NETSTREIT Corp. 10-K

Item 8. Financial Statements and Supplementary Data Page Reports of Independent Registered Public Accounting Firm 51 Consolidated Balance Sheets as of December 31, 2023 and 2022 54 Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2022 and 2021 55 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2023, 2022 and 2021 56 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021 57 Notes to the Consolidated Financial Statements 58 50 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors NETSTREIT Corp.: Opinion on Internal Control Over Financial Reporting We have audited NETSTREIT Corp. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedules III and IV (collectively, the consolidated financial statements), and our report dated February 14, 2024 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Chicago, Illinois February 14, 2024 51 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors NETSTREIT Corp.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of NETSTREIT Corp. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedules III and IV (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023 in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 14, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Evaluation of indicators for potential impairment of long-lived asset groups As discussed in Note 2 to the consolidated financial statements, the Company evaluates its long-lived asset groups for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group is no longer recoverable. As of December 31, 2023 the Company has $1,538.7 million of real estate held for investment, net. The evaluation of the indicators of potential impairment relies upon certain management assumptions, including the anticipated holding period for a real estate investment property. We identified the evaluation of indicators for potential impairment of long-lived asset groups as a critical audit matter. Subjective and challenging auditor judgment was required to evaluate the reasonableness of the Company’s intent and ability to hold long-lived asset groups for particular periods of time. A shortening of the anticipated holding period could indicate a potential impairment. 52 Table of Contents The following are primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal control related the Company’s long-lived asset impairment process, including a control related to the identification of indicators of potential impairment. We inquired of and obtained representations from Company officials and inspected documents, such as meeting minutes of the investment committee and the board of trustees and its sub-committees, to evaluate the Company’s intent and ability to hold long-lived asset groups for particular periods of time. We read external communications with investors to identify information regarding potential sales of the Company’s long-lived asset groups. Evaluation of the fair value of land and building in certain real estate asset acquisitions As discussed in Notes 2 and 4 to the consolidated financial statements, the Company acquired real estate properties in asset acquisitions during 2023 for a total purchase price of $345.1 million, of which $71.6 million and $213.0 million were allocated to land and buildings, respectively. The purchase price of an asset acquisition is allocated to tangible and identifiable intangible assets or liabilities based on their relative fair values. In estimating fair values of land and building, the Company utilizes a number of sources, including real estate valuations prepared by an independent valuation firm. We identified the evaluation of the fair value of land and building in certain real estate asset acquisitions as a critical audit matter. Subjective auditor judgment was required to evaluate the assumptions used in the Company’s estimates of fair value of land and building, including comparable land sales and estimated replacement cost of the building for certain real estate asset acquisitions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s asset acquisition valuation process, including controls related to the assumptions noted above. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the relevance of the comparable land sales and replacement cost of the building used by the Company to estimate fair values, by comparing them to our independently developed ranges of comparable land sales and estimated replacement cost of the building for a selection of real estate asset acquisitions. /s/ KPMG LLP We have served as the Company’s auditor since 2019. Chicago, Illinois February 14, 2024 53 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2023 2022 Assets Real estate, at cost: Land $ 460,896 $ 401,146 Buildings and improvements 1,149,809 907,084 Total real estate, at cost 1,610,705 1,308,230 Less accumulated depreciation ( 101,210 ) ( 62,526 ) Property under development 29,198 16,796 Real estate held for investment, net 1,538,693 1,262,500 Assets held for sale 52,451 23,208 Mortgage loans receivable, net 114,472 46,378 Cash, cash equivalents and restricted cash 29,929 70,543 Lease intangible assets, net 161,354 151,006 Other assets, net 49,337 52,057 Total assets $ 1,946,236 $ 1,605,692 Liabilities and equity Liabilities: Term loans, net $ 521,912 $ 373,296 Revolving credit facility 80,000 113,000 Mortgage note payable, net 7,883 7,896 Lease intangible liabilities, net 25,353 30,131 Liabilities related to assets held for sale 1,158 406 Accounts payable, accrued expenses and other liabilities 36,498 22,540 Total liabilities 672,804 547,269 Commitments and contingencies Equity: Stockholders’ equity Common stock, $ 0.01 par value, 400,000,000 shares authorized; 73,207,080 and 58,031,879 shares issued and outstanding as of December 31, 2023 and 2022, respectively 732 580 Additional paid-in capital 1,367,505 1,091,514 Distributions in excess of retained earnings ( 112,276 ) ( 66,937 ) Accumulated other comprehensive income 8,943 23,673 Total stockholders’ equity 1,264,904 1,048,830 Noncontrolling interests 8,528 9,593 Total equity 1,273,432 1,058,423 Total liabilities and equity $ 1,946,236 $ 1,605,692 The accompanying notes are an integral part of these consolidated financial statements. 54 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except share and per share data) Year Ended December 31, 2023 2022 2021 Revenues Rental revenue (including reimbursable) $ 123,967 $ 93,934 $ 59,140 Interest income on loans receivable 7,388 2,345 — Other revenue 550 — — Total revenues 131,905 96,279 59,140 Operating expenses Property 16,413 11,695 5,803 General and administrative 20,176 19,053 14,810 Depreciation and amortization 63,677 50,075 30,807 Provisions for impairment 7,083 1,114 3,539 Transaction costs 456 839 700 Total operating expenses 107,805 82,776 55,659 Other income (expense) Interest expense, net ( 19,058 ) ( 9,181 ) ( 3,700 ) Gain on sales of real estate, net 1,175 4,148 2,997 Loss on debt extinguishment ( 128 ) — — Other income, net 752 131 431 Total other income (expense), net ( 17,259 ) ( 4,902 ) ( 272 ) Net income before income taxes 6,841 8,601 3,209 Income tax benefit (expense) 49 ( 396 ) ( 59 ) Net income 6,890 8,205 3,150 Net income attributable to noncontrolling interests 53 88 104 Net income attributable to common stockholders $ 6,837 $ 8,117 $ 3,046 Amounts available to common stockholders per common share: Basic $ 0.11 $ 0.16 $ 0.08 Diluted $ 0.11 $ 0.16 $ 0.08 Weighted average common shares: Basic 63,922,973 49,517,977 36,999,459 Diluted 64,665,439 50,431,822 38,672,565 Other comprehensive income: Net income $ 6,890 $ 8,205 $ 3,150 Change in value on derivatives, net ( 14,822 ) 19,758 4,057 Total comprehensive income (loss) $ ( 7,932 ) $ 27,963 $ 7,207 Comprehensive income (loss) attributable to noncontrolling interests ( 39 ) 296 273 Comprehensive income (loss) attributable to common stockholders $ ( 7,893 ) $ 27,667 $ 6,934 The accompanying notes are an integral part of these consolidated financial statements. 55 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands, except share data) Common stock Shares Par Value Additional Paid-in Capital Distributions in Excess of Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2020 28,203,545 $ 282 $ 501,045 $ ( 7,464 ) $ 235 $ 494,098 $ 33,975 $ 528,073 Issuance of common stock in public offerings, net of issuance costs 14,768,124 148 282,997 — — 283,145 — 283,145 OP Units converted to common stock 1,189,098 12 22,482 — — 22,494 ( 22,494 ) — Dividends and distributions declared on common stock and OP Units — — — ( 30,195 ) — ( 30,195 ) ( 1,109 ) ( 31,304 ) Dividends declared on restricted stock — — — ( 513 ) — ( 513 ) — ( 513 ) Vesting of restricted stock units 84,790 — — — — — — — Repurchase of common stock for tax withholding obligations ( 22,507 ) — ( 504 ) — — ( 504 ) — ( 504 ) Stock-based compensation, net — — 3,704 7 — 3,711 — 3,711 Other comprehensive income — — — — 3,888 3,888 169 4,057 Net income — — — 3,046 — 3,046 104 3,150 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 13,600,004 135 296,027 — — 296,162 — 296,162 Offering and related costs of common stock — — ( 18,444 ) — — ( 18,444 ) — ( 18,444 ) OP Units converted to common stock 49,317 — 929 — — 929 ( 929 ) — Dividends and distributions declared on common stock and OP Units — — — ( 39,533 ) — ( 39,533 ) ( 419 ) ( 39,952 ) Dividends declared on restricted stock — — — ( 522 ) — ( 522 ) — ( 522 ) Vesting of restricted stock units 234,108 3 ( 3 ) — — — — — Repurchase of common stock for tax withholding obligations ( 74,600 ) — ( 1,477 ) — — ( 1,477 ) — ( 1,477 ) Stock-based compensation, net — — 4,758 120 — 4,878 — 4,878 Other comprehensive income — — — — 19,550 19,550 208 19,758 Net income — — — 8,117 — 8,117 88 8,205 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 15,038,397 151 280,757 — — 280,908 — 280,908 Offering and related costs of common stock — — ( 9,519 ) — — ( 9,519 ) — ( 9,519 ) OP Units converted to common stock 34,169 — 619 — — 619 ( 619 ) — Dividends and distributions declared on common stock and OP Units — — — ( 51,675 ) — ( 51,675 ) ( 407 ) ( 52,082 ) Dividends declared on restricted stock — — — ( 503 ) — ( 503 ) — ( 503 ) Vesting of restricted stock units 139,527 1 ( 1 ) — — — — — Repurchase of common stock for tax withholding obligations ( 36,892 ) — ( 688 ) — — ( 688 ) — ( 688 ) Stock-based compensation, net — — 4,823 2 — 4,825 — 4,825 Other comprehensive loss — — — — ( 14,730 ) ( 14,730 ) ( 92 ) ( 14,822 ) Net income — — — 6,837 — 6,837 53 6,890 Balance at December 31, 2023 73,207,080 $ 732 $ 1,367,505 $ ( 112,276 ) $ 8,943 $ 1,264,904 $ 8,528 $ 1,273,432 The accompanying notes are an integral part of these consolidated financial statements. 56 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2023 2022 2021 Cash flows from operating activities Net income $ 6,890 $ 8,205 $ 3,150 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 63,677 50,075 30,807 Amortization of deferred financing costs 1,730 862 627 Amortization of above/below-market assumed debt 114 29 — Noncash revenue adjustments ( 1,632 ) ( 2,466 ) ( 1,769 ) Amortization of deferred gains on interest rate swaps ( 2,124 ) — — Stock-based compensation expense 4,823 4,758 3,704 Gain on sales of real estate, net ( 1,175 ) ( 4,148 ) ( 2,997 ) Provisions for impairment 7,083 1,114 3,539 Loss on debt extinguishment 128 — — Gain on involuntary conversion of building and improvements ( 78 ) ( 126 ) ( 438 ) Changes in assets and liabilities, net of assets acquired and liabilities assumed: Other assets, net ( 1,237 ) ( 6,193 ) ( 1,061 ) Accounts payable, accrued expenses and other liabilities 3,696 1,215 1,737 Lease incentive payments ( 1,740 ) ( 2,678 ) ( 5,821 ) Net cash provided by operating activities 80,155 50,647 31,478 Cash flows from investing activities Acquisitions of real estate ( 340,451 ) ( 424,794 ) ( 441,328 ) Real estate development and improvements ( 78,798 ) ( 22,402 ) ( 19,896 ) Investment in mortgage loans receivable ( 72,429 ) ( 46,466 ) — Principal collections on mortgage loans receivable 1,482 — — Earnest money deposits ( 265 ) 868 ( 219 ) Purchase of computer equipment and other corporate assets ( 35 ) ( 1,208 ) ( 732 ) Proceeds from sale of real estate 38,465 25,515 31,119 Proceeds from the settlement of property-related insurance claims 78 126 928 Net cash used in investing activities ( 451,953 ) ( 468,361 ) ( 430,128 ) Cash flows from financing activities Issuance of common stock in public offerings, net 271,389 277,718 283,145 Payment of common stock dividends ( 51,675 ) ( 39,533 ) ( 30,195 ) Payment of OP unit distributions ( 407 ) ( 419 ) ( 1,109 ) Payment of restricted stock dividends ( 148 ) ( 339 ) ( 34 ) Principal payments on mortgages payable ( 138 ) ( 48 ) — Proceeds under revolving credit facilities 361,000 515,000 150,000 Repayments under revolving credit facilities ( 394,000 ) ( 466,000 ) ( 86,000 ) Proceeds from term loans 150,000 200,000 — Proceeds under property development incentives — 755 — Repurchase of common stock for tax withholding obligations ( 688 ) ( 1,478 ) ( 504 ) Payment of deferred offering costs ( 878 ) ( 1,220 ) ( 1,693 ) Payment of deferred financing costs ( 3,271 ) ( 3,782 ) — Net cash provided by financing activities 331,184 480,654 313,610 Net change in cash, cash equivalents and restricted cash ( 40,614 ) 62,940 ( 85,040 ) Cash, cash equivalents and restricted cash at beginning of the period 70,543 7,603 92,643 Cash, cash equivalents and restricted cash at end of the period $ 29,929 $ 70,543 $ 7,603 Supplemental disclosures of cash flow information: Cash paid for interest, net of amounts capitalized $ 18,336 $ 7,218 $ 2,993 Cash paid for income taxes $ 628 $ 129 $ — Supplemental disclosures of non-cash investing and financing activities: Dividends declared and unpaid on restricted stock $ 501 $ 403 $ 506 Deferred offering costs included in accounts payable, accrued expenses and other liabilities $ 7 $ — $ — Cash flow hedge change in fair value $ 12,698 $ 19,758 $ 4,057 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 $ — $ — Accrued capital expenditures and real estate development and improvement costs $ 5,686 $ 2,473 $ 2,962 Mortgage note assumed at fair value $ — $ 7,913 $ — Involuntary conversion of building and improvements and change in related insurance proceeds receivable $ — $ — $ 490 Operating lease right-of-use asset and liability added for corporate office, excluding $ 0.9 million non-cash lease incentive received $ — $ — $ 4,493 The accompanying notes are an integral part of these consolidated financial statements. 57 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Organization and Description of Business NETSTREIT Corp. (the “Company”) was incorporated on October 11, 2019 as a Maryland corporation and commenced operations on December 23, 2019. The Company conducts its operations through NETSTREIT, L.P., a Delaware limited partnership (the “Operating Partnership”). NETSTREIT GP, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, is the sole general partner of the Operating Partnership. The Company elected to be treated and to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. Additionally, the Operating Partnership formed NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), which together with the Company jointly elected to be treated as a taxable REIT subsidiary under Section 856(a) of the Internal Revenue Code of 1986, as amended, (the “Code”) for U.S. federal income tax purposes. The Company is structured as an umbrella partnership real estate investment trust (commonly referred to as an “UPREIT”) and is an internally managed real estate company that acquires, owns, invests in and manages a diversified portfolio of single-tenant, retail commercial real estate leased on a long-term basis to high credit quality tenants across the United States. As of December 31, 2023, the Company owned or had investments in 598 properties, located in 45 states, excluding 24 property developments where rent has yet to commence. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The 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 income is reduced by the portion of net income attributable to noncontrolling interests. Noncontrolling Interests The Company presents noncontrolling interests, which represent limited partnership units in the Operating Partnership (the “OP Units”) not owned by the Company, as a component of permanent equity, separate from the Company's stockholders’ equity. Noncontrolling interests were created as part of an asset acquisition and recognized at fair value as of the date of the transaction. Effective with the Company’s initial public offering, each limited partner of the Operating Partnership has the right to require the Operating Partnership to redeem part or all of its OP Units for cash, based upon the value of an equivalent number of shares of the Company’s common stock at the time of the redemption, or, at the Company’s election, shares of the Company’s common stock on a one -for-one basis, subject to certain adjustments and the restrictions on ownership and transfer of the Company’s common stock. The election to pay cash or issue common stock is solely within the control of the Company to satisfy a noncontrolling interest holder's redemption request. Net income of the Operating Partnership is allocated to its noncontrolling interests based on the noncontrolling interests’ ownership percentages in the Operating Partnership throughout the period. Ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units outstanding. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant assumptions and estimates relate to the useful lives of real estate assets, lease accounting, real estate impairment assessments, and allocation of fair value of purchase consideration. These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances. The Company evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known. Actual results could differ from those estimates. 58 Table of Contents Real Estate Held for Investment Real estate is recorded and stated at cost less any provision for impairment. At acquisition date, the purchase price of an acquired property is allocated to tangible and identifiable intangible assets or liabilities based on their relative fair values. For properties developed by the Company, all direct and indirect costs related to planning, development and construction, including interest, real estate taxes and other miscellaneous costs incurred during the construction period, are capitalized for financial reporting purposes and recorded as property under development until construction has been completed. The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business and therefore accounted for as a business combination or if the acquisition transaction should be accounted for as an asset acquisition. Under Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related to acquisitions that qualify as asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred. The Company allocates the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or liabilities based on their relative fair values. Tangible assets may include land, buildings, site improvements and tenant improvements. Intangible assets include the value of in-place leases and above-market leases and intangible liabilities include below-market leases. The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets. The fair value of in-place leases is determined by considering estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases based on the specific characteristics of each tenant’s lease. The Company estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses. The fair value of above-market or below-market leases is recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between the contractual amount to be paid pursuant to the in-place lease and the Company’s estimate of the fair market lease rate for the corresponding in-place lease, measured over the remaining non-cancelable term of the lease including any below-market fixed rate renewal options for below-market leases. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including real estate valuations prepared by an independent valuation firm. The Company also considers information and other factors including market conditions, the industry that the tenant operates in, characteristics of the real estate; e.g., location, size, demographics, value and comparative rental rates; tenant credit profile and the importance of the location of the real estate to the operations of the tenant’s business. Additionally, the Company considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets and liabilities acquired. Based on these inputs for measuring and allocating the fair value of real estate acquisitions, the Company utilizes both observable market data (categorized as level 2 on the three-level valuation hierarchy of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement), and unobservable inputs that reflect the Company’s own internal assumptions (categorized as level 3 under ASC Topic 820). Depreciation and Amortization Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets: Buildings 13 – 35 years Building improvements 15 years Tenant improvements Shorter of the term of the related lease or useful life Acquired in-place leases or leasing commissions Remaining terms of the respective leases Assembled workforce 3 years Computer equipment and other corporate assets 3 – 5 years 59 Table of Contents Depreciation and amortization amounts for the years ended December 31, 2023, 2022, and 2021 are as follows (in thousands): Year Ended December 31, 2023 2022 2021 Depreciation on real estate held for investment and computer equipment and other corporate assets $ 44,402 $ 33,883 $ 21,073 Amortization on acquired in-place lease and assembled workforce intangible assets and leasing commission costs 19,275 16,192 9,734 Total depreciation and amortization expense $ 63,677 $ 50,075 $ 30,807 Repairs and maintenance are charged to operations as incurred; major renewals and betterments that extend the useful life or improve the operating capacity of the asset are capitalized. Upon the sale or disposition of a property, the asset and the related accumulated depreciation and amortization are removed from the consolidated balance sheets with the difference between the proceeds received, net of sales costs, and the carrying value of the asset group recorded as a gain or loss on sale, subject to impairment considerations. Assets Held for Sale The Company is continually evaluating the portfolio of real estate assets and may elect to dispose of assets considering criteria including, but not limited to, tenant concentration, tenant credit quality, unit financial performance, local market conditions and lease rates, asset location and tenant operation type (e.g., tenant or retail sector). Real estate assets held for sale are expected to be sold within twelve months. Properties classified as held for sale, including the related intangibles, in the consolidated balance sheets include only those properties available for immediate sale in their present condition, which are actively being marketed, and for which management believes that it is probable that a sale of the property will be completed within one year. Properties held for sale are carried at the lower of cost or fair value, less estimated selling costs. No depreciation expense or amortization expense is recognized on properties held for sale and the related intangible assets or liabilities once they have been classified as such. Only disposals representing a strategic shift in operations are presented as discontinued operations. Accordingly, the Company has not reclassified results of operations for properties disposed during the years ended December 31, 2023, 2022, and 2021 or held for sale as discontinued operations as of December 31, 2023 or December 31, 2022, as these events are a normal part of the Company’s operations and do not represent strategic shifts in the Company’s operations. As of December 31, 2023 and December 31, 2022, there were 23 and 11 properties, respectively, classified as held for sale. Impairment of Long-Lived Assets Fair value measurement of an asset group occurs when events or changes in circumstances related to an asset indicate that the carrying amount of the asset is no longer recoverable. An example of an event or changed circumstance is a reduction in the expected holding period of a property. If indicators are present, the Company will prepare a projection of the undiscounted future cash flows of the property, excluding interest charges, and determine if the carrying amount of the asset group is recoverable. When a carrying amount is not recoverable, an impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair market value. 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 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): Year Ended December 31, 2023 2022 2021 Total provision for impairment $ 7,083 $ 1,114 $ 3,539 Number of properties: (1) Classified as held for sale 14 — — Disposed within the period 4 1 3 (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 year ended December 31, 2023, the Company recorded $ 0.2 million of additional impairment expense on two properties that were classified as held for sale in prior periods and $ 1.9 million of impairment expense on three properties held for investment. 60 Table of Contents Cash, Cash Equivalents and Restricted Cash The Company considers all cash balances, money market accounts and highly liquid investments with original maturities of three months or less to be cash and cash equivalents. Restricted cash includes cash restricted for property tenant improvements and cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code. Restricted cash is included in cash, cash equivalents, and restricted cash in the consolidated balance sheets. The Company had $ 11.5 million of restricted cash as of December 31, 2023, and $ 4.7 million of restricted cash as of December 31, 2022. The Company’s bank balances as of December 31, 2023 and 2022 included certain amounts over the Federal Deposit Insurance Corporation limits. Revenue Recognition and Related Matters The Company’s rental revenue is primarily related to rent received from tenants under leases accounted for as operating leases. Rent from leases that have fixed and determinable rent increases is recognized on a straight-line basis over the non-cancellable initial term of the lease and reasonably certain renewal periods, from the later of the date of the commencement of the lease or the date of acquisition of the property subject to the lease. The difference between rental revenue recognized and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and included as a component of other assets in the consolidated balance sheets. Variable lease revenues include tenant reimbursements, lease termination fees, changes in the index or market-based indices after the inception of the lease or percentage rents. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred. The Company recognized variable lease revenue related to tenant reimbursements and lease termination fees for the periods presented. Capitalized above-market and below-market lease values are amortized on a straight-line basis as a reduction or increase of rental revenue as appropriate over the remaining non-cancellable terms of the respective leases. Reserves for uncollectible amounts are provided against the portion of accounts receivable, net including straight-line rents, which is estimated to be uncollectible, which includes a portfolio-based reserve and reserves for specifically disputed amounts. Such reserves are reviewed each period based upon recovery experience and the specific facts of each outstanding amount. As of December 31, 2023 and December 31, 2022, the Company had an immaterial reserve for uncollectible amounts specific to uncharged reimbursable expenses. Mortgage Loans Receivable The Company holds loans receivable, which are mortgage loans secured by real estate, for short and long-term investment. Loans receivable are carried at amortized cost. As of the year ended December 31, 2023, the Company held eight senior secured first-lien mortgage loans receivable. The Company recognizes interest income on loans receivable using the effective-interest method. Direct costs associated with originating loans, along with any premium or discount, is deferred and amortized as an adjustment to interest income over the term of the related loan receivable using the effective interest method. The Company evaluates its loan receivable balances, including accrued interest, for potential credit losses by analyzing the credit of the borrower, the remaining time to maturity of the loan, collateral value and quality (if any), and other relevant factors. A loan receivable is placed on nonaccrual status when management determines that full recovery of the contractually specified payments of principal and interest is doubtful. Stock-Based Compensation The Company has a share-based compensation award program for its employees and directors. Stock-based compensation expense associated with these awards is recognized in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). The Company classifies stock-based payment awards either as equity awards or liability awards based upon an analysis of ASC 718 and ASC 480. Equity classified awards are measured based on the fair value on the date of grant. Liability classified awards are remeasured to fair value each reporting period. Stock-based compensation expense is recognized over the requisite service or performance period. The Company recognizes forfeitures as they occur. 61 Table of Contents Forward Equity Sales The Company sells shares of common stock through forward sale agreements from time to time to enable the Company to set the price of such shares upon pricing the offering (subject to certain adjustments), while delaying the issuance of such shares and the receipt of the net proceeds by the Company. To account for the forward sale agreements, the Company considers the accounting guidance governing financial instruments and derivatives. To date, the Company has concluded that its forward sale agreements are not liabilities as they do not embody obligations to repurchase its shares nor do they embody obligations to issue a variable number of shares for which the monetary value are predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to its shares. The Company then evaluates whether the agreements meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments. The Company has concluded that the agreements are classifiable as equity contracts based on the following assessments: (i) none of the agreements’ exercise contingencies are based on observable markets or indices besides those related to the market for the Company’s own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to its own stock. The Company also considers the potential dilution resulting from the forward sale agreements on the earnings per share calculations. Prior to settlement, a forward sale agreement will be reflected in the diluted earnings per share calculations using the treasury stock method. Under this method, the number of shares of the Company’s common stock used in diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares of the Company’s common stock that would be issued upon full physical settlement of such forward sale agreement over the number of shares of the Company’s common stock that could be purchased by the Company in the market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the reporting period). Consequently, prior to settlement of a forward sale agreement, there will be no dilutive effect on the Company’s earnings per share except during periods when the average market price of the Company’s common stock is above the adjusted forward sale price. However, upon settlement of a forward sales agreement, if the Company’s elects to physically settle or net share settle such forward sale agreement, delivery of the Company’s shares will result in dilution to the Company’s earnings per share. Transaction Costs Transaction costs represent non-capitalizable acquisition related expenses and costs associated with abandoned acquisitions. Acquisition and dead deal related expenses were $ 0.5 million, $ 0.8 million, and $ 0.7 million for the years ended December 31, 2023, 2022, and 2021, respectively. Income Taxes The Company elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its stockholders and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution and share ownership tests. The Company expects the distributions made during 2023 are sufficient to receive a full dividends paid deduction. NETSTREIT TRS is treated as a taxable REIT subsidiary which may be subject to U.S. federal, state, and local income taxes on its taxable income. In general, NETSTREIT 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. The Company recognizes franchise and other state and local tax expenses in general and administrative and recognizes state and federal income tax in income tax benefit (expense) in the accompanying consolidated statements of operations and comprehensive income (loss). All provisions for federal income taxes in the accompanying consolidated financial statements are attributable to NETSTREIT TRS. Deferred income tax expense and its related deferred tax assets and liabilities were immaterial for the years presented. The Company has elected to record related interest and penalties, if any, as general and administrative expense or as income tax expense based on the nature of the tax in the consolidated statements of operations and comprehensive income (loss). The Company had no material interest or penalties relating to income, franchise, and other state and local taxes for the years presented. Additionally, there were no material accruals for interest or penalties as of December 31, 2023 and 2022. 62 Table of Contents The Company files federal, state and local income tax returns. The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in its financial statements when certain criteria regarding uncertain income tax positions have been met. The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain income tax positions have been recorded in the consolidated financial statements. All federal tax returns for years prior to 2020 are no longer subject to examination. Additionally, state tax returns for years prior to 2018 are generally no longer subject to examination. Earnings Per Share Earnings per common share has been computed pursuant to the guidance in FASB ASC Topic 260, Earnings per Share. Basic earnings per share (“EPS”) is computed by dividing net income allocated to common stockholders by the weighted-average number of common shares outstanding for the reporting period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. No effect is shown for any securities that are anti-dilutive. Net income allocated to common stockholders represents net income less income allocated to participating securities and noncontrolling interests. None of the Company’s equity awards are participating securities. Fair Value Measurement Fair value measurements are utilized in the accounting of the Company’s assets acquired and liabilities assumed in an asset acquisition and also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy described below prioritizes inputs to the valuation techniques used in measuring the fair value of assets and liabilities. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs to be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs. The Company uses the following inputs in its fair value measurements: – Level 2 and Level 3 inputs for its debt and derivative financial instrument fair value disclosures. See “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments,” respectively; and – Level 2 and Level 3 inputs when assessing the fair value of assets and liabilities in connection with real estate acquisitions and impairment. See “Note 4 - Real Estate Investments.” Additionally, 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 December 31, 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 December 31, 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. • Carrying values of the Company’s mortgage loans receivable approximate fair values based on a number of factors, including either their short-term nature, the availability of market quotes for comparable instruments, and a discounted cash flow analysis using estimates of the amount and timing of future cash flows, market rates, and credit spreads. • 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. 63 Table of Contents Provisions for impairment recognized during the years ended December 31, 2023, 2022, and 2021 primarily related to assets held for sale and the impairment was determined based on the estimated or negotiated selling price, less costs of disposal, compared to the carrying value of the property. Of the total provision for impairment during the year ended December 31, 2023, the Company recorded $ 1.9 million of impairment expense on three properties held for investment. Of these properties, one was accounted for at fair value on a nonrecurring basis using a cash flow model (Level 3 inputs) with an adjusted carrying value of $ 1.5 million. The Company estimated fair value using a capitalization rate of 10.0 % which it believes is reasonable based on current market rates. As of December 31, 2022, there were no real estate assets accounted for at fair value. The following table discloses recurring estimated 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”) which is derived based primarily on unobservable market inputs such as interest rates and discounted cash flow analysis using estimates of the amount and timing of future cash flows, market rates and credit spreads (in thousands): December 31, 2023 December 31, 2022 Carrying Value (1) Estimated Fair Value Carrying Value (1) Estimated Fair Value 2024 Term Loan (2) $ — $ — $ 174,532 $ 175,382 2027 Term Loan 174,037 175,641 — — 2028 Term Loan 199,006 201,396 198,764 201,108 2029 Term Loan 148,869 150,666 — — (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 Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company is exposed to credit risk with respect to cash held at various financial institutions, access to its credit facilities, amounts due under mortgage loans receivable, and amounts due or payable under derivative contracts. 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 years ended 2023, 2022, and 2021 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 ASC Topic 280, Segment Reporting, establishes standards for the manner in which companies report information about operating segments. Substantially all of the Company’s investments, at acquisition, are comprised of real estate owned that is leased to tenants on a long-term basis or real estate that secures the Company's investment in mortgage loans receivable. The Company allocates resources and assesses operating performance based on individual investment and property needs. Therefore, the Company aggregates these investments for reporting purposes and operates in one reportable segment. 64 Table of Contents Recent Accounting Pronouncements Issued But Not Yet Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosures by requiring disclosure of incremental segment information on an annual and interim basis such as, annual and interim disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, interim disclosure of a reportable segment’s profit or loss and assets, and the requirement that a public entity that has a single reportable segment provide all the disclosures required by ASU 2023-07 and all existing segment disclosures in Topic 280. The amendments in ASU 2023-07 do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The disclosures are applied retrospectively to all periods presented and early adoption is permitted. The Company has one reportable segment and continues to evaluate additional disclosures that may be required for entities with a single reportable segment. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires annual disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold within the rate reconciliation. In addition, the amendments require annual disclosure of income taxes paid disaggregated by federal, state and foreign jurisdictions as well as individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis, however early adoption and retrospective application is permitted. The Company continues to evaluate the potential impact of the guidance and potential additional disclosures required. Note 3 – Leases Tenant Leases 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 December 31, 2023, exclusive of mortgage loans receivable, the Company’s weighted average remaining lease term was 9.5 years. The Company’s property leases have been classified as operating leases and some have scheduled rent increases throughout the lease term. The Company’s leases typically provide the tenant one or more multi-year renewal options to extend their leases, subject to generally the same terms and conditions, including rent increases, consistent with the initial lease term. All lease-related income is reported as a single line item, rental revenue (including reimbursable), in the consolidated statements of operations and comprehensive income (loss) and is presented net of any reserves, write-offs, or recoveries for uncollectible amounts. Fixed lease income includes stated amounts per the lease contract, which include base rent, fixed common area maintenance charges, and straight-line lease adjustments. Variable lease income primarily includes recoveries from tenants, which represent amounts that tenants are contractually obligated to reimburse the Company for, specific to their portion of actual recoverable costs incurred. Variable lease income also includes percentage rent, which represents amounts billable to tenants based on their actual sales volume in excess of levels specified in the lease contract. 65 Table of Contents The following table provides a disaggregation of lease income recognized under ASC 842 (in thousands): Year Ended December 31, 2023 2022 2021 Rental revenue Fixed lease income (1) $ 110,177 $ 82,836 $ 53,734 Variable lease income (2) 13,179 10,209 4,743 Other rental revenue: Above/below market lease amortization, net 1,400 1,430 785 Lease incentives ( 789 ) ( 541 ) ( 122 ) Rental revenue (including reimbursable) $ 123,967 $ 93,934 $ 59,140 (1) Fixed lease income includes contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term. (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 no material reserves, write-offs, or recoveries of uncollectible amounts during the years ended December 31, 2023, 2022, and 2021. 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 December 31, 2023 are as follows (in thousands): Future Minimum Base Rental Receipts 2024 $ 119,627 2025 119,673 2026 117,107 2027 113,188 2028 106,720 Thereafter 547,052 Total $ 1,123,367 Future minimum rentals exclude amounts that may be received from tenants for reimbursements of operating costs and property taxes. In addition, the future minimum rents do not include any contingent rents based on a percentage of the lessees' gross sales or lease escalations based on future changes in the Consumer Price Index (“CPI”) or other stipulated reference rate. Corporate Office Lease In August 2021, the Company entered into a lease agreement on a new corporate office space, which commenced in October 2021 and is classified as an operating lease. The Company began operating out of the new office in February 2022. The lease has a remaining noncancellable lease term of 8.6 years that expires on July 31, 2032, with a one -time option to terminate in 2029 exercisable by the Company. The lease is also renewable at the Company’s option for two additional periods of five years . No renewals were incorporated in the calculation of the corporate lease right-of-use asset and liability as it is not reasonably certain that the Company will exercise the options. Further, the lease agreement does not contain any material residual value guarantees or material restrictive covenants. The corporate office lease contains variable lease costs related to the lease of parking spaces and non-lease components related to the reimbursement of property operating expenses and certain common area maintenance expenses, all of which are recognized as incurred. The Company elected to use the component practical expedient, which permits the Company to not separate non-lease components from lease components if timing and pattern of transfer is the same. The following table presents the lease expense components for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Operating lease cost $ 542 $ 542 Variable lease cost $ 306 $ 110 The Company recorded a right-of-use asset and operating lease liability of approximately $ 4.5 million at lease commencement. As of December 31, 2023, the right-of-use asset and operating lease liability was $ 3.9 million and $ 5.1 million, respectively. 66 Table of Contents 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 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 December 31, 2023 (in thousands): Future Minimum Lease Payments 2024 $ 617 2025 636 2026 653 2027 670 2028 689 Thereafter 2,623 Total lease payments 5,888 Less: amount representing interest (1) ( 784 ) Present value of operating lease liabilities $ 5,104 (1) Imputed interest was calculated using a discount rate of 3.25 %. The discount rate is based on the estimated incremental borrowing rate, calculated as the treasury rate for the same period as the underlying lease term, plus a spread determined using factors including REIT industry performance. Note 4 – Real Estate Investments As of December 31, 2023, the Company owned or had investments in 598 properties, excluding 24 property developments where rent has yet to commence. The gross real estate investment portfolio, including properties under development, totaled approximately $ 1.9 billion and consisted of the gross acquisition cost of land, buildings, improvements, lease intangible assets and liabilities, and property development costs. The investment portfolio is geographically dispersed throughout 45 states with gross real estate investments in Illinois and Texas representing 9.4 % and 8.5 %, respectively, of the total gross real estate investment of the Company’s investment portfolio. Acquisitions During the year ended December 31, 2023, the Company acquired 103 properties for a total purchase price of $ 345.1 million, inclusive of $ 3.5 million of capitalized acquisition costs. During the year ended December 31, 2022, the Company acquired 105 properties for a total purchase price of $ 424.8 million, inclusive of $ 4.2 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): Year Ended December 31, 2023 2022 Land $ 71,574 $ 104,661 Buildings 212,971 268,621 Site improvements 18,613 21,627 Tenant improvements 3,396 3,747 In-place lease intangible assets 36,548 42,189 Above-market lease intangible assets 2,022 2,744 345,124 443,589 Liabilities assumed Below-market lease intangible liabilities — ( 10,842 ) Mortgage note payable — ( 7,913 ) Accounts payable, accrued expense and other liabilities — ( 40 ) Purchase price (including acquisition costs) $ 345,124 $ 424,794 67 Table of Contents Development As of December 31, 2023, the Company had 18 property developments under construction. During 2023, the Company invested $ 81.0 million in property developments, including the acquisition of 40 new developments with a combined initial purchase price of $ 27.3 million. During 2023, the Company completed development on 27 projects and reclassified approximately $ 68.6 million from property under development to land, building, and improvements in the accompanying consolidated balance sheets. Rent commenced for 21 of the 27 completed developments in 2023, while rent is expected to commence for the other six completed developments in the first quarter of 2024. The remaining 18 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 consolidated balance sheets as of December 31, 2023. During 2022, the Company invested $ 22.0 million in property developments, including the land acquisition of two new developments with a combined initial purchase price of $ 1.8 million. During 2022, the Company completed development on six projects and reclassified approximately $ 23.1 million from property under development to land, building, and improvements in the accompanying consolidated balance sheets. Rent commenced for five of the six completed developments in 2022, while rent on the sixth completed development commenced in the second quarter of 2023. The purchase price, including acquisitions costs, and subsequent development are included in property under development in the accompanying consolidated balance sheets as of December 31, 2022. Additionally, during 2023 and 2022, the Company capitalized approximately $ 1.1 million and $ 0.5 million, respectively, of interest expense associated with properties under development. Dispositions During 2023, the Company sold 19 properties for a total sales price, net of disposal costs, of $ 40.3 million, recognizing a net gain of $ 1.2 million. During 2022, the Company sold seven properties for a total sales price, net of disposal costs, of $ 25.5 million, recognizing a net gain of $ 4.1 million. During 2021, the Company sold nine properties for a total sales price, net of disposal costs, of $ 31.1 million, recognizing a net gain of $ 3.0 million. Investment in Mortgage Loans Receivable The Company’s mortgage loans receivable portfolio as of December 31, 2023 and December 31, 2022 is summarized below (in thousands): Loan Type Monthly Payment (5) Number of Secured Properties Effective Interest Rate (6) Stated Interest Rate Maturity Date December 31, 2023 December 31, 2022 Mortgage (1) (4) I/O 1 6.74 % 7.00 % 4/8/2024 $ 43,612 $ 40,316 Mortgage (4) I/O 2 6.57 % 7.00 % 6/30/2023 — 6,000 Mortgage (4) I/O 46 9.55 % 9.55 % 3/10/2026 41,940 — Mortgage (2) (4) I/O 3 8.10 % 6.89 % 4/10/2026 4,132 — Mortgage (1) (2) (4) I/O 9 7.59 % 7.59 % 6/10/2025 14,024 — Mortgage None (3) 1 8.50 % 8.50 % 12/29/2024 660 — Mortgage (1) P+I 1 7.50 % 7.50 % 3/8/2024 3,246 — Mortgage (1) (4) I/O 7 10.25 % 10.25 % 12/5/2024 5,007 — Mortgage (1) (4) I/O 2 10.25 % 10.25 % 12/22/2024 1,909 — Total 114,530 46,316 Unamortized loan origination costs 58 62 Unamortized discount ( 116 ) $ — Total mortgage loans receivable, net $ 114,472 $ 46,378 (1) The Company has the right, subject to certain terms and conditions, to acquire all or a portion of the underlying collateralized properties. 68 Table of Contents (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) Payments of both interest and principal are due at maturity. (4) Loans 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. (5) I/O: Interest Only; P+I: Principal and Interest. (6) Includes amortization of discount and loan origination costs, as applicable. Note 5 – Intangible Assets and Liabilities Intangible assets and liabilities consisted of the following (in thousands): December 31, 2023 December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Assets: In-place leases $ 181,564 $ ( 45,210 ) $ 136,354 $ 154,876 $ ( 28,472 ) $ 126,404 Above-market leases 21,661 ( 4,361 ) 17,300 20,091 ( 2,892 ) 17,199 Assembled workforce 873 ( 873 ) — 873 ( 873 ) — Lease incentives 8,996 ( 1,296 ) 7,700 8,021 ( 618 ) 7,403 Total intangible assets $ 213,094 $ ( 51,740 ) $ 161,354 $ 183,861 $ ( 32,855 ) $ 151,006 Liabilities: Below-market leases $ 33,196 $ ( 7,843 ) $ 25,353 $ 35,596 $ ( 5,465 ) $ 30,131 The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of December 31, 2023 and 2022 by category were as follows: Years Remaining December 31, 2023 2022 In-place leases 8.8 9.4 Above-market leases 12.2 13.0 Below-market leases 10.9 11.6 Lease incentives 11.1 11.8 The Company records amortization of in-place lease assets and assembled workforce intangible assets to amortization expense, and records net amortization of above-market and below-market lease intangibles as well as amortization of lease incentives to rental revenue. The following amounts in the accompanying consolidated statements of operations and comprehensive income (loss) related to the amortization of intangible assets and liabilities for all property and ground leases (in thousands): Year Ended December 31, 2023 2022 2021 Amortization: Amortization of in-place leases $ 19,203 $ 15,872 $ 9,411 Amortization of assembled workforce — 281 293 $ 19,203 $ 16,153 $ 9,704 Net adjustment to rental revenue: Above-market lease assets ( 1,575 ) ( 1,376 ) ( 1,050 ) Below-market lease liabilities 2,975 2,806 1,858 Lease incentives ( 789 ) ( 541 ) ( 122 ) $ 611 $ 889 $ 686 69 Table of Contents 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 intangible assets and liabilities to rental revenue as of December 31, 2023, for the next five years and thereafter (in thousands): 2024 2025 2026 2027 2028 Thereafter Total In-place leases $ 19,965 $ 19,391 $ 18,149 $ 15,956 $ 13,279 $ 49,614 $ 136,354 Above-market lease assets ( 1,656 ) ( 1,655 ) ( 1,632 ) ( 1,568 ) ( 1,523 ) ( 9,266 ) ( 17,300 ) Below-market lease liabilities 2,802 2,780 2,688 2,616 2,484 11,983 25,353 Lease incentives ( 785 ) ( 785 ) ( 785 ) ( 730 ) ( 700 ) ( 3,915 ) ( 7,700 ) Net adjustment to rental revenue $ 361 $ 340 $ 271 $ 318 $ 261 $ ( 1,198 ) $ 353 Note 6 – Debt Debt consists of the following (in thousands): Amounts Outstanding as of Contractual Maturity Date Fully Extended Maturity Date (1) Interest Rate December 31, 2023 December 31, 2022 Debt: 2024 Term Loan (2) December 23, 2024 — 1.37 % $ — $ 175,000 2027 Term Loan (3) January 15, 2026 January 15, 2027 3.12 % 175,000 — Revolver (4) August 11, 2026 August 11, 2027 6.49 % 80,000 113,000 2028 Term Loan (5) February 11, 2028 — 3.88 % 200,000 200,000 Mortgage Note November 1, 2027 — 4.53 % 8,361 8,498 2029 Term Loan (6) July 3, 2026 January 3, 2029 4.89 % 150,000 — Total debt 613,361 496,498 Unamortized discount and debt issuance costs ( 3,566 ) ( 2,306 ) Unamortized deferred financing costs, net (7) ( 1,942 ) ( 2,684 ) Total debt, net $ 607,853 $ 491,508 (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 December 31, 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 reset effective November 27, 2023 to 1.87 % and will reset again effective December 23, 2024 to 2.40 %. (4) The annual interest rate of the Revolver assumes daily SOFR as of December 31, 2023 of 5.39 % plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.00 % as of December 31, 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 December 31, 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 December 31, 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 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). 70 Table of Contents 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 have been capitalized to other assets, net on the 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 consolidated statements of operations and comprehensive income (loss). Credit Facility On August 11, 2022, the Company entered into a sustainability-linked senior unsecured credit facility consisting of (i) a $ 200.0 million senior unsecured term loan (the “2028 Term Loan”) and (ii) a $ 400.0 million senior unsecured revolving credit facility (the “Revolver”, and together with the 2028 Term Loan, the “Credit Facility”). The Credit Facility may be increased by $ 400.0 million in the aggregate for total availability of up to $ 800.0 million. The 2028 Term Loan matures on February 11, 2028. The Revolver matures on August 11, 2026, subject to a one year extension option at the Company’s election (subject to certain conditions) to August 11, 2027. Borrowings under the Credit Facility are repayable at the Company’s option in whole or in part without premium or penalty. Borrowings under the Revolver may be repaid and reborrowed from time to time prior to the maturity date. Prior to the date the Company obtains an Investment Grade Rating (as defined in the credit agreement governing the Credit Facility (the “Credit Agreement”)), interest rates are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10 %, plus a margin ranging from 1.15 % to 1.60 %, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.15 % to 0.60 %, based on the Company’s consolidated total leverage ratio and (B) in the case of the Revolver either (i) SOFR, plus a SOFR adjustment of 0.10 %, plus a margin ranging from 1.00 % to 1.45 %, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.00% to 0.45 %, based on the Company’s consolidated total leverage ratio. After the date the Company obtains an Investment Grade Rating, interest rates are based on the Company’s Investment Grade Rating, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10 %, plus a margin ranging from 0.80 % to 1.60 %, based on the Company’s Investment Grade Rating, or (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.00% to 0.60 %, based on the Company’s Investment Grade Rating and (B) in the case of the Revolver either (i) SOFR, plus a SOFR adjustment of 0.10 %, plus a margin ranging from 0.725 % to 1.40 %, based on the Company’s Investment Grade Rating, or (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.00% to 0.40 %, based on the Company’s Investment Grade Rating. Additionally, the Company will incur a facility fee based on the total commitment amount of $ 400.0 million under the Revolver. Prior to the date the Company obtains an Investment Grade Rating, the applicable facility fee will range from 0.15 % to 0.30 % based on the Company’s consolidated total leverage ratio. 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. 71 Table of Contents 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 SBTi. The Company has fully hedged the 2028 Term Loan with an all-in interest rate of 3.88 %. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rate hedge is further described in “Note 7 – Derivative Financial Instruments.” In connection with the Credit Facility, the Company incurred $ 3.8 million of deferred financing costs which were allocated between the Revolver and 2028 Term Loan in the amounts of $ 2.4 million and $ 1.3 million, respectively. 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 (loss). 2027 Term Loan 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. The interest rate applicable to the 2027 Term Loan is determined by the Company’s Investment Grade Rating (as defined in the 2027 Term Loan). 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 2027 Term Loan), 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. The Company has fully hedged the 2027 Term Loan. The interest rate hedges are described in “Note 7 – Derivative Financial Instruments.” Mortgage Note Payable As of December 31, 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 $ 12.6 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 consolidated balance sheets. The mortgage note matures on November 1, 2027, but may be repaid in full beginning August 2027. Debt Maturities Payments on the 2027 Term Loan, 2028 Term Loan, and 2029 Term Loan are interest only through maturity. As of December 31, 2023, scheduled debt maturities, including balloon payments, are as follows (in thousands): Scheduled Principal Balloon Payment (1) Total 2024 $ 162 $ — $ 162 2025 170 — 170 2026 178 405,000 405,178 2027 170 7,681 7,851 2028 — 200,000 200,000 Total $ 680 $ 612,681 $ 613,361 (1) Does not assume the exercise of any extension options available to the Company. 72 Table of Contents Interest Expense The following table is a summary of the components of interest expense related to the Company’s borrowings (in thousands): Year Ended December 31, 2023 2022 2021 Revolving credit facilities (1) $ 5,492 $ 3,187 $ 743 Term loans (2) 14,518 5,455 2,408 Mortgage note payable 387 100 — Non-cash: Amortization of deferred financing costs 898 541 402 Amortization of debt discount and debt issuance costs, net 947 350 225 Amortization of deferred gains on interest rate swaps ( 2,124 ) — — Capitalized interest ( 1,060 ) ( 452 ) ( 78 ) Total interest expense, net $ 19,058 $ 9,181 $ 3,700 (1) Includes facility fees and non-utilization fees of approximately $ 0.6 million, $ 0.4 million, and $ 0.6 million for the years ended December 31, 2023, 2022, and 2021, 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 consolidated statements of operations and comprehensive income (loss). During the years ended December 31, 2023, 2022, and 2021, the term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 5.51 %, 3.39 %, and 1.27 %, respectively. During the years ended December 31, 2023, 2022, and 2021, 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 %, 2.59 %, and 1.31 %, 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. These measurements are classified as Level 2 within the fair value hierarchy. 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 December 31, 2023 and expects to be in compliance for the twelve-month period ending December 31, 2024. Note 7 – Derivative Financial Instruments The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. 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 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 December 31, 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 December 31, 2023 of 5.34 %, 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. 73 Table of Contents 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”). 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. The interest rate on the variable 2027 Term Loan includes a daily SOFR rate as of December 31, 2023 of 5.31 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 %. Amounts will subsequently be reclassified to earnings when the hedged item affects earnings. The Company does not enter into derivative contracts for speculative or trading purposes and does not have derivative netting arrangements. The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company evaluates counterparty credit risk through monitoring the creditworthiness of counterparties, which includes review of debt ratings and financial performance. To mitigate credit risk, the Company enters into agreements with counterparties it considers credit-worthy, such as large financial institutions with favorable credit ratings. The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments): Number of Instruments Notional Interest Rate Derivatives December 31, 2023 December 31, 2022 December 31, 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 in the consolidated balance sheets as of December 31, 2023 and December 31, 2022 (in thousands): Derivative Assets Fair Value as of December 31, Derivatives Designated as Hedging Instruments: Balance Sheet Location 2023 2022 Interest rate swaps Other assets, net $ 14,442 $ 24,067 Derivative Liabilities Fair Value as of December 31, Derivatives Designated as Hedging Instruments: Balance Sheet Location 2023 2022 Interest rate swaps Accounts payable, accrued expenses and other liabilities $ 3,073 $ — The following table presents the effect of the Company's interest rate swaps in the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2023, 2022, and 2021 (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 2021 2023 2022 2021 Interest Rate Products $ 1,729 $ 22,898 $ 3,873 Interest expense, net $ 16,551 $ 3,140 $ ( 184 ) The Company did not exclude any amounts from the assessment of hedge effectiveness for the years ended December 31, 2023, 2022, and 2021. During the next twelve months, the Company estimates that an additional $ 14.6 million will be reclassified as a decrease to interest expense. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. 74 Table of Contents To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. 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 December 31, 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 and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 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 December 31, 2023 Derivative assets $ — $ 14,442 $ — $ 14,442 Derivative liabilities $ — $ 3,073 $ — $ 3,073 December 31, 2022 Derivative assets $ — $ 24,067 $ — $ 24,067 Note 8 – Supplemental Detail for Certain Components of the Consolidated Balance Sheets Other assets, net consist of the following (in thousands): December 31, 2023 2022 Accounts receivable, net $ 10,074 $ 7,167 Deferred rent receivable 7,744 5,629 Prepaid assets 1,387 3,864 Earnest money deposits 450 185 Fair value of interest rate swaps 14,442 24,067 Deferred offering costs 1,031 796 Deferred financing costs, net 2,724 2,685 Right-of-use asset 3,866 4,235 Leasehold improvements and other corporate assets, net 1,723 1,969 Interest receivable 1,397 256 Other assets, net 4,499 1,204 $ 49,337 $ 52,057 75 Table of Contents Accounts payable, accrued expenses and other liabilities consists of the following (in thousands): December 31, 2023 2022 Accrued expenses $ 8,826 $ 5,745 Accrued bonus 2,575 1,305 Prepaid rent 3,896 2,937 Operating lease liability 5,104 5,464 Accrued interest 2,921 1,782 Deferred rent 3,257 1,756 Accounts payable 4,691 1,394 Fair value of interest rate swaps 3,073 — Other liabilities 2,155 2,157 $ 36,498 $ 22,540 Note 9 – Shareholders’ Equity ATM Program On September 1, 2021, the Company entered into a $ 250.0 million at-the-market equity program (the “2021 ATM Program”) through which, from time to time, it may sell shares of its common stock in registered transactions. On September 14, 2023, the Company entered into a forward confirmation with respect to 7,500,000 shares of its common stock under the 2021 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 December 31, 2023. The Company may physically settle this forward confirmation (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than September 13, 2024. On October 25, 2023, the Company entered into a $ 300.0 million at-the-market equity program (the “2023 ATM Program”) through which, from time to time, it may sell shares of its common stock in registered transactions. Effective October 24, 2023, in connection with the establishment of the new at-the-market offering program, the 2021 ATM Program was terminated. The following table presents information about the 2023 ATM Program and the 2021 ATM Program (in thousands): Maximum Sales Authorization Gross Sales through December 31, 2023 Program Name Date Established Date Terminated 2021 ATM Program (1) September 2021 October 2023 $ 250,000 $ 150,391 2023 ATM Program October 2023 $ 300,000 $ 77,323 The following table details information related to activity under the ATM Program for each period presented (in thousands, except share and per share data): Year Ended December 31, 2023 (1) 2022 2021 Shares of common stock issued 7,662,341 276,060 3,852,436 Weighted average price per share $ 17.22 $ 21.02 $ 23.36 Gross proceeds $ 131,911 $ 5,802 $ 90,000 Sales commissions and offering costs $ 1,638 $ 269 $ 1,017 Net proceeds (2) $ 130,274 $ 5,533 $ 88,983 (1) Includes 1,516,289 shares of common stock partially physically settled at a price of $ 16.49 per share under the forward confirmation with respect to the 2021 ATM Program. 5,983,711 shares remain unsettled under the forward confirmation as of December 31, 2023 at the available net settlement price of $ 16.48 . (2) The net proceeds were contributed to the Operating Partnership in exchange for an equivalent number of Class A OP Units. As of December 31, 2023, the Company has $ 222.7 million remaining gross proceeds available for future issuances of shares of common stock under the 2023 ATM Program. 76 Table of Contents 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. 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 On January 13, 2022, the Company completed a registered public offering of 10,350,000 shares of its common stock at a public offering price of $ 22.25 per share. In connection with the offering, the Company entered into forward sale agreements for 10,350,000 shares of its 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). April 2021 Follow-On Offering On April 12, 2021, the Company completed a public offering of 10,915,688 shares of common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,423,785 shares of common stock. The Company received net proceeds of $ 194.2 million, net of underwriting discounts and transaction costs of $ 9.4 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 10,915,688 Class A OP Units. Surrendered Shares on Vested Stock Unit Awards During the years presented, 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 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 37 thousand and 75 thousand RSUs, respectively, valued at approximately $ 0.7 million and $ 1.5 million, respectively, solely to pay the associated statutory tax withholding. The surrendered RSUs are included in the row entitled “repurchase of common stock for tax withholding obligations” in the consolidated statements of cash flows. Dividends During the year ended December 31, 2023, the Company declared and paid the following common stock dividends (in thousands, except per share data): Year Ended December 31, 2023 Declaration Date Dividend Per Share Record Date Total Amount Payment Date February 21, 2023 $ 0.200 March 15, 2023 $ 11,650 March 30, 2023 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 October 24, 2023 0.205 December 1, 2023 14,084 December 15, 2023 $ 0.810 $ 51,675 During the year ended December 31, 2022, the Company declared and paid the following common stock dividends (in thousands, except per share data): Year Ended December 31, 2022 Declaration Date Dividend Per Share Record Date Total Amount Payment Date February 22, 2022 $ 0.200 March 15, 2022 $ 8,888 March 30, 2022 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 October 25, 2022 0.200 December 1, 2022 10,984 December 15, 2022 $ 0.800 $ 39,533 The holders of OP Units are entitled to an equal distribution per each OP Unit held as of each record date. Accordingly, during each of the years ended December 31, 2023 and 2022, the Operating Partnership paid distributions of $ 0.4 million to holders of OP Units. 77 Table of Contents For federal income tax purposes, distributions to stockholders are characterized as ordinary income dividends, capital gain distributions, or non-dividend distributions. Non-dividend distributions will reduce U.S. stockholders’ basis (but not below zero) in their shares. The following table shows the character of the Company’s common stock distributions paid per share for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 Ordinary income dividends $ 0.7488 $ 0.6768 $ 0.3099 Non-dividend distributions 0.0502 0.0856 0.4901 Capital gain distributions 0.0110 0.0376 — Total $ 0.8100 $ 0.8000 $ 0.8000 Noncontrolling Interests Noncontrolling interests represent noncontrolling holders of OP Units in the Operating Partnership. 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 December 31, 2023 and 2022, noncontrolling interests represented 0.7 % and 0.9 %, respectively, of OP Units. During the years ended December 31, 2023 and 2022, OP Unit holders redeemed 34,169 and 49,317 OP units, respectively, into shares of common stock on a one -for-one basis. Note 10 – Stock-Based Compensation Under the Omnibus Incentive Plan, 2,094,976 shares of common stock are reserved for issuance. The Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted shares, RSUs, long-term incentive plan units, dividend equivalent rights, and other share-based, share-related or cash-based awards, including performance-based awards, to employees, directors and consultants, with each grant evidenced by an award agreement providing the terms of the award. The Omnibus Incentive Plan is administered by the Compensation Committee of the Board of Directors. As of December 31, 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 consolidated statements of operations and comprehensive income (loss) was $ 4.8 million for the years ended 2023 and 2022 and $ 3.7 million for the year ended 2021. 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) Pursuant to the Omnibus Incentive Plan, the Company made performance-based RSUs to certain employees and non-employee directors. The performance condition required the Company to effectively file a shelf registration statement. Up until the point of filing the registration statement, performance was not deemed probable and accordingly, no RSUs had the capability of vesting and no stock-based compensation expense was recorded. As a result of the Company's initial public offering in August 2020, the performance condition was satisfied and the Company recorded a stock-based compensation expense catch-up adjustment of $ 1.4 million. The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next year. The following table summarizes performance-based RSU activity for the years ended December 31, 2023, 2022, and 2021: 2023 2022 2021 Shares Weighted Average Grant Date Fair Value per Share Shares Weighted Average Grant Date Fair Value per Share Shares Weighted Average Grant Date Fair Value per Share Unvested RSU grants outstanding as of December 31, 2022 61,391 $ 19.75 157,380 $ 19.75 207,803 $ 19.75 Vested during the period ( 31,012 ) 19.75 ( 95,989 ) 19.75 ( 50,423 ) 19.75 Unvested RSU grants outstanding as of December 31, 2023 30,379 $ 19.75 61,391 $ 19.75 157,380 $ 19.75 78 Table of Contents For the years ended 2023, 2022, and 2021, the Company recognized $ 0.3 million, $ 0.9 million, and $ 1.2 million, respectively, in stock-based compensation expense associated with performance-based RSUs. As of December 31, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 0.1 million and $ 0.4 million, respectively, and as of December 31, 2023, these awards are expected to be recognized over a remaining weighted average period of one 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. The grant date fair value of unvested RSUs is calculated as the per share price in the private offering that closed on December 23, 2019. Service-Based RSUs 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 five years . The following table summarizes service-based RSU activity for the years ended December 31, 2023, 2022, and 2021: 2023 2022 2021 Shares Weighted Average Grant Date Fair Value per Share Shares Weighted Average Grant Date Fair Value per Share Shares Weighted Average Grant Date Fair Value per Share Unvested RSU grants outstanding as of December 31, 2022 247,079 $ 19.86 295,207 $ 17.84 169,793 $ 18.00 Granted during the period 161,757 19.79 148,913 22.09 167,454 17.71 Forfeited during the period ( 2,213 ) 20.18 ( 58,922 ) 19.29 ( 7,673 ) 17.93 Vested during the period ( 108,515 ) 19.93 ( 138,119 ) 18.20 ( 34,367 ) 18.00 Unvested RSU grants outstanding as of December 31, 2023 298,108 $ 19.79 247,079 $ 19.86 295,207 $ 17.84 For the years ended 2023 and 2022, the Company recognized $ 2.8 million and for the year ended 2021 recognized $ 1.6 million in stock-based compensation expense associated with service-based RSUs. As of December 31, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 3.4 million and $ 3.0 million, respectively, and as of December 31, 2023, these awards are expected to be recognized over a remaining weighted average period of 1.8 years. Stock-based compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award. The grant date fair value of service-based unvested RSUs is calculated as the per share price determined in the initial public offering for awards granted in 2020, and as the per share price of the Company’s stock on the date of grant for those granted in years subsequent to 2020. Performance-Based RSUs (total shareholder return) Pursuant to the Omnibus Incentive Plan, the Company has made market-based RSU grants to certain employees. These grants are subject to the participant’s continued service over a three year period with 40 % of the award based on the Company’s total shareholder return (“TSR”) as compared to the TSR of identified peer companies and 60 % of the award based on total absolute TSR over the cumulative three year period. The performance period of these grants runs through March 8, 2024, February 28, 2025, and February 28, 2026. Grant date fair value of the market-based share awards was calculated using the Monte Carlo simulation model, which incorporated stock price volatility of the Company and each of the Company’s peers and other variables over the performance period. Significant inputs for the current period calculation were expected volatility of the Company of 29.0 % and expected volatility of the Company's peers, ranging from 32.2 % to 102.8 %, with an average volatility of 46.7 % and a risk-free interest rate of 4.46 %. The fair value per share on the grant date specific to the target TSR relative to the Company’s peers was $ 24.13 and the target absolute TSR was $ 20.15 for a weighted average grant date fair value of $ 21.57 per share. 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 . 79 Table of Contents The following table summarizes market-based RSU activity for the years ended December 31, 2023, 2022, and 2021: 2023 2022 2021 Shares Weighted Average Grant Date Fair Value per Share Shares Weighted Average Grant Date Fair Value per Share Shares Weighted Average Grant Date Fair Value per Share Unvested RSU grants outstanding as of December 31, 2022 177,350 $ 19.83 134,467 $ 17.77 — $ — Granted during the period 81,751 21.57 106,645 22.38 135,766 17.77 Forfeited during the period ( 543 ) 19.36 ( 63,762 ) 19.76 ( 1,299 ) 17.77 Unvested RSU grants outstanding as of December 31, 2023 258,558 $ 20.38 177,350 $ 19.83 134,467 $ 17.77 For the years ended 2023, 2022, and 2021, the Company recognized $ 1.7 million, $ 0.9 million, and $ 0.6 million, respectively, in stock-based compensation expense associated with market-based RSUs. As of December 31, 2023 and December 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 2.1 million and $ 2.0 million, respectively, and as of December 31, 2023, these awards are expected to be recognized over a remaining weighted average period of 1.7 years. Alignment of Interest Program During March 2021, the Company adopted the Alignment of Interest Program (the “Program”), which allows employees to elect to receive a portion of their annual bonus in unvested RSUs in the first quarter of the following year that would then vest over a four-year service period beginning in the period that the bonus relates. The Program is deemed to be a liability-classified award (accounted for as an equity-classified award as the service date precedes the grant date and the award would otherwise be classified as equity on grant date), which will be fair-valued and accrued over the applicable service period. The total estimated fair value of the elections made for 2023 under the Program was approximately $ 0.5 million. The award will be remeasured to fair value each reporting period until the unvested RSUs are granted. For the years ended December 31, 2023 and 2022, the Company recognized approximately $ 0.1 million and for the year ended 2021, recognized $ 0.2 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 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. 80 Table of Contents 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 years ended December 31, 2023, 2022, and 2021. Year Ended December 31, (in thousands, except share and per share data) 2023 2022 2021 Numerator: Net income $ 6,890 $ 8,205 $ 3,150 Net income attributable to noncontrolling interest ( 53 ) ( 88 ) ( 104 ) Net income attributable to common shares, basic 6,837 8,117 3,046 Net income attributable to noncontrolling interest 53 88 104 Net income attributable to common shares, diluted $ 6,890 $ 8,205 $ 3,150 Denominator: Weighted average common shares outstanding, basic 63,922,973 49,517,977 36,999,459 Effect of dilutive shares for diluted net income per common share: OP Units 501,751 526,859 1,377,335 Unvested RSUs 165,420 248,602 295,771 Unsettled shares under open forward equity contracts 75,295 138,384 — Weighted average common shares outstanding, diluted 64,665,439 50,431,822 38,672,565 Net income available to common stockholders per common share, basic $ 0.11 $ 0.16 $ 0.08 Net income available to common stockholders per common share, diluted $ 0.11 $ 0.16 $ 0.08 As of December 31, 2023 and 2022, there were 479,298 and 513,467 of OP Units outstanding, respectively. Note 12 – Commitments and Contingencies Litigation and Regulatory Matters In the ordinary course of business, from time to time, the Company may be subject to litigation, claims and regulatory matters, none of which are currently outstanding, which the Company believes could have, individually or in the aggregate, a material adverse effect on its business, financial condition or results of operations, liquidity or cash flows. Environmental Matters The Company is subject to environmental regulations related to the ownership of real estate. The cost of complying with the environmental regulations was not material to the Company’s results of operations for any of the periods presented. The Company is not aware of any environmental condition on any of its properties that is likely to have a material adverse effect on the consolidated financial statements when the fair value of such liability can be reasonably estimated and is required to be recognized. Commitments In the normal course of business, the Company enters into various types of commitments to purchase real estate properties, fund development projects, or extend funds under mortgage notes receivable. 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 to purchase or extend funding. As of December 31, 2023, the Company had tenant improvement allowance commitments totaling approximately $ 4.1 million, which is expected to be funded over the next two years . Additionally, as of December 31, 2023, the Company had commitments to fund 18 properties under development totaling $ 35.7 million, all of which is expected to be funded over the next 12 months. The Company also had commitments to extend funds under mortgage notes receivable of $ 13.7 million which is expected to occur throughout 2024. In August 2021, the Company entered into a lease agreement on a new corporate office space, which is classified as an operating lease. The Company began operating out of the new office in February 2022. The lease has a remaining noncancellable term of 8.6 years that expires on July 31, 2032 and is renewable at the Company’s option for two additional periods of five years . 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. 81 Table of Contents As of December 31, 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 – Related-Party Transactions Effective with the commencement of the Company’s operations on December 23, 2019, the Company executed a facilities agreement with a subsidiary of EB Arrow Holdings, LLC, which was subsequently amended in April 2021 and ultimately terminated in July 2021. Under the facilities agreement, the Company shared in office rent by paying a fixed monthly rate and office related expenses based on employee headcount. No expenses were incurred during the years ended 2023 and 2022. For the year ended 2021, the Company incurred approximately $ 0.1 million in related expenses. Note 14 – Subsequent Events The Company has evaluated all events that occurred subsequent to December 31, 2023 through the date on which these consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements. Common Stock Dividend On February 13, 2024, the Company's Board of Directors declared a cash dividend of $ 0.205 per share for the first quarter of 2024. The dividend will be paid on March 28, 2024 to stockholders of record on March 15, 2024. January Follow-On Offering In January 2024, the Company completed a public offering of 11,040,000 shares of its common stock at the public offering price of $ 18.00 per share. In connection with the offering, the Company entered into forward sale agreements for 11,040,000 shares of its common stock. The Company did not initially receive any proceeds from the sale of shares of common stock by the forward purchasers. The Company expects to physically settle the forward sale agreements (by delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than January 9, 2025. The Company may also elect to cash settle or net share settle all or a portion of its obligations under a forward sale agreement if it concludes it is in its best interest to do so. If the Company elects to cash settle a forward sale agreement, it may not receive any proceeds and it may owe cash to the relevant counterparty in certain circumstances. No physical settlement has occurred through the date on which these consolidated financial statements were issued. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.