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Item 7. Management’s Discussion and Analysis

2025-02-24 compared with 2024-02-14 · 134 added, 142 removed, 273 unchanged (50% of the section changed)

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Business Overview

We are an internally managed real estate company that acquires, owns, invests in and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.

As of December 31, 2023, we owned or had investments in 598 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 85 different tenants, across 26 retail sectors in 45 states.

This excludes 24 property developments where rent has yet to commence.

We are an internally managed real estate company that acquires, owns, and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.

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

As of December 31, 2024, we owned or had investments in 687 properties that were diversified by tenant, industry, and geography, including 98 different tenants, across 26 retail sectors in 45 states.

This excludes five property developments where rent has not yet commenced.

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

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Approximately 56% of our ABR is from investment grade 2 credit rated tenants and an additional 15% of our ABR is derived from tenants with an investment grade profile 3 .

Exclusive of mortgage loans receivable, our portfolio was 100% occupied with a weighted average remaining lease term (“WALT”) of 9.5 years, which we believe provides us with a strong stable source of recurring cash flow from our portfolio.

On October 25, 2023, we entered into a $300.0 million at-the-market equity program (the “2023 ATM Program”) through which, from time to time, we may sell shares of our common stock in registered transactions.

From October 25, 2023 through December 31, 2023, we sold 4,478,539 shares of our common stock at a weighted average price of $17.27 per share, from which we received net proceeds of $76.5 million.

As of December 31, 2023, we had $222.7 million in remaining gross proceeds available for future issuances of shares of our common stock under the 2023 ATM Program.

Effective October 24, 2023, in connection with the establishment of the 2023 ATM Program, we terminated our prior $250.0 million at-the-market equity program (the “2021 ATM Program”).

As a result of such termination, we will not offer or sell any additional shares of common stock under the 2021 ATM Program.

We have entered into a forward confirmation with respect to 5,983,711 shares of common stock under the 2021 ATM Program that remains unsettled.

We 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.

The following table details information related to activity under the 2021 ATM Program and the 2023 ATM Program for the year ended December 31, 2023 (in thousands, except share and per share data):

Our portfolio was 99.9% occupied and, excluding mortgage loans receivable, had a weighted average remaining lease term (“WALT”) of 9.8 years, which we believe provides a strong, stable source of recurring cash flow.

On September 1, 2021, October 25, 2023, and August 12, 2024, we entered into a $250.0 million at-the-market equity program (the “2021 ATM Program”), a $300.0 million at-the-market equity program (the “2023 ATM Program”), and a $300.0 million at-the-market equity program (the “2024 ATM Program”), respectively (collectively, the “ATM Programs”) from which, from time to time, we may sell shares of our common stock in registered transactions.

In connection with the establishment of the 2024 ATM Program, the 2023 ATM Program was terminated, and, in connection with the establishment of the 2023 ATM Program, the 2021 Program was terminated.

As a result of such terminations, we will not offer or sell any additional shares of common stock under the 2023 ATM Program or the 2021 ATM Program.

Additionally, as of December 31, 2024, we had $30.5 million and $2.6 million of unsettled forward equity under the 2023 ATM Program and 2024 ATM Program, respectively.

During 2024, we entered into forward sale agreements with respect to 1,743,100 shares of common stock under the 2023 ATM Program at a weighted average price of $17.67 per share that remain unsettled.

We may physically settle the forward sale agreements (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 December 31, 2025.

During 2024, we entered into forward sale agreements with respect to an aggregate 152,547 shares of common stock under the 2024 ATM Program at a weighted average price of $17.13 per share.

The following table details information related to activity under the ATM Programs for the year ended December 31, 2024 (in thousands, except share and per share data):

Year Ended December 31, 2024 (1)

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Net proceeds $ 97,661

(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.

2027 Term Loan

In December 2019, we 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, we 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 our election (subject to certain conditions) (the “2027 Term Loan”).

The 2027 Term Loan is repayable at our option in whole or in part without premium or penalty.

The Company has fully hedged the 2027 Term Loan.

(1) Represented shares of common stock physically settled under the forward sale agreement with respect to the 2021 ATM Program.

1 Annualized base rent (“ABR”) is annualized base rent as of December 31, 2024, for all leases that commenced, and annualized cash interest on mortgage loans receivable in place as of that date.

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

2029 Term Loan

On July 3, 2023, we 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 our request.

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

The 2029 Term Loan is prepayable at our option in whole or in part without premium or penalty.

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

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

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

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

January 2024 Follow-On Offering

In January 2024, we completed a registered public offering of 11,040,000 shares of our common stock at a public offering price of $18.00 per share.

In connection with the offering, we entered into forward sale agreements for 11,040,000 shares of our common stock.

We did not initially receive any proceeds from the sale of shares of common stock by the forward purchasers.

We expect to physically settle the forward sale agreements (by the 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 December 31, 2025.

On September 26, 2024, we partially physically settled 2,200,000 shares of common stock at a price of $17.22 per share in accordance with the forward sale agreements.

We received net proceeds from the settlement of $37.8 million, net of underwriting discounts and offering costs of $1.8 million.

As of December 31, 2024, 8,840,000 shares remain unsettled under the January 2024 forward sale agreements.

January 2025 Debt Transaction

On January 15, 2025, the Company amended its existing credit agreements agented by PNC Bank, National Association (the “PNC Credit Agreement”), Wells Fargo Bank, National Association (the “Wells Fargo Credit Agreement”) and Truist Bank (the “Truist Credit Agreement”).

The PNC Credit Agreement was amended and restated and provides for:

a new $175.0 million senior unsecured term loan (the “2030 Term Loan B”);

an existing $200.0 million senior unsecured term loan, which was fully funded under the existing PNC Credit Agreement (the “2028 Term Loan”);

and an upsized $500.0 million senior unsecured revolving credit facility (increased from $400 million under the existing PNC Credit Agreement) (the “Revolver”).

The 2030 Term Loan B and the upsized Revolver initially mature in January 2029 and include, at the Company’s election, a one-year option to extend the maturity to January 2030.

The 2030 Term Loan B was fully funded on the closing date and the Company has hedged the entire $175.0 million 2030 Term Loan B at an all-in fixed interest rate of 5.12% through January 2030.

The Wells Fargo Credit Agreement was amended and restated to extend the maturity date of the existing $175.0 million senior unsecured term loan (the “2030 Term Loan A” or, prior to the extended maturity, referred to as the “2027 Term Loan”) thereunder from January 2027 to January 2029 with an option, at the Company’s election, to extend the maturity to January 2030.

The Truist Credit Agreement governs existing term loans thereunder (the “2029 Term Loan”).

Among other changes, each of the PNC Credit Agreement, Wells Fargo Credit Agreement, and Truist Credit Agreement were also amended to remove certain financial covenants and provide for revised, improved pricing when the Company meets certain investment grade rating and leverage targets.

Results of Operations

We continued to grow our assets held for investment during the year ended December 31, 2023 through the acquisition of properties, property developments, and investment in mortgage loans receivable.

This growth was financed through the settlement of shares of common stock through our forward sale agreements in an amount of $141.1 million, the issuance of common stock under the 2023 ATM Program and the 2021 ATM Program in an amount of $76.5 million and $53.7 million, respectively, the execution of the 2029 Term Loan Agreement and receipt of proceeds of $150.0 million under the 2029 Term Loan, net borrowings on our $400.0 million senior unsecured revolving credit facility (the “Revolver”), and cash flows from operations during the year ended December 31, 2023.

We continued to grow our assets held for investment during the year ended December 31, 2024 through the acquisition of properties, property developments, and investment in mortgage loans receivable, with an underwritten weighted-average capitalization rate of approximately 7.5%.

This growth was financed through a $100.0 million draw on our $250.0 million 2029 Term Loan, settlement of shares of common stock through our forward sale agreements in an amount of $135.4 million, the usage of cash balances as a result of borrowings on our Revolver, the usage of restricted cash balances as a result of tax-free exchanges under Section 1031 of the Internal Revenue Code of 1986, and cash flows from operations during the year ended December 31, 2024.

During 2024, we acquired 115 properties for a total purchase price of $479.0 million, inclusive of $4.6 million of capitalized acquisition costs.

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These properties are located in 27 states with a WALT of approximately 13.5 years.

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

As of December 31, 2023, we had 18 property developments under construction.

During 2023, we invested $81.0 million in our property developments, including the land acquisition of 40 new developments with a combined initial purchase price of $27.3 million.

During the year, we 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.

The remaining 18 developments are expected to be substantially completed with rent commencing at various points throughout 2024.

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, 2023.

As of December 31, 2024, we had four property developments under construction.

During 2024, we invested $29.8 million in our property developments, including the land acquisition of four new developments with a combined initial purchase price of $2.0 million.

During 2024, we completed development on 18 projects and reclassified approximately $52.9 million from property under development to land, buildings and improvements, and other assets (leasing commissions) in the accompanying consolidated balance sheets.

Rent commenced for 17 of the 18 completed developments in 2024, while rent is expected to commence for the other completed development in the first quarter of 2025.

The remaining four developments 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, 2024.

During 2024, we sold 56 properties for a total sales price, net of disposal costs, of $110.9 million, recognizing a net gain of $1.9 million.

Investment in Mortgage Loans Receivable

During the year ended December 31, 2023, we invested $72.3 million, in fully collateralized mortgage loans receivable with stated interest rates ranging from 6.89% to 10.25%.

During the year ended December 31, 2024, we invested an additional $49.8 million in fully collateralized mortgage loans receivable with stated interest rates ranging from 6.5% to 13.1%, inclusive of $20.1 million provided through seller financing transactions.

In addition, during the year ended December 31, 2024, we collected $24.9 million in principal on our mortgage loans receivable.

The mortgage loans receivable are collateralized by real estate, primarily leased by investment grade credit rated tenants.

The funds provided under the loans, in addition to discount and loan origination costs of $0.1 million and $0.1 million, respectively, are included in mortgage loans receivable, net in the accompanying consolidated balance sheets as of December 31, 2023.

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

The funds provided under the loans, in addition to discount and loan origination costs, net of loan origination fees of $0.1 million, are included in mortgage loans receivable, net in the accompanying consolidated balance sheets as of December 31, 2024.

See discussion of our mortgage loans receivable portfolio included in “Note 4 - Real Estate Investments” of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.

Economic and Financial Environment

The annual inflation rate for the twelve months ended December 31, 2023 was 3.4% as compared to 6.5% for the prior year.

While the Federal Reserve had been raising interest rates in an effort to lower inflation throughout 2022 and the first half of 2023, there continues to be uncertainty entering into 2024 as to whether rates will be kept steady or potentially cut, leading to uncertainties in the financing market and a volatile economy.

The annual inflation rate for the twelve months ended December 31, 2024 and 2023 was 2.9% and 3.4%, respectively.

While the Federal Reserve raised interest rates in an effort to lower inflation throughout 2022 and the first half of 2023, rates had remained unchanged for nearly a year until the first rate cut occurred in September 2024.

This initial rate cut was followed by two additional cuts during the fourth quarter of 2024.

There continues to be uncertainty entering into 2025 as to whether rates will be maintained or further cut, and the timing of potential cuts, leading to uncertainties in the financing market and broader economy.

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

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Total operating expenses 144,343 107,805

Other income (expense)

Other (expense) income

Interest expense, net (30,324) (19,058)

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Loss on debt extinguishment — (128)

Other income, net 752 131

Total other income (expense), net (17,259) (4,902)

Net income before income taxes 6,841 8,601

Income tax benefit (expense) 49 (396)

Net income $ 6,890 $ 8,205

Other (expense) income, net (1,944) 752

Total other expense, net (30,392) (17,259)

Net (loss) income before income taxes (11,951) 6,841

Income tax (expense) benefit (49) 49

Net (loss) income $ (12,000) $ 6,890

Revenue for the year ended December 31, 2024 increased by $30.9 million to $162.8 million from $131.9 million for the year ended December 31, 2023, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.

The increase includes additional cash rental receipts of $27.7 million, combined with net increases of property expense reimbursements of $4.4 million, an increase of $5.0 million related to interest income on mortgage loans receivable, and an increase of $0.6 million in other revenue related to the receipt of legal settlement proceeds associated with a lease termination.

The increase in revenue is offset by a $0.5 million decrease in straight-line rental revenue, $0.8 million decrease related to prior year recoveries, a $0.4 million increase in reserves for uncollectible amounts, and a $0.2 million decrease in lease incentive adjustments.

The increase includes additional cash rental receipts of $26.1 million, an increase of $4.2 million related to interest income on mortgage loans receivable, and an increase of $1.7 million in straight-line rental revenue.

The increase is partially offset by a $0.8 million increase in reserves for uncollectible amounts.

Total operating expenses.

Total expenses increased by $36.5 million to $144.3 million for the year ended December 31, 2024 as compared to $107.8 million for the year ended December 31, 2023.

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

The increase is primarily attributed to an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense and provisions for impairment.

Total operating expenses include the following:

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Property expenses increased $1.0 million to $17.4 million for the year ended December 31, 2024 from $16.4 million for the year ended December 31, 2023.

The increase is primarily attributed to an increase in the number of operating properties, including combined net increases of reimbursable property expenses of $4.4 million, of which $2.8 million, $1.3 million, and $0.3 million were related to reimbursable property taxes, reimbursable common area maintenance costs, and reimbursable insurance costs, respectively.

Non-reimbursable property expenses increased by approximately $0.2 million.

The increase is primarily attributed to an increase in the number of operating properties, including combined net increases of reimbursable property expenses of $0.5 million, of which $0.9 million and $0.3 million were related to reimbursable property taxes and reimbursable insurance costs, respectively, partially offset by a decrease of $0.6 million of common area maintenance costs, and combined net increases of non-reimbursable property expenses of $0.5 million, of which $0.3 million, $0.1 million, and $0.1 million were related to common area maintenance costs, property insurance, and property taxes, respectively.

• General and administrative expenses.

General and administrative expenses increased $1.1 million to $20.2 million for the year ended December 31, 2023 from $19.1 million for the year ended December 31, 2022.

The increase is primarily due to increased bonus expenses of $1.3 million, payroll expenses of $0.7 million, and corporate office lease expenses of $0.2 million.

This is offset by decreased executive severance and transition costs of $0.6 million, corporate insurance of $0.4 million and accounting service and consulting fees of $0.3 million.

General and administrative expenses decreased $0.5 million to $19.7 million for the year ended December 31, 2024 from $20.2 million for the year ended December 31, 2023.

The decrease is primarily related to a decrease of $1.0 million of payroll expense and $1.4 million of bonus expense, and a decrease of $0.3 million of corporate insurance premiums.

The decrease is partially offset by increases in employee severance of $1.4 million, including cash severance of $0.9 million and the expense associated with the accelerated vesting of stock-based compensation of $0.5 million, an increase of $0.3 million of stock-based compensation, an increase of $0.3 million in accounting outsourcing fees, and a net increase of $0.2 million in other general and administrative expenses.

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

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Depreciation and amortization expense increased by $13.2 million to $76.9 million for the year ended December 31, 2024 from $63.7 million for the year ended December 31, 2023.

The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of $7.7 million, in-place lease amortization expense of $3.3 million, building improvements depreciation expense of $2.6 million, and leasehold improvements depreciation expense of $0.3 million.

This is offset by a decrease in assembled workforce amortization expense of $0.3 million.

The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases primarily in building depreciation expense of $7.4 million, building improvements depreciation expense of $2.9 million, in-place lease amortization expense of $2.1 million, leasehold improvements depreciation expense of $0.4 million, and amortization of leasing commissions of $0.4 million.

• Provisions for impairment.

For the year ended December 31, 2024, we recorded provisions for impairment of $30.0 million on 63 properties, the majority of which were either previously classified as held-for sale, newly classified as held-for-sale, or disposed of during the year ended December 31, 2024.

Two of the properties are held for investment as of the year ended December 31, 2023, but were approved for sale subsequent to year-end.

For the year ended December 31, 2022, we recorded a provision for impairment of $1.1 million on one property.

For the year ended December 31, 2023, we sold four properties that were impaired.

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

• Transaction costs.

Transaction costs decreased by $0.3 million to $0.5 million for the year ended December 31, 2023 from $0.8 million for the year ended December 31, 2022, which primarily relates to a decrease in costs incurred for abandoned acquisitions.

Of those properties impaired, 11 are held for investment as of December 31, 2024.

For the year ended December 31, 2023, we recorded provisions for impairment of $7.1 million on 22 properties, the majority of which were either previously classified as held-for-sale, newly classified as held-for-sale, or disposed of during the year ended December 31, 2023.

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

Interest expense.

Interest expense increased by $11.2 million to $30.3 million for the year ended December 31, 2024 from $19.1 million for the year ended December 31, 2023.

The increase is primarily attributed to an increase of $4.5 million of interest incurred under the 2028 Term Loan, an increase of $4.4 million of interest incurred under the 2029 Term Loan, a net increase of $2.1 million under the Revolver as a result of higher interest rates, offset by a decrease in average borrowings outstanding during the respective periods, and an increase of $0.3 million of interest incurred under the mortgage note payable.

Additional increases of $1.0 million and $0.4 million are attributed to increased loan fee amortization and increased facility fees, respectively.

This is offset by $2.1 million in amortization of deferred gains on interest rate swaps and $0.6 million of increased capitalized interest on our property developments.

The increase is primarily attributed to an increase of $8.0 million of interest incurred under our 2029 Term Loan, an increase of $3.1 million of interest incurred under our 2027 Term Loan, an increase of $1.4 million of interest incurred under our Revolver primarily due to an increase in average borrowings outstanding during the respective periods, and an increase of $0.5 million of loan fee amortization.

This is offset by a $1.7 million increase in amortization of deferred gains on interest rate swaps.

Gain on sales of real estate, net.

Net gain on sales of real estate decreased by $2.9 million to $1.2 million for the year ended December 31, 2023 from $4.1 million for the year ended December 31, 2022.

Net gain on sales of real estate increased by $0.7 million to $1.9 million for the year ended December 31, 2024 from $1.2 million for the year ended December 31, 2023.

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

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Gain on sales of real estate, net $ 1,876 $ 1,175

Other income, net.

Other income increased by $0.7 million for the year ended December 31, 2023.

The increase relates to $0.7 million of interest income earned on the Company’s cash, cash equivalents and restricted cash balances as presented in the consolidated balance sheets.

Income tax (benefit) expense.

Income tax expense decreased by $0.4 million to an income tax benefit of less than $0.1 million for the year ended December 31, 2023.

The decrease relates to lower provisions for federal and state income taxes on the financial results of our TRS, including certain losses on sales of real estate in 2023.

Net income decreased $1.3 million to $6.9 million for the year ended December 31, 2023 from $8.2 million for the year ended December 31, 2022.

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

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

Other (expense) income, net.

Other (expense) income, net increased by $2.7 million to $1.9 million for the year ended December 31, 2024 from $0.8 million for the year ended December 31, 2023.

The net increase to expense is primarily related to a transfer fraud loss of $2.8 million, net of insurance recoveries, $0.9 million of losses associated with property damages related to flooding and foundation issues, partially offset by $0.5 million of proceeds received from the settlement of a lease escrow agreement and an increase in property insurance proceeds of $0.3 million.

Net (loss) income.

Net (loss) income decreased by $18.9 million to a net loss of $12.0 million for the year ended December 31, 2024 from net income of $6.9 million for the year ended December 31, 2023.

Net (loss) income decreased primarily due to increases in interest expense, depreciation and amortization expense, provisions for impairment, and net expense associated with the transfer fraud loss, as set forth above.

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

Liquidity and Capital Resources

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

As of December 31, 2023, we had $175.0 million outstanding principal amount under the senior unsecured term loan (the “2027 Term Loan”), $200.0 million outstanding principal amount under the 2028 Term Loan, $150.0 million outstanding principal amount under the 2029 Term Loan, and $80.0 million of borrowings outstanding under our Revolver.

Additionally, as of December 31, 2023, we had $99.6 million and $300.0 million of remaining gross proceeds available for future issuances of shares of our common stock under the 2021 ATM Program and 2023 ATM Programs, respectively, inclusive of 5,983,711 shares remaining unsettled under the outstanding forward confirmation under the 2021 ATM Program.

We believe that the availability of proceeds from future issuances of shares of our common stock under the 2023 ATM Program or subsequent at-the-market sale programs, coupled with our cash flows from operations and available borrowing capacity under the Revolver and 2029 Term Loan, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital requirements for at least the next 12 months.

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

As of December 31, 2024, we had $175.0 million outstanding principal amount under the 2027 Term Loan, $200.0 million outstanding principal amount under the 2028 Term Loan, $250.0 million outstanding principal amount under the 2029 Term Loan, and $239.0 million of borrowings outstanding under the Revolver.

Additionally, as of December 31, 2024, we had $30.5 million and $2.6 million of unsettled forward equity under the 2023 ATM Program and 2024 ATM Program, respectively.

As of December 31, 2024, $300.0 million of remaining gross proceeds were available for future issuances of shares of our common stock under the 2024 ATM Program, inclusive of unsettled shares under forward sale agreements.

Lastly, we had $152.0 million of unsettled forward equity under the January 2024 follow-on offering forward sale agreements as of December 31, 2024.

On January 15, 2025, we amended our PNC Credit Agreement to provide for:

a new $175.0 million 2030 Term Loan B and an upsized $500.0 million Revolver.

The 2030 Term Loan B and the upsized Revolver initially mature in January 2029 and include, at the Company’s election, a one-year option to extend the maturity to January 2030.

The 2030 Term Loan B was fully funded on the closing date and the Company has hedged the entire $175.0 million 2030 Term Loan B at an all-in fixed interest rate of 5.12% through January 2030.

The Wells Fargo Credit Agreement was amended and restated to extend the maturity date of the existing $175.0 million 2030 Term Loan A from January 2027 to January 2029 with an option, at the Company’s election, to extend the maturity to January 2030.

We believe the availability of proceeds from the settlement of unsettled outstanding forward sale agreements, future issuances of shares of our common stock under the 2024 ATM Program, or subsequent at-the-market sale programs, as well as our cash flows from operations and available borrowing capacity under the Revolver, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital requirements for at least the next 12 months.

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

Contractual Obligations and Commitments

As of December 31, 2023, our contractual debt obligations primarily include the maturity of our 2027 Term Loan with the scheduled principal payment due on January 15, 2026, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, the maturity of our 2029 Term Loan with the scheduled principal payment due on July 3, 2026, and repayment of borrowings on our Revolver with a maturity of August 11, 2026.

During the year ended December 31, 2023, we borrowed $361.0 million at a weighted average interest rate of 5.92% and also repaid $394.0 million on our revolving credit facilities.

As of December 31, 2024, our contractual debt obligations primarily include the maturity of our 2027 Term Loan with the scheduled principal payment due on January 15, 2026, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, the maturity of our 2029 Term Loan with the scheduled principal payment due on July 3, 2026, and the repayment of borrowings on our Revolver with a contractual maturity of August 11, 2026.

During the year ended December 31, 2024, we borrowed $392.0 million at a weighted average interest rate of 6.24% and also repaid $233.0 million on our Revolver.

The following table provides information with respect to our commitments as of December 31, 2024 (in thousands):

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6,643 6,381 262 — —

Revolver – Borrowings 80,000 — 80,000 — —

Revolver – Variable interest 13,556 5,192 8,364 — —

Facility Fee (2)

1,567 600 967 — —

2028 Term Loan – Principal 200,000 — — 200,000 —

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18,748 12,465 6,283 — —

Revolver – Borrowings 239,000 — 239,000 — —

Revolver – Variable interest 21,677 13,456 8,221 — —

Facility Fee (4)

967 600 367 — —

Mortgage Note – Principal 8,205 174 8,031 — —

Mortgage Note – Interest 1,048 367 681 — —

Property developments under contract 35,690 35,690 — — —

Additional principal under mortgage notes receivable 13,737 13,737 — — —

Property development under contract 7,299 7,299 — — —

Additional principal under mortgage loans receivable 9,470 9,470 — — —

Tenant improvement allowances 4,089 1,349 2,740 — —

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

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

Accordingly, the projected interest rate obligations for the variable rate 2027 Term Loan are based on the hedged fixed rate of 1.87% through December 23, 2024, and 2.40% thereafter, compared to the variable 2027 Term Loan daily SOFR rate as of December 31, 2023 of 5.31%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $175.0 million 2027 Term Loan outstanding through the contractual maturity date of January 15, 2026.

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

Accordingly, the projected interest rate obligations for the variable rate 2027 Term Loan are based on the hedged fixed rate of 2.40% compared to the variable 2027 Term Loan daily SOFR rate of 4.31% as of December 31, 2024, plus a SOFR adjustment of 0.10%, and applicable margin of 1.15% based on the $175.0 million 2027 Term Loan outstanding through the contractual maturity date of January 15, 2026.

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

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Accordingly, the projected interest rate obligations for the variable rate 2029 Term Loan are based on the hedged fixed rate of 3.74% compared to the variable 2029 Term Loan daily SOFR rate as of December 31, 2024 of 4.46%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $250.0 million of the 2029 Term Loan outstanding through the contractual maturity date of July 3, 2026.

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

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

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

Additionally, in the normal course of business, we enter 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 our customary due diligence process and, accordingly, a number of specific conditions must be met before we are obligated to purchase or extend funding.

As of December 31, 2023, we had commitments to fund properties under development and extend funds under mortgage notes receivable totaling $35.7 million and $13.7 million, respectively, all of which is expected to be funded over the next 12 months.

See discussion of our debt and interest rate hedges included in “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments” of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.

As of December 31, 2024, we had commitments to fund properties under development and extend funds under mortgage loans receivable totaling $7.3 million and $9.5 million, respectively, which is expected to be funded over the next 12 months.

See discussion of our debt and interest rate hedges included in “Note 6 – Debt,” “Note 7 – Derivative Financial Instruments” and “Note 13 – Subsequent Events” of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.

Historical Cash Flow Information

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Net cash provided by operating activities increased by $10.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase was largely attributed to the increase in the size of our real estate investment portfolio with an increase in rental receipts of $27.7 million and an increase in mortgage loan receivable interest of $5.0 million, offset primarily by increases in operating and general and administrative expenses paid associated with our larger portfolio.

The increase was largely attributed to the increase in the size of our real estate investment portfolio with an increase in rental receipts of $26.1 million, additional interest received under our mortgage loans receivable, partially offset by an increase in cash interest paid of $12.0 million, increases in operating and general and administrative expenses paid associated with our larger portfolio and changes in working capital accounts.

Cash Flows Used In Investing Activities.

Net cash used in investing activities decreased by $19.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The decrease was primarily due to a decrease in cash spent on acquisitions of real estate of $84.3 million, offset by increases in cash spent on real estate development and improvements of $56.4 million and cash spent on investments in mortgage loans receivable of $25.9 million.

The remaining decrease is primarily related to proceeds from the sale of real estate, which increased $13.0 million compared to the prior period, and principal collections on mortgage loans receivable, which increased $1.5 million compared to the prior period.

The decrease was primarily due to a decrease in cash invested in mortgage loans receivable of $42.9 million, an increase of $52.4 million from proceeds from the sale of real estate, an increase of $23.4 million in principal collections on mortgage loans receivable, and a decrease of $38.5 million in real estate development and improvements, partially offset by an increase of $138.6 million in acquisitions of real estate.

Cash Flows Provided By Financing Activities.

Net cash provided by financing activities decreased by $4.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The decrease was primarily attributed to a reduction in net borrowings of $82.0 million under our revolving credit facilities, a reduction in term loan proceeds of $50.0 million, an increase in payments of common stock dividends of $12.2 million, a decrease of proceeds from issuances of common stock in connection with our ATM Program of $6.3 million, and a decrease in proceeds under property development incentives of $0.8 million during the year ended December 31, 2023.

The decrease was offset by decreases in the repurchase of common stock for tax withholding obligations, deferred financing costs and deferred offering costs of $0.8 million, $0.5 million, and $0.3 million, respectively, during the year ended December 31, 2023.

The decrease was primarily attributed to $135.9 million of less proceeds received in 2024 due to fewer issuances of common stock, which was the net effect of less proceeds received in connection with our 2023 ATM Program and our August 2022 follow-on offering and respective settlements of common stock under forward sale agreements, and more proceeds received in connection with our 2021 ATM Program and January 2024 follow-on offering and respective settlements of common stock under forward sale agreements.

The decrease was also attributed to a reduction in term loan proceeds of $50.0 million, an increase in payments of common stock dividends of $11.8 million, and an increase in the repurchase of common stock for tax withholding obligations and deferred offering costs of $0.8 million and $0.4 million, respectively.

This decrease is partially offset by an increase in net borrowings of $192.0 million under our revolving credit facilities and a decrease in deferred financing costs of $3.3 million.

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

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

During the years ended 2023 and 2022, we recognized franchise and other state and local tax expenses in general and administrative and federal income tax in income tax benefit (expense) in the accompanying consolidated statements of operations and comprehensive income (loss).

During the years ended 2024 and 2023, we recognized franchise and other state and local tax expenses in general and administrative expenses and federal income tax in income tax (expense) benefit in the accompanying consolidated statements of operations and comprehensive (loss) income.

Recent Accounting Pronouncements

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Purchase Price Allocation of Acquired Properties

We evaluate 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.

We evaluate each acquisition transaction to determine whether the acquired asset meets the definition of a business and should therefore be accounted for as a business combination, or if the transaction should be accounted for as an asset acquisition.

Under Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805):

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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 group is no longer recoverable.

Examples of events or changed circumstances may include, but are not limited to, significant changes in real estate market conditions, estimated residual values, our ability or expectation to re-lease properties that are vacant or become vacant or a reduction in the expected holding period of a property.

Examples of events or changes in circumstances may include, but are not limited to, significant changes in real estate market conditions, estimated residual values, our ability or expectation to re-lease properties that are vacant or become vacant, or a reduction in the expected holding period of a property.

If indicators are present, we 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.

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We also disclose the following non-GAAP financial measures:

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

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

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

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Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis.

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

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

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

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Further, FFO, Core FFO, and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO, and AFFO.

The following table sets forth a reconciliation of FFO, Core FFO and AFFO for the periods presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

The following table sets forth a reconciliation of FFO, Core FFO, and AFFO for the periods presented to net (loss) income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

Year Ended December 31,

Net income $ 6,890 $ 8,205

Net (loss) income $ (12,000) $ 6,890

Depreciation and amortization of real estate 76,560 63,379

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Loss on debt extinguishment and other related costs — 223

Gain on insurance proceeds (78) (126)

Other non-recurring loss (gain), net 2,934 (78)

Core FFO 97,230 76,684

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Amortization of above/below-market assumed debt 114 114

Amortization of loan origination costs 163 88

Amortization of loan origination costs and discounts (365) 163

Amortization of lease-related intangibles (458) (611)

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

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

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

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

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Year Ended December 31,

Net income $ 6,890 $ 8,205

Net (loss) income $ (12,000) $ 6,890

Depreciation and amortization of real estate 76,560 63,379

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Interest expense, net 30,324 19,058

Income tax (benefit) expense (49) 396

Amortization of loan origination costs 163 88

Income tax expense (benefit) 49 (49)

Amortization of loan origination costs and discounts (365) 163

EBITDA 94,421 89,128

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$ 122,514 $ 95,036

The following table sets forth a reconciliation of EBITDA, EBITDA re , Adjusted EBITDA re and Annualized Adjusted EBITDA re for the period presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

The following table sets forth a reconciliation of EBITDA, EBITDA re , Adjusted EBITDA re, and Annualized Adjusted EBITDA re for the period presented to net (loss) income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

Three Months Ended December 31, 2024

Net income $ 1,962

Net (loss) income $ (5,424)

Depreciation and amortization of real estate 20,275

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Income tax expense 18

Amortization of loan origination costs 80

Amortization of loan origination costs and discounts (123)

EBITDA 23,302

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Non-recurring executive transition costs, severance and related charges 148

Gain on insurance proceeds (31)

Other non-recurring gain, net (142)

Other non-recurring expenses, net 438

Transaction costs 158

Non-cash compensation expense 999

Lease termination fees (400)

Adjustment for construction in process (1)

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(1) Adjustment reflects the estimated cash yield on developments in process as of December 31, 2024.

(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity completed during the year ended December 31, 2023 had occurred on January 1, 2023.

(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2024, had occurred on October 1, 2024.

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

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

The following table reconciles the principal amount of total debt to Net Debt and Adjusted Net Debt:

The following table reconciles the principal amount of total debt to Net Debt and Adjusted Net Debt (in thousands):

December 31, 2024

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Adjusted Net Debt $ 672,822

(1) There were 5,983,711 unsettled shares under forward equity contracts under the ATM Program as of December 31, 2023 at the available net settlement price of $16.48.

(1) There were 10,735,647 unsettled shares under forward sale agreements as of December 31, 2024 at the available weighted-average net settlement price of $17.24.

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

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

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

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

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

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You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

The following table sets forth a reconciliation of Property-Level NOI and Property-Level Cash NOI for the periods presented (in thousands):

Year Ended December 31,

Net income $ 6,890 $ 8,205

General and administrative 20,176 19,053

Depreciation and amortization 63,677 50,075

Provisions for impairment 7,083 1,114

Transaction costs 456 839

Interest expense, net 19,058 9,181

Gain on sales of real estate, net (1,175) (4,148)

Income tax (benefit) expense (49) 396

Loss on debt extinguishment 128 —

Interest income on mortgage loans receivable (7,388) (2,345)

Lease termination fees (550) —

Other income, net (752) (131)

Property-Level NOI 107,554 82,239

Straight-line rent adjustments (1,163) (1,286)

Amortization of lease-related intangibles (611) (889)

Property-Level Cash NOI $ 105,780 $ 80,064

The following table sets forth a reconciliation of Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate for the period presented (in thousands):

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Gain on sales of real estate, net (1,002)

Gain on forfeited earnest money deposit —

Income tax expense 18

Loss on debt extinguishment —

Amortization of loan origination costs and discounts (123)

Interest income on mortgage loans receivable (3,103)

Lease termination fees (400)

Other income, net (166)

Other expense, net 103

Property-Level NOI 36,241

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Total Cash NOI - Estimated Run Rate $ 40,039

(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the year ended December 31, 2023 had occurred on January 1, 2023.

(2) Adjustment assumes all loan activity completed during the year ended December 31, 2023 had occurred on January 1, 2023.

(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2024, had occurred on October 1, 2024.

(2) Adjustment assumes all loan activity completed during the three months ended December 31, 2024 had occurred on October 1, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis