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Item 2. Management’s Discussion and Analysis

2023-10-25 compared with 2023-07-26 · 190 added, 161 removed, 258 unchanged (58% of the section changed)

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We also invest in property developments and mortgage loans secured by real estate.

As of June 30, 2023, we owned or had investments in 525 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 87 different tenants, across 25 retail sectors in 45 states.

As of September 30, 2023, we owned or had investments in 547 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 85 different tenants, across 26 retail sectors in 45 states.

This excludes 32 property developments where rent has yet to commence.

We focus on tenants in industries where a physical location is critical to the generation of sales and profits, with a focus on necessity goods and essential services in the retail sector, including home improvement, auto parts, drug stores and pharmacies, general retail, grocers, convenience stores, discount stores, and quick-service restaurants, all of which we refer to as defensive retail industries.

As of June 30, 2023, our investments generated ABR 1 of $116.9 million.

As of September 30, 2023, our investments generated ABR 1 of $124.3 million.

Approximately 69% of our ABR is from investment grade 2 credit rated tenants and an additional 15% of our ABR is derived from tenants with an investment grade profile 3 .

Exclusive of mortgage loans receivable, our portfolio was 100% occupied with a weighted average remaining lease term (“WALT”) of 9.3 years, which we believe provides us with a strong stable source of recurring cash flow from our portfolio.

(1 ) Annualized base rent (“ABR”) is annualized base rent as of the most recent quarter end for all leases that commenced, annualized cash interest on mortgage loans receivable, and the cash yield on amounts funded to date on interest-earning construction in process.

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

We have 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, we entered into a forward confirmation with respect to 7,500,000 shares of our common stock under the ATM Program.

On September 28, 2023, we 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.

We 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, we 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.

• In August 2023, we 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.

As of September 30, 2023, we have $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.

2029 Term Loan

On July 3, 2023, we 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 our 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 our option in whole or in part without premium or penalty.

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

1 Annualized base rent (“ABR”) is annualized base rent as of September 30, 2023, for all leases that commenced, and annualized cash interest on mortgage loans receivable in place as of that date.

2 We define “investment grade” tenants as tenants, or tenants that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher.

3 We define “investment grade profile” tenants as tenants with metrics of more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x but do not carry a published rating from S&P, Moody’s or NAIC.

August 2022 Follow-On Offering

On August 8, 2022, we completed a registered public offering of 9,000,000 shares of our 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, we entered into forward sale agreements for 10,350,000 shares of its common stock.

We 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, we 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.

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

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

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

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

In March 2023, we issued 146,745 shares of common stock at a weighted average price of $20.22 per share for net proceeds of approximately $2.9 million, net of sales commissions and offering costs of less than $0.1 million.

In June 2023, we 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.

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

We 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.

See further discussion of our debt, interest rate, and interest rate hedges included in “Note 6 - Debt.”

Results of Operations

We continued to grow our assets during the first half of 2023 through the acquisition of properties and investment in mortgage loans receivable.

This growth was financed through the settlement of shares of common stock through our forward sale agreements in an amount of $141.1 million, the issuance of common stock under the ATM Program in an amount of $26.3 million, the usage of existing cash balances as a result of borrowings on our $400.0 million senior unsecured revolving credit facility (the “Revolver”), and cash flows from operations during the six months ended June 30, 2023.

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

We continued to grow our assets during the nine months ended September 30, 2023 through the acquisition of properties, property developments, and investment in mortgage loans receivable.

This growth was financed through the settlement of shares of common stock through our forward sale agreements in an amount of $141.1 million, the issuance of common stock under the ATM Program in an amount of $53.7 million, the execution of the 2029 Term Loan Agreement and receipt of proceeds of $150.0 million under the 2029 Term Loan, net borrowings on our $400.0 million senior unsecured revolving credit facility (the “Revolver”), and cash flows from operations during nine months ended September 30, 2023.

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

The acquisitions were all accounted for as asset acquisitions.

These properties are located in 10 states with a WALT of approximately 10.0 years.

The underwritten weighted-average capitalization rate on our second quarter acquisitions was approximately 6.7%.

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

The underwritten weighted-average capitalization rate on our third quarter acquisitions was approximately 7.0%.

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

The acquisitions were all accounted for as asset acquisitions.

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The underwritten weighted-average capitalization rate on our year to date acquisitions was approximately 6.9%.

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

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

During the six months ended June 30, 2023, we 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 this period, we 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, we had 27 property developments under construction.

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

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

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, 2023, we 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, we sold fourteen properties for a total sales price, net of disposal costs of $26.5 million, recognizing a gain of $0.7 million.

Investment in Mortgage Loans Receivable

On March 3, 2023, we executed a fully collateralized $41.9 million loan receivable with a stated interest rate of 9.55% and scheduled maturity date of March 10, 2026.

The loan receivable is collateralized by 46 properties leased by one investment grade tenant.

The funds provided under the loan are included in mortgage loans receivable, net in the accompanying condensed consolidated balance sheets as of June 30, 2023.

On March 24, 2023, we executed a fully collateralized $4.1 million loan receivable with an effective interest rate of 8.03% and scheduled maturity date of April 10, 2026.

The loan receivable is collateralized by three properties leased by one investment grade tenant.

The funds provided under the loan are included in mortgage loans receivable, net in the accompanying condensed consolidated balance sheets as of June 30, 2023.

On May 12, 2023, we executed a fully collateralized $15.5 million loan receivable with an effective interest rate of 7.57% and scheduled maturity date of June 10, 2025.

The loan receivable is collateralized by 10 properties leased by one investment grade tenant.

The funds provided under the loan are included in mortgage loans receivable, net in the accompanying condensed consolidated balance sheets as of June 30, 2023.

During the three months ended September 30, 2023, we invested $7.2 million in fully collateralized mortgage loans receivable with stated interest rates ranging from 7.00% to 8.50%.

During the nine months ended September 30, 2023, we invested $68.8 million in fully collateralized mortgage loans receivable with stated interest rates ranging from 6.89% to 9.55%.

The mortgage loans receivable are collateralized by real estate.

The funds provided under the loans, in addition to discount and loan origination costs of $0.1 million and $0.1 million, respectively, are included in mortgage loans receivable, net in the accompanying condensed consolidated balance sheets as of September 30, 2023.

See “Note 4 - Real Estate Investments” for further discussion on our mortgage loans receivable portfolio.

Economic and Financial Environment

The average inflation rate for the six months ended June 30, 2023 was 4.9%.

While the Federal Reserve has been continuing to raise interest rates in an effort to lower inflation, the pace at which it may continue to do so is unclear leading to uncertainties in the financing market and a volatile economy.

The average inflation rate for the nine months ended September 30, 2023 was 4.4%.

While the Federal Reserve has been raising interest rates in an effort to lower inflation, the pace at which it may continue to do so is unclear leading to uncertainties in the financing market and a volatile economy.

In the commercial real estate market, property prices generally continue to fluctuate which may impact our investment capitalization rates and operating costs.

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We continually monitor the commercial real estate and credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly.

Three Months Ended June 30, 2023 Compared with Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 Compared with Three Months Ended September 30, 2022

The following table sets forth our operating results for the periods indicated (in thousands):

Three Months Ended

September 30,

Rental revenue (including reimbursable) $ 31,167 $ 24,339

Interest income on loans receivable 2,244 674

Other revenue 550 —

Total revenues 33,961 25,013

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Gain on sales of real estate, net 373 143

Loss on debt extinguishment (128) —

Other income 68 36

Total other (expense) income, net (4,966) 372

Net (loss) income before income taxes (824) 2,103

Income tax benefit (expense) 32 (93)

Net (loss) income $ (792) $ 2,010

Revenue for the three months ended June 30, 2023 increased by $9.0 million to $31.6 million from $22.6 million for the three months ended June 30, 2022, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.

The increase includes additional cash rental receipts of $7.4 million, combined with net increases of property expense reimbursements of $0.7 million, and an increase of $1.3 million related to interest income on mortgage loans receivable, offset by a decrease in straight-line rental revenue.

Other income, net 367 —

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

Net income before income taxes 4,254 1,590

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

Net income $ 4,239 $ 1,419

Revenue for the three months ended September 30, 2023 increased by $9.0 million to $34.0 million from $25.0 million for the three months ended September 30, 2022, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.

The increase includes additional cash rental receipts of $6.1 million, combined with net increases of property expense reimbursements of $1.1 million, an increase of $1.6 million related to interest income on mortgage loans receivable, and an increase of $0.6 million in other revenue related to the receipt of legal settlement proceeds associated with a lease termination.

The increase in revenue is offset by a $0.1 million decrease in straight-line rental revenue, a $0.1 million increase in reserves for uncollectible amounts, and a $0.1 million decrease in amortization of above- and below-market lease related intangible assets.

Total Operating Expenses.

Total expenses increased by $6.6 million to $27.5 million for the three months ended June 30, 2023 as compared to $20.9 million for the three months ended June 30, 2022.

The increase is primarily attributed to the increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, provisions for impairment, property-specific reimbursable expenses, and payroll costs.

Total expenses increased by $6.0 million to $26.5 million for the three months ended September 30, 2023 as compared to $20.5 million for the three months ended September 30, 2022.

The increase is primarily attributed to an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, provisions for impairment, property-specific reimbursable expenses, and payroll costs.

Total operating expenses include the following:

• Property Expenses.

Property expenses increased $0.8 million to $3.5 million for the three months ended June 30, 2023 from $2.7 million for the three months ended June 30, 2022.

The increase is primarily attributed to the increase in the number of operating properties, including combined net increases of reimbursable property expenses of $0.8 million, of which $0.4 million, $0.2 million, and $0.2 million were related to reimbursable property taxes, reimbursable common area maintenance costs, and reimbursable insurance costs, respectively.

Property expenses increased $1.4 million to $3.9 million for the three months ended September 30, 2023 from $2.5 million for the three months ended September 30, 2022.

The increase is primarily attributed to an increase in the number of operating properties, including combined net increases of reimbursable property expenses of $1.3 million, of which $0.7 million, $0.5 million, and $0.1 million were related to reimbursable property taxes, reimbursable common area maintenance costs, and reimbursable insurance costs, respectively.

• General and Administrative Expenses.

General and administrative expenses increased $0.4 million to $5.3 million for the three months ended June 30, 2023 from $4.9 million for the three months ended June 30, 2022.

The increase is primarily due to an increase in total headcount resulting in increased payroll expenses of $0.2 million and an increase in bonus expenses of $0.2 million.

General and administrative expenses increased $0.5 million to $5.1 million for the three months ended September 30, 2023 from $4.6 million for the three months ended September 30, 2022.

The increase is primarily due to an increase in bonus expenses of $0.4 million and an increase in payroll expenses of $0.1 million.

While our general and administrative expenses will continue to rise in some measure as our portfolio grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies and economies of scale.

• Depreciation and Amortization.

Depreciation and amortization expense increased $4.0 million to $15.8 million for the three months ended June 30, 2023 from $11.8 million for the three months ended June 30, 2022.

The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases

in building depreciation expense of $2.2 million, in-place lease amortization expense of $1.1 million, and building improvements depreciation expense of $0.8 million.

• Provision for Impairment.

For the three months ended June 30, 2023, we recorded provisions for impairment of $2.8 million on six properties, which were classified as held-for-sale as of June 30, 2023.

For the three months ended June 30, 2022, we recorded a provision for impairment of $1.1 million on one property which was also sold during the period.

Depreciation and amortization expense increased $2.4 million to $15.8 million for the three months ended September 30, 2023 from $13.4 million for the three months ended September 30, 2022.

The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of $1.5 million, building improvements depreciation expense of $0.5 million, and in-place lease amortization expense of $0.4 million.

• Provisions for Impairment.

For the three months ended September 30, 2023, we recorded provisions for impairment of $1.5 million on seven properties, which were either previously classified as held-for-sale, newly classified as held-for-sale or disposed of during the three months ended September 30, 2023.

For the three months ended September 30, 2022, we recorded no provisions for impairment.

For the three months ended September 30, 2023, we sold two properties that were impaired.

These disposals relate to management’s continuous assessment of the Company’s portfolio in an effort to improve returns and manage risk exposure.

• Transaction costs.

Transaction costs decreased by $0.5 million to less than $0.1 million for the three months ended June 30, 2023 from $0.5 million for the three months ended June 30, 2022, which primarily relates to a decrease in costs incurred for abandoned acquisitions.

Transaction costs increased by less than $0.1 million for the three months ended September 30, 2023 from less than $0.1 million for the three months ended September 30, 2022, which primarily relates to an increase in costs incurred for abandoned acquisitions.

Interest Expense.

Interest expense increased by $4.0 million to $5.5 million for the three months ended June 30, 2023 from $1.5 million for the three months ended June 30, 2022.

The increase is primarily attributed to an increase of $2.1 million of interest incurred under our $200.0 million senior unsecured term loan (the “2028 Term Loan”), a net increase of $1.6 million under our Revolver primarily as a result of higher interest rates.

Interest expense increased by $0.9 million to $3.9 million for the three months ended September 30, 2023 from $3.0 million for the three months ended September 30, 2022.

The increase is primarily attributed to an increase of $0.7 million of interest incurred under our $200.0 million senior unsecured term loan (the “2028 Term Loan”), an increase of $2.2 million of interest incurred under the 2029 Term Loan, and an increase of $0.3 million in loan fee amortization.

This is offset by $1.1 million in amortization of deferred gains on interest rate swaps, $0.3 million of increased capitalized interest on our property developments, and a net decrease of $0.9 million under the Revolver primarily due to a decrease in average borrowings outstanding during the respective periods.

Gain on sales of real estate, net.

Net gain on sales of real estate decreased by $1.3 million to $0.6 million for the three months ended June 30, 2023 from $1.9 million for the three months ended June 30, 2022.

Net gain on sales of real estate increased by $0.3 million to a net gain of $0.4 million for the three months ended September 30, 2023 from a net gain of $0.1 million for the three months ended September 30, 2022.

The table below summarizes the properties sold for the periods indicated (dollars in thousands):

Three Months Ended

September 30,

Number of properties sold 4 1

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Gain on sales of real estate, net

Other income.

The change in other income is primarily related to $0.1 million of interest income earned on the Company’s cash, cash equivalents and restricted cash balances as presented in the condensed consolidated balance sheets.

Income tax benefit (expense).

The income tax benefit incurred for the three months ended June 30, 2023 is attributed to the gross loss of the Company's taxable REIT subsidiary ("TRS") compared to the income tax expense realized by the Company for the gross income earned by the TRS in the prior period.

Net (loss) income.

Net (loss) income decreased $2.8 million to a net loss of $0.8 million for the three months ended June 30, 2023 from net income of $2.0 million for the three months ended June 30, 2022.

Net (loss) income decreased primarily due to increases in interest expense, depreciation and amortization expense, and provisions for impairment, as well as a decrease in the net gain on sales of real estate, as set forth above.

These decreases are offset by increases in additional rental revenues primarily due to the growth in the size of our real estate investment portfolio, including interest income associated with our mortgage loans receivable.

Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022

Other income, net.

Other income increased by $0.4 million for the three months ended September 30, 2023.

The increase relates to $0.4 million of interest income earned on our cash, cash equivalents and restricted cash balances as presented in the condensed consolidated balance sheets.

Income tax (expense) benefit.

Income tax expense decreased by $0.2 million for the three months ended September 30, 2023.

The decrease relates to lower provisions for federal and state income taxes on the financial results of our taxable REIT subsidiary (“TRS”).

Net income increased $2.8 million to $4.2 million for the three months ended September 30, 2023 from $1.4 million for the three months ended September 30, 2022.

Net income increased primarily due to increases in rental revenues due to the growth in the size of our real estate investment portfolio, including interest income associated with our mortgage loans receivable.

This is offset by increases in depreciation and amortization expense, interest expense, reimbursable property expenses, and provisions for impairment as set forth above.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

The following table sets forth our operating results for the periods indicated (in thousands):

Six Months Ended

Nine Months Ended

September 30,

Rental revenue (including reimbursable) $ 89,347 $ 67,309

Interest income on loans receivable 5,145 1,671

Other revenue 550 —

Total revenues 95,042 68,980

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Loss on debt extinguishment (128) —

Other income 220 36

Total other expense, net (9,077) (636)

Other income, net 586 36

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

Net income before income taxes 4,868 5,751

Income tax benefit (expense) 75 (184)

Income tax (expense) benefit 60 (356)

Net income $ 4,928 $ 5,395

Revenue for the six months ended June 30, 2023 increased by $17.1 million to $61.1 million from $44.0 million for the six months ended June 30, 2022 which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.

The increase includes additional cash rental receipts of $14.4 million, combined with net increases of property expense reimbursements of $1.6 million, and an increase of $1.9 million related to interest income on mortgage loans receivable, offset by a $0.6 million decrease in straight-line rental revenue.

Revenue for the nine months ended September 30, 2023 increased by $26.0 million to $95.0 million from $69.0 million for the nine months ended September 30, 2022, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.

The increase includes additional cash rental receipts of $20.5 million, combined with net increases of property expense reimbursements of $2.8 million, an increase of $3.5 million related to interest income on mortgage loans receivable, and an increase of $0.6 million in other revenue related to the receipt of legal settlement proceeds associated with a lease termination.

The increase in revenue is offset by a $0.8 million decrease in straight-line rental revenue and a $0.4 million increase in reserves for uncollectible amounts.

Total Operating Expenses.

Total expenses increased by $12.2 million to $51.4 million for the six months ended June 30, 2023 as compared to $39.2 million for the six months ended June 30, 2022.

Total expenses increased by $18.2 million to $77.9 million for the nine months ended September 30, 2023 from $59.7 million for the nine months ended September 30, 2022.

Total operating expenses include the following:

• Property Expenses.

Property expenses increased $1.9 million to $7.5 million for the six months ended June 30, 2023 from $5.6 million for the six months ended June 30, 2022.

The increase is primarily attributed to the increase in the number of operating properties, including combined net increases of reimbursable property expenses of $1.7 million, of which $0.6 million, $0.6 million, and $0.5 million were related to reimbursable property taxes, reimbursable common area maintenance costs, and reimbursable insurance costs, respectively.

Property expenses increased $3.2 million to $11.4 million for the nine months ended September 30, 2023 from $8.2 million for the nine months ended September 30, 2022.

The increase is primarily attributed to an increase in the number of operating properties, including combined net increases of reimbursable property expenses of $3.1 million, of which $1.3 million, $1.2 million, and $0.6 million were related to reimbursable property taxes, reimbursable common area maintenance costs, and reimbursable insurance costs, respectively.

• General and Administrative Expenses.

General and administrative expenses increased $1.1 million to $10.2 million for the six months ended June 30, 2023 from $9.1 million for the six months ended June 30, 2022.

The increase is primarily due to an increase in total headcount resulting in increased payroll expenses of $0.7 million and increased bonus expenses of $0.3 million.

General and administrative expenses increased $1.7 million to $15.3 million for the nine months ended September 30, 2023 from $13.6 million for the nine months ended September 30, 2022.

The increase is primarily due to increased payroll expenses of $0.8 million, bonus expenses of $0.7 million, franchise taxes of $0.2 million, corporate office lease expenses of $0.2 million, and executive severance and transition costs of $0.2 million.

This is offset by decreased corporate insurance of $0.3 million and accounting service and consulting fees of $0.3 million.

• Depreciation and Amortization.

Depreciation and amortization expense increased $8.1 million to $30.8 million for the six months ended June 30, 2023 from $22.7 million for the six months ended June 30, 2022.

The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of $4.3 million, in-place lease amortization expense of $2.2 million, and building improvements depreciation expense of $1.6 million.

Depreciation and amortization expense increased $10.5 million to $46.6 million for the nine months ended September 30, 2023 from $36.1 million for the nine months ended September 30, 2022.

The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of $5.8 million, in-place lease amortization expense of $2.6 million, building improvements depreciation expense of $2.0 million, and leasehold improvements depreciation expense of $0.2 million.

This is offset by a decrease in assembled workforce amortization expense of $0.2 million.

• Provision for Impairment.

For the six months ended June 30, 2023, we recorded provisions for impairment of $2.8 million on six properties, which were classified as held-for-sale as of June 30, 2023.

For the six months ended June 30, 2022, we recorded a provision for impairment of $1.1 million on one property which was also sold during the period.

For the nine months ended September 30, 2023, we recorded provisions for impairment of $4.4 million on 10 properties, which were either previously classified as held-for-sale, newly classified as held-for-sale or disposed of during the nine months ended September 30, 2023.

For the nine months ended September 30, 2022, we recorded provisions for impairment of $1.1 million on one property.

For the nine months ended September 30, 2023, we sold two properties that were impaired.

These disposals relate to management’s continuous assessment of the Company’s portfolio in an effort to improve returns and manage risk exposure.

• Transaction costs.

Transaction costs decreased by $0.6 million to $0.1 million for the six months ended June 30, 2023 from $0.7 million for the six months ended June 30, 2022, which primarily relates to a decrease in costs incurred for abandoned acquisitions.

Transaction costs decreased by $0.4 million to $0.3 million for the nine months ended September 30, 2023 from $0.7 million for the nine months ended September 30, 2022, which primarily relates to a decrease in costs incurred for abandoned acquisitions.

Interest Expense.

Interest expense increased by $6.8 million to $9.5 million for the six months ended June 30, 2023 from $2.7 million for the six months ended June 30, 2022.

The increase is primarily attributed to an increase of $4.0 million of interest incurred under our 2028 Term Loan and a net increase of $2.2 million under our Revolver, primarily as a result of higher interest rates.

Interest expense increased by $7.7 million to $13.4 million for the nine months ended September 30, 2023 from $5.7 million for the nine months ended September 30, 2022.

The increase is primarily attributed to an increase of $4.7 million of interest incurred under the 2028 Term Loan, an increase of $2.2 million of interest incurred under the 2029 Term Loan, and a net increase of $1.3 million under the Revolver as a result of higher interest rates driving an increase of $2.2 million offset by a decrease in average borrowings outstanding during the respective periods.

Additional increases of $0.4 million and $0.6 million are attributed to increased facility fees and increased loan fee amortization, respectively.

This is offset by $1.1 million in amortization of deferred gains on interest rate swaps, $0.5 million of increased capitalized interest on our property developments.

Gain on sales of real estate, net.

Net gain on sales of real estate decreased by $1.7 million to $0.3 million for the six months ended June 30, 2023 from $2.0 million for the six months ended June 30, 2022.

Net gain on sales of real estate decreased by $1.5 million to a net gain of $0.7 million for the nine months ended September 30, 2023 from a net gain of $2.2 million for the nine months ended September 30, 2022.

The table below summarizes the properties sold for the periods indicated (in thousands):

Six Months Ended

Nine Months Ended

September 30,

Number of properties sold 14 4

1 unchanged sentence

Gain on sales of real estate, net

Other income.

The change in other income is primarily related to $0.2 million of interest income earned on the Company’s cash, cash equivalents and restricted cash balances as presented in the condensed consolidated balance sheets.

Income tax benefit (expense).

The income tax benefit incurred for the six months ended June 30, 2023 is attributed to the gross loss of the Company's taxable REIT subsidiary ("TRS") compared to the income tax expense realized by the Company for the gross income earned by the TRS in the prior period.

Net income decreased $3.3 million to $0.7 million for the six months ended June 30, 2023 from $4.0 million for the six months ended June 30, 2022.

Net income decreased primarily due to increases in interest expense, depreciation and amortization expenses, provisions for impairment, payroll expense, as well as a decrease in the net gain on sales of real estate, as set forth above.

$ 669 $ 2,162

Other income, net.

Other income increased by $0.6 million for the nine months ended September 30, 2023.

The increase relates to $0.6 million of interest income earned on the Company’s cash, cash equivalents and restricted cash balances as presented in the condensed consolidated balance sheets.

Income tax (expense) benefit.

Income tax expense decreased by $0.5 million to an income tax benefit of $0.1 million for the nine months ended September 30, 2023 from an income tax expense of $0.4 million for the nine months ended September 30, 2022.

The decrease relates to lower provisions for federal and state income taxes on the financial results of our TRS.

Net income decreased $0.5 million to $4.9 million for the nine months ended September 30, 2023 from a net income of $5.4 million for the nine months ended September 30, 2022.

Net income decreased primarily due to increases in interest expense, depreciation and amortization expenses, provisions for impairment, payroll expense, as well as a decrease in net gains on sales of real estate, as set forth above.

This is offset primarily by increases in rental revenues due to the growth in the size of our real estate investment portfolio, including interest income associated with our mortgage loans receivable.

Liquidity and Capital Resources

Our primary capital requirements are to fund property acquisitions and development and investments in mortgage loans receivable and required interest payments, as well as working capital needs, operating expenses, and capital expenditures.

Our capital resources primarily consist of cash from operations, sales of equity securities and borrowing facilities available to the Company.

As of June 30, 2023, we had $175.0 million outstanding principal amount of the senior unsecured term loan (the “2027 Term Loan”), $200.0 million outstanding principal amount of the 2028 Term Loan, and $106 million of borrowings outstanding under our Revolver.

Additionally, as of June 30, 2023, we had $127.3 million remaining gross proceeds available for future issuances of shares of our common stock under the ATM Program.

In addition, subsequent to June 30, 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.

We believe that the availability of proceeds from future issuances of shares of our common stock under the ATM Program, coupled with our cash flows from operations and available borrowing capacity under the Revolver and 2029 Term Loan, will be

adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital requirements for at least the next 12 months.

Our capital resources primarily consist of cash from operations, sales of equity securities and available borrowing facilities.

As of September 30, 2023, we had $175.0 million outstanding principal amount of the senior unsecured term loan (the “2027 Term Loan”), $200.0 million outstanding principal amount of the 2028 Term Loan, $150.0 million outstanding principal amount of the 2029 Term Loan, and $42.0 million of borrowings outstanding under our Revolver.

Additionally, as of September 30, 2023, we had $99.6 million remaining gross proceeds available for future issuances of shares of our common stock under the ATM Program, inclusive of 5,983,711 shares remaining unsettled under the outstanding forward confirmation.

We believe that the availability of proceeds from future issuances of shares of our common stock under the current ATM Program or subsequent at-the-market sale programs, coupled with our cash flows from operations and available borrowing capacity under the Revolver and 2029 Term Loan, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital requirements for at least the next 12 months.

We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our Revolver, 2029 Term Loan and issuances of common stock.

Contractual Obligations and Commitments

As of June 30, 2023, our contractual debt obligations primarily include the maturity of our 2027 Term Loan with the scheduled principal payment due on January 15, 2026, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, and repayment of borrowings on our Revolver with a maturity of August 11, 2026.

During the six months ended June 30, 2023, we borrowed $221.0 million at a weighted average interest rate of 5.92% and also repaid $228.0 million on our revolving credit facilities.

The following table provides information with respect to our commitments as of June 30, 2023 (in thousands):

As of September 30, 2023, our contractual debt obligations primarily include the maturity of our 2027 Term Loan with the scheduled principal payment due on January 15, 2026, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, the maturity of our 2029 Term Loan with the scheduled principal payment due on July 3, 2026, and repayment of borrowings on our Revolver with a maturity of August 11, 2026.

During the nine months ended September 30, 2023, we borrowed $288.0 million at a weighted average interest rate of 5.98% and also repaid $359.0 million on our revolving credit facilities.

The following table provides information with respect to our commitments as of September 30, 2023 (in thousands):

Payment Due by Period

Total From July 1, 2023 to December 31, 2023 1 – 3 Years 3 – 5 Years Thereafter

Total From October 1, 2023 to December 31, 2023 2024 – 2025 2026 – 2027 Thereafter

Contractual Obligations

9 unchanged sentences

33,873 1,940 15,521 15,521 891

2029 Term Loan – Principal 150,000 — — 150,000 —

2029 Term Loan – Variable interest (4)

20,192 1,833 14,663 3,696 —

Mortgage Note – Principal 8,382 39 332 8,011 —

4 unchanged sentences

Total $ 701,488 $ 43,712 $ 55,066 $ 398,508 $ 204,202

(1) We entered into four interest rate hedges to fix the base interest rate (daily SOFR) on our 2027 Term Loan.

Accordingly, the projected interest rate obligations for the variable rate 2027 Term Loan are based on the hedged fixed rate of 0.12% compared to the variable 2027 Term Loan daily SOFR) rate as of June 30, 2023 of 5.05%, plus a SOFR adjustment of 0.10%, plus a margin of 1.15% based on the $175.0 million Term Loan outstanding through the maturity date of January 15, 2026.

(1) We entered into five interest rate hedges to fix the base interest rate (daily SOFR) on our 2027 Term Loan.

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

Accordingly, the projected interest rate obligations for the variable rate 2027 Term Loan are based on the hedged fixed rates of 0.12% through November 27, 2023, 1.87% through December 23, 2024, and 2.40% thereafter, compared to the variable 2027 Term Loan daily SOFR rate as of September 30, 2023 of 5.30%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $175.0 million 2027 Term Loan outstanding through the contractual maturity date of January 15, 2026.

(2) We are subject to a facility fee of 0.15% on our Revolver.

(3) Effective August 11, 2022, we entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan.

Accordingly, the projected interest rate obligations for the variable rate 2028 Term Loan are based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of December 31, 2022 of 5.16%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $200.0 million 2028 Term Loan outstanding through the maturity date of February 11, 2028.

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

(3) We entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan.

Accordingly, the projected interest rate obligations for the variable rate 2028 Term Loan are 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% based on the $200.0 million 2028 Term Loan outstanding through the maturity date of February 11, 2028.

(4) We entered into four interest rate hedges to fix the base interest rate (daily SOFR) on our 2029 Term Loan.

Accordingly, the projected interest rate obligations for the variable rate 2029 Term Loan are 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% based on the $150.0 million of the 2029 Term Loan outstanding through the contractual maturity date of July 3, 2026.

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

We began operating out of the new office in February 2022.

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Additionally, in the normal course of business, we enter into various types of commitments to purchase real estate properties or fund development projects.

These commitments are generally subject to our 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, we had commitments to fund properties under development totaling $27.9 million, all of which is expected to be funded over the next twelve months.

These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before we are obligated or receive an option to purchase the properties.

As of September 30, 2023, we had commitments to fund properties under development totaling $37.9 million, all of which is expected to be funded over the next two years.

Credit Facilities

See discussion of our debt and interest rate hedges included in “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments” of our condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of June 30, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

See discussion of our debt and interest rate hedges included in “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments”

of our condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of September 30, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

Historical Cash Flow Information

Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022

Six Months Ended

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Nine Months Ended

September 30,

(In thousands) (Unaudited)

4 unchanged sentences

Cash Flows Provided By Operating Activities.

Net cash provided by operating activities increased by $12.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Net cash provided by operating activities increased by $12.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The increase was largely attributed to the increase in the size of the Company’s real estate investment portfolio with an increase in rental receipts of $20.5 million, offset primarily by increases in operating and general and administrative expenses paid associated with our larger portfolio.

Cash Flows Used In Investing Activities.

Net cash used in investing activities decreased by $62.7 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Net cash used in investing activities decreased by $35.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease was primarily due to a decrease in cash spent on acquisitions of real estate of $74.3 million, offset by increases in cash spent on investments in mortgage loans receivable of $19.0 million and cash spent on real estate development and improvements of $32.2 million.

The remaining decreases were related primarily to earnest money deposits, which decreased $38.6 million compared to the prior period, and proceeds from the sale of real estate, which increased $7.1 million compared to the prior period.

The remaining decrease is primarily related to proceeds from the sale of real estate, which increased $10.9 million compared to the prior period.

Cash Flows Provided By Financing Activities.

Net cash provided by financing activities decreased by $144.5 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

The decrease was primarily attributed to a reduction in net borrowings of $180.0 million under our revolving credit facilities during the six months ended June 30, 2023, offset by $41.9 million of more proceeds received in 2023 due to issuances of common stock in connection with our ATM Program and physical settlement of our common stock under the forward sale agreements.

Lastly, the decrease is further attributed to $5.3 million of additional common stock dividends paid during the six months ended June 30, 2023.

Net cash provided by financing activities decreased by $119.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease was primarily attributed to a reduction in net borrowings of $37.0 million under our revolving credit facilities, a reduction in term loan proceeds of $50.0 million, a decrease of proceeds from issuances of common stock in connection with our ATM Program of $24.1 million, an increase in payments of common stock dividends of $9.1 million, and a decrease in proceeds under property development incentives of $0.6 million during the nine months ended September 30, 2023.

The decrease was offset by decreases in deferred offering costs and deferred financing costs of $0.8 million and $0.5 million, respectively, during the nine months ended September 30, 2023.

The Company elected to be treated and qualify as a REIT for U.S.

7 unchanged sentences

In general, our TRS may perform services for tenants of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate-related business.

During the three and six months ended June 30, 2023, the Company recognized franchise and other state and local tax expenses which are included in general and administrative and recognized state and federal income tax expense which is included in income tax expense in the accompanying condensed consolidated statements of operations and comprehensive income.

During the three and nine months ended September 30, 2023, the Company recognized franchise and other state and local tax expenses which are included in general and administrative and recognized state and federal income tax expense which is included in income tax expense in the accompanying condensed consolidated statements of operations and comprehensive income.

Critical Accounting Policies and Estimates

13 unchanged sentences

We also disclose the following non-GAAP financial measures:

Funds From Operations (“FFO”), Core FFO, Adjusted FFO (“AFFO”), earnings before interest expense, income tax expense, and depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) from the sales of depreciable property and real estate impairment losses (“EBITDA re ”), Adjusted EBITDA re, Annualized Adjusted EBITDA re, Net Debt, property-level net operating income (“Property-Level NOI”), property-level cash net operating income (“Property-Level Cash NOI”), property-level cash net operating income estimated run rate (“Property-Level Cash NOI Estimated Run Rate”), and total property-level cash net operating income estimated run rate (“Total Property-Level Cash NOI Estimated Run Rate”), all of which are detailed below.

Funds From Operations (“FFO”), Core FFO, Adjusted FFO (“AFFO”), earnings before interest expense, income tax expense, and depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) from the sales of depreciable property and real estate impairment losses (“EBITDAre”), Adjusted EBITDAre, Annualized Adjusted EBITDAre, Net Debt, property-level net operating income (“Property-Level NOI”), property-level cash net operating income (“Property-Level Cash NOI”), property-level cash net operating income estimated run rate (“Property-Level Cash NOI Estimated Run Rate”), and total property-level cash net operating income estimated run rate (“Total Property-Level Cash NOI Estimated Run Rate”), all of which are detailed below.

We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.

4 unchanged sentences

These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs.

AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination costs.

AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense and earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination costs.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(Unaudited) (Unaudited)

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

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

Depreciation and amortization of real estate 15,726 13,241 46,379 35,701

11 unchanged sentences

Amortization of lease-related intangibles (121) (313) (517) (644)

Earned development interest 189 — 189 —

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

Non-cash interest expense (1,134) — (1,134) —

Non-cash compensation expense 1,280 1,302 3,559 3,645

5 unchanged sentences

NAREIT defines EBITDA re as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property.

Adjusted EBITDA re is a non-GAAP financial measure defined as EBITDA re further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), adjustment for construction in process, and adjustment for intraquarter activities.

Adjusted EBITDA re is a non-GAAP financial measure defined as EBITDA re further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities.

Annualized Adjusted EBITDA re is Adjusted EBITDA re multiplied by four.

1 unchanged sentence

We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs.

We use EBITDA,

EBITDA re, Adjusted EBITDA re and Annualized Adjusted EBITDA re as measures of our operating performance and not as measures of liquidity.

We use EBITDA, EBITDA re, Adjusted EBITDA re and Annualized Adjusted EBITDA re as measures of our operating performance and not as measures of liquidity.

EBITDA, EBITDA re, Adjusted EBITDA re and Annualized Adjusted EBITDA re do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements;

3 unchanged sentences

Three Months Ended

Net (loss) income $ (792) $ 2,010

September 30,

Net income $ 4,239 $ 1,419

Depreciation and amortization of real estate 15,726 13,241

3 unchanged sentences

Income tax expense (benefit) 15 171

Loss on debt extinguishment 128 —

Amortization of loan origination costs 26 28

2 unchanged sentences

Gain on sales of real estate, net (373) (143)

22,737 14,479

EBITDAre 25,074 17,586

Straight-line rent adjustments (245) (272)

Loss on debt extinguishment and other related costs 223 —

Non-recurring executive transition costs, severance and related charges 62 —

Gain on insurance proceeds (1) —

Other non-recurring expenses 242 —

Non-cash compensation expense 1,280 1,302

Lease termination fees (550) —

Adjustment for construction in process (1)

3 unchanged sentences

Annualized Adjusted EBITDA re (3)

Net Debt / Annualized Adjusted EBITDA re

(1) Adjustment reflects the estimated cash yield on non-interest earning construction in process balances as of period end.

(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including interest earning development, and interest earning loan activity completed during the three months ended June 30, 2023 and 2022 had occurred on April 1, 2023 and April 1, 2022, respectively.

Net Debt Adjusted for Outstanding Forward Equity / Annualized Adjusted EBITDA re

(1) Adjustment reflects the estimated cash yield on developments in process balances as of period end.

(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity completed during the three months ended September 30, 2023 and 2022 had occurred on July 1, 2023 and July 1, 2022, respectively.

(3) We calculate Annualized Adjusted EBITDA re by multiplying Adjusted EBITDA re by four.

Net Debt and Net Debt Adjusted for Outstanding Forward Equity

We calculate our Net Debt as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment.

We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which we believe is a beneficial disclosure to investors and analysts.

We further adjust Net Debt by the value of outstanding forward equity as of period end.

We believe these adjustments are additional beneficial disclosures to investors and analysis.

The following table reconciles Total Debt to Net Debt:

June 30, 2023

Total Debt $ 489,435

We further adjust Net Debt by the value of outstanding forward equity as of period end to derive Net Debt Adjusted for Outstanding Forward Equity.

We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount in addition to excluding the value of outstanding forward equity, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid.

We believe these adjustments are additional beneficial disclosures to investors and analysts.

The following table reconciles the principal amount of total debt to Net Debt Adjusted for Outstanding Forward Equity:

September 30, 2023

Principal amount of total debt $ 575,399

Cash, cash equivalents and restricted cash (7,934)

Value of outstanding forward equity (1)

Net Debt 567,465

(1) There were no unsettled shares under forward equity contracts as of June 30, 2023.

Value of outstanding forward equity (1)

Net Debt Adjusted for Outstanding Forward Equity $ 468,794

(1) There were 5,983,711 unsettled shares under forward equity contracts under the ATM Program as of September 30, 2023 at the available net settlement price of $16.49.

Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate

Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are non-GAAP financial measures which we use to assess our operating results.

We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, and other income (or expense).

We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI.

We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and interest-earning development to derive Property-Level Cash NOI - Estimated Run Rate.

We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed development to derive Property-Level Cash NOI - Estimated Run Rate.

We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(Unaudited) (Unaudited)

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

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

General and administrative 5,133 4,552 15,299 13,608

7 unchanged sentences

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

Other income (68) (36) (220) (36)

Lease termination fees (550) — (550) —

Other income, net (367) — (586) (36)

Property-Level NOI 27,284 21,800 77,997 59,153

2 unchanged sentences

Property-Level Cash NOI $ 26,918 $ 21,215 $ 76,773 $ 57,365

Adjustment for intraquarter acquisitions, dispositions and interest earning development (1)

Adjustment for intraquarter acquisitions, dispositions and completed development (1)

Property-Level Cash NOI Estimated Run Rate 28,238

2 unchanged sentences

Total Cash NOI - Estimated Run Rate $ 30,503

(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including interest earning development, completed during the three months ended June 30, 2023 had occurred on April 1, 2023.

(2) Adjustment assumes all loan activity completed during the three months ended June 30, 2023 had occurred on April 1, 2023.

(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended September 30, 2023 had occurred on July 1, 2023.

(2) Adjustment assumes all loan activity completed during the three months ended September 30, 2023 had occurred on July 1, 2023.

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