising interest rates, public health emergencies such as the COVID-19 pandemic and associated governmental responses in addition to any subsequent shift in policy, geopolitical conditions, new regulations or the long-term impact of social and infrastructure spending and tax reform in the U.S.

Finally, the continuing uncertainty surrounding the ability of the federal government to address its fiscal condition in both the near and long term, as well as other geopolitical issues relating to the global economic slowdown has increased domestic and global instability.

These developments could cause interest rates and borrowing costs to be volatile, which may adversely affect our ability to access both the equity and debt markets and could have an adverse impact on our tenants as well.

The majority of our variable rate debt is based upon the Secured Overnight Financing Rate (“SOFR”), although we have some variable rate mortgages based on the one-month London Interbank Offered Rate (“LIBOR”), which include fallback language providing a mechanism for the parties to negotiate a new reference interest rate in the event that LIBOR ceases to exist.

LIBOR is currently anticipated to be phased out by June 2023 and is expected to transition to SOFR, which incorporates repo data collected from multiple data sets.

The intent is to adjust the SOFR to minimize differences between the interest that a borrower would be paying using LIBOR versus what it will be paying using SOFR.

We are currently monitoring the transition as SOFR becomes the standard benchmark for variable rate debt.

During the transition further changes or reforms to the determination of supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based debt, or the value of our portfolio of LIBOR-indexed, floating-rate debt.

The London Inter-bank Offered Rate (“LIBOR”) is anticipated to be phased out by June 2023, and LIBOR is being transitioned to a new standard rate, the Secured Overnight Financing Rate (“SOFR”).

During 2022 and the first quarter of 2023, we began transitioning our variable rate debt to SOFR, and, at March 31, 2023 , all of our variable rate debt was based upon SOFR, with the exception of $20.7 million of hedged variable rate mortgages still based on LIBOR, which we are working to transition to SOFR prior to the mid-2023 phase out of LIBOR.

We continue to focus on re-leasing vacant space, renewing upcoming lease expirations, re-financing upcoming loan maturities, and acquiring additional properties with associated long-term leases.

Currently, we have seven partially vacant buildings and three fully vacant buildings.

There are no outstanding COVID-19 related rent modifications in place.

Our available vacant space at September 30, 2022 represents 3.1% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $3.8 million .

Currently, we have five partially vacant buildings and four fully vacant buildings.

Our available vacant space at March 31, 2023 represents 4.1% of our total square footage and the annual

carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $4.3 million .

We continue to actively seek new tenants for these properties.

We believe our lease expiration schedule for the remainder of 2 022 is quite manageable, as it equates to only 2.7% of our lease revenue at September 30, 2022 .

We believe our lease expiration schedule for the remainder of 2023 is quite manageable, as it equates to only 3.3% of our lease revenue at March 31, 2023.

Property acquisitions since the beginning of 2020 have totaled $343.2 million and all transactions were industrial in nature, with a weighted average lease term of 13.2 years and a current weighted average lease term today of 11.1 years.

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We refer to the Revolver, Term Loan A, Term Loan B and Term Loan C collectively herein as the Credit Facility.

While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders, in addition to the collateralized mortgage backed securities market (“CMBS”), to issue mortgages to finance our real estate activities.

While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders to issue mortgages to finance our real estate activities.

Recent Developments

Sale Activity

During the nine months ended September 30, 2022 we continued to execute our capital recycling program, whereby we sold properties outside of our core markets and redeployed proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt.

We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available, and use the sales proceeds to acquire properties in our target, secondary growth markets, or pay down outstanding debt.

During the nine months ended September 30, 2022, we sold three non-core properties, located in Jupiter, Florida, Parsippany, New Jersey, and Boston Heights, Ohio.

Aggregate Square Footage Sold Aggregate Sales Price Aggregate Sales Costs Aggregate Impairment Charge for the Nine Months Ended September 30, 2022 Aggregate Gain on Sale of Real Estate, net

145,111 $ 28,000 $ 1,153 $ 1,374 $ 8,902

On October 28, 2022, we sold one of our properties in Columbus, Ohio for $2.3 million, resulting in a gain on sale, net, of $0.02 million.

Acquisition Activity

During the nine months ended September 30, 2022, we acquired 11 industrial properties located in Wilkesboro, North Carolina, Oklahoma City, Oklahoma, Cleveland, Ohio, Fort Payne, Alabama, Wilmington, North Carolina, Bridgeton, New Jersey, Vineland, New Jersey, and Jacksonville, Florida which are summarized below (dollars in thousands):

Aggregate Square Footage Weighted Average Remaining Lease Term at Time of Acquisition Aggregate Purchase Price Aggregate Capitalized Acquisition Expenses Aggregate Annualized GAAP Fixed Lease Payments Aggregate Debt Issued

1,105,006 13.8 years $ 98,276 $ 776 $ 6,722 $ 41,313

On October 26, 2022, we purchased a 68,674 square foot industrial property in Denver, Colorado for $12.0 million.

This property is fully leased to 1.00 tenant on a 20.0 year lease.

On April 14, 2023, we purchased a 76,089 square foot industrial property in Riverdale, Illinois for $5.3 million.

This property is fully leased to one tenant on a 20.0-year lease.

Leasing Activity

During and subsequent to the nine months ended September 30, 2022, we executed nine leases, which are summarized below (dollars in thousands):

During and subsequent to the three months ended March 31, 2023, we executed six leases, which are summarized below (dollars in thousands):

Aggregate Square Footage Weighted Average Remaining Lease Term Aggregate Annualized GAAP Fixed Lease Payments Aggregate Tenant Improvement Aggregate Leasing Commissions

717,513 7.3 years $ 3,492 $ 45 $ 15

On October 12, 2022, we executed a lease amendment at our Egg Harbor, New Jersey property to extend the lease term an additional 2.0 years.

On October 31, 2022, we executed a lease for 20,682 square feet of vacant space in our Mason, Ohio property for 7.3 years, bringing the property to full occupancy.

During the nine months ended September 30, 2022, we had two lease terminations, which are summarized below (dollars in thousands):

Aggregate Square Footage Reduced Aggregate Accelerated Rent Aggregate Accelerated Rent Recognized through September 30, 2022

216,095 $ 5,888 $ 5,175

Financing Activity

During the nine months ended September 30, 2022, we repaid 13 mortgages, collateralized by 27 properties, which are summarized in the table below (dollars in thousands):

Aggregate Fixed Rate Debt Repaid Weighted Average Interest Rate on Fixed Rate Debt Repaid

$ 97,843 4.75 %

Aggregate Variable Rate Debt Repaid Weighted Average Interest Rate on Variable Rate Debt Repaid

$ 30,336 LIBOR/SOFR + 2.50% (1)

(1) As of September 30, 2022, Secured Overnight Financing Rate (“SOFR”) was approximately 2.98%.

During the nine months ended September 30, 2022, we issued five mortgages, collateralized by 10 properties, which are summarized in the table below (dollars in thousands):

Aggregate Fixed Rate Debt Issued Weighted Average Interest Rate on Fixed Rate Debt

$ 41,313 (1) 4.39 %

(1) We issued $10.0 million of fixed rate debt in connection with the two-property portfolio acquired on May 4, 2022 with a maturity date of May 4, 2027.

The interest rate is fixed at 4.00%.

We issued $10.0 million of fixed rate debt with a maturity date of June 1, 2032, in connection with the three-property acquisition on May 12, 2022.

The interest rate is fixed at 3.40%.

We issued $16.9 million of fixed rate debt with a maturity date of August 1, 2027, in connection with the two-property acquisition on August 5, 2022.

The interest rate is fixed at 4.95%.

We issued $4.4 million of swapped to fixed rate debt with a maturity date of September 16, 2029, in connection with the property acquisition on September 16, 2022.

The interest rate is swapped to a fixed rate of 5.39%.

Variable Rate Debt Issued Interest Rate on Variable Rate Debt

$ 15,000 (1) SOFR + 2.50%

(1) We issued $15.0 million of variable rate debt in connection with refinancing mortgage debt at two properties with a new maturity date of April 27, 2024 and interest rate of SOFR plus 2.50%.

On October 26, 2022, we issued $6.6 million of swapped to fixed rate debt in connection with property acquisition on the same date, with a term of 6.9 years and interest rate swapped to 5.90%.

During the nine months ended September 30, 2022, we extended the maturity date of three mortgages, collateralized by five properties, which is summarized in the table below (dollars in thousands):

Aggregate Fixed Rate Debt Extended Weighted Average Interest Rate on Fixed Rate Debt Extended Extension Term

$ 14,633 5.41 % 1.0 year

Variable Rate Debt Extended Interest Rate on Variable Rate Debt Extended Extension Term

$ 7,059 LIBOR + 2.75% 1.0 year

On August 18, 2022, we amended, extended and upsized our Credit Facility, increasing our Revolver from $100.0 million to $120.0 million (and its term to August 2026), adding the new $140.0 million Term Loan C, decreasing the principal balance of Term Loan B to $60.0 million and extending the maturity date of Term Loan A to August 2027.

Term Loan C has a maturity date of February 18, 2028 and a SOFR spread ranging from 125 to 195 basis points, depending on our leverage.

On September 27, 2022 we further increased the Revolver to $125.0 million and Term Loan C to $150.0 million, as permitted under the terms of the Credit Facility.

We entered into multiple interest rate swap agreements on Term Loan C, which swap the interest rate to fixed rates from 3.15% to 3.75%.

We incurred fees of approximately $4.2 million in connection with extending and upsizing our Credit Facility.

As of September 30, 2022, there was $150.0 million outstanding under Term Loan C, and we used all net proceeds to repay all outstanding borrowings on the Revolver, pay off mortgage debt, and fund acquisitions.

The Credit Facility’s current bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, United Bank, First Financial Bank, and S&T Bank.

On April 6, 2023, we repaid $2.7 million of fixed rate debt, collateralized by one property, at an interest rate of 4.16%.

Equity Activities

Common Stock ATM Program

During the nine months ended September 30, 2022, we sold 2.0 million shares of common stock, raising $40.6 million in net proceeds under our At-the-Market Equity Offering Sales Agreements (the “Common Stock Sales Agreement”) with sales agents Robert W.

Incorporated, Goldman Sachs & Co.

LLC, Stifel, Nicolaus & Company, Incorporated, BTIG, LLC, and Fifth Third Securities, Inc.

Common Stock ATM Programs

During the three months ended March 31, 2023, we sold 0.2 million shares of common stock, raising $4.0 million in net proceeds under our At-the-Market Equity Offering Sales Agreement (the “Common Stock Sales Agreement”) with sales agents Robert W.

Incorporated (“Baird”), Goldman Sachs & Co.

LLC (“Goldman Sachs”), Stifel, Nicolaus & Company, Incorporated (“Stifel”), BTIG, LLC, and Fifth Third Securities, Inc.

(“Fifth Third”).

On February 22, 2022, we entered into Amendment No.

1 to our Common Stock Sales Agreement.

The amendment permits shares of common stock to be issued pursuant to the Common Stock Sales Agreement under the Company’s Registration Statement on Form S-3 (File No.

333-236143) and future registration statements on Form S-3 (the “Common Stock ATM Program”).

As of September 30, 2022, we had remaining capacity to sell up to $26.5 million of common stock pursuant to the Common Stock ATM Program under the 2020 Universal Shelf (as defined below).

Universal Shelf Registration Statement

On January 29, 2020, we filed a universal registration statement on Form S-3, File No.

333-236143 (the “2020 Universal Shelf”).

The 2020 Universal Shelf was declared effective on February 11, 2020.

The 2020 Universal Shelf allows us to issue up to $800.0 million of securities.

Of the $800.0 million of available capacity under our 2020 Universal Shelf, approximately $636.5 million is reserved for the sale of our 6.00% Series F Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series F Preferred Stock”) and $63.0 million is reserved for our Common Stock ATM Program.

As of September 30, 2022, we had the ability to issue up to $648.6 million of securities under the 2020 Universal Shelf.

Series F Preferred Stock

1 to our Common Stock Sales Agreement, dated December 3, 2019 (together, the “Prior Common Stock Sales Agreement”).

The amendment permitted shares of common stock to be issued pursuant to the Prior Common Stock Sales Agreement under the Company’s Registration Statement on Form S-3 (File No.

333-236143) (the “2020 Registration Statement”), and future registration statements on Form S-3 (the “Prior Common Stock ATM Program”).

We terminated the Prior Common Stock Sales Agreement effective as of February 10, 2023 in connection with the expiration of the 2020 Registration Statement on February 11, 2023.

On March 3, 2023, we entered into an At-the-Market Equity Offering Sales Agreement (the “2023 Common Stock Sales Agreement”), with BofA Securities, Inc.

(“BofA”), Goldman Sachs, Baird, KeyBanc Capital Markets Inc.

(“KeyBanc”), and Fifth Third (collectively the “Common Stock Sales Agents”).

In connection with the 2023 Common Stock Sales Agreement, we filed prospectuses dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, with the SEC, for the offer and sale of an aggregate offering amount of $250.0 million of common stock.

During the three months ended March 31, 2023, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

Series E Preferred ATM Program

During the three months ended March 31, 2023, we had an At-the-Market Equity Offering Sales Agreement (the “Series E Preferred Stock Sales Agreement”) with sales agents Baird, Goldman Sachs, Stifel, Fifth Third, and U.S.

Bancorp Investments, Inc., pursuant to which we could, from time to time, offer to sell shares of our Series E Preferred Stock, in an aggregate offering price of up to $100.0 million.

We did not sell any shares of our Series E Preferred Stock pursuant to the Series E Preferred Stock Sales Agreement during the three months ended March 31, 2023.

We terminated the Series E Preferred Stock Sales Agreement effective as of February 10, 2023.

Universal Shelf Registration Statements

On January 29, 2020, we filed the 2020 Registration Statement.

The 2020 Registration Statement was declared effective on February 11, 2020.

The 2020 Registration Statement allowed us to issue up to $800.0 million of securities.

Of the $800.0 million of available capacity under our 2020 Registration Statement, approximately $636.5 million was reserved for the sale of our Series F Preferred Stock, and $63.0 million was reserved for our Prior Common Stock ATM Program.

The 2020 Registration Statement expired on February 11, 2023.

On November 23, 2022, we filed an automatic registration statement on Form S-3 (File No.

333-268549) (the “2022 Registration Statement”).

There is no limit on the aggregate amount of the securities that we may offer pursuant to the 2022 Registration Statement.

Series F Preferred Stock Continuous Offering

On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary (i) setting forth the rights, preferences and terms of the Series F Preferred Stock and (ii) reclassifying and designating 26,000,000 shares of our authorized and unissued shares of common stock as shares of Series F Preferred Stock.

The reclassification decreased the number of shares classified as common stock from 86,290,000 shares immediately prior to the reclassification to 60,290,000 shares immediately after the reclassification.

We sold 164,400 shares of our Series F Preferred Stock, raising $3.7 million in net proceeds during the three and nine months ended September 30, 2022.

As of September 30, 2022, we had remaining capacity to sell up to $621.6 million of Series F Preferred Stock.

We sold 22,256 shares of our Series F Preferred Stock, raising $0.5 million in net proceeds during the three months ended March 31, 2023.

Non-controlling Interest in Operating Partnership

As of September 30, 2022 and December 31, 2021, we owned approximately 99.0% and 99.3%, re spectively, of the outstanding operating partnership units in the Operating Partnership (“OP Units”).

On September 20, 2022 , we issued 134,474 OP Units as partial consideration to acquire our 49,375 square foot property located in Fort Payne, Alabama for $5.6 million .

During the nine months ended September 30, 2021, we redeemed 246,039 OP Units for an equivalent amount of common stock.

As of September 30, 2022 and December 31, 2021, there were 391,468 and 256,994 outstanding OP Units held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”), respectively.

As of March 31, 2023 and December 31, 2022, we owned approximately 99.0% and 99.0%, re spectively, of the outstanding operating partnership units in the Operating Partnership (“OP Units”).

As of March 31, 2023 and December 31, 2022, there were 391,468 and 391,468 outstanding OP Units held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”), respectively.

Director Activity

Terry Lee Brubaker resigned from our Board of Directors, effective April 14, 2023.

Brubaker’s resignation was not a result of any disagreement with the Company on any matters relating to the Company’s operations, policies, or practices.

Diversity of Our Portfolio

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By diversifying our portfolio, our Adviser intends to reduce the adverse effect on our portfolio of a single under-performing investment or a downturn in any particular industry or geographic market.

For the nine months ended September 30, 2022, our largest tenant comprised only 3.9% of total lease revenue.

The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):

For the three months ended September 30, For the nine months ended September 30,

2022 2021 2022 2021

Industry Classification Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue

Telecommunications $ 5,859 14.7 $ 5,815 16.7 $ 17,216 15.6 $ 16,978 16.8

For the three months ended March 31, 2023, our largest tenant comprised only 4.3% of total lease revenue.

The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three months ended March 31, 2023 and 2022 (dollars in thousands):

For the three months ended March 31,

Industry Classification Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue

Automotive $ 5,140 14.2 $ 4,636 13.0

Telecommunications 4,940 13.5 5,609 15.8

Diversified/Conglomerate Services 4,529 12.4 4,537 12.8

Healthcare 3,348 9.2 3,984 11.2

Banking 5,726 14.4 2,597 7.6 10,941 9.8 7,713 7.5

Diversified/Conglomerate Manufacturing 2,636 7.2 2,626 7.4

Buildings and Real Estate 2,317 5.8 2,331 6.8 6,976 6.2 6,968 6.8

Personal, Food & Miscellaneous Services 2,347 6.4 1,548 4.4

Beverage, Food & Tobacco 1,430 3.6 1,497 4.4 4,216 3.8 4,450 4.3

Banking 2,336 6.4 2,608 7.3

Buildings and Real Estate 2,304 6.3 2,338 6.6

Personal & Non-Durable Consumer Products 1,882 5.1 859 2.4

Chemicals, Plastics & Rubber 1,208 3.0 1,208 3.5 3,619 3.2 3,499 3.4

Beverage, Food & Tobacco 1,402 3.8 1,381 3.9

Machinery 1,369 3.7 976 2.7

Chemicals, Plastics & Rubber 1,365 3.7 1,205 3.4

Containers, Packaging & Glass 983 2.7 869 2.4

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Childcare 573 1.6 573 1.6

Electronics 272 0.7 181 0.5

Printing & Publishing 229 0.6 229 0.6

Education 203 0.6 204 0.6

Electronics 185 0.5 166 0.5 546 0.5 796 0.8

Home & Office Furnishings 123 0.3 123 0.5

Total $ 36,554 100.0 % $ 35,531 100.0 %

The tables below reflect the breakdown of total lease revenue by state for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):

State Lease Revenue for the three months ended September 30, 2022 Percentage of Lease Revenue Number of Leases for the three months ended September 30, 2022 Lease Revenue for the three months ended September 30, 2021 Percentage of Lease Revenue Number of Leases for the three months ended September 30, 2021

The tables below reflect the breakdown of total lease revenue by state for the three months ended March 31, 2023 and 2022 (dollars in thousands):

State Lease Revenue for the three months ended March 31, 2023 Percentage of Lease Revenue Number of Leases for the three months ended March 31, 2023 Lease Revenue for the three months ended March 31, 2022 Percentage of Lease Revenue Number of Leases for the three months ended March 31, 2022

Texas $ 4,781 13.1 % 13 $ 5,167 14.5 % 14

New Jersey 4,271 10.7 4 756 2.2 4

Florida 4,117 11.3 9 4,236 11.9 9

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Alabama 2,236 6.1 7 1,556 4.4 5

South Carolina 1,719 4.3 2 1,408 4.1 2

Colorado 1,870 5.1 4 849 2.4 3

Michigan 1,599 4.4 6 1,609 4.5 6

Minnesota 1,171 3.2 7 1,007 2.8 6

All Other States 8,157 22.3 45 8,994 25.4 45

Total $ 36,554 100.0 % 137 $ 35,531 100.0 % 132

State Lease Revenue for the nine months ended September 30, 2022 % of Lease Revenue Number of Leases for the nine months ended September 30, 2022 Lease Revenue for the nine months ended September 30, 2021 % of Lease Revenue Number of Leases for the nine months ended September 30, 2021

Texas $ 15,971 14.3 % 15 $ 11,232 11.0 % 15

Florida 12,242 11.0 9 12,614 12.3 10

Pennsylvania 11,145 10.0 10 11,409 11.1 10

Ohio 10,517 9.4 15 11,284 11.0 15

Georgia 8,749 7.8 10 8,167 8.0 9

North Carolina 6,354 5.7 10 5,084 5.0 7

New Jersey 5,772 5.2 4 2,259 2.2 4

Alabama 5,254 4.7 7 4,911 4.8 5

Michigan 4,825 4.3 6 4,765 4.7 6

South Carolina 4,530 4.2 2 4,162 4.1 2

All Other States 26,405 23.4 48 26,494 25.8 48

$ 111,764 100.0 % 136 $ 102,381 100.0 % 131

Our Adviser and Administrator

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Gladstone also serves as the chairman and chief executive officer of both our Adviser and Administrator, as well as president and chief investment officer of our Adviser.

Terry Lee Brubaker, our vice chairman and chief operating officer, is also the vice chairman and chief operating officer of our Adviser and Administrator and assistant secretary of our Adviser.

Terry Lee Brubaker, our chief operating officer, is also the vice chairman and chief operating officer of our Adviser and Administrator and assistant secretary of our Adviser.

Arthur “Buzz” Cooper, our president, also serves as executive vice president of commercial and industrial real estate of our Adviser.

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Cooper, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital Corporation and Gladstone Investment Corporation.

In addition, with the exception of Mr.

Cooper and Mr.

Gerson, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone

Land Corporation.

Cooper and Mr.

Gerson do not put forth any material efforts in assisting affiliated companies.

In addition, with the exception of Messrs.

Cooper and Gerson, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone Land Corporation.

Cooper and Gerson do not put forth any material efforts in assisting affiliated companies.

In the future, our Adviser may provide investment advisory services to other companies, both public and private.

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Core FFO (as defined in the Advisory Agreement) is GAAP net (loss) income (attributable) available to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net (loss) income (attributable) available to common stockholders for the period, and one-time events pursuant to changes in GAAP.

The Incentive Fee is used by the Adviser primarily for performance-based compensation related to certain of its employees.

On January 10, 2023, we amended and restated the Sixth Amended Advisory Agreement by entering into the Seventh Amended Advisory Agreement, which was approved unanimously by our board of directors, including specifically, our independent directors.

The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ending March 31, 2023 and June 30, 2023.

The calculation of the other fees remains unchanged.

Capital Gain Fee

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At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0% of such amount.

No capital gain fee was recognized during the three and nine months ended September 30, 2022 or 2021.

No capital gain fee was recognized during the three months ended March 31, 2023 or 2022.

Termination Fee

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A summary of all of our significant accounting policies is provided in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022, filed by us with the U.S.

Securities and Exchange Commission (the “SEC”) on February 15, 2022 (our “2021 Form 10-K”).

There were no material changes to our critical accounting policies or estimates during the nine months ended September 30, 2022.

Securities and

Exchange Commission (the “SEC”) on February 22, 2023 (our “2022 Form 10-K”).

There were no material changes to our critical accounting policies or estimates during the three months ended March 31, 2023.

Results of Operations

The weighted average yield on our total portfolio, which was 7.8% and 7.9% as of September 30, 2022 and 2021, respectively, is calculated by taking the annualized straight-line rents plus operating expense recoveries, reflected as lease revenue on our condensed consolidated statements of operations and other comprehensive income, less property operating expenses, of each acquisition since inception, as a percentage of the acquisition cost plus subsequent capital improvements.

The weighted average yield on our total portfolio, which was 7.9% and 7.4% as of March 31, 2023 and 2022, respectively, is calculated by taking the annualized straight-line rents plus operating expense recoveries, reflected as lease revenue on our condensed consolidated statements of operations and other comprehensive income, less property operating expenses, of each acquisition since inception, as a percentage of the acquisition cost plus subsequent capital improvements.

The weighted average yield does not account for the interest expense incurred on the mortgages placed on our properties.

A comparison of our operating results for the three and nine months ended September 30, 2022 and 2021 is below (dollars in thousands, except per share amounts) :

For the three months ended September 30,

A comparison of our operating results for the three months ended March 31, 2023 and 2022 is below (dollars in thousands, except per share amounts) :

For the three months ended March 31,

2023 2022 $ Change % Change

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General and administrative 1,063 997 66 6.6 %

Impairment charge 10,718 — 10,718 100.0 %

Total operating expenses $ 25,434 $ 25,658 $ (224) (0.9) %

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Interest expense $ (8,828) $ (6,586) $ (2,242) 34.0 %

Gain on sale of real estate, net 8,902 — 8,902 100.0 %

Other income 105 104 1 1.0 %

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Net income $ 2,397 $ 3,391 $ (994) (29.3) %

Distributions attributable to Series D, E, F, and G preferred stock (2,987) (2,868) (119) 4.1 %

Distributions attributable to Series E, F, and G preferred stock (3,022) (2,946) (76) 2.6 %

Distributions attributable to senior common stock (109) (116) 7 (6.0) %

Loss on extinguishment of Series F preferred stock (5) (5) — — %

Gain on repurchase of Series G preferred stock 3 — 3 100.0 %

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders $ (736) $ 324 $ (1,060) (327.2) %

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$ (0.02) (5.1) %

FFO per weighted average share of common stock and Non-controlling OP Units - diluted, as adjusted for comparability (1) $ 0.43 $ 0.44

$ (0.01) (2.3) %

(1) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO and FFO adjusted for comparability.

For the nine months ended September 30,

2022 2021 $ Change % Change

Operating revenues

Lease revenue $ 111,764 $ 102,381 $ 9,383 9.2 %

Total operating revenues $ 111,764 $ 102,381 $ 9,383 9.2 %

Operating expenses

Depreciation and amortization $ 45,672 $ 45,661 $ 11 — %

Property operating expenses 20,118 20,278 (160) (0.8) %

Base management fee 4,727 4,369 358 8.2 %

Incentive fee 4,193 3,540 653 18.4 %

Administration fee 1,342 1,016 326 32.1 %

General and administrative 2,788 2,540 248 9.8 %

Impairment charge 12,092 — 12,092 100.0 %

Total operating expense before incentive fee waiver $ 90,932 $ 77,404 $ 13,528 17.5 %

Incentive fee waiver — (16) 16 (100.0) %

Total operating expenses $ 90,932 $ 77,388 $ 13,544 17.5 %

Other (expense) income

Interest expense $ (22,813) $ (20,338) $ (2,475) 12.2 %

Gain (loss) on sale of real estate, net 8,902 (882) 9,784 (1,109.3) %

Other income 538 2,884 (2,346) (81.3) %

Total other expense, net $ (13,373) $ (18,336) $ 4,963 (27.1) %

Net income $ 7,459 $ 6,657 $ 802 12.0 %

Distributions attributable to Series D, E, F, and G preferred stock (8,900) (8,571) (329) 3.8 %

Series D preferred stock offering costs write off — (2,141) 2,141 (100.0) %

Distributions attributable to senior common stock (344) (534) 190 (35.6) %

Loss on extinguishment of Series F preferred stock (5) — (5) 100.0 %

Net loss attributable to common stockholders and Non-controlling OP Unitholders $ (1,790) $ (4,589) $ 2,799 (61.0) %

Net loss attributable to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ (0.05) $ (0.13) $ 0.08 (61.5) %

FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 47,072 $ 41,954 $ 5,118 12.2 %

FFO available to common stockholders and Non-controlling OP Unitholders - diluted (1) $ 47,416 $ 42,488 $ 4,928 11.6 %

FFO available to common stockholders and Non-controlling OP Unitholders - diluted, as adjusted for comparability (1) $ 47,416 $ 44,629 $ 2,787 6.2 %

FFO per weighted average share of common stock and Non-controlling OP Unit - basic (1) $ 1.21 $ 1.15 $ 0.06 5.2 %

FFO per weighted average share of common stock and Non-controlling OP Unit - diluted (1) $ 1.21 $ 1.14

FFO per weighted average share of common stock and Non-controlling OP Unit - diluted, as adjusted for comparability (1) $ 1.21 $ 1.20 $ 0.01 0.8 %

(1) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO and FFO adjusted for comparability.

(1) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO.

Same Store Analysis

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Operating Revenues

For the three months ended September 30,

(Dollars in Thousands)

Lease Revenues 2022 2021 $ Change % Change

Same Store Properties $ 28,706 $ 27,952 $ 754 2.7 %

Acquired & Disposed Properties 6,858 2,286 4,572 200.0 %

Properties with Vacancy 4,270 4,096 174 4.2 %

$ 39,834 $ 34,334 $ 5,500 16.0 %

For the nine months ended September 30,

For the three months ended March 31,

(Dollars in Thousands)

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Lease revenues consist of rental income and operating expense recoveries earned from our tenants.

Lease revenues from same store properties increased for the three and nine months ended September 30, 2022, primarily due to income recognized from tenant funded improvement projects, where our tenants used their capital to improve our buildings, partially offset by a decrease in variable lease payments due to a decrease in property operating expenses, and a corresponding decrease in recovery revenue from property operating expenses.

Lease revenues increased for acquired and disposed of properties for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, primarily due to accelerated rent from a lease termination relating to one property we sold, coupled with us acquiring 11 industrial properties during the nine months ended September 30, 2022, partially offset by a loss of revenues from three properties sold during the same period.

Lease revenues increased for our properties with vacancy for the three and nine months ended September 30, 2022 due to vacant space being leased.

Lease revenues from same store properties increased for the three months ended March 31, 2023, primarily due to income recognized from tenant funded improvement projects, where our tenants used their capital to improve our buildings, coupled with an increase in variable lease payments due to an increase in property operating expenses, and a corresponding increase in recovery revenue from property operating expenses.

Lease revenues increased for acquired and disposed of properties for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily because we acquired nine properties subsequent to March 31, 2022, partially offset by a decrease in variable lease payments due to a decrease in property operating expenses.

Lease revenues decreased for our properties with vacancy for the three months ended March 31, 2023 due to accelerated rent recognized during the three months ended March 31, 2022 from two tenants that terminated their leases early.

Operating Expenses

Depreciation and amortization expense increased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, due to an increase in depreciation and amortization expense on the 11 industrial properties acquired during the nine months ended September 30, 2022, partially offset by a decrease in depreciation and amortization expense on the three properties sold during the same period.

For the three months ended September 30,

(Dollars in Thousands)

Property Operating Expenses 2022 2021 $ Change % Change

Same Store Properties $ 4,070 $ 4,202 $ (132) (3.1) %

Acquired & Disposed Properties 466 478 (12) (2.5) %

Properties with Vacancy 2,000 2,127 (127) (6.0) %

$ 6,536 $ 6,807 $ (271) (4.0) %

For the nine months ended September 30,

Depreciation and amortization expense increased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due to an increase in depreciation and amortization expense on the nine properties acquired subsequent to March 31, 2022.

For the three months ended March 31,

(Dollars in Thousands)

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Property operating expenses consist of franchise taxes, property management fees, insurance, ground lease payments, property maintenance and repair expenses paid on behalf of certain of our properties.

The decrease in property operating expenses for same store properties for the three and nine months ended September 30, 2022, from the comparable 2021 period, is a result of

reduced real estate tax expense during the period, partially offset by general cost increases due to the inflationary environment during the three and nine months ended September 30, 2022.

The decrease in property operating expenses for acquired and disposed of properties for the three months ended September 30, 2022, from the comparable 2021 period, is a result of a decrease in property operating expenses in relation to three property sales during the three months ended September 30, 2022.

The increase in property operating expenses for acquired and disposed of properties for the nine months ended September 30, 2022, from the comparable 2021 period, is a result of an increase in property operating expenses for the 11 industrial properties acquired during the nine months ended September 30, 2022.

The decrease in property operating expenses for properties with vacancy for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, is a result of reduced real estate tax expense during the period, partially offset by general cost increases due to the inflationary environment during the same period.

The base management fee paid to the Adviser increased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, due to an increase in Gross Tangible Real Estate over the three and nine months ended September 30, 2022 as compared to a smaller increase in Gross Tangible Real Estate during the three and nine months ended September 30, 2021.

The increase in property operating expenses for same store properties for the three months ended March 31, 2023, from the comparable 2022 period, was a result of tenants requiring more employees to return on site as well as general cost increases due to the inflationary environment during the three months ended March 31, 2023.

The decrease in property operating expenses for acquired and disposed of properties for the three months ended March 31, 2023, from the comparable 2022 period, is a result of a decrease in property operating expenses in relation to two properties held for sale during the three months ended March 31, 2023 that are fully vacant, requiring less costs to operate the empty buildings.

The decrease in property operating expenses for properties with vacancy for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, is a result of reduced real estate tax expense during the period, partially offset by general cost increases due to the inflationary environment during the same period.

The base management fee paid to the Adviser increased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due to an increase in Gross Tangible Real Estate over the three months ended March 31, 2023 as compared to a smaller increase in Gross Tangible Real Estate during the three months ended March 31, 2022.

The calculation of the base management fee is described in detail above in “Advisory and Administration Agreements.”

The incentive fee paid to the Adviser increased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, due to a higher pre-incentive fee Core FFO.

The increase in Core FFO is a result of an increase in operating revenues.

The incentive fee paid to the Adviser decreased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due to the payment of the incentive fee being contractually eliminated for the quarter ended March 31, 2023 as outlined in the Seventh Amended Advisory Agreement.

The calculation of the incentive fee is described in detail above in “Advisory and Administration Agreements.”

The administration fee paid to the Administrator increased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, due to our Administrator incurring greater costs that are allocated to us.

The administration fee paid to the Administrator increased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due to our Administrator incurring greater costs that are allocated to us.

The calculation of the administration fee is described in detail above in “Advisory and Administration Agreements.”

General and administrative expenses increased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, primarily as a result of an increase in due diligence expenses for potential acquisition targets that were not completed, partially offset by a decrease in professional fees.

We recorded an impairment charge during the three and nine months ended September 30, 2022 on two properties, as we had determined the carrying value of these properties was in excess of the fair market value, and not recoverable.

Accordingly, we impaired these properties to fair market value.

We did not record an impairment charge during the three and nine months ended September 30, 2021.

General and administrative expenses increased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily as a result of an increase in due diligence expenses for potential acquisition targets that were not completed, coupled with an increase in professional fees.

Other Income and Expenses

Interest expense increased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021.

This increase was primarily a result of increased interest costs on variable rate debt, as global interest rates have increased to counteract growing inflation, coupled with expensed deferred financing fees associated with mortgage repayments, and the Credit Facility amendment.

We sold three non-core office properties during the three and nine months ended September 30, 2022, and as a result, incurred a gain on sale of real estate, net.

Loss on sale of real estate, net, for the nine months ended September 30, 2021, is attributable to two non-core office assets located in Rancho Cordova, California and Champaign, Illinois, being sold during the period.

Other income decreased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, primarily due to a cancelled sale fee we earned during the three and nine months ended September 30, 2021, coupled with income from a legal settlement.

Interest expense increased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

This increase was primarily a result of increased interest costs on variable rate debt, as global interest rates have increased to counteract growing inflation.

Other income remained consistent for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

Net (Loss) Income (Attributable) Available to Common Stockholders and Non-controlling OP Unitholders

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders increased for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, primarily due to the increase in operating revenues due to asset acquisition activity during and subsequent to September 30, 2021, coupled with a gain on sale of real estate, net, from three non-core office property sales, partially offset by an increase in interest expense due to higher borrowing costs on variable rate debt due to global interest rate expansion.

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders decreased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily due to an increase in interest expense due to higher borrowing costs on variable rate debt due to global interest rate expansion, partially offset by an increase in operating revenues due to asset acquisition activity during and subsequent to March 31, 2022.

Liquidity and Capital Resources

Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowings under our Credit Facility and issuing additional equity securities.

Our available liquidity as of September 30, 2022, was $69.5 million, consisting of approximately $13.5 million in cash and cash equivalents and available borrowing capacity of $56.0 million under our Credit Facility.

Our available borrowing capacity under the Credit Facility decreased to $35.5 million as of November 7, 2022.

Our available liquidity as of March 31, 2023, was $91.8 million, consisting of approximately $14.3 million in cash and cash equivalents and available borrowing capacity of $77.5 million under our Credit Facility.

Our available borrowing capacity under the Credit Facility decreased to $75.0 million as of May 3, 2023.

Future Capital Needs

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Equity Capital

During the nine months ended September 30, 2022, we raised net proceeds of $40.6 million of common equity under our Common Stock ATM Program at a net weighted average per share price of $20.38.

We used these proceeds to fund acquisitions, pay down outstanding debt and for other general corporate purposes.

We did not sell any of our Series E Preferred Stock under our Series E Preferred Stock Sales Agreement during the nine months ended September 30, 2022.

We raised net proceeds of $3.7 million from sales of our Series F Preferred Stock during the nine months ended September 30, 2022.

As of November 7, 2022, we had the ability to raise up to $648.3 million of additional equity capital through the sale and issuance of securities that are registered under the 2020 Universal Shelf, in one or more future public offerings.

Of the $648.3 million of available capacity under our 2020 Universal Shelf, approximately $26.5 million is reserved for additional sales under our Common Stock ATM Program, and approximately $621.3 million is res erved for the sale of our Series F Preferred Stock as of November 7, 2022.

We expect to continue to use our Common Stock ATM Program as a source of liquidity for the remainder of 2022.

As of September 30, 2022, we had 44 mortgage notes payable in the aggregate principal amount of $370.3 million, collateralized by a total of 50 properties with a remaining weighted average maturity of 4.4 years.

The weighted-average interest rate on the mortgage notes payable as of September 30, 2022 was 4.19%.

We continue to see banks and non-bank lenders willing to issue mortgages.

Consequently, we are focused on obtaining mortgages through regional banks, non-bank lenders and the CMBS market.

As of September 30, 2022, we had mortgage debt in the aggregate principal amount of $16.0 million payable during the remainder of 2022 and $66.1 million payable during 2023.

The 2022 principal amount payable includes both amortizing principal payments and one balloon principal payments due during the remaining three months of 2022.

During the three months ended March 31, 2023, we raised net proceeds of $4.0 million of common equity under our Prior Common Stock ATM Program at a net weighted average per share price of $17.10.

We used these proceeds to fund

acquisitions, pay down outstanding debt and for other general corporate purposes.

We did not sell any of our Series E Preferred Stock under our Series E Preferred Stock Sales Agreement during the three months ended March 31, 2023, which was terminated effective as of February 10, 2023.

We raised net proceeds of $0.5 million from sales of our Series F Preferred Stock during the three months ended March 31, 2023.

As of May 3, 2023, there is no limit on the aggregate amount of securities we may offer pursuant to the 2022 Registration Statement.

As of March 31, 2023, we had 44 mortgage notes payable in the aggregate principal amount of $357.0 million, collateralized by a total of 50 properties with a remaining weighted average maturity of 4.1 years.

The weighted-average interest rate on the mortgage notes payable as of March 31, 2023 was 4.24%.

We continue to see banks and other non-bank lenders willing to issue mortgages.

Consequently, we remain focused on obtaining mortgages through regional banks, non-bank lenders and, to a lesser extent, the commercial mortgage backed securities market.

As of March 31, 2023, we had mortgage debt in the aggregate principal amount of $64.5 million payable during the remainder of 2023 and $20.5 million payable during 2024.

The 2023 principal amount payable includes both amortizing principal payments and five balloon principal payments due during the remaining nine months of 2023.

We anticipate being able to refinance our mortgages that come due during 2023 and 2024 with a combination of new mortgage debt, availability under our Credit Facility and the issuance of additional equity securities.

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Operating Activities

Net cash provided by operating activities during the nine months ended September 30, 2022, was $56.9 million, as compared to net cash provided by operating activities of $53.7 million for the nine months ended September 30, 2021.

This change was primarily a result of an increase in operating revenues from our 11 industrial property acquisitions during the nine months ended September 30, 2022 , partially offset by an increase in interest expense due to higher interest rates on variable rate debt.

Net cash provided by operating activities during the three months ended March 31, 2023, was $14.9 million, as compared to net cash provided by operating activities of $17.2 million for the three months ended March 31, 2022.

This change was primarily a result of an increase in interest expense due to higher interest rates on variable rate debt, partially offset by an increase in operating revenues from the nine properties acquired subsequent to March 31, 2022 .

The majority of cash from operating activities is generated from the lease revenues that we receive from our tenants.

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Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2022, was $75.5 million, which primarily consisted of 11 property acquisitions, coupled with capital improvements performed at certain of our properties, partially offset by the sale of three properties.

Net cash used in investing activities during the nine months ended September 30, 2021, was $46.0 million, which primarily consisted of eight property acquisitions, coupled with capital improvements performed at certain of our properties, partially offset by proceeds from the sale of two properties.

Net cash provided by investing activities during the three months ended March 31, 2023, was $0.7 million, which primarily consisted of receipts from lender escrow, partially offset by capital improvements performed at certain of our properties and deposits on future acquisitions.

Net cash used in investing activities during the three months ended March 31, 2022, was $17.6 million, which primarily consisted of two property acquisitions, coupled with capital improvements performed at certain of our properties.

Financing Activities

Net cash provided in financing activities during the nine months ended September 30, 2022, was $23.1 million, which primarily consisted of the issuance of $45.2 million of common and preferred equity, coupled with a net increase in Credit Facility borrowings of $119.2 million, partially offset by the repayment of $138.9 million of outstanding mortgage debt, and distributions paid to common, senior common and preferred shareholders.

Net cash used in financing activities for the nine months ended September 30, 2021, was $8.6 million, which primarily consisted of $14.3 million of mortgage principal repayments, and distributions paid to common, senior common and preferred shareholders, partially offset by $5.5 million in new mortgage borrowings coupled with the issuance of $130.0 million of equity.

Net cash used in financing activities during the three months ended March 31, 2023, was $12.8 million, which primarily consisted of $5.0 million of mortgage principal repayments, and distributions paid to common, senior common and preferred shareholders, partially offset by the issuance of $4.6 million of equity.

Net cash provided by financing activities for the three months ended March 31, 2022, was $1.9 million, which primarily consisted of the issuance of $22.2 million of common and preferred equity, partially offset by the repayment $3.5 million of outstanding mortgage debt, and distributions paid to common, senior common and preferred shareholders.

Credit Facility

On July 2, 2019, we amended, extended and upsized our Credit Facility, expanding Term Loan A from $75.0 million to $160.0 million, and increasing our Revolver from $85.0 million to $100.0 million.

Term Loan A has a maturity date of July 2, 2024, and the Revolver has a maturity date of July 2, 2023.

The interest rate for the Credit Facility is equal to LIBOR plus a spread ranging from 125 to 215 basis points depending on our leverage.

We entered into multiple interest rate cap agreements on Term Loan A, which cap LIBOR ranging from 2.50% to 2.75%, to hedge our exposure to variable interest rates.

The bank syndicate is comprised of KeyBank, Fifth Third Bank, U.S.

Bank National Association, The Huntington National Bank, Goldman Sachs Bank USA, and Wells Fargo Bank, National Association.

On February 11, 2021, we added Term Loan B, a new $65.0 million term loan component to our Credit Facility.

Term Loan B has a maturity date of February 11, 2026 and a LIBOR floor of 25 basis points plus a spread ranging from 140 to 225 basis points depending on our leverage.

We entered into multiple interest rate cap agreements on Term Loan B, which cap LIBOR from 1.50% to 1.75%.

We incurred fees of approximately $0.5 million in connection with issuing Term Loan B.

As of September 30, 2022, there was $60.0 million outstanding under Term Loan B, and we used all net proceeds to repay all outstanding borrowings on the Revolver.

Term Loan C has a maturity date of February 18, 2028 and a SOFR spread ranging from 125 to 195 basis points, depending on our leverage.

On September 27, 2022 we further increased the Revolver to $125.0 million and the Term Loan C to $150.0 million, as permitted under the terms of the Credit Facility.

September 27, 2022 we further increased the Revolver to $125.0 million and the Term Loan C to $150.0 million, as permitted under the terms of the Credit Facility.

We entered into multiple interest rate swap agreements on Term Loan C, which swap the interest rate to fixed rates from 3.15% to 3.75%.

We incurred fees of approximately $4.2 million in connection with extending and upsizing our Credit Facility.

As of March 31, 2023, there was $150.0 million outstanding under Term Loan C, and we used all net proceeds to repay all outstanding borrowings on the Revolver, pay off mortgage debt, and fund acquisitions.

The Credit Facility’s current bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, United Bank, First Financial Bank, and S&T Bank.

As of September 30, 2022, there was $377.8 million outstanding under our Credit Facility at a weighted average interest rate of approximately 4.43% and $17.1 million outstanding under letters of credit at a weighted average interest rate of 1.75%.

As of November 7, 2022, the maximum additional amount we could draw under the Credit Facility was $35.5 million.

We were in compliance with all covenants under the Credit Facility as of September 30, 2022.

As of March 31, 2023, there was $396.3 million outstanding under our Credit Facility at a weighted average interest rate of approximately 6.32% and $14.4 million outstanding under letters of credit at a weighted average interest rate of 1.50%.

As of May 3, 2023, the maximum additional amount we could draw under the Credit Facility was $75.0 million.

We were in compliance with all covenants under the Credit Facility as of March 31, 2023.

Contractual Obligations

The following table reflects our material contractual obligations as of September 30, 2022 (in thousands):

The following table reflects our material contractual obligations as of March 31, 2023 (in thousands):

Payments Due by Period

5 unchanged sentences

$ 931,284 $ 114,309 $ 185,760 $ 529,207 $ 102,008

(1) Debt obligations represent borrowings under our Revolver, which represents $7.8 million of the debt obligation due in 2026, our Term Loan A, which represents $160.0 million of the debt obligation due in 2027, our Term Loan B, which represents $60.0 million of the debt obligation due in 2026, our Term Loan C, which represents $150.0 million of the debt obligation due in 2028 and mortgage notes payable that were outstanding as of September 30, 2022.

(1) Debt obligations represent borrowings under our Revolver, which represents $26.3 million of the debt obligation due in 2026, our Term Loan A, which represents $160.0 million of the debt obligation due in 2027, our Term Loan B, which represents $60.0 million of the debt obligation due in 2026, our Term Loan C, which represents $150.0 million of the debt obligation due in 2028 and mortgage notes payable that were outstanding as of March 31, 2023.

This figure does not include $(0.1) million of premiums and (discounts), net and $5.7 million of deferred financing costs, net, which are reflected in mortgage notes payable, net and borrowings under Term Loan, net on the condensed consolidated balance sheets.

1 unchanged sentence

The balance and interest rate on our Revolver, Term Loan A, Term Loan B and Term Loan C is variable;

thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of September 30, 2022.

thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of March 31, 2023.

(3) Operating lease obligations represent the ground lease payments due on four of our properties.

1 unchanged sentence

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of September 30, 2022.

We did not have any material off-balance sheet arrangements as of March 31, 2023.

Funds from Operations

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We believe that net income is the most directly comparable GAAP measure to FFO, Basic EPS is the most directly comparable GAAP measure to Basic FFO per share, and that Diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share.

We also present FFO available to our common stockholders and Non-controlling OP Unitholders as adjusted for comparability as an additional supplemental measure, as we believe it is more reflective of our core operating performance, and provides investors and analysts an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

FFO as adjusted for comparability is generally calculated as FFO available to common stockholders and Non-controlling OP Unitholders, excluding certain non-recurring and non-cash income and expense adjustments, which management believes are not reflective of the results within our operating real estate portfolio.

The following table provides a reconciliation of our FFO available to common stockholders for the three and nine months ended September 30, 2022 and 2021, respectively, to the most directly comparable GAAP measure, net income available to common stockholders, and a computation of basic and diluted FFO per weighted average share of common stock:

For the three months ended September 30, For the nine months ended September 30,

(Dollars in Thousands, Except for Per Share Amounts) (Dollars in Thousands, Except for Per Share Amounts)

2022 2021 2022 2021

The following table provides a reconciliation of our FFO available to common stockholders for the three months ended March 31, 2023 and 2022, respectively, to the most directly comparable GAAP measure, net income available to common stockholders, and a computation of basic and diluted FFO per weighted average share of common stock:

For the three months ended March 31,

(Dollars in Thousands, Except for Per Share Amounts)

Calculation of basic FFO per share of common stock and Non-controlling OP Unit

1 unchanged sentence

Distributions attributable to preferred and senior common stock (3,131) (3,062)

Series D preferred stock offering costs write off — — — (2,141)

Loss on extinguishment of Series F preferred stock (5) (5)

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders $ (604) $ 1,460 $ (1,790) $ (4,589)

Gain on repurchase of Series G preferred stock 3 —

Net (loss) gain (attributable) available to common stockholders and Non-controlling OP Unitholders $ (736) $ 324

Real estate depreciation and amortization $ 15,474 $ 14,689

Impairment charge 10,718 — 12,092 —

Loss on sale of real estate, net — — — 882

Gain on sale of real estate, net (8,902) — (8,902) —

FFO available to common stockholders and Non-controlling OP Unitholders - basic $ 14,738 $ 15,013

6 unchanged sentences

Distributions attributable to preferred and senior common stock (3,131) (3,062)

Series D preferred stock offering costs write off — — — (2,141)

Loss on extinguishment of Series F preferred stock (5) (5)

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders $ (604) $ 1,460 $ (1,790) $ (4,589)

Gain on repurchase of Series G preferred stock 3 —

Net (loss) gain (attributable) available to common stockholders and Non-controlling OP Unitholders $ (736) $ 324

Real estate depreciation and amortization $ 15,474 $ 14,689

Impairment charge 10,718 — 12,092 —

Income impact of assumed conversion of senior common stock 109 116

Loss on sale of real estate, net — — — 882

Gain on sale of real estate, net (8,902) — (8,902) —

FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions $ 14,847 $ 15,129

4 unchanged sentences

Diluted FFO per weighted average share of common stock and Non-controlling OP Unit $ 0.37 $ 0.39

Calculation of diluted FFO per share of common stock and Non-controlling OP Unit, as adjusted for comparability

FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions $ 17,090 $ 16,390 $ 47,416 $ 42,488

Series D preferred stock offering costs write off — — — 2,141

FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions, as adjusted for comparability $ 17,090 $ 16,390 $ 47,416 $ 44,629

Weighted average common shares and Non-controlling OP Units outstanding - diluted 40,141,052 37,558,558 39,349,239 37,166,404

Diluted FFO per weighted average share of common stock and Non-controlling OP Unit, as adjusted for comparability $ 0.43 $ 0.44 $ 1.21 $ 1.20

Distributions declared per share of common stock and Non-controlling OP Unit $ 0.37620 $ 0.37545 $ 1.12860 $ 1.12635

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-Q

Item 2. Management’s Discussion and Analysis