What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-04 · 73 added, 80 removed, 249 unchanged (38% of the section changed)

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Forward-Looking Statements

We make statements in this Quarterly Report that are forward-looking statements within the meaning of the federal securities laws.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of federal securities laws.

In particular, statements pertaining to our capital resources, acquisitions, property performance and results of operations contain forward-looking statements.

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• the solvency and financial health of the USPS;

• defaults on, early terminations of or non-renewal of leases or relocation, closure or consolidation of postal offices by the USPS;

• defaults on, early terminations of or non-renewal of leases or relocation, closure or consolidation of postal offices or delivery routes by the USPS;

• the competitive market in which we operate;

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We conduct our business through a traditional UPREIT structure in which our properties are owned by our Operating Partnership directly or through limited partnerships, limited liability companies or other subsidiaries.

During the six months ended June 30, 2022, we acquired 200 properties leased to the USPS for approximately $84.3 million, including closing costs.

As of June 30, 2022, our portfolio consists of 1,166 owned properties, located in 49 states and one territory and comprising approximately 5.0 million net leasable interior square feet.

During the nine months ended September 30, 2022, we acquired 266 properties leased to the USPS for approximately $105.7 million, including closing costs.

As of September 30, 2022, our portfolio consists of 1,232 owned properties, located in 49 states and one territory and comprising approximately 5.2 million net leasable interior square feet.

We are the sole general partner of our Operating Partnership through which our properties are directly or indirectly owned.

As of August 4, 2022, we owned approximately 81.4% of our outstanding common units of limited partnership interest in our Operating Partnership (the “OP Units”), including long term incentive units of our Operating Partnership (the “LTIP Units”).

As of November 2, 2022, we owned approximately 80.4% of our outstanding common units of limited partnership interest in our Operating Partnership (the “OP Units”), including long term incentive units of our Operating Partnership (the “LTIP Units”).

Our Board of Directors oversees our business and affairs.

ATM Program and Follow-on Offerings

On December 14, 2020, we entered into separate open market sale agreements for its at-the-market offering program (the "ATM Program") with each of Jefferies LLC, Stifel, Nicolaus & Company, Incorporated, BMO Capital Markets Corp., Janney Montgomery Scott LLC and D.A.

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During the year ended December 31, 2021, 344,717 shares were issued under the ATM Program.

As of June 30, 2022, we had approximately $43.1 million of availability remaining under the ATM Program.

On January 11, 2021, we priced a public offering of 3.25 million shares of our Class A common stock (the “January 2021 Offering”) at $15.25 per share.

On January 11, 2021, the underwriters purchased the full allotment of 487,500 shares pursuant to a 30-day option at $15.25 per share (the “January 2021 Additional Shares”).

The January 2021 Offering, including the January 2021 Additional Shares, closed on January 14, 2021 resulting in $57.0 million in gross proceeds, and approximately $53.9 million in net proceeds after deducting approximately $3.1 million in underwriting discounts and before giving effect to $0.6 million in other related expenses.

On November 16, 2021, we priced a public offering of 4.25 million shares of our Class A common stock (the “November 2021 Offering”) at $17.00 per share.

On November 16, 2021, the underwriters purchased the full allotment of 637,500 shares pursuant to a 30-day option at $17.00 per share (the “November 2021 Additional Shares”).

The November 2021 Offering, including the November 2021 Additional Shares, closed on November 19, 2021 resulting in $83.1 million in gross proceeds, and approximately $79.0 million in net proceeds after deducting approximately $4.1 million in underwriting discounts and before giving effect to $0.2 million in other related expenses.

During the nine months ended September 30, 2022, 227,473 shares were issued under the ATM Program.

As of September 30, 2022, we had approximately $39.4 million of availability remaining under the ATM Program.

Executive Overview

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Geographic Concentration

As of June 30, 2022, we owned a portfolio of 1,166 properties located in 49 states and one territory and leased primarily to the USPS.

For the six months ended June 30, 2022, 16.1% of our total of rental income was concentrated in Pennsylvania.

As of September 30, 2022, we owned a portfolio of 1,232 properties located in 49 states and one territory and leased primarily to the USPS.

For the nine months ended September 30, 2022, 15.4% of our total rental income was concentrated in Pennsylvania.

Emerging Growth Company

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As a result, among other consequences, the USPS is unable to fund its mandated expenses and continues to be subject to mandated payments to its retirement system and benefits.

While the USPS has undertaken, and proposes to undertake, a number of operational reforms and cost reduction measures, such as higher rates and slower deliveries for certain services and potential closure, relocation or consolidation of certain facilities, the USPS has taken the position such measures alone will not be sufficient to maintain its ability to meet all of its existing obligations when due or allow it to make the critical infrastructure investments that have been deferred in recent years.

While the USPS has recently undertaken, and proposes to undertake, a number of operational reforms and cost reduction measures, such as higher rates and slower deliveries for certain services and potential closure, relocation or consolidation of certain facilities and delivery routes, the USPS has taken the position such measures alone will not be sufficient to maintain its ability to meet all of its existing obligations when due or allow it to make the critical infrastructure investments that have been deferred in recent years.

These measures have also led to significant criticism and litigation, which may result in reputational or financial harm or increased regulatory scrutiny of the USPS or reduced demand for its services.

The ongoing COVID-19 pandemic (including new or mutated variants of COVID-19) and measures being taken to prevent its spread also continue to have a material and unpredictable effect on the USPS’ operations and liquidity, including volatility in demand for mail services, significant changes in the mix of mail and packages processed through the USPS’ network and significant additional operating expenses caused by pandemic-related disruptions.

The COVID-19 pandemic and other geopolitical and economic factors have also created inflationary pressures resulting in higher compensation, transportation and fuel costs for the USPS.

If the USPS becomes unable to meet its financial obligations or its revenue declines due to reduced demand for its services, the USPS may reduce its demand for leasing postal properties, which would have a material adverse effect on our business and operations.

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Spodek and his affiliates pursuant to the management agreements and is a percentage of the lease revenue for the managed property, (ii) revenue our TRS received from providing advisory services to third-party owners of postal properties and (iii) income recognized from properties accounted for as financing leases.

As of June 30, 2022, properties leased to our tenants had an average remaining lease term of approximately four years.

As of September 30, 2022, properties leased to our tenants had an average remaining lease term of approximately four years.

Factors that could affect our rental income and fee and other in the future include, but are not limited to:

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We lease our properties primarily to the USPS.

The majority of our leases are modified double-net leases, whereby the tenant is responsible for utilities, routine maintenance and reimbursement of property taxes and the landlord is responsible for

insurance, roof and structure.

The majority of our leases are modified double-net leases, whereby the tenant is responsible for utilities, routine maintenance and reimbursement of property taxes and the landlord is responsible for insurance, roof and structure.

Thus, an increase in costs related to the landlord’s responsibilities under these leases could negatively influence our operating results.

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We issue share-based awards to align our directors' and employees’ interests with those of our investors.

Depreciation and Amortization

Depreciation and amortization expense relates primarily to depreciation on our properties and capital improvements to such properties and the amortization of certain lease intangibles.

Other income relates primarily to insurance recoveries related to property damage claims.

Indebtedness and Interest Expense

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Lease Renewal

As of August 4, 2022, the leases at 51 of our properties, representing approximately 179,000 net leasable interior square feet and $1.9 million in annual contractual rental revenue, were expired and the USPS was occupying such properties as a holdover tenant.

As of November 2, 2022, the leases at 72 of our properties, representing approximately 249,000 net leasable interior square feet and $2.4 million in annual contractual rental revenue, were expired and the USPS was occupying such properties as a holdover tenant.

As of the date of this report, the USPS had not vacated or notified us of its intention to vacate any of these properties.

When a lease expires, the USPS becomes a holdover tenant on a month-to-month basis typically paying the greater of estimated market rent or the rent amount under the expired lease.

While we currently anticipate that we will execute new leases for all properties that have expired or will expire, there can be no guarantee that we will be successful in executing new leases, obtaining positive rent renewal spreads or renewing the leases on terms comparable to those of the expiring leases.

leases on terms comparable to those of the expiring leases.

Even if we are able to renew these expired leases, the lease terms may not be comparable to those of the previous leases.

If we are not successful, we will likely experience reduced occupancy, rental income and net operating income, as well as diminished borrowing capacity under our credit facilities, which could have a material adverse effect on our financial condition, results of operations and ability to make distributions to shareholders.

Refer to “Risk Factors - Risks Related to the USPS” under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding the risks associated with the USPS.

Results of Operations

Comparison of the Three Months Ended June 30, 2022 and the Three Months Ended June 30, 2021

Comparison of the Three Months Ended September 30, 2022 and the Three Months Ended September 30, 2021

For the Three Months Ended

September 30,

2022 2021 $ Change % Change

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Total interest expense, net (1,826) (1,028) (798) 77.6 %

Income before income tax expense 1,183 850 333 39.2 %

Income tax expense (18) (27) 9 (33.3) %

Income before income tax benefit (expense) 1,134 713 421 59.0 %

Income tax benefit (expense) 16 (37) 53 (143.2) %

Net income $ 1,150 $ 676 $ 474 70.1 %

Rental income – Rental income includes net rental income as well as the recovery of certain operating costs and property taxes from tenants.

Rental income increased by $3.2 million to $12.1 million for the three months ended June 30, 2022 from $9.0 million for the three months ended June 30, 2021 due to the volume of our acquisitions.

Fee and other – Other revenue increased by $0.1 million to $0.6 million for the three months ended June 30, 2022 from $0.5 million for the three months ended June 30, 2021 primarily due to income received from properties accounted for as financing leases.

Rental income increased by $3.0 million to $13.2 million for the three months ended September 30, 2022 from $10.2 million for the three months ended September 30, 2021 due to the volume of our acquisitions.

Fee and other – Fee and other revenue increased by $0.3 million to $0.6 million for the three months ended September 30, 2022 from $0.3 million for the three months ended September 30, 2021 primarily due to income received from properties accounted for as financing leases.

Operating Expense

Real estate taxes – Real estate taxes increased by $0.5 million to $1.7 million for the three months ended June 30, 2022 from $1.2 million for the three months ended June 30, 2021 due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by $0.4 million to $1.2 million for the three months ended June 30, 2022 from $0.8 million for the three months ended June 30, 2021.

Property management expenses are included within property operating expenses and increased by $0.2 million to $0.5 million for the three months ended June 30, 2022 from $0.3 million for the three months ended June 30, 2021, due to expanding our property management staff as a result

of our continued growth as well as an increase in equity-based compensation expense related to awards that have been granted to our property management employees.

Real estate taxes – Real estate taxes increased by $0.2 million to $1.8 million for the three months ended September 30, 2022 from $1.6 million for the three months ended September 30, 2021 due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by $0.4 million to $1.3 million for the three months ended September 30, 2022 from $1.0 million for the three months ended September 30, 2021.

Property management expenses are included within property operating expenses and increased by $0.1 million to $0.5 million for the three months ended September 30, 2022 from $0.4 million for the three months ended September 30, 2021 due to expanding our property management staff as a result of our continued growth as well as an increase in equity-based compensation expense related to awards that have been granted to our property management employees.

The remainder of the increase of $0.3 million is related to expenses for repairs and maintenance and insurance, which increase is primarily due to the volume of our acquisitions.

General and administrative – General and administrative expenses increased by $0.6 million to $3.3 million for the three months ended June 30, 2022 from $2.7 million for the three months ended June 30, 2021 primarily due to expanding our staff and increase in information technology costs as a result of our continued growth as well as an increase in equity-based compensation expense related to awards that have been granted to our employees in 2021 and during the three months ended June 30, 2022.

Depreciation and amortization – Depreciation and amortization expense increased by $1.0 million to $4.2 million for the three months ended June 30, 2022 from $3.2 million for three months ended June 30, 2021 due to the volume of our acquisitions.

General and administrative – General and administrative expenses increased by $0.4 million to $3.0 million for the three months ended September 30, 2022 from $2.6 million for the three months ended September 30, 2021 primarily due to expanding our staff and increase in information technology costs as a result of our continued growth as well as an increase in equity-based compensation expense related to awards that have been granted to our employees in 2021 and during the three months ended September 30, 2022.

Depreciation and amortization – Depreciation and amortization expense increased by $0.9 million to $4.6 million for the three months ended September 30, 2022 from $3.7 million for three months ended September 30, 2021 due to the volume of our acquisitions.

Other income primarily includes insurance recoveries related to property damage claims.

Other income increased by $0.1 million to $0.2 million for the three months ended June 30, 2022 from $0.08 million for the three months ended June 30, 2021, primarily due to higher insurance recoveries.

Other income decreased by $0.1 million to $0.04 million for the three months ended September 30, 2022 from $0.2 million for the three months ended September 30, 2021, primarily due to lower insurance recoveries.

Total Interest Expense, Net

During the three months ended June 30, 2022, we incurred total interest expense, net of $1.3 million compared to $0.8 million for the three months ended June 30, 2021.

The increase in interest expense is primarily related to higher amount of borrowings under the Credit Facilities.

Comparison of the Six Months Ended June 30, 2022 and Six Months Ended June 30, 2021

For the Six Months Ended

During the three months ended September 30, 2022, we incurred total interest expense, net of $1.8 million compared to $1.0 million for the three months ended September 30, 2021.

The increase in interest expense is primarily related to higher amount of borrowings under the Credit Facilities to finance our acquisitions.

Comparison of the Nine Months Ended September 30, 2022 and Nine Months Ended September 30, 2021

For the Nine Months Ended

September 30,

2022 2021 $ Change % Change

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Rental income includes net rental income as well as the recovery of certain operating costs and property taxes from tenants.

Rental income increased by $6.0 million to $23.5 million for the six months ended June 30, 2022 from $17.5 million for the six months ended June 30, 2021 due to the volume of our acquisitions.

Rental income increased by $9.0 million to $36.7 million for the nine months ended September 30, 2022 from $27.7 million for the nine months ended September 30, 2021 due to the volume of our acquisitions.

Fee and other .

Other revenue increased by 0.4 million to $1.2 million for the six months ended June 30, 2022 from $0.8 million for the six months ended June 30, 2021, primarily due to income received from properties accounted for as financing leases.

Other revenue increased by $0.6 million to $1.8 million for the nine months ended September 30, 2022 from $1.1 million for the nine months ended September 30, 2021, primarily due to income received from properties accounted for as financing leases.

Operating Expense

Real estate taxes – Real estate taxes increased by 1.0 million to $3.3 million for the six months ended June 30, 2022 from $2.3 million for the six months ended June 30, 2021 due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by 1.0 million to $2.8 million for the six months ended June 30, 2022 from $1.7 million for the six months ended June 30, 2021.

Property management expenses are included within property operating expenses and increased by $0.4 million to $1.1 million for the six months ended June 30, 2022 from $0.7 million for the six months ended June 30, 2021.

Real estate taxes – Real estate taxes increased by $1.3 million to $5.1 million for the nine months ended September 30, 2022 from $3.9 million for the nine months ended September 30, 2021 due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by $1.4 million to $4.1 million for the nine months ended September 30, 2022 from $2.7 million for the nine months ended September 30, 2021.

Property management expenses are included within property operating expenses and increased by $0.5 million to $1.6 million for the nine months ended September 30, 2022 from $1.1 million for the nine months ended September 30, 2021.

The remainder of the increase of $0.9 million is related to expenses for repairs and maintenance and insurance, which increase is due to the volume of our acquisitions.

General and administrative – General and administrative expenses increased by 1.7 million to $7.0 million for the six months ended June 30, 2022 from $5.3 million for the six months ended June 30, 2021 primarily due to expanding our staff and increase in information technology costs as a result of our continued growth, as well as an increase in equity-based compensation expense related to awards that have been granted to our employees throughout 2020 and 2021.

Depreciation and amortization – Depreciation and amortization expense increased by 1.9 million to $8.3 million for the six months ended June 30, 2022 from $6.4 million for the six months ended June 30, 2021 due to the volume of our acquisitions.

General and administrative – General and administrative expenses increased by $2.1 million to $10.0 million for the nine months ended September 30, 2022 from $7.9 million for the nine months ended September 30, 2021 primarily due to expanding our staff and increase in information technology costs as a result of our continued growth, as well as an increase in equity-based compensation expense related to awards that have been granted to our employees.

Depreciation and amortization – Depreciation and amortization expense increased by $2.8 million to $13.0 million for the nine months ended September 30, 2022 from $10.1 million for the nine months ended September 30, 2021 due to the volume of our acquisitions.

Other income primarily includes insurance recoveries related to property damage claims.

Other income increased by 0.6 million to $0.7 million for the six months ended June 30, 2022 from $0.1 million for the six months ended June 30, 2021, primarily due to higher insurance recoveries.

Other income increased by $0.4 million to $0.7 million for the nine months ended September 30, 2022 from $0.3 million for the nine months ended September 30, 2021, primarily due to higher insurance recoveries.

Total Interest Expense, Net

During the six months ended June 30, 2022, we incurred total interest expense, net of $2.1 million compared to $1.8 million for the six months ended June 30, 2021.

The increase in interest expense is primarily related due to a higher amount of borrowings under the Credit Facilities.

Comparison of the Six Months Ended June 30, 2022 and the Six Months Ended June 30, 2021

We had $4.6 million of cash and $1.4 million of escrows and reserves as of June 30, 2022 compared to $4.9 million of cash and $1.2 million of escrows and reserves as of June 30, 2021.

Cash flow from operating activities – Net cash provided by operating activities increased by $4.7 million to $13.1 million for the six months ended June 30, 2022 compared to $8.4 million for the same period in 2021.

During the nine months ended September 30, 2022, we incurred total interest expense, net of $3.9 million compared to $2.8 million for the nine months ended September 30, 2021.

The increase in interest expense is primarily related due to a higher amount of borrowings under the Credit Facilities to finance our acquisitions.

Comparison of the Nine Months Ended September 30, 2022 and the Nine Months Ended September 30, 2021

We had $4.6 million of cash and $0.3 million of escrows and reserves as of September 30, 2022 compared to $4.0 million of cash and $0.9 million of escrows and reserves as of September 30, 2021.

Cash flow from operating activities – Net cash provided by operating activities increased by $5.1 million to $18.6 million for the nine months ended September 30, 2022 compared to $13.4 million for the same period in 2021.

The increase is primarily due to the volume of properties that we have acquired, all of which have generated additional rental income and related changes in working capital.

Cash flow to investing activities – Net cash used in investing activities for the six months ended June 30, 2022 primarily consisted of $79.9 million of acquisitions and $3.0 million of escrow deposits for acquisition, capital improvements and other investing activities, offset by $0.6 million of insurance proceeds that were received.

Net cash used in investing activities for the six months ended June 30, 2021 primarily consisted of $47.6 million of acquisitions.

Cash flow from financing activities – Net cash provided by financing activities increased by $25.6 million to $68.1 million for the six months ended June 30, 2022 compared to $42.5 million for the six months ended June 30, 2021.

The increase was primarily related to our 2022 Term Loan, additional borrowings under our 2021 Revolving Credit Facility and the paydown of two mortgage financings during the six months ended June 30, 2021, offset by a decrease in net proceeds from issuance of shares and increased payments of dividends and distributions.

Cash flow to investing activities – Net cash used in investing activities for the nine months ended September 30, 2022 primarily consisted of $96.4 million of acquisitions and $4.1 million of escrow deposits for acquisition and construction, capital improvements and other investing activities, offset by $0.6 million of insurance proceeds that were received.

Net cash used in investing activities for the nine months ended September 30, 2021 primarily consisted of $60.7 million of acquisitions.

Cash flow from financing activities – Net cash provided by financing activities increased by $29.5 million to $79.3 million for the nine months ended September 30, 2022 compared to $49.8 million for the nine months ended September 30, 2021.

The increase was primarily related to our 2022 Term Loan, additional borrowings under our 2021 Revolving Credit Facility, proceeds received from our ATM Program and the paydown of two mortgage financings during the nine months ended September 30, 2021, offset by a decrease in net proceeds from issuance of shares and increased payments of dividends and distributions.

Liquidity and Capital Resources

Analysis of Liquidity and Capital Resources

We had approximately $4.6 million of cash and $1.4 million of escrows and reserves as of June 30, 2022.

We had approximately $4.6 million of cash and $0.3 million of escrows and reserves as of September 30, 2022.

On August 9, 2021, we entered into the Credit Facilities, which include the $150.0 million 2021 Revolving Credit Facility and the $50.0 million 2021 Term Loan, with Bank of Montreal, as administrative agent, and BMO Capital Markets Corp., People’s United Bank, National Association, JPMorgan Chase Bank, N.A.

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On May 11, 2022, we entered into the First Amendment to, among other things, add the 2022 Term Loan.

As of June 30, 2022, we had $143.0 million of aggregate principal amount outstanding under our Credit Facilities, with 50.0 million drawn on the 2021 Term Loan, 75.0 million drawn on the 2022 Term Loan and $18.0 million drawn on the 2021 Revolving Credit Facility.

As of September 30, 2022, we had $156.0 million of aggregate principal amount outstanding under our Credit Facilities, with $50.0 million drawn on the 2021 Term Loan, $75.0 million drawn on the 2022 Term Loan and $31.0 million drawn on the 2021 Revolving Credit Facility.

The Credit Facilities include an accordion feature which permit us to borrow up to an additional $150.0 million under the 2021 Revolving Credit Facility and up to an additional $75.0 million under the term loans, in each case subject to customary terms and conditions.

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The Credit Facilities also contain certain customary events of default, including the failure to make timely payments under the Credit Facilities, any event or condition that makes other material indebtedness due prior to its scheduled maturity, the failure to satisfy certain covenants and specified events of bankruptcy and insolvency.

As of June 30, 2022, we were in compliance with all of the Credit Facilities’ debt covenants.

We have three interest rate swaps with a total notional amount of $100.0 million that are used to manage our interest rate risk and fix the SOFR component on the Credit Facilities.

$50.0 million of the swaps mature in January 2027 and fix the interest rate of the 2021 Term Loan at 2.291% as of June 30, 2022.

The remaining $50.0 million mature in February 2028 and fix the first $50.0 million amount outstanding under the 2022 Term Loan at 4.237% as of June 30, 2022.

In June 2022, we also entered into a forward-starting interest rate swap for a notional amount of $25.0 million, which became effective in July 2022 and fixed the SOFR component of $25.0 million of the Credit Facilities through February 2028.

The forward-starting interest rate swap initially applied to the remaining $25.0 million amount outstanding under the 2022 Term Loan, fixing the interest rate for this portion of the 2022 Term Loan initially at 4.81%.

As of September 30, 2022, we were in compliance with all of the Credit Facilities’ debt covenants.

We have four interest rate swaps with a total notional amount of $125.0 million that are used to manage our interest rate risk and fix the SOFR component on the Credit Facilities.

Within the $125.0 million, $50.0 million of the swaps mature in January 2027 and fix the interest rate of the 2021 Term Loan at 2.291% as of September 30, 2022.

The additional $50.0 million of the swaps mature in February 2028 and fix the first $50.0 million amount outstanding under the 2022 Term Loan at 4.237% as of September 30, 2022.

The remaining $25.0 million of the swaps mature in February 2028 and fix the remaining $25.0 million amount outstanding under the 2022 Term Loan at 4.81% as of September 30, 2022.

Our short-term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, distributions to our limited partners and distributions to our stockholders required to qualify for REIT status, capital expenditures and, potentially, acquisitions.

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If we do not have sufficient funds available to us from our operations to fund our business needs, we will need to find alternative ways to fund those needs.

Such alternatives may include, among other things, divesting ourselves of

properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring indebtedness or issuing equity securities in public or private transactions, the availability and attractiveness of the terms of which cannot be assured.

Such alternatives may include, among other things, divesting ourselves of properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring

indebtedness or issuing equity securities in public or private transactions, the availability and attractiveness of the terms of which cannot be assured.

Consolidated Indebtedness

As of June 30, 2022, we had approximately $176.1 million of outstanding consolidated principal indebtedness.

The following table sets forth information as of June 30, 2022 with respect to our outstanding indebtedness (in thousands):

Balance as of June 30, 2022

Rate at June 30, 2022

As of September 30, 2022, we had approximately $189.1 million of outstanding consolidated principal indebtedness.

The following table sets forth information as of September 30, 2022 with respect to our outstanding indebtedness (in thousands):

Balance as of September 30, 2022

Rate at September 30, 2022

Revolving Credit Facility (1) :

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(1) See above under "— Analysis of Liquidity and Capital Resources" for details regarding the Credit Facilities.

During the three and six months ended June 30, 2022, we incurred $0.06 million and $0.1 million, respectively, of unused facility fees related to the 2021 Revolving Credit Facility.

During the three and nine months ended September 30, 2022, we incurred $0.06 million and $0.2 million, respectively, of unused facility fees related to the 2021 Revolving Credit Facility.

(2) Based upon the one-month Adjusted Term SOFR, which is SOFR plus a term SOFR adjustment of 0.10%, subject to a 0% floor (the “Adjusted Term SOFR”) .

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The loan has a fixed interest rate of 2.80% with interest-only payments for the first five years and fixed payments of principal and interest thereafter based on a 30-year amortization schedule.

Secured Borrowings as of June 30, 2022

As of June 30, 2022, we had approximately $33.1 million of secured borrowings outstanding, all of which are currently fixed rate debt with a weighted average interest rate of 2.90% per annum.

Secured Borrowings as of September 30, 2022

As of September 30, 2022, we had approximately $33.1 million of secured borrowings outstanding, all of which are currently fixed rate debt with a weighted average interest rate of 2.90% per annum.

To maintain our qualification as a REIT, we are required to pay dividends to stockholders at least equal to 90% of our REIT taxable income determined without regard to the deduction for dividends paid and excluding net capital gains.

During the three and six months ended June 30, 2022, we paid cash dividends of $0.23 and $0.46, respectively, per share.

Our Board of Directors approved, and o n July 27, 2022 , we declared a second quarter common stock dividend of $0.2325 per share, which will be paid on August 26, 2022 to stockholders of record as of August 8, 2022 .

During the three and nine months ended September 30, 2022, we paid cash dividends of $0.2325 and $0.69, respectively, per share.

Our Board of Directors approved, and o n October 26, 2022 , we declared a third quarter common stock dividend of $0.2350 per share, which will be paid on November 28, 2022 to stockholders of record as of November 7, 2022

Because most of our leases provide for fixed annual rental payments without annual rent escalations, our rental revenues are fixed while our property operating expenses are subject to inflationary increases.

A majority of our leases provide for tenant reimbursement of real estate taxes and thus the tenant must reimburse us for real estate taxes.

We believe that if inflation increases expenses over time, increases in lease renewal rates will materially offset such increase.

Subsequent Real Estate Acquisitions

Subsequent to June 30, 2022, we have acquired 16 properties in individual or portfolio transactions for an aggregate of approximately $4.6 million, excluding closing costs.

Subsequent to September 30, 2022, we have acquired 7 properties in individual or portfolio transactions for an aggregate of approximately $5.9 million, excluding closing costs.

Critical Accounting Policies and Estimates

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Summary of Significant Accounting Policies in the Notes to the of our Consolidated Financial Statements included herein.

A majority of our leases provide for tenant reimbursement of real estate taxes and thus the tenant must reimburse us for real estate taxes.

We believe that if inflation increases expenses over time, increases in lease renewal rates will materially offset such increase.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis