What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-06 compared with 2023-08-08 · 149 added, 147 removed, 367 unchanged (45% 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 August 8, 2023:

As of November 6, 2023:

• we owned 136 properties totaling 17.2 million square feet of rentable space, located in 27 states;

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Business Environment

The commercial real estate sector was marked by continued uncertainty and volatility in the second quarter of 2023.

In June, the Federal Reserve held rates steady for the first time in 15 months due to inflation decreasing to 3.0%, its biggest improvement since March 2021.

However, the Federal Reserve continued its path of rising rates by raising them 0.25% in the July meeting, signaling that the Fed will look for lower levels of inflation before determining peak rate levels.

With inflation moderating to its lowest year-over-year increase since March 2021, the economy is showing the effects of the rapid rate hikes and tightening credit standards over the past 18 months.

The commercial real estate sector was marked by continued uncertainty and volatility in the third quarter of 2023.

The Federal Reserve is signaling a holding pattern on its short-term rate increases as inflation levels out, but long-term rates have risen significantly over the last few months.

These long-term rates have slowed the mortgage market which has, in turn, slowed the market for acquisitions.

Real estate transaction volumes remain low, as tightened credit standards and increasing capital costs have sidelined many investors.

The industrial sector normalized in the second quarter of 2023, relative to the record setting years of 2021 and 2022;

however, overall fundamentals remain sound, and the sector continues to outperform other property types.

The second quarter of 2023

posted 44.9 million square feet of net absorption, down from 71.0 million square feet in the first quarter of 2023.

Absorption levels for the first half of 2023 were in line with the years leading up to the pandemic, which were historically strong years in the broader context of the e-commerce demand boom kickstarted by the pandemic.

Leasing activity in the industrial sector totaled 141.0 million square feet in the second quarter of 2023, down 8.9% from the first quarter of 2023.

New deliveries totaled 140.0 million square feet, pushing the vacancy rate to 4.1%.

This is the first time the vacancy rate has surpassed 4.0% since the first half of 2021, but it still remains below the 10-year historical average of 5.2%.

The sunbelt continues to outperform, with Savannah, Dallas, and Houston leading major markets for net absorption.

Overall industrial fundamentals remain sound, and the sector continues to outperform other property types.

According to Cushman Wakefield, the third quarter of 2023 posted 46.2 million square feet of net absorption, 12.7% lower than in the second quarter of 2023.

Absorption levels for the first three quarters of 2023 were below where they had been in the years leading up to

the pandemic, which were historically strong years in the broader context of the e-commerce demand boom kick-started by the pandemic.

New deliveries totaled 171.8 million square feet, an 18.7% increase over the 144.7 million square feet delivered in the second quarter of 2023.

This record amount of new deliveries pushed the vacancy rate to 4.7%, which is still well below the 15-year historical average of 6.8%.

The Sunbelt continues to outperform, with Savannah, Dallas-Fort Worth, Charlotte, and Houston all exceeding 4.0 million square feet of net occupancy gains during the third quarter.

While net absorption remains positive, the national under construction pipeline continued to shrink by 96.7 million square feet.

According to Cushman Wakefield, this is the smallest pipeline since the second quarter of 2021.

The office sector continued to weaken in the second quarter of 2023.

Nonetheless, for the first time in over a year, second quarter 2023 leasing volume increased by 11.6% to 42.0 million square feet.

The sector posted negative 12.5 million square feet of net absorption, which is 40.0% less than the 20.0 million square feet lost in the first quarter of 2023.

Only 1.4 million square feet of new product broke ground in the second quarter of 2023, which will limit future new deliveries.

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

According to Jones Lang LaSalle, overall office vacancy increased 39 basis points to 21.0%, but a slowing volume of deliveries and increased inventory removals point to stabilization in 2024.

Only 7.9 million square feet of new product has broken ground in 2023 to date, which will limit future new deliveries.

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

The yield on the 10-year U.S.

Treasury Note has increased significantly since the beginning of 2022 and finished the second quarter of 2023 at 3.81%.

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 the six months ended June 30, 2023.

Treasury Note has increased significantly since the beginning of 2022 and finished the third quarter of 2023 at 4.57% and subsequent to quarter end has approached 5.00%.

Global recessionary conditions may occur over the next 6-24 months likely stemming from central bank intervention to curb inflation.

We collected 100% of all outstanding cash rents for the nine months ended September 30, 2023.

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

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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 June 30, 2023.

We are in compliance with all of our debt covenants as of September 30, 2023.

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

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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 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.

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 (including instability resulting from military conflicts), 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 London Inter-bank Offered Rate (“LIBOR”) has been phased out as of June 2023.

The London Inter-bank Offered Rate (“LIBOR”) was phased out as of June 2023.

The Secured Overnight Financing Rate (“SOFR”) is now the new rate standard.

During 2022 and the first half of 2023, we began transitioning our variable rate debt to SOFR, and, at June 30, 2023 , all of our variable rate debt was based upon SOFR, with the exception of $20.5 million of hedged variable rate mortgages still based on LIBOR.

We are actively working to transition the remaining debt to SOFR.

During 2022 and the first half of 2023, we began transitioning our variable rate debt to SOFR, and, at September 30, 2023 , all of our variable rate debt was based upon SOFR.

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 four partially vacant buildings and four fully vacant buildings.

Our available vacant space at June 30, 2023 represents 4.0% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $3.9 million .

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

Our available vacant space at September 30, 2023 represents 3.4% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $3.5 million .

We continue to actively seek new tenants for these properties.

We believe our lease expiration schedule for the remainder of 2023 is quite manageable, as it equates to only 2.1% of our lease revenue at June 30, 2023.

We believe our lease expiration schedule for the remainder of 2023 is quite manageable, as it equates to only 2.1% of our lease revenue at September 30, 2023.

Property acquisitions since the beginning of 2020 have totaled $360.4 million and all transactions were industrial in nature, with a weighted average lease term of 13.4 years and a current weighted average lease term today of 10.9 years.

Our ability to make new investments is highly dependent upon our ability to procure financing.

Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, borrowings under

our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”), which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, and our $150.0 million term loan facility (“Term Loan C”) which matures in February 2028.

Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, borrowings under our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”),

which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, and our $150.0 million term loan facility (“Term Loan C”) which matures in February 2028.

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

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Sale Activity

During the six months ended June 30, 2023 we continued to execute our capital recycling program, whereby we sold non-core properties and redeployed proceeds to either fund property acquisitions in our target secondary growth markets or repay outstanding debt.

During the nine months ended September 30, 2023, we continued to execute our capital recycling program, whereby we sold non-core properties 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 six months ended June 30, 2023, we sold two non-core properties, located in Baytown, Texas and Birmingham, Alabama, which are summarized in the table below (dollars in thousands):

Aggregate Square Footage Sold Aggregate Sales Price Aggregate Sales Costs Aggregate Loss on Sale of Real Estate, net

During the nine months ended September 30, 2023, we sold five non-core properties, located in Baytown, Texas and Birmingham, Alabama, which are summarized in the table below (dollars in thousands):

Aggregate Square Footage Sold Aggregate Sales Price Aggregate Sales Costs Aggregate Impairment Charge for the Nine Months Ended September 30, 2023 Aggregate Gain on Sale of Real Estate, net

206,278 $ 23,650 $ 1,476 $ 3,591 $ 4,245

On July 27, 2023 we sold our 26,080 square foot office property in Pittsburgh, Pennsylvania for $6.8 million.

We realized a $3.6 million gain on sale.

On October 2, 2023, we sold our 146,483 square foot office property in Columbia, South Carolina for $7.0 million.

We realized a $2.9 million gain on sale, net.

Acquisition Activity

During the six months ended June 30, 2023, we acquired one industrial property located in Riverdale, Illinois, which is summarized below (dollars in thousands):

During the nine months ended September 30, 2023, we acquired three properties located in Riverdale, Illinois and Dallas-Fort Worth, Texas, 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

183,803 18.7 years $ 17,539 $ 349 $ 1,649

On July 10, 2023, we purchased a 7,714 square foot medical office property in Dallas Fort Worth, Texas for $2.9 million.

This property is fully leased to one tenant on a 10-year lease.

On July 28, 2023 we purchased a 100,000 square foot industrial property in Cedar Hill, Texas for $9.1 million.

This property is fully leased to one tenant on a 20-year lease.

On October 12, 2023, we purchased a 69,920 square foot industrial property in Allentown, Pennsylvania for $7.8 million.

The property is fully leased to one tenant on a 20-year lease.

On November 3, 2023, we purchased a 67,709 square foot industrial property in Indianapolis, Indiana for $4.5 million.

The property is fully leased to one tenant on a 20-year lease.

Leasing Activity

During and subsequent to the six months ended June 30, 2023, we executed ten leases, which are summarized below (dollars in thousands):

During and subsequent to the nine months ended September 30, 2023, we executed 12 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

1,282,641 10.6 years $ 8,805 $ 4,685 $ 1,767

During the six months ended June 30, 2023, we had one lease termination, which is summarized below (dollars in thousands):

Square Footage Reduced Accelerated Rent Accelerated Rent Recognized through June 30, 2023

During the nine months ended September 30, 2023, we had one lease termination, which is summarized below (dollars in thousands):

Square Footage Reduced Accelerated Rent Accelerated Rent Recognized through September 30, 2023

119,224 $ 2,045 $ 2,045

Financing Activity

During the six months ended June 30, 2023, we repaid one mortgage, collateralized by one property, which is summarized in the table below (dollars in thousands):

During the nine months ended September 30, 2023, we repaid four mortgages, collateralized by four properties, which are summarized in the table below (dollars in thousands):

Fixed Rate Debt Repaid Interest Rate on Fixed Rate Debt Repaid

$ 46,530 4.78 %

On July 28, 2023 we repaid $6.8 million in fixed rate mortgage debt, collateralized by one property, at an interest rate of 5.00%.

On August 4, 2023 we repaid $28.9 million in fixed rate mortgage debt, collateralized by one property, at an interest rate of 4.81%.

During the six months ended June 30, 2023, we extended the maturity date of one mortgage, collateralized by one property, which is summarized in the table below (dollars in thousands):

On October 2, 2023, we repaid $9.0 million in fixed rate debt, collateralized by one property, at an interest rate of 4.04%.

We realized a $2.8 million gain on debt extinguishment.

During the nine months ended September 30, 2023, we issued three mortgages, collateralized by three properties, which are summarized in the table below (dollars in thousands):

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

$ 9,000 6.10 %

During the nine months ended September 30, 2023, we extended the maturity date of one mortgage, collateralized by one property, which is summarized in the table below (dollars in thousands):

Fixed Rate Debt Extended Interest Rate on Fixed Rate Debt Extended Extension Term

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Common Stock ATM Programs

During the six months ended June 30, 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.

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

During the nine months ended September 30, 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”).

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.

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In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements 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 six months ended June 30, 2023, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

During the six months ended June 30, 2023, we utilized our common stock repurchase program, repurchasing $1.0 million worth of common stock.

During the nine months ended September 30, 2023, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

Common Stock Buyback Program

During the nine months ended September 30, 2023, we utilized our common stock repurchase program, repurchasing $1.0 million worth of common stock.

All repurchased shares were retired.

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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 six months ended June 30, 2023.

We did not sell any shares of our Series E Preferred Stock pursuant to the Series E Preferred Stock Sales Agreement during the nine months ended September 30, 2023.

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

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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 188,919 shares of our Series F Preferred Stock, raising $4.3 million in net proceeds during the six months ended June 30, 2023.

We sold 229,677 shares of our Series F Preferred Stock, raising $5.2 million in net proceeds during the nine months ended September 30, 2023.

Non-controlling Interest in Operating Partnership

As of June 30, 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 June 30, 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.

As of September 30, 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 September 30, 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.

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 six months ended June 30, 2023, our largest tenant comprised only 4.2% of total lease revenue.

The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

For the three months ended June 30, For the six months ended June 30,

For the nine months ended September 30, 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 and nine months ended September 30, 2023 and 2022 (dollars in thousands):

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

2023 2022 2023 2022

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Diversified/Conglomerate Services 4,588 12.6 4,248 10.7 13,780 12.3 13,338 11.9

Diversified/Conglomerate Manufacturing 2,762 7.1 2,795 7.7 5,398 7.2 5,218 7.3

Healthcare 2,683 7.4 4,025 10.1 8,636 7.7 12,084 10.8

Personal, Food & Miscellaneous Services 2,345 6.1 1,550 4.3 4,692 6.2 3,097 4.3

Buildings and Real Estate 2,313 6.0 2,315 6.4 4,621 6.1 5,419 7.5

Diversified/Conglomerate Manufacturing 2,653 7.3 2,779 7.0 8,052 7.2 8,198 7.3

Banking 2,527 6.9 5,726 14.4 7,136 6.4 10,941 9.8

Buildings and Real Estate 2,511 6.9 2,317 5.8 7,131 6.4 6,976 6.2

Personal, Food & Miscellaneous Services 2,345 6.4 1,809 4.5 7,038 6.3 4,906 4.4

Personal & Non-Durable Consumer Products 1,967 5.4 1,669 4.2 5,737 5.1 3,634 3.3

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Total $ 36,464 100.0 % $ 39,834 100.0 % $ 111,675 100.0 % $ 111,764 100.0 %

The tables below reflect the breakdown of total lease revenue by state for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

State Lease Revenue for the three months ended June 30, 2023 Percentage of Lease Revenue Number of Leases for the three months ended June 30, 2023 Lease Revenue for the three months ended June 30, 2022 Percentage of Lease Revenue Number of Leases for the three months ended June 30, 2022

Florida $ 6,763 17.5 % 9 $ 4,230 11.6 % 9

The tables below reflect the breakdown of total lease revenue by state for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

State Lease Revenue for the three months ended September 30, 2023 Percentage of Lease Revenue Number of Leases for the three months ended September 30, 2023 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

Texas $ 4,510 12.4 % 14 $ 5,452 13.7 % 15

Pennsylvania 3,721 9.6 10 3,704 10.2 10

Florida 4,236 11.6 9 3,775 9.5 9

Ohio 3,660 10.0 16 3,381 8.5 15

Pennsylvania 3,640 10.0 9 3,707 9.3 10

Georgia 3,109 8.5 11 2,894 7.3 10

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Michigan 1,638 4.5 6 1,608 4.0 6

Minnesota 1,045 2.7 7 1,013 2.8 7

Indiana 1,053 2.9 10 1,063 2.7 10

All Other States 8,183 22.5 42 12,592 31.5 41

Total $ 36,464 100.0 % 137 $ 39,834 100.0 % 136

State Lease Revenue for the six months ended June 30, 2023 Percentage of Lease Revenue Number of Leases for the six months ended June 30, 2023 Lease Revenue for the six months ended June 30, 2022 Percentage of Lease Revenue Number of Leases for the six months ended June 30, 2022

State Lease Revenue for the nine months ended September 30, 2023 Percentage of Lease Revenue Number of Leases for the nine months ended September 30, 2023 Lease Revenue for the nine months ended September 30, 2022 Percentage of Lease Revenue Number of Leases for the nine months ended September 30, 2022

Florida $ 15,118 13.5 % 9 $ 12,242 11.0 % 9

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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, 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.

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Base Management Fee

On July 14, 2020, we amended and restated the previous Advisory Agreement by entering into the Sixth Amended and Restated Investment Advisory Agreement between us and the Adviser (the “Sixth Amended Advisory Agreement”).

The Sixth Amended Advisory Agreement replaced the previous calculation of the base management fee with a calculation based on Gross Tangible Real Estate.

The revised base management fee will be payable quarterly in arrears and calculated at an annual rate of 0.425% (0.10625% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined in the Sixth Amended Advisory Agreement as the current gross value of our property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon).

The calculations of the other fees in the Amended Agreement remain unchanged.

On July 14, 2020, we amended and restated the Advisory Agreement, which replaced the previous calculation of the base management fee with a calculation based on Gross Tangible Real Estate.

The revised base management fee is payable quarterly in arrears and calculated at an annual rate of 0.425% (0.10625% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined in the Advisory Agreement as the current gross value of our property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon).

The calculations of the other fees in the Amended Agreement was unchanged.

Our Adviser does not charge acquisition or disposition fees when we acquire or dispose of properties as is common in other externally managed REITs;

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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.

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

On January 10, 2023, we amended and restated the Advisory Agreement by entering into the Seventh Amended Advisory Agreement, as 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 ended March 31, 2023 and June 30, 2023.

The calculation of the other fees remains unchanged.

On July 11, 2023, the Company amended and restated the Seventh Amended Advisory Agreement by entering into the Eighth Amended and Restate Investment Advisory Agreement between the Company and the Advisory (the “Eighth Amended Advisory Agreement”), as approved unanimously by our Board of Directors, including specifically, our independent directors.

The Eight Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ending September 30, 2023 and December 31, 2023.

In addition, the Eight Amended Advisory Agreement also clarifies that for any future quarter whereby an incentive fee would exceed by greater than 15% the average quarterly incentive fee paid, the

measurement would be versus the last four quarters where an incentive fee was actually paid.

The calculation of the other fees was unchanged.

On July 11, 2023, the Company entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors.

The Eighth Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ending September 30, 2023 and December 31, 2023.

In addition, the Eighth Amended Advisory Agreement also clarifies that for any future quarter whereby an incentive fee would exceed by greater than 15% the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid.

The calculation of the other fees remains unchanged.

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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 six months ended June 30, 2023 or 2022.

No capital gain fee was recognized during the three and nine months ended September 30, 2023 or 2022.

Termination Fee

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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 six months ended June 30, 2023.

There were no material changes to our critical accounting policies or estimates during the nine months ended September 30, 2023.

Results of Operations

The weighted average yield on our total portfolio, which was 7.9% and 7.6% as of June 30, 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 on our total portfolio, which was 8.0% and 7.8% as of September 30, 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 six months ended June 30, 2023 and 2022 is below (dollars in thousands, except per share amounts) :

For the three months ended June 30,

A comparison of our operating results for the three and nine months ended September 30, 2023 and 2022 is below (dollars in thousands, except per share amounts) :

For the three months ended September 30,

2023 2022 $ Change % Change

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Interest expense $ (9,936) $ (9,107) $ (829) 9.1 %

Loss on sale of real estate, net (451) — (451) 100.0 %

Gain on sale of real estate, net 4,696 8,902 (4,206) (47.2) %

Other income 155 316 (161) (50.9) %

Total other expense, net $ (5,085) $ 111 $ (5,196) (4,681.1) %

Net (loss) income $ (4,588) $ 1,624 $ (6,212) (382.5) %

Net income $ 1,792 $ 2,787 $ (995) (35.7) %

Distributions attributable to Series E, F, and G preferred stock (3,099) (2,987) (112) 3.7 %

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FFO per weighted average share of common stock and Non-controlling OP Units - diluted (1) $ 0.33 $ 0.43

$ (0.10) (23.3) %

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

For the six months ended June 30,

For the nine months ended September 30,

2023 2022 $ Change % Change

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Interest expense $ (27,845) $ (22,813) $ (5,032) 22.1 %

Loss on sale of real estate, net (451) — (451) 100.0 %

Gain on sale of real estate, net 4,245 8,902 (4,657) (52.3) %

Other income 262 538 (276) (51.3) %

Total other expense, net $ (23,338) $ (13,373) $ (9,965) 74.5 %

Net (loss) income $ (1,420) $ 5,068 $ (6,488) (128.0) %

Net income $ 370 $ 7,852 $ (7,482) (95.3) %

Distributions attributable to Series E, F, and G preferred stock (9,179) (8,900) (279) 3.1 %

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Operating Revenues

For the three months ended June 30,

For the three months ended September 30,

(Dollars in Thousands)

4 unchanged sentences

$ 36,464 $ 39,834 $ (3,370) (8.5) %

For the six months ended June 30,

For the nine months ended September 30,

(Dollars in Thousands)

5 unchanged sentences

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 six months ended June 30, 2023, due to 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, accelerated rent from a lease termination, and income recognized from tenant funded improvement projects which were determined to be lessor assets, where our tenants used their capital to improve our properties.

Lease revenues decreased for acquired and disposed of properties for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, primarily due to loss of lease revenue including variable lease payments caused by a decrease in property operating expenses from vacancy at properties held for sale, partially offset by lease revenue from the seven properties acquired subsequent to June 30, 2022.

Lease revenues increased for our properties with vacancy for the three and six months ended June 30, 2023 due to an increase in rental revenue and variable lease payments due to an increase in property operating expenses, from partially leasing space.

Lease revenues from same store properties increased for the three and nine months ended September 30, 2023, due to an increase in recovery revenue from property operating expenses, accelerated rent from a lease termination, and income recognized from tenant funded improvement projects which were determined to be lessor assets.

Lease revenues decreased for acquired and disposed of properties for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, primarily due to accelerated rent from a lease termination in the prior period relating to a property sold and loss of lease revenue including variable lease payments caused by a decrease in property operating expenses from vacancy at properties held for sale, and partially offset by lease revenue from the three properties acquired subsequent to September 30, 2022.

Lease revenues increased for our properties with vacancy for the three and nine months ended September 30, 2023 due to an increase in rental revenue from partially leasing vacant space and variable lease payments due to an increase in property operating expenses.

Operating Expenses

Depreciation and amortization expense increased for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to an increase in depreciation and amortization expense on the seven properties acquired subsequent to June 30, 2022 and lease-related assets for lease that was terminated during the period.

This was partially offset by the depreciation error corrected during the period, as outlined in Note 1 and Note 9.

For the three months ended June 30,

Depreciation and amortization expense decreased for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, due to the depreciation errors corrected, as outlined in Note 1 and Note 9, coupled with the reduced depreciation and amortization expense from the seven property sales subsequent to September 30, 2022, partially offset by an increase in depreciation and amortization expense on the three properties acquired subsequent to September 30, 2022 and lease-related assets for lease that was terminated during the period.

For the three months ended September 30,

(Dollars in Thousands)

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$ 6,821 $ 6,536 $ 285 4.4 %

For the six months ended June 30,

For the nine months ended September 30,

(Dollars in Thousands)

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The increase in property operating expenses for

same store properties for the three and six months ended June 30, 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 and six months ended June 30, 2023.

The decrease in property operating expenses for acquired and disposed of properties for the three and six months ended June 30, 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 and six months ended June 30, 2023 that are fully vacant, requiring less costs to operate the empty buildings.

The increase in property operating expenses for properties with vacancy for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, is a result of general cost increases due to the inflationary environment during the same period coupled with increased expenses due to partially leasing space.

The base management fee paid to the Adviser increased for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to an increase in Gross Tangible Real Estate over the three and six months ended June 30, 2023 as compared to a smaller increase in Gross Tangible Real Estate during the three and six months ended June 30, 2022.

same store properties for the three and nine months ended September 30, 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 and nine months ended September 30, 2023.

The decrease in property operating expenses for acquired and disposed of properties for the three and nine months ended September 30, 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 and nine months ended September 30, 2023 that are fully vacant, requiring less costs to operate the empty buildings.

The increase in property operating expenses for properties with vacancy for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, is a result of general cost increases due to the inflationary environment during the same period coupled with increased expenses due to partially leasing space.

The base management fee paid to the Adviser increased for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, due to an increase in Gross Tangible Real Estate over the three and nine months ended September 30, 2023 as compared to a smaller increase in Gross Tangible Real Estate during the three and nine months ended September 30, 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 decreased for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to the payment of the incentive fee being contractually eliminated for the quarters ended March 31, 2023 and June 30, 2023, as outlined in the Seventh Amended Advisory Agreement.

The incentive fee paid to the Adviser decreased for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, due to the payment of the incentive fee being contractually eliminated for the quarters ended March 31, 2023 and June 30, 2023, as outlined in the Seventh Amended Advisory Agreement, and for the quarters ended September 30, 2023 and December 31, 2023, as outlined in the Eighth 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 six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to our Administrator incurring greater costs that are allocated to us.

The administration fee paid to the Administrator increased for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 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 six months ended June 30, 2023, as compared to the three and six months ended June 30, 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.

General and administrative expenses increased for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, primarily as a result of an increase in professional fees.

Other Income and Expenses

Interest expense increased for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 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.

We sold two non-core office properties during the three and six months ended June 30, 2023, and as a result, incurred a loss on sale of real estate, net.

We did not have any property sales during the three and six months ended June 30, 2022.

Other income decreased for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to nonrecurring income items that occurred in the three months ended June 30, 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 decreased for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, as revised, primarily due to an increase in interest expense due to higher borrowing costs on variable rate debt due to global interest rate expansion and impairment charges recorded on three properties.

This was partially offset by an increase in operating revenues due to asset acquisition activity during and subsequent to June 30, 2022 as well as partially leasing vacant space subsequent to June 30, 2022.

Interest expense increased for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 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, coupled with the maturity of several interest rate caps.

We sold five non-core office properties during the three and nine months ended September 30, 2023, and as a result, incurred a gain on sale of real estate, net.

Gain on sale of real estate, net, during the three and nine months ended September 30, 2022 is attributable to three non-core office properties sold during the period.

Other income decreased for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, due to nonrecurring income items that occurred in the three months ended September 30, 2022.

Net Income Available to Common Stockholders and Non-controlling OP Unitholders

Net income available to common stockholders and Non-controlling OP Unitholders decreased for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, as revised, primarily due to impairment charges in the prior period, partially offset by a smaller gain on sale, net.

Net income available to common stockholders and Non-controlling OP Unitholders decreased for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, as revised, primarily due to an increase in interest expense due to higher borrowing costs on variable rate debt due to global interest rate expansion.

This was partially offset by the contractual elimination of the Incentive Fee during the nine months ended September 30, 2023.

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 June 30, 2023 was $86.8 million, consisting of approximately $16.5 million in cash and cash equivalents and available borrowing capacity of $70.3 million under our Credit Facility.

Our available borrowing capacity under the Credit Facility decreased to $36.5 million as of August 8, 2023.

Our available liquidity as of September 30, 2023 was $63.2 million, consisting of approximately $18.3 million in cash and cash equivalents and available borrowing capacity of $44.9 million under our Credit Facility.

Our available borrowing capacity under the Credit Facility decreased to $43.6 million as of November 6, 2023.

Future Capital Needs

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Equity Capital

During the six months ended June 30, 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.

During the nine months ended September 30, 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 six months ended June 30, 2023, which was terminated effective as of February 10, 2023.

We raised net proceeds of $4.3 million from sales of our Series F Preferred Stock during the six months ended June 30, 2023.

As of August 8, 2023, there is no limit on the aggregate amount of securities we may offer pursuant to the 2022 Registration Statement.

As of June 30, 2023, we had 43 mortgage notes payable in the aggregate principal amount of $350.7 million, collateralized by a total of 49 properties with a remaining weighted average maturity of 3.9 years.

The weighted-average interest rate on the mortgage notes payable as of June 30, 2023 was 4.23%.

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, 2023, which was terminated effective as of February 10, 2023.

We raised net proceeds of $5.2 million from sales of our Series F Preferred Stock during the nine months ended September 30, 2023.

As of November 6, 2023, there is no limit on the aggregate amount of securities we may offer pursuant to the 2022 Registration Statement.

As of September 30, 2023, we had 43 mortgage notes payable in the aggregate principal amount of $313.4 million, collateralized by a total of 49 properties with a remaining weighted average maturity of 4.1 years.

The weighted-average interest rate on the mortgage notes payable as of September 30, 2023 was 4.20%.

We continue to see banks and other non-bank lenders willing to make mortgage loans.

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 June 30, 2023, we had mortgage debt in the aggregate principal amount of $50.2 million payable during the remainder of 2023 and $28.6 million payable during 2024.

The 2023 principal amount payable includes both amortizing principal payments and three balloon principal payments due during the remaining six 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.

As of September 30, 2023, we had mortgage debt in the aggregate principal amount of $12.0 million payable during the remainder of 2023 and $28.4 million payable during 2024.

The 2023 principal amount payable includes both amortizing principal payments and one balloon principal payment due during the remaining three months of 2023, which was repaid subsequent to quarter end.

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

In addition, we have raised substantial equity under our at-the-market programs and plan to continue to use these programs.

Operating Activities

Net cash provided by operating activities during the six months ended June 30, 2023, was $30.7 million, as compared to net cash provided by operating activities of $34.6 million for the six months ended June 30, 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 seven properties acquired subsequent to June 30, 2022.

Net cash provided by operating activities during the nine months ended September 30, 2023, was $48.5 million, as compared to net cash provided by operating activities of $56.9 million for the nine months ended September 30, 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 three properties acquired subsequent to September 30, 2022.

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

1 unchanged sentence

Investing Activities

Net cash used in investing activities during the six months ended June 30, 2023, was $6.9 million, which primarily consisted of one property acquisition, coupled with capital improvements performed at certain of our properties, partially offset by proceeds from one property sale.

Net cash used in investing activities during the six months ended June 30, 2022, was $57.8 million, which primarily consisted of seven property acquisitions, coupled with capital improvements performed at certain of our properties.

Net cash used in investing activities during the nine months ended September 30, 2023, was $3.6 million, which primarily consisted of two property acquisitions, coupled with capital improvements performed at certain of our properties, partially offset by proceeds from five property sales.

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.

Financing Activities

Net cash used in financing activities during the six months ended June 30, 2023, was $19.2 million, which primarily consisted of $11.3 million of mortgage principal repayments, and distributions paid to common, senior common and preferred shareholders, partially offset by the issuance of $8.8 million of equity and net borrowings on our credit facility.

Net cash provided by financing activities for the six months ended June 30, 2022, was $25.3 million, which primarily consisted of the issuance of $35.3 million of common and preferred equity, partially offset by the repayment $22.0 million of outstanding mortgage debt, and distributions paid to common, senior common and preferred shareholders.

Net cash used in financing activities during the nine months ended September 30, 2023, was $38.8 million, which primarily consisted of $57.6 million of mortgage principal repayments, and distributions paid to common, senior common and preferred shareholders, partially offset by the issuance of $9.8 million of equity, issuances of $9.0 million of new mortgage debt, and net borrowings on our credit facility.

Net cash provided by financing activities for 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 $138.9 million of outstanding mortgage debt, and distributions paid to common, senior common and preferred shareholders.

Credit Facility

4 unchanged sentences

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

As of June 30, 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 net proceeds of the transaction were used to repay the then-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 June 30, 2023, there was $408.5 million outstanding under our Credit Facility at a weighted average interest rate of approximately 6.54% and $14.4 million outstanding under letters of credit at a weighted average interest rate of 1.50%.

As of August 8, 2023, the maximum additional amount we could draw under the Credit Facility was $36.5 million.

We were in compliance with all covenants under the Credit Facility as of June 30, 2023.

As of September 30, 2023, there was $441.0 million outstanding under our Credit Facility at a weighted average interest rate of approximately 6.77% and $2.9 million outstanding under letters of credit at a weighted average interest rate of 1.50%.

As of November 6, 2023, the maximum additional amount we could draw under the Credit Facility was $43.6 million.

We were in compliance with all covenants under the Credit Facility as of September 30, 2023.

Contractual Obligations

The following table reflects our material contractual obligations as of June 30, 2023 (in thousands):

The following table reflects our material contractual obligations as of September 30, 2023 (in thousands):

Payments Due by Period

5 unchanged sentences

$ 931,479 $ 87,219 $ 264,857 $ 480,942 $ 98,461

(1) Debt obligations represent borrowings under our Revolver, which represents $38.5 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 June 30, 2023.

(1) Debt obligations represent borrowings under our Revolver, which represents $71.0 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, 2023.

This figure does not include $(0.1) million of premiums and (discounts), net and $5.3 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 June 30, 2023.

thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of September 30, 2023.

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

(4) Purchase obligations consist of tenant and capital improvements at eight of our properties.

(4) Purchase obligations consist of tenant and capital improvements at six of our properties.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of June 30, 2023.

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

The following table provides a reconciliation of our FFO available to common stockholders for the three and six months ended June 30, 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 June 30, For the six months ended June 30,

The following table provides a reconciliation of our FFO available to common stockholders for the three and nine months ended September 30, 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 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)

1 unchanged sentence

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

Net (loss) income $ (4,588) $ 1,624 $ (1,420) $ 5,068

Net income $ 1,792 $ 2,787 $ 370 $ 7,852

Distributions attributable to preferred and senior common stock (3,207) (3,101) (9,502) (9,244)

4 unchanged sentences

Impairment charge 6,754 10,718 13,577 12,092

Loss on sale of real estate, net 451 — 451 —

Gain on sale of real estate, net (4,696) (8,902) (4,245) (8,902)

FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 13,127 $ 16,976 $ 44,316 $ 47,072

4 unchanged sentences

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

Net (loss) income $ (4,588) $ 1,624 $ (1,420) $ 5,068

Net income $ 1,792 $ 2,787 $ 370 $ 7,852

Distributions attributable to preferred and senior common stock (3,207) (3,101) (9,502) (9,244)

5 unchanged sentences

Income impact of assumed conversion of senior common stock 108 114 323 344

Loss on sale of real estate, net 451 — 451 —

Gain on sale of real estate, net (4,696) (8,902) (4,245) (8,902)

FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions (1) $ 13,235 $ 17,090 $ 44,639 $ 47,416

4 unchanged sentences

Diluted FFO per weighted average share of common stock and Non-controlling OP Unit (1) $ 0.33 $ 0.43 $ 1.10 $ 1.21

Distributions declared per share of common stock and Non-controlling OP Unit $ 0.3000 $ 0.3762 $ 0.9000 $ 1.1286

(1) These amounts were unchanged by the revisions described in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies” and Note 9, “Revision of Previously Issued Financial Statements.”

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