What changed in this filing

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Item 1. Financial Statements

2023-10-25 compared with 2023-07-26 · 247 added, 202 removed, 580 unchanged (44% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

June 30, 2023 December 31, 2022

September 30, December 31,

Real estate, at cost:

6 unchanged sentences

Assets held for sale 38,839 23,208

Mortgage loans receivables, net 107,758 46,378

Mortgage loans receivable, net 109,091 46,378

Cash, cash equivalents and restricted cash 7,934 70,543

13 unchanged sentences

Common stock, $ 0.01 par value, 400,000,000 shares authorized;

66,991,597 and 58,031,879 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

68,701,223 and 58,031,879 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,289,810 1,091,514

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

1 unchanged sentence

Interest income on loans receivable 2,244 674 5,145 1,671

Other revenue 550 — 550 —

Total revenues 33,961 25,013 95,042 68,980

10 unchanged sentences

Loss on debt extinguishment — — ( 128 ) —

Other income 68 36 220 36

Total other (expense) income, net ( 4,966 ) 372 ( 9,077 ) ( 636 )

Net (loss) income before income taxes ( 824 ) 2,103 614 4,160

Income tax benefit (expense) 32 ( 93 ) 75 ( 184 )

Net (loss) income ( 792 ) 2,010 689 3,976

Net (loss) income attributable to noncontrolling interests ( 1 ) 23 8 47

Net (loss) income attributable to common stockholders $ ( 791 ) $ 1,987 $ 681 $ 3,929

Other income, net 367 — 586 36

Total other income (expense), net ( 3,206 ) ( 2,874 ) ( 12,285 ) ( 3,510 )

Net income before income taxes 4,254 1,590 4,868 5,751

Income tax (expense) benefit ( 15 ) ( 171 ) 60 ( 356 )

Net income 4,239 1,419 4,928 5,395

Net income attributable to noncontrolling interests 24 16 32 63

Net income attributable to common stockholders $ 4,215 $ 1,403 $ 4,896 $ 5,332

Amounts available to common stockholders per common share:

5 unchanged sentences

Other comprehensive income:

Net (loss) income $ ( 792 ) $ 2,010 $ 689 $ 3,976

Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395

Change in value on derivatives, net 6,466 13,887 6,875 21,436

10 unchanged sentences

Balance at December 31, 2022 58,031,879 $ 580 $ 1,091,514 $ ( 66,937 ) $ 23,673 $ 1,048,830 $ 9,593 $ 1,058,423

Issuance of common stock in public offerings, net of issuance costs 2,759,481 28 52,875 — — 52,903 — 52,903

Issuance of common stock in public offering, net of issuance costs 2,759,481 28 52,875 — — 52,903 — 52,903

OP Units converted to common stock 5,694 — 105 — — 105 ( 105 ) —

7 unchanged sentences

Balance at March 31, 2023 60,862,466 $ 609 $ 1,145,160 $ ( 77,237 ) $ 17,743 $ 1,086,275 $ 9,347 $ 1,095,622

Issuance of common stock in public offerings, net of issuance costs 6,128,135 61 114,475 — — 114,536 — 114,536

Issuance of common stock in public offering, net of issuance costs 6,128,135 61 114,475 — — 114,536 — 114,536

Dividends and distributions declared on common stock and OP Units — — — ( 12,173 ) — ( 12,173 ) ( 102 ) ( 12,275 )

6 unchanged sentences

Balance at June 30, 2023 66,991,597 $ 670 $ 1,260,879 $ ( 90,329 ) $ 24,082 $ 1,195,302 $ 9,293 $ 1,204,595

Issuance of common stock in public offering, net of issuance costs 1,672,242 17 27,401 — — 27,418 — 27,418

OP Units converted to common stock 19,932 — 362 — — 362 ( 362 ) —

Dividends and distributions declared on common stock and OP Units — — — ( 13,768 ) — ( 13,768 ) ( 104 ) ( 13,872 )

Dividends declared on restricted stock, net — — — ( 126 ) — ( 126 ) — ( 126 )

Vesting of restricted stock units 24,088 — — — — — — —

Repurchase of common stock for tax withholding obligations ( 6,636 ) — ( 112 ) — — ( 112 ) — ( 112 )

Stock-based compensation, net — — 1,280 2 — 1,282 — 1,282

Other comprehensive income — — — — 6,412 6,412 54 6,466

Net income — — — 4,215 — 4,215 24 4,239

Balance at September 30, 2023 68,701,223 $ 687 $ 1,289,810 $ ( 100,006 ) $ 30,494 $ 1,220,985 $ 8,905 $ 1,229,890

The accompanying notes are an integral part of these condensed consolidated financial statements.

6 unchanged sentences

Balance at December 31, 2021 44,223,050 $ 442 $ 809,724 $ ( 35,119 ) $ 4,123 $ 779,170 $ 10,645 $ 789,815

Issuance of common stock in public offerings, net of issuance costs 3,604,736 36 75,461 — — 75,497 — 75,497

Issuance of common stock in public offering, net of issuance costs 3,604,736 36 75,461 — — 75,497 — 75,497

OP Units converted to common stock 25,629 — 484 — — 484 ( 484 ) —

7 unchanged sentences

Balance at March 31, 2022 47,921,988 $ 479 $ 886,351 $ ( 42,193 ) $ 10,258 $ 854,895 $ 10,152 $ 865,047

Issuance of common stock in public offerings, net of issuance costs 2,397,035 24 49,976 — — 50,000 — 50,000

Issuance of common stock in public offering, net of issuance costs 2,397,035 24 49,976 — — 50,000 — 50,000

OP Units converted to common stock 22,265 — 418 — — 418 ( 418 ) —

5 unchanged sentences

Balance at June 30, 2022 50,341,288 $ 503 $ 938,043 $ ( 49,943 ) $ 11,581 $ 900,184 $ 9,668 $ 909,852

Issuance of common stock in public offering, net of issuance costs 4,512,003 45 93,477 — — 93,522 — 93,522

Dividends and distributions declared on common stock and OP Units — — — ( 10,073 ) — ( 10,073 ) ( 103 ) ( 10,176 )

Dividends declared on restricted stock, net — — — ( 141 ) — ( 141 ) — ( 141 )

Vesting of restricted stock units 31,865 1 ( 1 ) — — — — —

Repurchase of common stock for tax withholding obligations ( 8,861 ) — ( 187 ) — — ( 187 ) — ( 187 )

Stock-based compensation, net — — 1,302 7 — 1,309 — 1,309

Other comprehensive income — — — — 13,754 13,754 133 13,887

Net income — — — 1,403 — 1,403 16 1,419

Balance at September 30, 2022 54,876,295 $ 549 $ 1,032,634 $ ( 58,747 ) $ 25,335 $ 999,771 $ 9,714 $ 1,009,485

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

5 unchanged sentences

Noncash revenue adjustments ( 1,147 ) ( 2,076 )

Amortization of deferred gains on interest rate swaps ( 1,134 ) —

Stock-based compensation expense 3,559 3,646

11 unchanged sentences

Real estate development and improvements ( 47,692 ) ( 15,492 )

Investment in mortgage loan receivables ( 61,422 ) ( 46,466 )

Investment in mortgage loans receivable ( 65,513 ) ( 46,466 )

Earnest money deposits ( 2,531 ) ( 3,486 )

9 unchanged sentences

Principal payments on mortgages payable ( 99 ) ( 12 )

Proceeds under property development incentives — 605

Proceeds under revolving credit facilities 288,000 365,000

Repayments under revolving credit facilities ( 359,000 ) ( 399,000 )

Proceeds from term loans 150,000 200,000

Proceeds under property development incentives — 605

Repurchase of common stock for tax withholding obligations ( 480 ) ( 549 )

12 unchanged sentences

Cash flow hedge change in fair value $ 8,009 $ 21,436

Mortgage loan receivable settled in exchange for acquisition of real estate $ 4,673 $ —

Increase in mortgage loan receivable in exchange for disposition of real estate $ 1,837 $ —

Refinancing of mortgage loan receivable $ 1,327 $ —

Mortgage note assumed at fair value $ — $ 7,913

Accrued capital expenditures and real estate development and improvement costs $ 9,834 $ 952

15 unchanged sentences

The Company also invests in property developments and mortgage loans secured by real estate.

As of June 30, 2023, the Company owned or had investments in 525 properties, located in 45 states, excluding 23 property developments where rent has yet to commence.

As of September 30, 2023, the Company owned or had investments in 547 properties, located in 45 states, excluding 32 property developments where rent has yet to commence.

Note 2 – Summary of Significant Accounting Policies

4 unchanged sentences

The accompanying condensed consolidated financial statements include the accounts of the Company and subsidiaries in which the Company has a controlling financial interest.

All intercompany accounts and transactions have been eliminated in consolidation and the Company’s net (loss) income is reduced by the portion of net (loss) income attributable to noncontrolling interests.

All intercompany accounts and transactions have been eliminated in consolidation and the Company’s net income is reduced by the portion of net income attributable to noncontrolling interests.

Interim Unaudited Financial Information

2 unchanged sentences

In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been included.

The results of operations for the three and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results for the full year.

The results of operations for the three and nine months ended September 30, 2023 and 2022 are not necessarily indicative of the results for the full year.

Use of Estimates

11 unchanged sentences

The Company estimates fair value using data such as operating income, estimated capitalization rates or multiples, leasing prospects, local market information, and with regard to assets held for sale, based on the estimated or negotiated selling price, less estimated costs of disposal.

Based on these unobservable inputs, the Company determined that its valuations of impaired real estate and intangible assets fall within Level 3 of the fair value hierarchy under ASC Topic 820.

Based on these unobservable inputs, the Company determined that its valuations of impaired real estate and intangible assets fall within Level 2 and Level 3 of the fair value hierarchy under ASC Topic 820.

The following table summarizes the provision for impairment during the periods indicated below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

3 unchanged sentences

Disposed within the period 2 — 2 1

(1) Includes the number of properties that were impaired and classified as held for sale as of year-end or impaired and disposed of during the respective periods.

(1) Includes the number of properties that were either (i) impaired during the period on the held for sale classification date and remained as held for sale as of period-end or (ii) impaired and disposed of during the respective period.

Excludes properties that did not have impairment recorded during the year.

Of the total provision for impairment during the three and nine months ended September 30, 2023, the Company recorded $ 0.7 million of additional impairment expense on properties that were classified as held for sale in prior periods.

Cash, Cash Equivalents and Restricted Cash

2 unchanged sentences

Restricted cash is included in cash, cash equivalents, and restricted cash in the condensed consolidated balance sheets.

The Company had $ 1.6 million of restricted cash as of June 30, 2023, and $ 4.7 million of restricted cash as of December 31, 2022.

The Company’s bank balances as of June 30, 2023 and December 31, 2022 included certain amounts over the Federal Deposit Insurance Corporation limits.

The Company had less than $ 0.1 million of restricted cash as of September 30, 2023, and $ 4.7 million of restricted cash as of December 31, 2022.

The Company’s bank balances as of September 30, 2023 and December 31, 2022 included certain amounts over the Federal Deposit Insurance Corporation limits.

Fair Value Measurement

Companies are required to disclose the estimated fair values of all financial instruments, even if they are not carried at their fair value.

The fair values of financial instruments are estimates based on market conditions and perceived risks as of June 30, 2023 and December 31, 2022.

The fair values of the Company’s financial instruments are estimates based on market conditions and perceived risks as of September 30, 2023 and December 31, 2022.

These estimates require management’s judgement and may not be indicative of the future fair values of the assets and liabilities.

The fair value of the Company’s cash, cash equivalents and restricted cash (including money market accounts), other assets and accounts payable, accrued expenses and other liabilities approximate their carrying value because of the short-term nature of these instruments.

Additionally, the Company believes the following financial instruments have carrying values that approximate their fair values as of June 30, 2023:

Additionally, the Company believes the following financial instruments have carrying values that approximate their fair values as of September 30, 2023:

• Borrowings under the Company’s Revolver (as defined in “Note 6 - Debt”) approximate fair value based on their nature, terms and variable interest rates.

1 unchanged sentence

• Carrying value of the Company’s mortgage note payable approximates fair value based on a discounted cash flow analysis using estimates of the amount and timing of future cash flows, market rates, and credit spreads.

The following table discloses fair value information for the Company’s 2024 Term Loan, 2027 Term Loan, and 2028 Term Loan (each as defined in “Note 6 - Debt”) (in thousands):

June 30, 2023 December 31, 2022

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

The following table discloses fair value information for the Company’s 2024 Term Loan, 2027 Term Loan, 2028 Term Loan, and 2029 Term Loan (each as defined in “Note 6 - Debt”) (in thousands):

September 30, 2023 December 31, 2022

Carrying Value (1)

Estimated Fair Value Carrying Value (1)

Estimated Fair Value

2024 Term Loan (2)

4 unchanged sentences

198,945 201,465 198,764 201,108

2029 Term Loan

148,749 150,727 — —

(1) The carrying value of the debt instruments are net of unamortized debt issuance and discount costs.

(2) On June 15, 2023, the Company amended and restated its 2024 Term Loan, providing for a $ 175.0 million senior unsecured term loan (the “2027 Term Loan”).

Concentrations of Credit Risk

2 unchanged sentences

The credit risk exposure with regard to the Company’s cash, credit facilities, and derivative instruments is spread among a diversified group of investment grade financial institutions.

During the three and six months ended June 30, 2023 and 2022, there were no tenants or borrowers with rental revenue or interest income on loans receivable, respectively, that exceeded 10% of total revenues.

During the three and nine months ended September 30, 2023 and 2022, there were no tenants or borrowers with rental revenue or interest income on loans receivable, respectively, that exceeded 10% of total rental revenue.

Segment Reporting

6 unchanged sentences

The Company acquires, owns and manages commercial single-tenant lease properties, with the majority being long-term triple-net leases where the tenant is generally responsible for all improvements and contractually obligated to pay all operating costs (such as real estate taxes, utilities and repairs and maintenance costs).

As of June 30, 2023, the Company’s weighted average remaining lease term was 9.4 years.

As of September 30, 2023, the Company’s weighted average remaining lease term was 9.3 years.

The Company’s property leases have been classified as operating leases and some have scheduled rent increases throughout the lease term.

1 unchanged sentence

All lease-related income is reported as a single line item, rental revenue (including reimbursable), in the condensed consolidated statements of operations and comprehensive income and is presented net of any reserves for uncollectible amounts.

There were no material reserves for uncollectible amounts during the three and six months ended June 30, 2023 and 2022.

There were no material reserves for uncollectible amounts during the three and nine months ended September 30, 2023 and 2022.

Fixed lease income includes stated amounts per the lease contract, which include base rent, fixed common area maintenance charges, and straight-line lease adjustments.

2 unchanged sentences

The following table provides a disaggregation of lease income recognized under ASC 842 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

10 unchanged sentences

(2) Variable lease income primarily includes tenant reimbursements for real estate taxes, insurance, common area maintenance, and lease termination fees, and the write-off of uncollectible amounts.

There were immaterial write-offs of uncollectible amounts during the three and six months ended June 30, 2023 and 2022.

Scheduled future minimum base rental payments (excluding base rental payments from properties classified as held for sale and straight line rent adjustments for all properties) due to be received under the remaining non-cancelable term of the operating leases in place as of June 30, 2023 are as follows (in thousands):

There were immaterial write-offs of uncollectible amounts during the three and nine months ended September 30, 2023 and 2022.

Scheduled future minimum base rental payments (excluding base rental payments from properties classified as held for sale and straight-line rent adjustments for all properties) due to be received under the remaining non-cancelable term of the operating leases in place as of September 30, 2023 are as follows (in thousands):

Future Minimum Base

8 unchanged sentences

The lease has a remaining noncancellable lease term of 8.8 years that expires on July 31, 2032, with a one-time option to terminate in 2029 exercisable by the Company.

The following table presents the lease expense components for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table presents the lease expense components for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

2 unchanged sentences

The Company recorded a right-of-use asset and operating lease liability of approximately $ 4.5 million at lease commencement.

As of June 30, 2023, the right-of-use asset and operating lease liability was $ 4.1 million and $ 5.3 million, respectively.

As of September 30, 2023, the right-of-use asset and operating lease liability was $ 4.0 million and $ 5.2 million, respectively.

The right-of-use asset is included in other assets, net and the operating lease liability is included in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for the corporate office lease obligation as of June 30, 2023 (in thousands):

The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for the corporate office lease obligation as of September 30, 2023 (in thousands):

Future Minimum Lease Payments

7 unchanged sentences

Note 4 – Real Estate Investments

As of June 30, 2023, the Company owned or had investments in 525 properties, excluding 23 property developments where rent has yet to commence.

As of September 30, 2023, the Company owned or had investments in 547 properties, excluding 32 property developments where rent has yet to commence.

The gross real estate investment portfolio, including properties under development, totaled approximately $ 1.8 billion and consisted of the gross acquisition cost of land, buildings, improvements, and lease intangible assets and liabilities.

The investment portfolio is geographically dispersed throughout 45 states with gross real estate investments in Illinois and Texas representing 9.5 % and 8.9 %, respectively, of the total gross real estate investment of the Company’s entire portfolio.

During the three months ended June 30, 2023, the Company acquired 28 properties for a total purchase price of $ 96.2 million, inclusive of $ 1.0 million of capitalized acquisition costs.

During the six months ended June 30, 2023, the Company acquired 48 properties for a total purchase price of $ 163.9 million, inclusive of $ 1.7 million of capitalized acquisition costs.

During the three months ended June 30, 2022, the Company acquired 22 properties for a total purchase price of $ 117.3 million, inclusive of $ 0.7 million of capitalized acquisition costs.

During the six months ended June 30, 2022, the Company acquired 56 properties for a total purchase price of $ 207.3 million, inclusive of $ 1.9 million of capitalized acquisition costs.

The investment portfolio is geographically dispersed throughout 45 states with gross real estate investments in Illinois and Texas representing 8.9 % and 8.8 %, respectively, of the total gross real estate investment of the Company’s investment portfolio.

During the three months ended September 30, 2023, the Company acquired 21 properties for a total purchase price of $ 95.3 million, inclusive of $ 0.8 million of capitalized acquisition costs.

During the nine months ended September 30, 2023, the Company acquired 69 properties for a total purchase price of $ 259.2 million, inclusive of $ 2.4 million of capitalized acquisition costs.

During the three months ended September 30, 2022, the Company acquired 26 properties for a total purchase price of $ 121.7 million, inclusive of $ 1.3 million of capitalized acquisition costs.

During the nine months ended September 30, 2022, the Company acquired 82 properties for a total purchase price of $ 329.0 million, inclusive of $ 3.2 million of capitalized acquisition costs.

The acquisitions were all accounted for as asset acquisitions.

An allocation of the purchase price and acquisition costs paid for the completed acquisitions is as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

Below-market lease intangible liabilities — ( 4,418 ) — ( 10,734 )

Mortgage note payable — ( 7,913 ) — ( 7,913 )

Accounts payable, accrued expense and other liabilities — ( 16 ) — ( 40 )

Purchase price (including acquisition costs) $ 95,311 $ 121,697 $ 259,245 $ 328,986

As of June 30, 2023, the Company had 23 property developments under construction.

During the three months ended June 30, 2023, the Company invested $ 17.7 million in property developments.

During the six months ended June 30, 2023, the Company invested $ 22.2 million in property developments, including the acquisition of 20 new build-to-suit projects with a combined initial purchase price of $ 11.9 million.

During the six months ended June 30, 2023, the Company completed development on two projects and reclassified approximately $ 14.8 million from property under development to land, building, and improvements in the accompanying condensed consolidated balance sheets.

Rent commenced for the completed developments in the first quarter of 2023.

As of September 30, 2023, the Company had 27 property developments under construction.

During the three months ended September 30, 2023, the Company invested $ 33.2 million in property developments, including the land acquisition of 14 new developments with a combined initial purchase price of $ 9.6 million.

During the nine months ended September 30, 2023, the Company invested $ 55.5 million in property developments, including the land acquisition of 34 new developments with a combined initial purchase price of $ 21.6 million.

During the nine months ended September 30, 2023, the Company completed development on 12 projects and reclassified approximately $ 38.8 million from property under development to land, building, and improvements in the accompanying condensed consolidated balance sheets.

Rent commenced for seven of the 12 completed developments during the nine months ended September 30, 2023, while rent is expected to commence for the other five completed developments in the fourth quarter of 2023.

The remaining 27 developments in progress are expected to be substantially completed with rent commencing at various points throughout the next twelve months.

The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of June 30, 2023.

During the three months ended June 30, 2022, the Company invested $ 4.6 million in property developments.

During this period, the Company completed development on three projects and reclassified approximately $ 9.8 million from property under development to land, building, and improvements in the accompanying condensed consolidated balance sheets.

During the six months ended June 30, 2022, the Company invested $ 9.6 million in property developments, including the acquisition of one new build-to-suit project with an initial purchase price of $ 1.0 million.

The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of September 30, 2023.

During the three months ended September 30, 2022, the Company invested $ 4.7 in property developments.

During the nine months ended September 30, 2022, the Company invested $ 14.3 million in property developments, including the land acquisition of one new development with an initial purchase price of $ 1.0 million.

During this period, the Company completed development on four projects and reclassified approximately $ 14.7 million from property under development to land, building, and improvements in the accompanying condensed consolidated balance sheets.

Additionally, during the six months ended June 30, 2023 and 2022, the Company capitalized approximately $ 0.3 million and $ 0.1 million, respectively, of interest expense associated with properties under development.

During the three months ended June 30, 2023, the Company sold two properties for a total sales price, net of disposal costs, of $ 3.8 million, recognizing a gain of $ 0.6 million.

During the six months ended June 30, 2023, the Company sold ten properties for a total sales price, net of disposal costs, of $ 19.3 million, recognizing a gain of $ 0.3 million.

During the three months ended June 30, 2022, the Company sold two properties for a total sales price, net of disposal costs, of $ 9.9 million, recognizing a gain of $ 1.9 million.

During the six months ended June 30, 2022, the Company sold three properties for a total sales price, net of disposal costs, of $ 12.2 million, recognizing a gain of $ 2.0 million.

Additionally, during the three months ended September 30, 2023 and 2022, the Company capitalized approximately $ 0.4 million and $ 0.1 million, respectively, of interest expense associated with properties under development.

During the nine months ended September 30, 2023 and 2022, the Company capitalized approximately $ 0.7 million and $ 0.2 million, respectively, of interest expense associated with properties under development.

During the three months ended September 30, 2023, the Company sold four properties for a total sales price, net of disposal costs, of $ 7.2 million, recognizing a gain of $ 0.4 million.

During the nine months ended September 30, 2023, the Company sold fourteen properties for a total sales price, net of disposal costs, of $ 26.5 million, recognizing a gain of $ 0.7 million.

During the three months ended September 30, 2022, the Company sold one property for a total sales price, net of disposal costs, of $ 1.7 million, recognizing a gain of $ 0.1 million.

During the nine months ended September 30, 2022, the Company sold four properties for a total sales price, net of disposal costs, of $ 13.8 million, recognizing a gain of $ 2.2 million.

Investment in Mortgage Loans Receivable

The Company’s mortgage loans receivable portfolio as of June 30, 2023 and December 31, 2022 is summarized below (in thousands):

The Company’s mortgage loans receivable portfolio as of September 30, 2023 and December 31, 2022 is summarized below (in thousands):

Loan Type Number of Secured Properties Effective Interest Rate (4)

Stated Interest Rate Maturity Date June 30, 2023 December 31, 2022

Stated Interest Rate Maturity Date September 30, 2023 December 31, 2022

1 6.46 % 7.00 % 4/8/2024 $ 43,612 $ 40,316

Mortgage 2 6.57 % 7.00 % 6/30/2023 — 6,000

2 5.77 % 6.50 % 6/30/2023 6,000 6,000

Mortgage 46 9.55 % 9.55 % 3/10/2026 41,940 —

1 unchanged sentence

10 7.57 % 7.57 % 6/10/2025 15,505 —

Mortgage 1 8.50 % 8.50 % 3/21/2024 660 —

Mortgage (1) (3)

1 7.50 % 7.50 % 3/8/2024 3,246 —

Total 109,095 46,316

3 unchanged sentences

(1) The Company has the right, subject to certain terms and conditions, to purchase all or a portion of the underlying collateralized property.

(2) The balance is expected to be settled via a like kind exchange subsequent to June 30, 2023.

(2) The stated interest rate is variable up to 15.0 % and is calculated based on contractual rent for existing collateralized properties subject to the loan agreement.

(3) Requires monthly payments of both interest and principal.

(4) Includes amortization of discount and loan origination costs, as applicable.

All of the Company’s mortgage loans receivable require monthly payments of interest only with principal payments occurring as borrower disposes of underlying properties, limited to the Company’s allocated investment by property.

All of the Company’s mortgage loans receivable, excluding the $ 3.2 million mortgage loan with a maturity of March 8, 2024 noted above, require monthly payments of interest only with principal payments occurring as borrower disposes of underlying properties, limited to the Company’s allocated investment by property.

Any remaining principal balance will be repaid at or before the maturity date.

Assets Held for Sale

As of June 30, 2023 and December 31, 2022, there were fourteen and eleven properties, respectively, classified as held for sale.

As of September 30, 2023 and December 31, 2022, there were fifteen and eleven properties, respectively, classified as held for sale.

Provisions for Impairment

The Company recorded provisions for impairment of $ 2.8 million on six properties for both the three and six months ended June 30, 2023.

The Company recorded a provision for impairment of $ 1.1 million on one property for both the three and six months ended June, 30, 2022.

The Company recorded provisions for impairment of $ 1.5 million on seven properties for the three months ended September 30, 2023, and provisions for impairment of $ 4.4 million on ten properties for the nine months ended September 30, 2023.

The Company recorded no provisions for impairment for the three months ended September 30, 2022, and provisions for impairment of $ 1.1 million on one property for the nine months ended September 30, 2022.

Note 5 – Intangible Assets and Liabilities

Intangible assets and liabilities consisted of the following (in thousands):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Amount Accumulated Amortization Net Carrying Amount Gross

6 unchanged sentences

Below-market leases $ 33,959 $ ( 7,260 ) $ 26,699 $ 35,596 $ ( 5,465 ) $ 30,131

The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of June 30, 2023 and as of December 31, 2022 by category were as follows:

The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of September 30, 2023 and as of December 31, 2022 by category were as follows:

Years Remaining

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

In-place leases 9.1 9.4

4 unchanged sentences

The following amounts in the accompanying condensed consolidated statements of operations and comprehensive income related to the amortization of intangible assets and liabilities for all property and ground leases (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

$ 121 $ 313 $ 517 $ 644

The following table provides the projected amortization of in-place lease assets to amortization expense and the net amortization of above-market, below-market, and lease incentive lease intangibles to rental revenue as of June 30, 2023, for the next five years and thereafter (in thousands):

The following table provides the projected amortization of in-place lease assets to amortization expense and the net amortization of above-market, below-market, and lease incentive lease intangibles to rental revenue as of September 30, 2023, for the next five years and thereafter (in thousands):

Remainder of 2023

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Debt consists of the following (in thousands):

Amounts Outstanding

Amounts Outstanding as of

Maturity Date Fully Extended Maturity Date (1)

Rate June 30, 2023 December 31, 2022

2024 Term Loan December 23, 2024 — 1.37 % $ — $ 175,000

Interest Rate September 30, 2023 December 31, 2022

2024 Term Loan (2)

December 23, 2024 — 1.37 % $ — $ 175,000

2027 Term Loan (3)

January 15, 2026 January 15, 2027 1.37 % 175,000 —

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Mortgage Note November 1, 2027 — 4.53 % 8,399 8,498

2029 Term Loan (6)

July 3, 2026 January 3, 2029 4.89 % 150,000 —

Total debt 575,399 496,498

3 unchanged sentences

Total debt, net $ 569,375 $ 491,508

(1) Loan is a floating-rate loan which resets daily at daily SOFR plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.15 % as of June 30, 2023.

The Company has entered into four interest rate swap agreements that effectively convert the floating rate to a fixed rate.

(2) The annual interest rate of the Revolver assumes daily SOFR as of June 30, 2023 of 5.05 % plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.00 % as of June 30, 2023.

(3) Loan is a floating-rate loan which resets monthly at one-month term SOFR plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.15 % as of June 30, 2023.

The Company has entered into three interest rate swap agreements that effectively convert the floating rate to a fixed rate.

(4) The Company records deferred financing costs for the Revolver in other assets, net on its condensed consolidated balance sheets.

(1) Date represents the fully extended maturity date available to the Company under each related debt instrument.

(2) On June 15, 2023, the Company amended and restated its 2024 Term Loan, providing for a $ 175.0 million senior unsecured term loan (the “2027 Term Loan”).

(3) Loan is a floating-rate loan which resets daily at daily SOFR plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.15 % as of September 30, 2023.

The Company has entered into five interest rate swap agreements that effectively convert the floating rate to a fixed rate.

The hedged fixed rate will reset effective November 27, 2023 to 1.87 % and December 23, 2024 to 2.40 %.

(4) The annual interest rate of the Revolver assumes daily SOFR as of September 30, 2023 of 5.32 % plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.00 % as of September 30, 2023.

(5) Loan is a floating-rate loan which resets monthly at one-month term SOFR plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.15 % as of September 30, 2023.

The Company has entered into three interest rate swap agreements that effectively convert the floating rate to a fixed rate.

(6) Loan is a floating-rate loan which resets daily at daily SOFR plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.15 % as of September 30, 2023.

The Company has entered into four interest rate swap agreements that effectively convert the floating rate to a fixed rate.

(7) The Company records deferred financing costs associated with the Revolver and loan commitment fees associated with the 2029 Term Loan in other assets, net on its condensed consolidated balance sheets.

2029 Term Loan

On July 3, 2023, the Company entered into an agreement (the “2029 Term Loan Agreement”) related to a $ 250.0 million sustainability-linked senior unsecured term loan (the “2029 Term Loan”) which may, subject to the terms of the 2029 Term Loan Agreement, be increased to an amount of up to $ 400.0 million at the Company’s request.

The 2029 Term Loan contains a 12-month delayed draw feature and $ 150.0 million was drawn on July 3, 2023.

The 2029 Term Loan is prepayable at the Company’s option in whole or in part without premium or penalty.

The 2029 Term Loan matures on July 3, 2026, subject to extension options at the Company’s election on two occasions, by one year and, on one occasion, by six months (subject to certain conditions).

The interest rate applicable to the 2029 Term Loan is determined by the Company’s Investment Grade Rating (as defined in the 2029 Term Loan Agreement).

Prior to the date the Company obtains an Investment Grade Rating, interest shall accrue at either (i) SOFR, plus a margin ranging from 1.15 % to 1.60 % or (ii) Base Rate (as defined in the 2029 Term Loan Agreement), plus a margin ranging from 0.15 % to 0.60 %, in each case based on the Company’s consolidated total leverage ratio.

After the date the Company obtains an Investment Grade Rating, interest shall accrue at either (i) SOFR, plus a margin ranging from 0.80 % to

1.60 % or (ii) Base Rate, plus a margin ranging from 0.00% to 0.60 %, in each case based on the Company’s Investment Grade Rating.

The Company has hedged the entire $ 250.0 million of the 2029 Term Loan at an all-in fixed interest rate of 4.99 %, through January 2029, which consists of the fixed rate SOFR swap of 3.74 %, plus a credit spread adjustment of 0.10 % and, at current leverage levels, a borrowing spread of 1.15 %.

Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings.

The 2029 Term Loan also contains sustainability-linked pricing component pursuant to which the Company will receive interest rate reductions up to 0.025 % based on its performance against a sustainability performance target focused on the portion of the Company’s annualized based rent attributable to tenants with commitments or quantifiable targets for reduced GHG emission is accordance with the standards of the Science Based Targets initiative (“SBTi”).

In connection with the 2029 Term Loan, the Company incurred $ 1.4 million of deferred financing costs.

Additionally, the Company incurred $ 0.9 million of loan commitment fees which has been capitalized to other assets, net on the condensed consolidated balance sheets.

The deferred financing costs and capitalized loan commitment fees are both amortized over the term of the loan and are included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive income.

Credit Facility

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After the date the Company obtains an Investment Grade Rating, the applicable facility fee will range from 0.125 % to 0.30 % based on the Company’s Investment Grade Rating.

The Credit Facility also contains a sustainability-linked pricing component pursuant to which the Company will receive interest rate reductions up to 0.025 % based on its performance against a sustainability performance target focused on the portion of the Company’s annualized base rent attributable to tenants with commitments or quantifiable targets for reduced greenhouse gas emission in accordance with the standards of the Science Based Targets initiative (“SBTi”).

The Company has fully hedged the 2028 Term Loan with an all-in interest rate of 3.88 %.

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Additionally, $ 0.5 million of unamortized deferred financing costs associated with the Company’s previous revolving credit facility were reclassed to the Revolver.

Deferred financing costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net in the Company’s consolidated statements of operations and comprehensive income.

Deferred financing costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net in the Company’s condensed consolidated statements of operations and comprehensive income.

2027 Term Loan

In December 2019, the Company entered into an agreement governing a $ 175.0 million senior unsecured term loan that matured in December 2024 (the “2024 Term Loan”).

On June 15, 2023, the Company amended and restated its 2024 Term Loan, providing for a $ 175.0 million senior unsecured term loan (the “2027 Term Loan”).

The 2027 Term Loan matures on January 15, 2026, subject to a one year extension option at the Company’s election (subject to certain conditions).

In December 2019, the Company entered into an agreement governing a $ 175.0 million senior unsecured term loan that was scheduled to mature in December 2024 (the “2024 Term Loan”).

On June 15, 2023, the Company amended and restated the agreement governing the 2024 Term Loan to provide for a $ 175.0 million senior unsecured term loan with a maturity date of January 15, 2026 that is subject to a one year extension option at the Company’s election (subject to certain conditions) (the “2027 Term Loan”).

The 2027 Term Loan is repayable at the Company’s option in whole or in part without premium or penalty.

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Mortgage Note Payable

As of June 30, 2023, the Company had total gross mortgage indebtedness of $ 8.4 million, which was collateralized by related real estate and a tenant’s lease with an aggregate net book value of $ 12.9 million.

As of September 30, 2023, the Company had total gross mortgage indebtedness of $ 8.4 million, which was collateralized by related real estate and a tenant’s lease with an aggregate net book value of $ 12.7 million.

The Company incurred debt issuance costs of less than $ 0.1 million and recorded a debt discount of $ 0.6 million, both of which are recorded as a reduction of the principal balance in mortgage note payable, net in the Company’s condensed consolidated balance sheets.

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Debt Maturities

Payments on the 2027 Term Loan and the 2028 Term Loan are interest only through maturity.

As of June 30, 2023, scheduled debt maturities, including balloon payments, are as follows (in thousands):

Payments on the 2027 Term Loan, 2028 Term Loan, and 2029 Term Loan are interest only through maturity.

As of September 30, 2023, scheduled debt maturities, including balloon payments, are as follows (in thousands):

Scheduled Principal Balloon Payment (1)

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(1) Does not assume the exercise of any extension options available to the Company.

Interest Expense

I nterest Expense

The following table is a summary of the components of interest expense related to the Company’s borrowings (in thousands):

Three Months Ended

June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

5 unchanged sentences

Amortization of deferred financing costs 264 153 635 354

Amortization of debt discount, net 150 56 301 113

Amortization of debt discount and debt issuance costs, net 315 86 616 199

Amortization of deferred gains on interest rate swaps ( 1,134 ) — ( 1,134 ) —

Capitalized interest ( 404 ) ( 115 ) ( 688 ) ( 218 )

Total interest expense, net $ 3,946 $ 3,017 $ 13,412 $ 5,708

(1) Includes facility fees and non-utilization fees of approximately $ 0.2 million and less than $ 0.1 million for the three months ended June 30, 2023 and 2022, respectively, and facility fees of $ 0.3 million and $ 0.1 million for the six months ended June 30, 2023 and 2022, respectively.

(1) Includes facility fees and non-utilization fees of approximately $ 0.2 million and $ 0.1 million for the three months ended September 30, 2023 and 2022, respectively, and facility fees of $ 0.5 million and $ 0.2 million for the nine months ended September 30, 2023 and 2022, respectively.

(2) Includes the effects of interest rate hedges in place as of such date.

Deferred financing, discount, and debt issuance costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net in the Company’s condensed consolidated statements of operations and comprehensive income.

During the three months ended June 30, 2023 and 2022, term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 6.41 % and 1.94 %, respectively.

During the six months ended June 30, 2023 and 2022, term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 6.09 % and 1.63 %, respectively.

During the three months ended June 30, 2023 and 2022, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs and facility fees, of 5.94 % and 2.08 %, respectively.

During the six months ended June 30, 2023 and 2022, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs and facility fees, of 5.92 % and 1.78 %, respectively.

During the three months ended September 30, 2023 and 2022, the term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 6.53 % and 3.53 %, respectively.

During the nine months ended September 30, 2023 and 2022, term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 5.09 % and 2.49 %, respectively.

During the three months ended September 30, 2023 and 2022, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs and facility fees, of 7.05 % and 3.28 %, respectively.

During the nine months ended September 30, 2023 and 2022, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs and facility fees, of 5.98 % and 2.29 %, respectively.

The estimated fair values of the Company’s term loans have been derived based on market observable inputs such as interest rates and discounted cash flow analysis using estimates of the amount and timing of future cash flows.

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Refer to “Note 2 - Summary of Significant Accounting Policies” for additional detail on fair value measurements.

The Company was in compliance with all of its debt covenants as of June 30, 2023 and expects to be in compliance for the twelve-month period ending December 31, 2023.

The Company was in compliance with all of its debt covenants as of September 30, 2023 and expects to be in compliance for the twelve-month period ending December 31, 2023.

Note 7 – Derivative Financial Instruments

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The Company recognizes the entire change in the fair value in Accumulated Other Comprehensive Income (“AOCI”) and the change is reflected as cash flow hedge changes in fair value in the supplemental disclosures of non-cash investing and financing activities in the condensed consolidated statements of cash flows.

Effective July 3, 2023, such derivatives were initiated to hedge the variable cash flows associated with the 2029 Term Loan.

The interest rate for the variable rate 2029 Term Loan is based on the hedged fixed rate of 3.64% compared to the variable 2029 Term Loan daily SOFR rate as of September 30, 2023 of 5.32 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 %.

The maturity dates of the interest rate swaps coincide with the fully extended maturity date of the 2029 Term Loan.

Effective September 1, 2022, such derivatives were initiated to hedge the variable cash flows associated with the 2028 Term Loan.

The interest rate for the variable rate 2028 Term Loan is based on the hedged fixed rate of 2.63 % compared to the variable 2028 Term Loan one-month SOFR rate as of June 30, 2023 of 5.16 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 %.

The interest rate for the variable rate 2028 Term Loan is based on the hedged fixed rate of 2.63 % compared to the variable 2028 Term Loan one-month SOFR rate as of September 30, 2023 of 5.33 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 %.

The maturity dates of the interest rate swaps coincide with the maturity date of the 2028 Term Loan.

In anticipation of the settlement of the 2024 Term Loan, the Company converted and extended the existing cash flow hedges with an aggregate notional amount of $ 150.0 million to cover the base rate associated with the new 2027 Term Loan of $ 175.0 million.

The remaining $25.0 million remained hedged under the original cash flow hedge with a maturity date of December 23, 2024.

Subsequent to June 30, 2023, the Company entered into a $25.0 million cash flow hedge through the extended maturity date of the 2027 Term Loan of January 15, 2027.

Effective June 30, 2023, the Company had a hedged fixed rate of 0.12 % compared to the variable 2027 Term Loan SOFR rate as of June 30, 2023 of 5.05 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 %.

This hedged fixed rate of 0.12 % is effective through November 27, 2023, and then adjusts to 1.87 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 % through December 23, 2024, and 2.40 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 % thereafter through the fully extended maturity of the 2027 Term Loan of January 2027.

Effective January 27, 2023, the Company converted its four existing LIBOR swap agreements associated with the 2024 Term Loan into four new SOFR swaps that convert the SOFR variable rate to a fixed rate of 0.12 % and on June 15, 2023, the Company amended and restated its 2024 Term Loan, providing for a $ 175.0 million senior unsecured term loan (the “2027 Term Loan”).

The interest rate on the variable 2027 Term Loan includes a daily SOFR rate as of September 30, 2023 of 5.30 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 %.

In anticipation of the amendment and restatement of the 2024 Term Loan, additional derivatives, effective November 27, 2023 and December 23, 2024 at hedged fixed rates of 1.87 % and 2.40 %, respectively, were initiated to hedge the variable cash flows associated with the 2027 Term Loan through the fully extended maturity date.

Amounts will subsequently be reclassified to earnings when the hedged item affects earnings.

5 unchanged sentences

Number of Instruments Notional

Interest Rate Derivatives June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

Interest Rate Derivatives September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

Interest rate swaps 12 7 $ 650,000 $ 375,000

The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 (in thousands):

The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 (in thousands):

Derivative Assets

1 unchanged sentence

Derivatives Designated as Hedging Instruments:

Balance Sheet Location June 30, 2023 December 31, 2022

Balance Sheet Location September 30, 2023 December 31, 2022

Interest rate swaps Other assets, net $ 32,077 $ 24,067

The following table presents the effect of the Company's interest rate swaps on the condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2023 and 2022 (in thousands):

Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income

The following table presents the effect of the Company's interest rate swaps on the condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income

(Effective Portion)

Derivatives in Cash Flow Hedging Relationships 2023 2022 2023 2022

For the Three Months Ended June 30

For the Three Months Ended September 30

Interest Rate Products $ 11,814 $ 14,761 Interest expense, net $ 5,218 $ 874

For the Six Months Ended June 30

For the Nine Months Ended September 30

Interest Rate Products $ 18,388 $ 22,539 Interest expense, net $ 11,513 $ 1,103

The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and six months ended June 30, 2023 and 2022.

The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and nine months ended September 30, 2023 and 2022.

During the next twelve months, the Company estimates that an additional $ 25.6 million will be reclassified as a decrease to interest expense.

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Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of June 30, 2023, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

However, as of September 30, 2023, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below presents the Company’s derivative assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

The table below presents the Company’s derivative assets measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

Fair Value Hierarchy Level

Description Level 1 Level 2 Level 3 Total Fair Value

June 30, 2023

September 30, 2023

Derivative assets $ — $ 32,077 $ — $ 32,077

3 unchanged sentences

Other assets, net consist of the following (in thousands):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Accounts receivable, net $ 9,195 $ 7,167

11 unchanged sentences

Accounts payable, accrued expenses and other liabilities consists of the following (in thousands):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Accrued expenses $ 11,221 $ 5,745

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On September 1, 2021, the Company entered into a $ 250.0 million at-the-market equity program (the “ATM Program”) through which, from time to time, it may sell shares of its common stock in registered transactions.

The Company has issued shares of common stock in connection with the ATM Program for the periods presented as follows:

The Company has issued or committed to issue shares of common stock in connection with the ATM Program for the periods presented as follows:

• On September 14, 2023, the Company entered into a forward confirmation with respect to 7,500,000 shares of its common stock under the ATM Program.

On September 28, 2023, the Company partially physically settled 1,516,289 shares of common stock at a price of $ 16.49 per share under such forward confirmation for net proceeds of approximately $ 24.8 million, net of sales commissions and offering costs of $ 0.2 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 1,516,289 Class A OP Units.

5,983,711 shares remain unsettled under the forward confirmation as of September 30, 2023.

• In September 2023, the Company issued 46,228 shares of common stock at a weighted average price of $ 17.09 per share for net proceeds of approximately $ 0.8 million, net of sales commissions and offering costs of less than $ 0.1 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 46,228 Class A OP Units.

• In August 2023, the Company issued 109,725 shares of common stock at a weighted average price of $ 17.18 per share for net proceeds of approximately $ 1.8 million, net of sales commissions and offering costs of $ 0.1 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 109,725 Class A OP Units.

• In June 2023, the Company issued 1,364,815 shares of common stock at a weighted average price of $ 17.53 per share for net proceeds of approximately $ 23.4 million, net of sales commissions and offering costs of $ 0.3 million.

4 unchanged sentences

The Company contributed the net proceeds to the Operating Partnership in exchange for 163,774 Class A OP Units.

As of June 30, 2023, the Company has $ 127.3 million remaining gross proceeds available for future issuances of shares of common stock under the ATM Program.

As of September 30, 2023, the Company has $ 99.6 million remaining gross proceeds available for future issuances of shares of common stock under the ATM Program, inclusive of 5,983,711 shares remaining unsettled under the outstanding forward confirmation.

August 2022 Follow-On Offering

On August 8, 2022, the Company completed a registered public offering of 9,000,000 shares of its common stock at a public offering price of $ 20.20 per share, which excluded an over-allotment option to the underwriters to purchase up to an additional 1,350,000 shares, which was exercised in full on August 10, 2022.

In connection with the offering, the Company entered into forward sale agreements for 10,350,000 shares of its common stock.

The Company did not initially receive any proceeds from the sales of shares of common stock by the forward purchasers upon registration of the offering.

On March 30, 2023, the Company partially physically settled 2,612,736 shares of common stock at a price of $ 20.20 per share in accordance with the forward sale agreements.

The Company received net proceeds from the settlement of $ 50.0 million, net of underwriting discounts and offering costs of $ 2.8 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 2,612,736 Class A OP Units.

On June 28, 2023, the Company physically settled 4,763,320 shares of common stock at a price of $ 20.20 per share in accordance with the forward sale agreements.

The Company received net proceeds from the settlement of $ 91.1 million, net of underwriting discounts and offering costs of $ 5.1 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 4,763,320 Class A OP Units.

As of June 30, 2023, the Company fully physically settled the forward sale agreements (by the delivery of shares of common stock).

In connection with the offering, the Company entered into

forward sale agreements for 10,350,000 shares of its common stock.

As of June 30, 2023, the Company had fully physically settled the forward sale agreements (by the delivery of shares of common stock).

January 2022 Follow-On Offering

1 unchanged sentence

In connection with the offering, the Company entered into forward sale agreements for 10,350,000 shares of its common stock.

On June 23, 2022, the Company settled 2,397,035 shares of common stock at a price of $ 22.25 per share in accordance with the forward sale agreements.

The Company received net proceeds from the offering of $ 50.0 million, net of underwriting discounts and offering costs of $ 3.3 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 2,397,035 Class A OP Units.

On March 30, 2022, the Company settled 3,440,962 shares of common stock at a price of $ 22.25 per share in accordance with the forward sale agreements.

The Company received net proceeds from the settlement of $ 72.0 million, net of underwriting discounts and offering costs of $ 4.6 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 3,440,962 Class A OP Units.

As of December 31, 2022, the Company fully physically settled the forward sale agreements (by the delivery of shares of common stock).

As of September 30, 2022, the Company had fully physically settled the forward sale agreements (by the delivery of shares of common stock).

Surrendered Shares on Vested Stock Unit Awards

During the six months ended June 30, 2023 and 2022, portions of restricted stock unit awards (“RSUs”) granted to certain of the Company’s officers, directors, and employees vested.

During the nine months ended September 30, 2023 and 2022, portions of restricted stock unit awards (“RSUs”) granted to certain of the Company’s officers, directors, and employees vested.

The vesting of these awards, granted pursuant to the NETSTREIT Corp.

2019 Omnibus Incentive Plan (the “Omnibus Incentive Plan”), resulted in federal and state income tax liabilities for the recipients.

During the six months ended June 30, 2023 and 2022, as permitted by the terms of the Omnibus Incentive Plan and the award grants, certain executive officers and employees elected to surrender a total of 18 thousand and 17 thousand RSUs, respectively both valued at approximately $ 0.4 million, solely to pay the associated statutory tax withholding.

During the nine months ended September 30, 2023 and 2022, as permitted by the terms of the Omnibus Incentive Plan and the award grants, certain executive officers and employees elected to surrender a total of 25 thousand and 26 thousand RSUs, respectively, both valued at approximately $ 0.5 million, solely to pay the associated statutory tax withholding.

The surrendered RSUs are included in the row entitled “repurchase of shares of common stock” on the condensed consolidated statements of cash flows.

During the six months ended June 30, 2023, the Company declared and paid the following common stock dividends (in thousands, except per share data):

Six Months Ended June 30, 2023

During the nine months ended September 30, 2023, the Company declared and paid the following common stock dividends (in thousands, except per share data):

Nine Months Ended September 30, 2023

Declaration Date Dividend Per Share Record Date Total Amount Payment Date

1 unchanged sentence

April 25, 2023 0.200 June 1, 2023 12,173 June 15, 2023

July 24, 2023 0.205 September 1, 2023 13,768 September 15, 2023

$ 0.605 $ 37,591

Six Months Ended June 30, 2022

During the nine months ended September 30, 2022, the Company declared and paid the following common stock dividends (in thousands, except per share data):

Nine Months Ended September 30, 2022

Declaration Date Dividend Per Share Record Date Total Amount Payment Date

1 unchanged sentence

April 26, 2022 0.200 June 1, 2022 9,588 June 15, 2022

July 26, 2022 0.200 September 1, 2022 10,073 September 15, 2022

$ 0.600 $ 28,549

The holders of OP Units are entitled to an equal distribution per each OP Unit held as of each record date.

Accordingly, during the six months ended June 30, 2023 and 2022, the Operating Partnership paid distributions of $ 0.2 million and $ 0.2 million, respectively, to holders of OP Units.

Accordingly, during the nine months ended September 30, 2023 and 2022, the Operating Partnership paid distributions of $ 0.3 million and $ 0.3 million, respectively, to holders of OP Units.

Noncontrolling Interests

1 unchanged sentence

OP Units are convertible into common stock as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one -for-one basis.

As of June 30, 2023 and December 31, 2022, noncontrolling interests represented 0.8 % and 0.9 %, respectively, of OP Units.

During the three months ended June 30, 2023 and 2022, OP Unit holders redeemed 0 and 22,265 OP units, respectively, into shares of common stock on a one -for-one basis.

During the six months ended June 30, 2023 and 2022, OP Unit holders redeemed 5,694 and 47,894 OP units, respectively, into shares of common stock on a one -for-one basis.

As of September 30, 2023 and December 31, 2022, noncontrolling interests represented 0.7 % and 0.9 %, respectively, of OP Units.

During the three months ended September 30, 2023, OP Unit holders redeemed 19,932 OP Units into shares of common stock on a one -for-one basis and during the three months ended September 30, 2022, no OP Units were converted.

During the nine months ended September 30, 2023 and 2022, OP Unit holders redeemed 25,626 and 47,894 OP Units, respectively, into shares of common stock on a one -for-one basis.

Note 10 – Stock-Based Compensation

2 unchanged sentences

The Omnibus Incentive Plan is administered by the Compensation Committee of the Board of Directors.

As of June 30, 2023, the only stock-based compensation granted by the Company were RSUs.

The total amount of stock-based compensation costs recognized in general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive income was $ 1.3 million for both the three months ended June 30, 2023 and 2022.

Stock-based compensation expense was $ 2.3 million for both the six months ended June 30, 2023 and 2022.

All awards of unvested restricted stock units are expected to fully vest over the next one to four years .

As of September 30, 2023, the only stock-based compensation granted by the Company were RSUs.

Stock-based compensation expense was $ 3.6 million for both the nine months ended September 30, 2023 and 2022.

All awards of unvested restricted stock units are expected to fully vest over the next one to five years .

Performance-Based RSUs (effectiveness of Initial Public Offering)

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The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next two years .

The following table summarizes performance-based RSU activity for the period ended June 30, 2023:

The following table summarizes performance-based RSU activity for the period ended September 30, 2023:

Shares Weighted Average Grant Date Fair Value per Share

Unvested RSU grants outstanding as of December 31, 2022 61,391 $ 19.75

Granted during the period — —

Forfeited during the period — —

Vested during the period ( 632 ) 19.75

Unvested RSU grants outstanding as of June 30, 2023 61,391 $ 19.75

For both the three and six months ended June 30, 2023, the Company recognized $ 0.1 million in stock-based compensation expense associated with performance-based RSUs.

As of June 30, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 0.3 million and $ 0.4 million, respectively, and as of June 30, 2023, these awards are expected to be recognized over a remaining weighted average period of 1.2 years.

Unvested RSU grants outstanding as of September 30, 2023 60,759 $ 19.75

For the three and nine months ended September 30, 2023, the Company recognized $ 0.1 million and $ 0.2 million, respectively, in stock-based compensation expense associated with performance-based RSUs.

As of September 30, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 0.2 million and $ 0.4 million, respectively, and as of September 30, 2023, these awards are expected to be recognized over a remaining weighted average period of 1.0 year.

These units are subject to graded vesting and stock-based compensation expense is recognized ratably over the requisite service period for each vesting tranche in the award.

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Pursuant to the Omnibus Incentive Plan, the Company has made service-based RSU grants to certain employees and non-employee directors.

The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next one to four years .

The following table summarizes service-based RSU activity for the period ended June 30, 2023:

The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next one to three years .

The following table summarizes service-based RSU activity for the period ended September 30, 2023:

Shares Weighted Average Grant Date Fair Value per Share

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Vested during the period ( 108,300 ) 19.93

Unvested RSU grants outstanding as of June 30, 2023 321,709 $ 19.70

For the three and six months ended June 30, 2023, the Company recognized $ 0.7 million and $ 1.3 million, respectively, in stock-based compensation expense associated with service-based RSUs.

As of June 30, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 4.8 million and $ 3.0 million, respectively, and as of June 30, 2023, these awards are expected to be recognized over a remaining weighted average period of 2.1 years.

Unvested RSU grants outstanding as of September 30, 2023 298,909 $ 19.79

For the three and nine months ended September 30, 2023, the Company recognized $ 0.7 million and $ 2.0 million, respectively, in stock-based compensation expense associated with service-based RSUs.

As of September 30, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 4.1 million and $ 3.0 million, respectively, and as of September 30, 2023, these awards are expected to be recognized over a remaining weighted average period of 2.0 years.

Stock-based compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award.

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Stock-based compensation expense associated with unvested market-based share awards is recognized on a straight-line basis over the minimum required service period, which is three years .

The following table summarizes market-based RSU activity for the period ended June 30, 2023:

The following table summarizes market-based RSU activity for the period ended September 30, 2023:

Shares Weighted Average Grant Date Fair Value per Share

Unvested RSU grants outstanding as of December 31, 2022

177,350 $ 19.83

Granted during the period 81,751 21.57

Forfeited during the period ( 543 ) 19.36

Vested during the period — —

Unvested RSU grants outstanding as of June 30, 2023 259,101 $ 20.38

For the three and six months ended June 30, 2023, the Company recognized $ 0.4 million and $ 0.8 million, respectively, in stock-based compensation expense associated with market-based RSUs.

As of June 30, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 2.9 million and $ 2.0 million, respectively, and as of June 30, 2023, these awards are expected to be recognized over a remaining weighted average period of 2.1 years.

Unvested RSU grants outstanding as of September 30, 2023

258,558 $ 20.38

For the three and nine months ended September 30, 2023, the Company recognized $ 0.4 million and $ 1.2 million, respectively, in stock-based compensation expense associated with market-based RSUs.

As of September 30, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 2.5 million and $ 2.0 million, respectively, and as of September 30, 2023, these awards are expected to be recognized over a remaining weighted average period of 1.9 years.

Alignment of Interest Program

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The award will be remeasured to fair value each reporting period until the unvested RSUs are granted.

For both the three and six months ended June 30, 2023, the Company recognized approximately $ 0.1 million in stock-based compensation expense associated with these awards.

For both the three and nine months ended September 30, 2023, the Company recognized approximately $ 0.1 million in stock-based compensation expense associated with these awards.

Previous awards under the Program that have been granted are included within service-based RSUs above.

Note 11 – Earnings Per Share

Net (loss) income per common share has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings per Share.

Basic earnings per share is computed by dividing net (loss) income attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Net income per common share has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings per Share.

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted earnings per share is similarly calculated except that the denominator is increased by using the treasury stock method to determine the potential dilutive effect of the Company’s outstanding unvested RSUs and unsettled shares under open forward equity contracts and using the if-converted method to determine the potential dilutive effect of the OP Units.

The Company has noncontrolling interests in the form of OP Units which are convertible into common stock and represent potentially dilutive securities, as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one -for-one basis.

The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net (loss) income per common share for the three and six months ended June 30, 2023 and 2022.

Three Months Ended June 30, Six Months Ended June 30,

The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net income per common share for the three and nine months ended September 30, 2023 and 2022.

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands, except share and per share data) 2023 2022 2023 2022

Net (loss) income $ ( 792 ) $ 2,010 $ 689 $ 3,976

Net loss (income) attributable to noncontrolling interest 1 ( 23 ) ( 8 ) ( 47 )

Net (loss) income attributable to common shares, basic ( 791 ) 1,987 681 3,929

Net (loss) income attributable to noncontrolling interest ( 1 ) 23 8 47

Net (loss) income attributable to common shares, diluted $ ( 792 ) $ 2,010 $ 689 $ 3,976

Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395

Net income attributable to noncontrolling interest ( 24 ) ( 16 ) ( 32 ) ( 63 )

Net income attributable to common shares, basic 4,215 1,403 4,896 5,332

Net income attributable to noncontrolling interest 24 16 32 63

Net income attributable to common shares, diluted $ 4,239 $ 1,419 $ 4,928 $ 5,395

Weighted average common shares outstanding, basic 67,112,587 50,449,735 62,123,334 47,679,870

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Weighted average common shares outstanding, diluted 68,048,369 51,384,758 62,897,957 48,657,049

Net (loss) income available to common stockholders per common share, basic $ ( 0.01 ) $ 0.04 $ 0.01 $ 0.08

Net (loss) income available to common stockholders per common share, diluted $ ( 0.01 ) $ 0.04 $ 0.01 $ 0.08

For the three months ended June 30, 2023, diluted net loss per common share does not assume the conversion of 507,773 OP Units or 152,785 unvested RSUs as such conversion would be antidilutive.

As of June 30, 2023 and December 31, 2022, there were 507,773 and 513,467 of OP Units outstanding, respectively.

Net income available to common stockholders per common share, basic $ 0.06 $ 0.03 $ 0.08 $ 0.11

Net income available to common stockholders per common share, diluted $ 0.06 $ 0.03 $ 0.08 $ 0.11

As of September 30, 2023 and December 31, 2022, there were 487,841 and 513,467 of OP Units outstanding, respectively.

Note 12 – Commitments and Contingencies

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These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated or receives an option to purchase the properties.

As of June 30, 2023, the Company had tenant improvement allowance commitments totaling approximately $ 4.1 million, all of which is expected to be funded over the next two years .

Additionally, as of June 30, 2023, the Company had

commitments to fund 23 properties under development totaling $ 27.9 million, which is expected to be funded over the next twelve months .

As of September 30, 2023, the Company had tenant improvement allowance commitments totaling approximately $ 4.1 million, all of which is expected to be funded over the next two years .

Additionally, as of September 30, 2023, the Company had commitments to fund 27 properties under development totaling $ 37.9 million, which is expected to be funded over the next two years .

In August 2021, the Company entered into a lease agreement on a new corporate office space, which is classified as an operating lease.

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Future minimum base rental payments under the lease are outlined in “Note 3 – Leases.” Annual rent expense, excluding operating expenses, is approximately $ 0.5 million during the initial term.

As of June 30, 2023, the Company did not have any other material commitments for re-leasing costs, recurring capital expenditures, non-recurring building improvements, or similar types of costs.

As of September 30, 2023, the Company did not have any other material commitments for re-leasing costs, recurring capital expenditures, non-recurring building improvements, or similar types of costs.

Note 13 – Subsequent Events

The Company has evaluated all events that occurred subsequent to June 30, 2023 through the date on which these condensed consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements.

The Company has evaluated all events that occurred subsequent to September 30, 2023 through the date on which these condensed consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements.

Common Stock Dividend

On July 24, 2023, the Company's Board of Directors declared a cash dividend of $ 0.205 per share for the third quarter of 2023.

The dividend will be paid on September 15, 2023 to stockholders of record on September 1, 2023.

On October 24, 2023, the Company's Board of Directors declared a cash dividend of $ 0.205 per share for the fourth quarter of 2023 which will be paid on December 15, 2023 to shareholders of record on December 1, 2023.

Revolver Activity

In July 2023, the Company repaid $ 106.0 million under the Revolver.

2029 Term Loan

On July 3, 2023, the Company entered into an agreement (“2029 Term Loan Agreement”) related to a $ 250.0 million sustainability linked senior unsecured term loan (the “2029 Term Loan”) which may, subject to the terms of the 2029 Term Loan Agreement, be increased to an amount of up to $ 400.0 million at the Company’s request.

The 2029 Term Loan contains a 12-month delayed draw feature and $ 150.0 million was drawn on July 3, 2023.

The 2029 Term Loan is prepayable at the Company’s option in whole or in part without premium or penalty.

The 2029 Term Loan matures on July 3, 2026, subject to extension options at the Company’s election on two occasions, by one year and, on one occasion, by six months (subject to certain conditions).

The interest rate applicable to the 2029 Term Loan is determined by the Company’s Investment Grade Rating.

Prior to the date the Company obtains an Investment Grade Rating (as defined in the 2029 Term Loan Agreement), interest shall accrue at either (i) SOFR, plus a margin ranging from 1.15 % to 1.60 % or (ii) Base Rate (as defined in the 2029 Term Loan Agreement), plus a margin ranging from 0.15 % to 0.60 %, in each case based on the Company’s consolidated total leverage ratio.

After the date the Company obtains an Investment Grade Rating, interest shall accrue at either (i) SOFR, plus a margin ranging from 0.80 % to 1.60 % or (ii) Base Rate, plus a margin ranging from 0.00% to 0.60 %, in each case based on the Company’s Investment Grade Rating.

Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings.

In October 2023, the Company borrowed $ 35.0 million under the Revolver which will be used for general corporate purposes, including the acquisition of properties in the Company’s pipeline.

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 1. Financial Statements