NETSTREIT Corp. 10-Q

Item 1. Financial Statements (unaudited) NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) June 30, 2024 December 31, 2023 Assets Real estate, at cost: Land $ 494,654 $ 460,896 Buildings and improvements 1,270,572 1,149,809 Total real estate, at cost 1,765,226 1,610,705 Less accumulated depreciation ( 122,236 ) ( 101,210 ) Property under development 16,896 29,198 Real estate held for investment, net 1,659,886 1,538,693 Assets held for sale 68,096 52,451 Mortgage loans receivable, net 129,941 114,472 Cash, cash equivalents and restricted cash 13,726 29,929 Lease intangible assets, net 162,273 161,354 Other assets, net 64,064 49,337 Total assets $ 2,097,986 $ 1,946,236 Liabilities and equity Liabilities: Term loans, net $ 621,869 $ 521,912 Revolving credit facility 98,000 80,000 Mortgage note payable, net 7,869 7,883 Lease intangible liabilities, net 23,876 25,353 Liabilities related to assets held for sale 1,142 1,158 Accounts payable, accrued expenses and other liabilities 27,368 36,498 Total liabilities 780,124 672,804 Commitments and contingencies (Note 12) Equity: Stockholders’ equity Common stock, $ 0.01 par value, 400,000,000 shares authorized; 77,377,679 and 73,207,080 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 773 732 Additional paid-in capital 1,435,577 1,367,505 Distributions in excess of retained earnings ( 143,734 ) ( 112,276 ) Accumulated other comprehensive income 17,600 8,943 Total stockholders’ equity 1,310,216 1,264,904 Noncontrolling interests 7,646 8,528 Total equity 1,317,862 1,273,432 Total liabilities and equity $ 2,097,986 $ 1,946,236 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (In thousands, except share and per share data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues Rental revenue (including reimbursable) $ 36,864 $ 29,707 $ 72,053 $ 58,180 Interest income on loans receivable 2,703 1,923 5,187 2,901 Total revenues 39,567 31,630 77,240 61,081 Operating expenses Property 3,982 3,530 8,084 7,467 General and administrative 5,268 5,260 10,978 10,168 Depreciation and amortization 18,544 15,847 36,084 30,795 Provisions for impairment 3,836 2,836 7,498 2,836 Transaction costs 47 15 175 124 Total operating expenses 31,677 27,488 62,819 51,390 Other (expense) income Interest expense, net ( 7,604 ) ( 5,521 ) ( 13,784 ) ( 9,465 ) Gain on sales of real estate, net 8 615 1,006 296 Loss on debt extinguishment — ( 128 ) — ( 128 ) Other (expense) income, net ( 2,588 ) 68 ( 2,868 ) 220 Total other (expense) income, net ( 10,184 ) ( 4,966 ) ( 15,646 ) ( 9,077 ) Net (loss) income before income taxes ( 2,294 ) ( 824 ) ( 1,225 ) 614 Income tax (expense) benefit ( 12 ) 32 ( 29 ) 75 Net (loss) income ( 2,306 ) ( 792 ) ( 1,254 ) 689 Net (loss) income attributable to noncontrolling interests ( 15 ) ( 1 ) ( 8 ) 8 Net (loss) income attributable to common stockholders $ ( 2,291 ) $ ( 791 ) $ ( 1,246 ) $ 681 Amounts available to common stockholders per common share: Basic $ ( 0.03 ) $ ( 0.01 ) $ ( 0.02 ) $ 0.01 Diluted $ ( 0.03 ) $ ( 0.01 ) $ ( 0.02 ) $ 0.01 Weighted average common shares: Basic 73,588,605 61,043,531 73,419,198 59,600,630 Diluted 73,588,605 61,043,531 73,419,198 60,294,734 Other comprehensive income: Net (loss) income $ ( 2,306 ) $ ( 792 ) $ ( 1,254 ) $ 689 Change in value on derivatives, net ( 420 ) 6,388 8,708 409 Total comprehensive (loss) income $ ( 2,726 ) $ 5,596 $ 7,454 $ 1,098 Comprehensive (loss) income attributable to noncontrolling interests ( 15 ) 48 43 8 Comprehensive (loss) income attributable to common stockholders $ ( 2,711 ) $ 5,548 $ 7,411 $ 1,090 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands, except share data) (Unaudited) 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, 2023 73,207,080 $ 732 $ 1,367,505 $ ( 112,276 ) $ 8,943 $ 1,264,904 $ 8,528 $ 1,273,432 OP Units converted to common stock 7,119 — 126 — — 126 ( 126 ) — Dividends and distributions declared on common stock and OP Units — — — ( 15,031 ) — ( 15,031 ) ( 98 ) ( 15,129 ) Dividends declared on restricted stock, net — — — ( 143 ) — ( 143 ) — ( 143 ) Vesting of restricted stock units 176,197 2 ( 2 ) — — — — — Repurchase of common stock for tax withholding obligations ( 61,985 ) ( 1 ) ( 1,068 ) — — ( 1,069 ) — ( 1,069 ) Stock-based compensation, net — — 1,751 135 1,886 — 1,886 Other comprehensive income — — — — 9,077 9,077 51 9,128 Net income — — — 1,045 — 1,045 7 1,052 Balance at March 31, 2024 73,328,411 $ 733 $ 1,368,312 $ ( 126,270 ) $ 18,020 $ 1,260,795 $ 8,362 $ 1,269,157 Issuance of common stock in public offerings, net of issuance costs 4,000,000 40 65,284 — — 65,324 — 65,324 OP Units converted to common stock 35,121 — 611 — — 611 ( 611 ) — Dividends and distributions declared on common stock and OP Units — — — ( 15,042 ) — ( 15,042 ) ( 90 ) ( 15,132 ) Dividends declared on restricted stock, net — — — ( 139 ) — ( 139 ) — ( 139 ) Vesting of restricted stock units 23,510 — — — — — — — Repurchase of common stock for tax withholding obligations ( 9,363 ) — ( 160 ) — — ( 160 ) — ( 160 ) Stock-based compensation, net — — 1,530 8 — 1,538 — 1,538 Other comprehensive loss — — — — ( 420 ) ( 420 ) — ( 420 ) Net loss — — — ( 2,291 ) — ( 2,291 ) ( 15 ) ( 2,306 ) Balance at June 30, 2024 77,377,679 $ 773 $ 1,435,577 $ ( 143,734 ) $ 17,600 $ 1,310,216 $ 7,646 $ 1,317,862 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands, except share data) (Unaudited) 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, 2022 58,031,879 $ 580 $ 1,091,514 $ ( 66,937 ) $ 23,673 $ 1,048,830 $ 9,593 $ 1,058,423 Issuance of common stock in public offerings, net of issuance costs 2,759,481 28 52,875 — — 52,903 — 52,903 OP Units converted to common stock 5,694 — 105 — — 105 ( 105 ) — Dividends and distributions declared on common stock and OP Units — — — ( 11,650 ) — ( 11,650 ) ( 101 ) ( 11,751 ) Dividends declared on restricted stock, net — — — ( 122 ) — ( 122 ) — ( 122 ) Vesting of restricted stock units 83,428 1 ( 1 ) — — — — — Repurchase of common stock for tax withholding obligations ( 18,016 ) — ( 360 ) — — ( 360 ) — ( 360 ) Stock-based compensation, net — — 1,027 — 1,027 — 1,027 Other comprehensive loss — — — — ( 5,930 ) ( 5,930 ) ( 49 ) ( 5,979 ) Net income — — — 1,472 — 1,472 9 1,481 Balance at March 31, 2023 60,862,466 $ 609 $ 1,145,160 $ ( 77,237 ) $ 17,743 $ 1,086,275 $ 9,347 $ 1,095,622 Issuance of common stock in public offerings, net of issuance costs 6,128,135 61 114,475 — — 114,536 — 114,536 Dividends and distributions declared on common stock and OP Units — — — ( 12,173 ) — ( 12,173 ) ( 102 ) ( 12,275 ) Dividends declared on restricted stock, net — — — ( 128 ) — ( 128 ) — ( 128 ) Vesting of restricted stock units 1,416 — — — — — — — Repurchase of common stock for tax withholding obligations ( 420 ) — ( 8 ) — — ( 8 ) — ( 8 ) Stock-based compensation, net — — 1,252 — — 1,252 — 1,252 Other comprehensive income — — — — 6,339 6,339 49 6,388 Net loss — — — ( 791 ) — ( 791 ) ( 1 ) ( 792 ) Balance at June 30, 2023 66,991,597 $ 670 $ 1,260,879 $ ( 90,329 ) $ 24,082 $ 1,195,302 $ 9,293 $ 1,204,595 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2024 2023 Cash flows from operating activities Net (loss) income $ ( 1,254 ) $ 689 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 36,084 30,795 Amortization of deferred financing costs 1,115 615 Amortization of above/below-market assumed debt 57 57 Noncash revenue adjustments ( 1,227 ) ( 839 ) Amortization of deferred gains on interest rate swaps ( 1,958 ) — Stock-based compensation expense 3,281 2,279 Gain on sales of real estate, net ( 1,006 ) ( 296 ) Provisions for impairment 7,498 2,836 Loss on debt extinguishment — 128 Loss (gain) on involuntary conversion of building and improvements 905 ( 47 ) Changes in assets and liabilities, net of assets acquired and liabilities assumed: Other assets, net ( 4,285 ) ( 2,227 ) Accounts payable, accrued expenses and other liabilities ( 2,192 ) 1,628 Lease incentive payments — ( 1,223 ) Net cash provided by operating activities 37,018 34,395 Cash flows from investing activities Acquisitions of real estate ( 190,764 ) ( 163,934 ) Real estate development and improvements ( 29,996 ) ( 19,426 ) Investment in mortgage loans receivable ( 18,021 ) ( 61,422 ) Principal collections on mortgage loans receivable 2,338 — Earnest money deposits ( 14 ) ( 1,066 ) Purchase of computer equipment and other corporate assets ( 8 ) ( 23 ) Proceeds from sale of real estate 32,542 19,299 Proceeds from the settlement of property-related insurance claims — 47 Net cash used in investing activities ( 203,923 ) ( 226,525 ) Cash flows from financing activities Issuance of common stock in public offerings, net 65,324 167,439 Payment of common stock dividends ( 30,073 ) ( 23,823 ) Payment of OP unit distributions ( 188 ) ( 203 ) Payment of restricted stock dividends ( 441 ) ( 93 ) Principal payments on mortgages payable ( 77 ) ( 63 ) Proceeds under revolving credit facilities 190,000 221,000 Repayments under revolving credit facilities ( 172,000 ) ( 228,000 ) Proceeds from term loans 100,000 — Repurchase of common stock for tax withholding obligations ( 1,229 ) ( 368 ) Deferred offering costs ( 614 ) ( 185 ) Deferred financing costs — ( 977 ) Net cash provided by financing activities 150,702 134,727 Net change in cash, cash equivalents and restricted cash ( 16,203 ) ( 57,403 ) Cash, cash equivalents and restricted cash at beginning of the period 29,929 70,543 Cash, cash equivalents and restricted cash at end of the period $ 13,726 $ 13,140 Supplemental disclosures of cash flow information: Cash paid for interest, net $ 13,437 $ 8,045 Cash (received) paid for income taxes $ ( 8 ) $ 477 Supplemental disclosures of non-cash investing and financing activities: Dividends declared and unpaid on restricted stock $ 139 $ 250 Deferred offering costs included in accounts payable, accrued expenses and other liabilities $ 22 $ 121 Accrued loan origination fees on mortgage loans receivable $ 200 $ — Cash flow hedge change in fair value $ 10,666 $ 409 Accrued capital expenditures and real estate development and improvement costs $ 2,657 $ 3,858 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents NETSTREIT CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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, 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. The Company also invests in property developments and mortgage loans secured by real estate. As of June 30, 2024, the Company owned or had investments in 649 properties, located in 45 states, excluding 12 property developments where rent has yet to commence. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying interim condensed 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 accompanying condensed consolidated financial statements include the accounts of the Company and subsidiaries in which the Company has a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation and the Company’s net (loss) income is reduced by the portion of net (loss) income attributable to noncontrolling interests. Interim Unaudited Financial Information The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto on the Annual Report on Form 10-K as of and for the year ended December 31, 2023, which provide a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results for the full year. Use of Estimates The preparation of the condensed 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 condensed 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. 8 Table of Contents 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 discount rates, 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): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Total provision for impairment $ 3,836 $ 2,836 $ 7,498 $ 2,836 Number of properties: (1) Classified as held for sale 5 6 5 6 Disposed within the period 1 — 7 — (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 period. Of the total provision for impairment during the three months ended June 30, 2024, the Company recorded $ 1.1 million of additional impairment expense on four properties that were classified as held for sale in prior periods, and $ 1.9 million of impairment expense on two properties held for investment. Of the total provision for impairment during the six months ended June 30, 2024, the Company recorded $ 1.4 million of additional impairment expense on five properties that were classified as held for sale in prior periods and $ 4.1 million of impairment expense on six properties held for investment. 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 condensed consolidated balance sheets. The Company had $ 0.5 million of restricted cash as of June 30, 2024, and $ 11.5 million of restricted cash as of December 31, 2023. The Company’s bank balances as of June 30, 2024 and December 31, 2023 included certain amounts over the Federal Deposit Insurance Corporation limits. 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 9 Table of Contents – 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 June 30, 2024 and December 31, 2023. These estimates require management’s judgment and may not be indicative of the future fair values of the assets and liabilities. The fair value of the Company’s cash, cash equivalents and restricted cash (including money market accounts), other assets and accounts payable, accrued expenses and other liabilities approximate their carrying value because of the short-term nature of these instruments. Additionally, the Company believes the following financial instruments have carrying values that approximate their fair values as of June 30, 2024: • 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. Provisions for impairment recognized during the three and six months ended June 30, 2024 partially related to assets held for sale where impairment was determined based on the estimated or negotiated selling price, less costs of disposal, compared to the carrying value of the property. The Company also recorded $ 1.9 million and $ 4.1 million of impairment expense on two and six properties held for investment, respectively, during the three and six months ended June 30, 2024. These properties were accounted for at fair value on a nonrecurring basis using a cash flow model (Level 3 inputs) with adjusted carrying values ranging from $ 0.2 million to $ 4.8 million. The Company estimated the fair value using a capitalization rates ranging from 7.6 % to 12.1 % which it believes is reasonable based on current market rates. As of December 31, 2023, there were two real estate assets held for investment accounted for at fair value. 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 following table discloses estimated fair value information for the Company’s 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): June 30, 2024 December 31, 2023 Carrying Value (1) Estimated Fair Value Carrying Value (1) Estimated Fair Value 2027 Term Loan $ 174,273 $ 175,493 $ 174,037 $ 175,641 2028 Term Loan 199,126 201,242 199,006 201,396 2029 Term Loan 248,471 250,909 148,869 150,666 (1) The carrying value of the debt instruments are net of unamortized debt issuance and discount costs. Concentrations of Credit Risk During the three months ended June 30, 2024, one tenant, Dollar General, accounted for 11.3 % of total revenues. During the three months ended June 30, 2023, there were no other tenants or borrowers with rental or interest income on loans receivable that exceeded 10% of total revenues. During the six months ended June 30, 2024, one tenant, Dollar General, accounted for 11.5 % of total revenues. During the six months ended June 30, 2023, there were no other tenants or borrowers with rental or interest income on loans receivable that exceeded 10% of total revenues. Other financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash held at various financial institutions, access to the Company’s credit facilities, and amounts due or payable under derivative contracts. These credit risk exposures are spread among a diversified group of investment grade financial institutions. 10 Table of Contents 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. 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. Note 3 – 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 June 30, 2024, 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 condensed consolidated statements of operations and comprehensive (loss) income 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. The following table provides a disaggregation of lease income recognized under ASC 842 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Rental revenue Fixed lease income (1) $ 33,788 $ 26,808 $ 65,653 $ 51,531 Variable lease income (2) 2,978 2,715 6,207 6,252 Other rental revenue: Above/below market lease amortization, net 287 377 573 789 Lease incentives ( 189 ) ( 193 ) ( 380 ) ( 392 ) Rental revenue (including reimbursable) $ 36,864 $ 29,707 $ 72,053 $ 58,180 (1) Fixed lease income includes contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term. 11 Table of Contents (2) Variable lease income primarily includes tenant reimbursements for real estate taxes, insurance, common area maintenance, and lease termination fees, and reserves for uncollectible amounts. There were no material reserves, write-offs, or recoveries of uncollectible amounts during the three and six months ended June 30, 2024 and 2023. Scheduled future minimum base rental payments (excluding base rental payments from properties classified as held for sale and straight line rent adjustments for all properties) due to be received under the remaining non-cancelable term of the operating leases in place as of June 30, 2024 are as follows (in thousands): Future Minimum Base Rental Receipts Remainder of 2024 $ 66,247 2025 132,701 2026 130,639 2027 127,206 2028 120,591 Thereafter 736,410 Total $ 1,313,794 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 or other stipulated reference rate. Note 4 – Real Estate Investments As of June 30, 2024, the Company owned or had investments in 649 properties, excluding 12 property developments where rent has yet to commence. The gross real estate investment portfolio, including properties under development, totaled approximately $ 2.0 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 Texas and Illinois representing 10.6 % and 9.0 %, respectively, of the total gross real estate investment of the Company’s investment portfolio. Acquisitions During the three months ended June 30, 2024, the Company acquired 18 properties for a total purchase price of $ 95.6 million, inclusive of $ 0.6 million of capitalized acquisition costs. During the six months ended June 30, 2024, the Company acquired 46 properties for a total purchase price of $ 190.8 million, inclusive of $ 1.8 million of capitalized acquisition costs. During the three months ended June 30, 2023, the Company acquired 28 properties for a total purchase price of $ 96.2 million, inclusive of $ 1.0 million of capitalized acquisition costs. During the six months ended June 30, 2023, the Company acquired 48 properties for a total purchase price of $ 163.9 million, inclusive of $ 1.7 million of capitalized acquisition costs. The acquisitions were all accounted for as asset acquisitions. An allocation of the purchase price and acquisition costs paid for the completed acquisitions is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Land $ 28,264 $ 19,748 $ 44,872 $ 34,052 Buildings 55,508 56,869 114,887 100,002 Site improvements 7,001 5,490 13,429 8,969 Tenant improvements 359 1,168 1,804 1,559 In-place lease intangible assets 4,479 11,399 15,772 17,809 Above-market lease intangible assets — 1,543 — 1,543 Purchase price (including acquisition costs) $ 95,611 $ 96,217 $ 190,764 $ 163,934 12 Table of Contents Development As of June 30, 2024, the Company had eight property developments under construction. During the three months ended June 30, 2024, the Company invested $ 12.0 million in property developments, including the land acquisition of two new developments with a combined initial purchase price of $ 1.2 million. During the six months ended June 30, 2024, the Company invested $ 23.0 million in property developments, including the land acquisition of four new developments with a combined initial purchase price of $ 2.0 million. During the six months ended June 30, 2024, the Company completed development on 14 projects and reclassified approximately $ 35.3 million from property under development to land, buildings and improvements, and other assets (leasing commissions) in the accompanying condensed consolidated balance sheets. Rent commenced for 10 of the completed developments during the six months ended June 30, 2024, while rent is expected to commence for the other four completed developments in the third quarter of 2024. The remaining eight developments are expected to be substantially completed with rent commencing at various points throughout 2024. The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of June 30, 2024. During the three months ended June 30, 2023, the Company invested $ 17.7 million in property developments. During the six months ended June 30, 2023, the Company invested $ 22.2 million in property developments, including the land acquisition of 20 new developments with an initial purchase price of $ 11.9 million. During the six months ended June 30, 2023, the Company completed development on two projects and reclassified approximately $ 14.8 million from property under development to land, buildings and improvements in the accompanying condensed consolidated balance sheets. Rent commenced for the completed developments in the first quarter of 2023. The purchase price, including acquisitions costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of June 30, 2023. Additionally, during the three months ended June 30, 2024 and 2023, the Company capitalized approximately $ 0.2 million and $ 0.1 million, respectively, of interest expense associated with properties under development. During the six months ended June 30, 2024 and 2023, the Company capitalized approximately $ 0.6 million and $ 0.3 million, respectively, of interest expense associated with properties under development. Dispositions During the three months ended June 30, 2024, the Company sold six properties for a total sales price, net of disposal costs, of $ 12.1 million, recognizing a net gain of less than $ 0.1 million. During the three months ended June 30, 2023, the Company sold two properties for a total sales price, net of disposal costs, of $ 3.8 million, recognizing a net gain of $ 0.6 million. During the six months ended June 30, 2024, the Company sold 18 properties for a total sales price, net of disposal costs, of $ 32.5 million, recognizing a net gain of $ 1.0 million. During the six months ended June 30, 2023, the Company sold 10 properties for a total sales price, net of disposal costs, of $ 19.3 million, recognizing a net gain of $ 0.3 million. 13 Table of Contents Investment in Mortgage Loans Receivable The Company’s mortgage loans receivable portfolio as of June 30, 2024 and December 31, 2023 is summarized below (in thousands): Loan Type Monthly Payment (1) Number of Secured Properties Effective Interest Rate (2) Stated Interest Rate Maturity Date June 30, 2024 December 31, 2023 Mortgage (3) (4) I/O 1 7.60 % 7.50 % 1/8/2025 $ 43,612 $ 43,612 Mortgage (4) I/O 46 9.55 % 9.55 % 3/10/2026 41,940 41,940 Mortgage (4) (5) I/O 3 8.11 % 6.89 % 4/10/2026 4,132 4,132 Mortgage (3) (4) (5) I/O 9 7.59 % 7.59 % 6/10/2025 14,024 14,024 Mortgage None (6) 1 7.73 % 8.50 % 12/29/2024 660 660 Mortgage (3) P+I 1 9.32 % 7.50 % 1/8/2025 3,231 3,246 Mortgage (3) (4) (7) I/O 12 8.80 % 10.25 % 6/18/2025 16,823 5,007 Mortgage (3) (4) I/O 2 14.10 % 10.25 % 12/22/2024 4,149 1,909 Mortgage (3) (4) I/O 1 10.25 % 10.25 % 4/26/2025 819 — Mortgage (3) (4) I/O 1 10.25 % 10.25 % 5/15/2025 784 — Total 130,174 114,530 Unamortized loan origination costs and fees, net 20 58 Unamortized discount ( 252 ) ( 116 ) Total mortgage loans receivable, net $ 129,941 $ 114,472 (1) I/O: Interest Only; P+I: Principal and Interest. (2) Includes amortization of discount, loan origination costs and fees, as applicable. (3) The Company has the right, subject to certain terms and conditions, to acquire all or a portion of the underlying collateralized properties. (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) 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. (6) Payments of both interest and principal are due at maturity. (7) The collateralized properties are in process developments with varying maturity dates dependent upon initial funding. Maturity dates range from December 5, 2024 to June 18, 2025. Assets Held for Sale As of June 30, 2024 and December 31, 2023, there were 25 and 23 properties, respectively, classified as held for sale. Provisions for Impairment The Company recorded provisions for impairment of $ 3.8 million and $ 2.8 million on 12 properties and six properties for the three months ended June 30, 2024 and 2023, respectively. The Company recorded provisions for impairment of $ 7.5 million and $ 2.8 million on 23 properties and six properties for the six months ended June 30, 2024 and 2023, respectively . 14 Table of Contents Note 5 – Intangible Assets and Liabilities Intangible assets and liabilities consisted of the following (in thousands): June 30, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Assets: In-place leases $ 191,928 $ ( 53,058 ) $ 138,870 $ 181,564 $ ( 45,210 ) $ 136,354 Above-market leases 21,634 ( 5,163 ) 16,471 21,661 ( 4,361 ) 17,300 Lease incentives 8,541 ( 1,609 ) 6,932 8,996 ( 1,296 ) 7,700 Total intangible assets $ 222,103 $ ( 59,830 ) $ 162,273 $ 212,221 $ ( 50,867 ) $ 161,354 Liabilities: Below-market leases $ 33,062 $ ( 9,186 ) $ 23,876 $ 33,196 $ ( 7,843 ) $ 25,353 The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of June 30, 2024 and as of December 31, 2023 by category were as follows: Years Remaining June 30, 2024 December 31, 2023 In-place leases 8.9 8.8 Above-market leases 11.8 12.2 Below-market leases 10.5 10.9 Lease incentives 10.5 11.1 The Company records amortization of in-place lease 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 condensed consolidated statements of operations and comprehensive (loss) income related to the amortization of intangible assets and liabilities for all property and ground leases (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Amortization: Amortization of in-place leases $ 5,196 $ 4,809 $ 10,071 $ 9,479 Net adjustment to rental revenue: Above-market lease assets ( 93 ) ( 391 ) ( 188 ) ( 762 ) Below-market lease liabilities 380 768 761 1,551 Lease incentives ( 189 ) ( 193 ) ( 380 ) ( 392 ) $ 98 $ 184 $ 193 $ 397 15 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 June 30, 2024, for the next five years and thereafter (in thousands): Remainder of 2024 2025 2026 2027 2028 Thereafter Total In-place leases $ 10,388 $ 20,525 $ 19,319 $ 17,352 $ 14,548 $ 56,738 $ 138,870 Above-market lease assets $ ( 828 ) $ ( 1,655 ) $ ( 1,632 ) $ ( 1,568 ) $ ( 1,523 ) $ ( 9,265 ) $ ( 16,471 ) Below-market lease liabilities 1,394 2,771 2,681 2,610 2,478 11,942 23,876 Lease incentives ( 375 ) ( 751 ) ( 751 ) ( 695 ) ( 665 ) ( 3,695 ) ( 6,932 ) Net adjustment to rental revenue $ 191 $ 365 $ 298 $ 347 $ 290 $ ( 1,018 ) $ 473 Note 6 – Debt Debt consists of the following (in thousands): Amounts Outstanding as of Contractual Maturity Date Fully Extended Maturity Date (1) Interest Rate (2) June 30, 2024 December 31, 2023 Debt: 2027 Term Loan (3) January 15, 2026 January 15, 2027 3.12 % $ 175,000 $ 175,000 2028 Term Loan (4) February 11, 2028 — 3.88 % 200,000 200,000 2029 Term Loan (5) July 3, 2026 January 3, 2029 4.99 % 250,000 150,000 Revolver (6) August 11, 2026 August 11, 2027 6.43 % 98,000 80,000 Mortgage Note November 1, 2027 — 4.53 % 8,284 8,361 Total debt 731,284 613,361 Unamortized discount and debt issuance costs ( 3,546 ) ( 3,566 ) Unamortized deferred financing costs, net (7) ( 1,571 ) ( 1,942 ) Total debt, net $ 726,167 $ 607,853 (1) Date represents the fully extended maturity date available to the Company, subject to certain conditions, under each related debt instrument. ( 2 ) Rate represents the effective interest rate as of June 30, 2024 and includes the effect of interest rate swap agreements, as described further in “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments.” (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 June 30, 2024. 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) Loan is a floating-rate loan which resets monthly at one-month term SOFR plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.15 % as of June 30, 2024. The Company has entered into three interest rate swap agreements that effectively convert the floating rate to a fixed rate. (5) Loan is a floating-rate loan which resets daily at daily SOFR plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.15 % as of June 30, 2024. The Company has entered into four interest rate swap agreements that effectively convert the floating rate to a fixed rate. (6) The annual interest rate of the Revolver assumes daily SOFR as of June 30, 2024 of 5.34 % plus a SOFR adjustment of 0.10 % plus the applicable margin which was 1.00 % as of June 30, 2024. (7) The Company records deferred financing costs associated with the Revolver in other assets, net on its condensed consolidated balance sheets. The Company reclassed the net amount of loan commitment fees associated with the 2029 Term Loan from other assets, net to debt issuance costs upon the $ 100.0 million draw under the 2029 Term Loan. 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 two one-year extension options and one six-month extension option with a final, extended maturity date of January 3, 2029. The extension options are at the Company’s election and are subject to certain conditions. Subject to the terms of the 2029 Term Loan Agreement, the Company drew an additional $ 100.0 million under the 2029 Term Loan on March 1, 2024. 16 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 a fixed SOFR rate 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 in 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 associated with the 2029 Term Loan, which were capitalized to other assets, net on the condensed consolidated balance sheets and subsequently reclassed to debt issuance costs upon the $ 100.0 million draw under the 2029 Term Loan. Deferred financing costs are amortized over the term of the loan and are included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive (loss) income. 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 $ 1.0 billion. 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. 17 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 approximately $ 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 condensed consolidated statements of operations and comprehensive (loss) income. 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 June 30, 2024, the Company had total gross mortgage indebtedness of $ 8.3 million, which was collateralized by related real estate and a tenant’s lease with an aggregate net book value of $ 12.4 million. The Company incurred debt issuance costs of less than $ 0.1 million and recorded a debt discount of $ 0.6 million, both of which are recorded as a reduction of the principal balance in mortgage note payable, net in the Company’s condensed consolidated balance sheets. 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 June 30, 2024, scheduled debt maturities, including balloon payments, are as follows (in thousands): Scheduled Principal Balloon Payment (1) Total Remainder of 2024 $ 83 $ — $ 83 2025 170 — 170 2026 178 523,000 523,178 2027 170 7,683 7,853 2028 — 200,000 200,000 Total $ 601 $ 730,683 $ 731,284 (1) Does not assume the exercise of any extension options available to the Company. 18 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): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revolving credit facilities (1) $ 1,636 $ 2,567 $ 2,759 $ 3,716 Term loans (2) 6,491 2,668 12,200 5,168 Mortgage note payable 95 100 190 193 Non-cash: Amortization of deferred financing costs 186 186 423 371 Amortization of debt discount and debt issuance costs, net 401 150 749 301 Amortization of deferred gains on interest rate swaps ( 979 ) — ( 1,958 ) — Capitalized interest ( 226 ) ( 150 ) ( 579 ) ( 284 ) Total interest expense, net $ 7,604 $ 5,521 $ 13,784 $ 9,465 (1) Includes facility fees and non-utilization fees of approximately $ 0.2 million and $ 0.1 million for the three months ended June 30, 2024 and 2023, respectively, and facility fees of $ 0.3 million and $ 0.3 million for the six months ended June 30, 2024 and 2023, respectively. (2) Includes the effects of interest rate hedges in place as of such date. Deferred financing, discount, and debt issuance costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net in the Company’s condensed consolidated statements of operations and comprehensive (loss) income. During the three months ended June 30, 2024 and 2023, term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 6.66 % and 6.41 %, respectively. During the six months ended June 30, 2024 and 2023, term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 6.69 % and 6.09 %, respectively. During the three months ended June 30, 2024 and 2023, 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 6.49 % and 5.94 %, respectively. During the six months ended June 30, 2024 and 2023, 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 6.51 % and 5.92 %, 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 June 30, 2024 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 condensed consolidated statements of cash flows. Effective July 3, 2023, such derivatives were initiated to hedge the variable cash flows associated with the 2029 Term Loan. The interest rate for the variable rate 2029 Term Loan is based on the hedged fixed rate of 3.74 % compared to the variable 2029 Term Loan daily SOFR rate as of June 30, 2024 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 fully extended maturity date of the 2029 Term Loan. 19 Table of Contents Effective September 1, 2022, such derivatives were initiated to hedge the variable cash flows associated with the 2028 Term Loan. The interest rate for the variable rate 2028 Term Loan is based on the hedged fixed rate of 2.63 % compared to the variable 2028 Term Loan one-month SOFR rate as of June 30, 2024 of 5.33 %, plus a SOFR adjustment of 0.10 % and applicable margin of 1.15 %. The maturity dates of the interest rate swaps coincide with the maturity date of the 2028 Term Loan. 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 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 June 30, 2024 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 June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023 Interest rate swaps 12 12 $ 650,000 $ 650,000 The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 (in thousands): Derivative Assets Fair Value as of Derivatives Designated as Hedging Instruments: Balance Sheet Location June 30, 2024 December 31, 2023 Interest rate swaps Other assets, net $ 22,035 $ 14,442 Derivative Liabilities Fair Value as of Derivatives Designated as Hedging Instruments: Balance Sheet Location June 30, 2024 December 31, 2023 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 on the condensed consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2024 and 2023 (in thousands): Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Derivatives in Cash Flow Hedging Relationships 2024 2023 2024 2023 For the Three Months Ended June 30 Interest Rate Products $ 4,446 $ 9,714 Interest expense, net $ 4,866 $ 3,326 For the Six Months Ended June 30 Interest Rate Products $ 18,207 $ 6,572 Interest expense, net $ 9,499 $ 6,163 20 Table of Contents The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and six months ended June 30, 2024 and 2023. During the next twelve months, the Company estimates that an additional $ 12.6 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. 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 June 30, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. The table below presents the Company’s derivative assets measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands): Fair Value Hierarchy Level Description Level 1 Level 2 Level 3 Total Fair Value June 30, 2024 Derivative assets $ — $ 22,035 $ — $ 22,035 December 31, 2023 Derivative assets $ — $ 14,442 $ — $ 14,442 Derivative liabilities $ — $ 3,073 $ — $ 3,073 Note 8 – Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets Other assets, net consist of the following (in thousands): June 30, 2024 December 31, 2023 Accounts receivable, net $ 11,143 $ 10,074 Deferred rent receivable 9,469 7,744 Prepaid assets 3,834 1,387 Earnest money deposits 464 450 Fair value of interest rate swaps 22,035 14,442 Deferred offering costs 1,244 1,031 Deferred financing costs, net 1,571 2,724 Right-of-use asset 3,677 3,866 Leasehold improvements and other corporate assets, net 1,575 1,723 Interest receivable 2,542 1,397 Other assets, net 6,510 4,499 $ 64,064 $ 49,337 21 Table of Contents Accounts payable, accrued expenses and other liabilities consists of the following (in thousands): June 30, 2024 December 31, 2023 Accrued expenses $ 8,753 $ 8,826 Accrued bonus 736 2,575 Prepaid rent 3,090 3,896 Operating lease liability 4,882 5,104 Accrued interest 3,258 2,921 Deferred rent 3,998 3,257 Accounts payable 812 4,691 Fair value of interest rate swaps — 3,073 Other liabilities 1,839 2,155 $ 27,368 $ 36,498 Note 9 – Shareholders’ Equity, Partners’ Capital and Preferred Equity ATM Program On September 1, 2021, the Company entered into a $ 250.0 million at-the-market equity program (the “2021 ATM Program”). • In March 2023, the Company issued 146,745 shares of common stock under the 2021 ATM Program at a weighted average price of $ 20.22 per share for net proceeds of approximately $ 2.9 million, net of sales commissions and offering costs of less than $ 0.1 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 146,745 Class A units of limited partnership of the Operating Partnership (“Class A OP Units”). • In June 2023, the Company issued 1,364,815 shares of common stock under the 2021 ATM Program at a weighted average price of $ 17.53 per share for net proceeds of approximately $ 23.4 million, net of sales commissions and offering costs of $ 0.3 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 1,364,815 Class A OP Units. 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 June 26, 2024, the Company partially physically settled 4,000,000 shares of common stock at a price of $ 16.43 per share under such forward confirmation for net proceeds of approximately $ 65.3 million, net of sales commissions and offering costs of $ 0.7 million. As of June 30, 2024, 1,983,711 shares remain unsettled under the forward confirmation. 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. On March 28, 2024, the Company entered into a forward confirmation with respect to 107,500 shares of its common stock under the 2023 ATM Program, at a public offering price of $ 18.29 per share. 107,500 shares remain unsettled under the forward confirmation as of June 30, 2024. 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 April 12, 2025. 22 Table of Contents During April 2024, the Company entered into forward sale agreements with respect to an aggregate 1,635,600 shares of its common stock under the 2023 ATM Program at a weighted average price of $ 17.63 per share. The Company did not initially receive any proceeds from the sale of shares of common stock by the forward purchaser. 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 April 12, 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. No physical settlement has occurred through the date on which these condensed consolidated financial statements were issued. 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 forward counterparty in certain circumstances. As of June 30, 2024, the Company has $ 222.7 million remaining gross proceeds available for future issuances of shares of common stock under the 2023 ATM Program, inclusive of unsettled shares under forward confirmation. The following table presents information about the 2023 ATM Program and the 2021 ATM Program (in thousands): Maximum Sales Authorization Gross Sales through June 30, 2024 Program Name Date Established Date Terminated 2021 ATM Program (1) September 2021 October 2023 $ 250,000 $ 216,391 2023 ATM Program (2) October 2023 — $ 300,000 $ 77,323 (1) As of June 30, 2024, 1,983,711 shares remain unsettled under the forward confirmation at the available net settlement price of $ 16.44 . (2) As of June 30, 2024, 1,743,100 shares remain unsettled under the forward confirmation as of June 30, 2024 at the available net settlement price of $ 17.54 . January 2024 Follow-On Offering In January 2024, the Company completed a registered public offering of 11,040,000 shares of its common stock at a 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 forward counterparty in certain circumstances. As of June 30, 2024, 11,040,000 shares remain unsettled under the January 2024 forward sale agreements. Surrendered Shares on Vested Stock Unit Awards During the six months ended June 30, 2024 and 2023, portions of restricted stock unit awards (“RSUs”) granted to certain of the Company’s officers, directors, and employees vested. The vesting of these awards, granted pursuant to the NETSTREIT Corp. 2019 Omnibus Incentive Plan (the “Omnibus Incentive Plan”), resulted in federal and state income tax liabilities for the recipients. During the six months ended June 30, 2024 and 2023, as permitted by the terms of the Omnibus Incentive Plan and the award grants, certain executive officers and employees elected to surrender an approximate total of 71 thousand and 18 thousand RSUs, respectively, valued at approximately $ 1.2 million and $ 0.4 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 condensed consolidated statements of cash flows. Dividends During the six months ended June 30, 2024, the Company declared and paid the following common stock dividends (in thousands, except per share data): Six Months Ended June 30, 2024 Declaration Date Dividend Per Share Record Date Total Amount Payment Date February 13, 2024 $ 0.205 March 15, 2024 $ 15,031 March 28, 2024 April 23, 2024 0.205 June 3, 2024 15,042 June 14, 2024 $ 0.410 $ 30,073 23 Table of Contents During the six months ended June 30, 2023, the Company declared and paid the following common stock dividends (in thousands, except per share data): Six Months Ended June 30, 2023 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 $ 0.400 $ 23,823 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 six months ended June 30, 2024 and 2023, the Operating Partnership paid distributions of $ 0.2 million to holders of OP Units. 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 June 30, 2024 and December 31, 2023, noncontrolling interests represented 0.6 % and 0.7 %, respectively, of OP Units. During the three months ended June 30, 2024 and 2023, OP Unit holders redeemed 35,121 and no OP Units, respectively, into shares of common stock on a one -for-one basis. During the six months ended June 30, 2024 and 2023, OP Unit holders redeemed 42,240 and 5,694 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 June 30, 2024, the only stock-based compensation granted by the Company were RSUs. The total amount of stock-based compensation costs recognized in general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive (loss) income was $ 1.5 million for the three months ended June 30, 2024 and $ 1.3 million for the three months ended June 30, 2023. Stock-based compensation expense was $ 3.3 million for the six months ended June 30, 2024 and $ 2.3 million for the six months ended June 30, 2023. 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 resale 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 are expected to fully vest during the current year. The following table summarizes performance-based RSU activity for the period ended June 30, 2024: Shares Weighted Average Grant Date Fair Value per Share Unvested RSU grants outstanding as of December 31, 2023 30,379 $ 19.75 Granted during the period — — Forfeited during the period — — Vested during the period — — Unvested RSU grants outstanding as of June 30, 2024 30,379 $ 19.75 24 Table of Contents For both the three and six months ended June 30, 2024, the Company recognized less than $ 0.1 million in stock-based compensation expense associated with performance-based RSUs. As of June 30, 2024 and December 31, 2023, the remaining unamortized stock-based compensation expense totaled less than $ 0.1 million, and as of June 30, 2024, these awards are expected to be recognized over a remaining weighted average period of 0.5 years. 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 period ended June 30, 2024: Shares Weighted Average Grant Date Fair Value per Share Unvested RSU grants outstanding as of December 31, 2023 298,108 $ 19.79 Granted during the period 200,140 17.33 Forfeited during the period ( 1,034 ) 18.10 Vested during the period ( 153,047 ) 19.72 Unvested RSU grants outstanding as of June 30, 2024 344,167 $ 18.39 For the three and six months ended June 30, 2024, the Company recognized $ 0.9 million and $ 1.9 million, respectively, in stock-based compensation expense associated with service-based RSUs. As of June 30, 2024 and December 31, 2023, the remaining unamortized stock-based compensation expense totaled $ 4.8 million and $ 3.4 million, respectively, and as of June 30, 2024, these awards are expected to be recognized over a remaining weighted average period of 2.1 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 February 28, 2025, February 28, 2026, and December 31, 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 24.9 % and expected volatility of the Company's peers, ranging from 19.9 % to 49.4 %, with an average volatility of 27.1 % and a risk-free interest rate of 4.41 %. The fair value per share on the grant date specific to the target TSR relative to the Company’s peers was $ 18.03 and the target absolute TSR was $ 14.56 for a weighted average grant date fair value of $ 15.77 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 . 25 Table of Contents The following table summarizes market-based RSU activity for the period ended June 30, 2024: Shares Weighted Average Grant Date Fair Value per Share Unvested RSU grants outstanding as of December 31, 2023 258,558 $ 20.38 Granted during the period 169,002 16.05 Forfeited during the period ( 75,229 ) 17.26 Vested during the period ( 46,660 ) 20.36 Unvested RSU grants outstanding as of June 30, 2024 305,671 $ 18.76 For the three and six months ended June 30, 2024, the Company recognized $ 0.5 million and $ 1.1 million, respectively, in stock-based compensation expense associated with market-based RSUs. As of June 30, 2024 and December 31, 2023, the remaining unamortized stock-based compensation expense totaled $ 3.4 million and $ 2.1 million, respectively, and as of June 30, 2024, these awards are expected to be recognized over a remaining weighted average period of 2.2 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 RSUs in the first quarter of the following year, that vests from one to four years based on the terms of the grant agreement. Stock-based compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award, which begins in the period 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 2024 under the Program was approximately $ 1.7 million. The award will be remeasured to fair value each reporting period until the unvested RSUs are granted. For the three and six months ended June 30, 2024, the Company recognized approximately $ 0.1 million and $ 0.2 million, respectively, 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 – (Loss) Earnings Per Share Net (loss) income per common share has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net (loss) income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. 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. 26 Table of Contents The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net (loss) income per common share for the three and six months ended June 30, 2024 and 2023. Three Months Ended June 30, Six Months Ended June 30, (In thousands, except share and per share data) 2024 2023 2024 2023 Numerator: Net (loss) income $ ( 2,306 ) $ ( 792 ) $ ( 1,254 ) $ 689 Net loss (income) attributable to noncontrolling interest 15 1 8 ( 8 ) Net (loss) income attributable to common shares, basic ( 2,291 ) ( 791 ) ( 1,246 ) 681 Net (loss) income attributable to noncontrolling interest ( 15 ) ( 1 ) ( 8 ) 8 Net (loss) income attributable to common shares, diluted $ ( 2,306 ) $ ( 792 ) $ ( 1,254 ) $ 689 Denominator: Weighted average common shares outstanding, basic 73,588,605 61,043,531 73,419,198 59,600,630 Effect of dilutive shares for diluted net income per common share: OP Units — — — 509,588 Unvested RSUs — — — 164,322 Unsettled shares under open forward equity contracts — — — 20,194 Weighted average common shares outstanding, diluted 73,588,605 61,043,531 73,419,198 60,294,734 Net (loss) income available to common stockholders per common share, basic $ ( 0.03 ) $ ( 0.01 ) $ ( 0.02 ) $ 0.01 Net (loss) income available to common stockholders per common share, diluted $ ( 0.03 ) $ ( 0.01 ) $ ( 0.02 ) $ 0.01 For the three months ended June 30, 2024 and 2023, diluted net loss per common share does not assume the conversion of 440,654 and 507,773 OP Units, respectively, 69,023 and 152,785 unvested RSUs, respectively, and 254,299 unsettled shares under open forward equity contracts for the three months ended June 30, 2024, as such conversion would be antidilutive. For the six months ended June 30, 2024, diluted net loss per common share does not assume the conversion of 459,520 OP Units, 118,790 unvested RSUs, or 462,103 unsettled shares under open forward equity contracts, as such conversion would be antidilutive. As of June 30, 2024 and December 31, 2023, there were 437,058 and 479,298 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 condensed consolidated financial statements when the fair value of such liability can be reasonably estimated and is required to be recognized. 27 Table of Contents 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 June 30, 2024, the Company had tenant improvement allowance commitments totaling approximately $ 4.1 million, which is expected to be funded within the next two years . Additionally, as of June 30, 2024, the Company had commitments to fund properties under development totaling $ 16.1 million, which is expected to be funded over the next 18 months. The Company also had commitments to extend funds under mortgage notes receivable of $ 15.3 million as of June 30, 2024, which is expected to occur over the next 12 months. 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 8.1 years that expires on July 31, 2032 and is renewable at the Company’s option for two additional periods of five years . Annual rent expense, excluding operating expenses, is approximately $ 0.5 million during the initial term. As of June 30, 2024, the Company did not have any other material commitments for re-leasing costs, recurring capital expenditures, non-recurring building improvements, or similar types of costs. Note 13 – Subsequent Events The Company has evaluated all events that occurred subsequent to June 30, 2024 through the date on which these condensed consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements. Common Stock Dividend On July 23, 2024, the Company's Board of Directors declared a cash dividend of $ 0.21 per share for the third quarter of 2024. The dividend will be paid on September 13, 2024 to stockholders of record on September 3, 2024. Revolver Activity In July 2024, the Company borrowed $ 6.0 million under the Revolver which will be used for general corporate purposes, including the acquisition of properties in the Company’s pipeline.