What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-10-30 · 72 added, 119 removed, 204 unchanged (48% of the section changed)

17 unchanged sentences

• the solvency and financial health of the USPS;

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

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

• the competitive market in which we operate;

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• change in our business, financing or investment strategy or the markets in which we operate;

• fluctuations in interest rates and increased operating costs, repair and maintenance expenses and capital expenditures;

• fluctuations in interest rates;

• increased operating costs, repair and maintenance expenses and capital expenditures for our properties;

• general economic conditions (including inflation, rising interest rates, uncertainty regarding ongoing conflict between Russia and Ukraine and their related impact on macroeconomic conditions);

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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 nine months ended September 30, 2023, we acquired 148 properties leased to the USPS for approximately $58.4 million, including closing costs.

As of September 30, 2023, our portfolio consists of 1,434

During the three months ended March 31, 2024, we acquired 29 properties leased to the USPS for approximately $18.9 million, including closing costs.

As of March 31, 2024, our portfolio consists of 1,537

owned properties, located in 49 states and one territory and comprising approximately 6.0 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 October 30, 2023, we owned approximately 81.9% of 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 May 7, 2024, we owned approximately 79.2% of 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.

On November 4, 2022, we entered into separate open market sale agreements for our at-the-market offering program (the "ATM Program") with each of Jefferies LLC, BMO Capital Markets Corp., Janney Montgomery Scott LLC, Stifel, Nicolaus & Company, Incorporated and Truist Securities, Inc., as agents, pursuant to which we may offer and sell, from time to time, shares of our Class A common stock having an aggregate sales price of up to $50.0 million.

On November 4, 2022, we entered into separate open market sale agreements for our at-the-market offering program (the "ATM Program") with each of Jefferies LLC, BMO Capital Markets Corp., Stifel, Nicolaus & Company, Incorporated and Truist Securities, Inc., as agents, pursuant to which we may offer and sell, from time to time, shares of our Class A common stock having an aggregate sales price of up to $50.0 million.

The agreements also provide that we may enter into one or more forward sale agreements under separate master forward confirmations and related supplemental confirmations with affiliates of certain agents.

On August 8, 2023, we amended the ATM Program to increase the aggregate offering amount under the program from up to $50.0 million to up to $150.0 million.

During the nine months ended September 30, 2023, 1,435,304 shares were issued under the ATM Program (including 600,000 shares that were issued in September 2023 in settlement of forward sales transactions that we entered into in July 2023).

As of September 30, 2023, we had an additional 198,847 shares of forward sales transactions that had yet been settled.

On October 11, 2023, the remaining 198,847 shares were settled for net proceeds of approximately $2.9 million.

As of September 30, 2023, we had approximately $117.3 million of availability remaining under the ATM Program.

During the three months ended March 31, 2024, 576,087 shares were issued under the ATM Program for approximately $8.2 million in gross proceeds.

As of March 31, 2024, we had approximately $105.8 million of availability remaining under the ATM Program.

Executive Overview

We are an internally managed REIT with a focus on acquiring and managing properties leased primarily to the USPS, ranging from last-mile post offices to larger industrial facilities.

We are an internally managed REIT with a focus on acquiring and managing properties leased primarily to the USPS, ranging from last-mile post offices to industrial facilities.

We believe the overall opportunity for consolidation that exists within the postal logistics network is very attractive.

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Geographic Concentration

As of September 30, 2023, we owned a portfolio of 1,434 properties located in 49 states and one territory and leased primarily to the USPS.

For the nine months ended September 30, 2023, approximately 13.5% of our total rental income was concentrated in Pennsylvania.

As of March 31, 2024, we owned a portfolio of 1,537 properties located in 49 states and one territory and leased primarily to the USPS.

For the three months ended March 31, 2024, approximately 12.4% of our total rental income was concentrated in Pennsylvania.

Emerging Growth Company

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In addition, the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards.

In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have availed ourselves of these exemptions;

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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 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 closure, relocation or consolidation of certain facilities and delivery units, 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 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 COVID-19 pandemic and measures taken to prevent its spread have also had a material and unpredictable effect on the USPS’ operations and liquidity, including significant additional operating expenses caused by pandemic-related disruptions.

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

The occurrence of a regional epidemic or a global pandemic, such as the COVID-19 pandemic, and measures taken to prevent its spread may also have a material and unpredictable effect on the USPS’ operations and liquidity, including significant additional operating expenses caused by pandemic-related disruptions.

The lingering effect of the COVID-19 pandemic and other geopolitical and economic factors have also created significant inflationary pressures resulting in higher compensation, benefits, 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 properties, (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 September 30, 2023, properties leased to our tenants had an average remaining lease term of approximately 3.2 years.

As of March 31, 2024, properties leased to our tenants had an average remaining lease term of approximately three 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, certain maintenance obligations and reimbursement of property taxes and the landlord is generally 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.

Refer to “Lease Renewal” below for further discussion.

Operating expenses generally consist of real estate taxes, property operating expenses, which consist of insurance, repairs and maintenance (other than those for which the tenant is responsible), property maintenance-related payroll and

depreciation and amortization.

Factors that may affect our ability to control these operating costs include but are not limited to:

the cost of periodic repair, age and durability of our properties, renovation costs, the cost of re-leasing space, inflation and the potential for liability under applicable laws.

Recoveries from the tenant are recognized as revenue on an accrual basis over the periods in which the related expenditures are incurred.

the cost of periodic repair, age and durability of our properties, renovation costs, landlord’s responsibilities under the leases, the cost of re-leasing space, inflation and the potential for liability under applicable laws.

Recoveries from the tenant are recognized

as revenue on an accrual basis over the periods in which the related expenditures are incurred.

Tenant reimbursements and the related property operating expenses are recognized on a gross basis, because (i) generally, we are the primary obligor with respect to the real estate taxes and (ii) we bear the credit risk in the event the tenant does not reimburse the real estate taxes.

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As a result, if revenues decrease in the future, static operating costs may adversely affect our future cash flow and results of operations.

General and Administrative

General and Administrative Expense

General and administrative expense represents personnel costs, professional fees, legal fees, insurance, consulting fees, information technology costs and other expenses related to our day-to-day activities of being a public company.

1 unchanged sentence

Equity-Based Compensation Expense

All equity-based compensation expense is recognized in our Consolidated Statements of Operations and Comprehensive Income as components of general and administrative expense and property operating expenses.

All equity-based compensation expense is recognized in our Consolidated Statements of Operations and Comprehensive Income (Loss) as components of general and administrative expense and property operating expenses.

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

Indebtedness and Interest Expense

On August 9, 2021, we entered into a $150.0 million senior unsecured revolving credit facility (the "Revolving Credit Facility") and a $50.0 million senior unsecured term loan facility (the "2021 Term Loan").

On May 11, 2022, we amended the Credit Facilities (the "First Amendment") to, among other things, add a new $75.0 million senior unsecured delayed draw term loan facility (the "2022 Term Loan" and, together with the Revolving Credit Facility and the 2021 Term Loan, the “Credit Facilities”), replace the London Interbank Offered Rate with the Secured Overnight Financing Rate ("SOFR") as the benchmark interest rate and allow for a decrease in the applicable margin by 0.02% if we achieve certain sustainability targets.

On December 6, 2022, we exercised $40.0 million of term loan accordion under the 2022 Term Loan.

On July 24, 2023, we amended the Credit Facilities (the "Second Amendment") to, among other things, add a daily simple SOFR-based option to the term SOFR-based floating interest rate option as a benchmark rate for borrowings under the Credit Facilities and further exercised $25.0 million of term loan accordion under the 2021 Term Loan and, on a delayed-draw basis, $10.0 million of term loan accordion under the 2022 Term Loan.

Our credit facilities (the "Credit Facilities") consist of a $150.0 million senior unsecured revolving credit facility (the "Revolving Credit Facility"), a $75.0 million senior unsecured term loan facility (the "2021 Term Loan") and a $125.0 million senior unsecured term loan facility (the "2022 Term Loan").

We intend to use the Credit Facilities for working capital purposes, which may include repayment of mortgage indebtedness, property acquisitions and other general corporate purposes.

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Even though we qualify as a REIT for federal income tax purposes, we may still be subject to state and local taxes on our income and assets and to federal income and excise taxes on our undistributed income.

Additionally, any income earned by our existing TRS and any other TRS we form in the future will be subject to federal, state and local corporate income tax.

Additionally, any income earned by our existing TRS and any other TRS we may form in the future will be subject to federal, state and local corporate income tax.

Lease Renewal

As of October 30, 2023, the leases at 60 of our properties, representing approximately 522,000 net leasable interior square feet, were expired and the USPS was occupying such properties as a holdover tenant.

As of May 7, 2024, the leases at 101of our properties, representing approximately 673,000 net leasable interior square feet, had 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.

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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.

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, 2023 for additional information regarding the risks associated with the USPS.

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and the Three Months Ended September 30, 2022

Comparison of the Three Months Ended March 31, 2024 and the Three Months Ended March 31, 2023

For the Three Months Ended

September 30,

(Amounts in thousands) 2024 2023 $ Change % Change

13 unchanged sentences

Write-off and amortization of deferred financing fees (181) (165) (16) 9.7 %

Total interest expense, net (2,620) (1,826) (794) 43.5 %

Income before income tax (expense) benefit

1,455 1,134 321 28.3 %

Income tax (expense) benefit

(19) 16 (35) (218.8) %

Net income $ 1,436 $ 1,150 $ 286 24.9 %

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 $2.3 million to $15.4 million for the three months ended September 30, 2023 from $13.2 million for the three months ended September 30, 2022, primarily due to the volume of our acquisitions.

Fee and other – Fee and other revenue increased by $0.1 million to $0.7 million for the three months ended September 30, 2023 from $0.6 million for the three months ended September 30, 2022, primarily due to income received from advisory services and an increase in management fees.

Operating Expenses

Real estate taxes – Real estate taxes increased by $0.3 million to $2.1 million for the three months ended September 30, 2023 from $1.8 million for the three months ended September 30, 2022, primarily due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by $0.6 million to $1.9 million for the three months ended September 30, 2023 from $1.3 million for the three months ended September 30, 2022.

Property management expenses are included within property operating expenses and increased by $0.1 million to $0.6 million for the three months ended September 30, 2023 from $0.5 million for the three months ended September 30, 2022.

The increase in property operating expenses of $0.5 million was related to an increase in repairs and maintenance.

General and administrative – General and administrative expenses increased by $0.3 million to $3.4 million for the three months ended September 30, 2023 from $3.0 million for the three months ended September 30, 2022, primarily due to expanding our staff, an increase in information technology related costs as a result of our continued growth and an increase in equity-based compensation expense related to awards that have been granted to our employees throughout 2022 and 2023.

Depreciation and amortization – Depreciation and amortization expense increased by $0.3 million to $4.9 million for the three months ended September 30, 2023 from $4.6 million for three months ended September 30, 2022, primarily due to the volume of our acquisitions.

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

Other income increased by $0.2 million to $0.2 million for the three months ended September 30, 2023 from $0.04 million for the three months ended September 30, 2022, primarily due to an increase in property related insurance recoveries.

Total Interest Expense, Net

During the three months ended September 30, 2023, we incurred total interest expense, net of $2.6 million compared to $1.8 million for the three months ended September 30, 2022.

The increase in interest expense is primarily related to additional borrowings under the Credit Facilities and increased interest rates.

Comparison of the Nine Months Ended September 30, 2023 and Nine Months Ended September 30, 2022

For the Nine Months Ended

September 30,

2023 2022 $ Change % Change

Rental income $ 44,699 $ 36,665 $ 8,034 21.9 %

Fee and other 2,012 1,765 247 14.0 %

Total revenues 46,711 38,430 8,281 21.5 %

Operating expenses

Real estate taxes 6,101 5,131 970 18.9 %

Property operating expenses 4,955 4,106 849 20.7 %

General and administrative 11,121 9,990 1,131 11.3 %

Depreciation and amortization 14,537 12,966 1,571 12.1 %

Total operating expenses 36,714 32,193 4,521 14.0 %

Income from operations 9,997 6,237 3,760 60.3 %

Other income 485 718 (233) (32.5) %

Interest expense, net

Contractual interest expense (6,793) (3,467) (3,326) 95.9 %

Write-off and amortization of deferred financing fees (504) (440) (64) 14.5 %

Interest income 1 — 1 100.0 %

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Income before income tax expense

272 449 (177) (39.4) %

Income tax expense

(16) (16) — —

Net income $ 256 $ 433 $ (177) (40.9) %

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 $8.0 million to $44.7 million for the nine months ended September 30, 2023 from $36.7 million for the nine months ended September 30, 2022, primarily due to the volume of our acquisitions.

Fee and other – Other revenue increased by $0.2 million to $2.0 million for the nine months ended September 30, 2023 from $1.8 million for the nine months ended September 30, 2022, primarily due to income received from properties accounted for as financing leases, income received from advisory services and an increase in management fees.

Operating Expense

Real estate taxes – Real estate taxes increased by $1.0 million to $6.1 million for the nine months ended September 30, 2023 from $5.1 million for the nine months ended September 30, 2022, primarily due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by $0.8 million to $5.0 million for the nine months ended September 30, 2023 from $4.1 million for the nine months ended September 30, 2022.

Property management expenses are included within property operating expenses and increased by $0.3 million to $1.9 million for the nine months ended September 30, 2023 from $1.6 million for the nine months ended September 30, 2022.

The remainder of the increase of $0.5 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 $1.1 million to $11.1 million for the nine months ended September 30, 2023 from $10.0 million for the nine months ended September 30, 2022 primarily due to expanding our staff, an increase in information technology related costs as a result of our continued growth and an increase in equity-based compensation expense related to awards that have been granted to our employees throughout 2022 and 2023.

Depreciation and amortization – Depreciation and amortization expense increased by $1.6 million to $14.5 million for the nine months ended September 30, 2023 from $13.0 million for the nine months ended September 30, 2022, primarily due to the volume of our acquisitions.

Rental income increased by $2.1 million to $16.6 million for the three months ended March 31, 2024 from $14.5 million for the three months ended March 31, 2023, primarily due to the volume of our acquisitions.

Fee and other – Fee and other revenue increased by $0.03 million to $0.7 million for the three months ended March 31, 2024 from $0.6 million for the three months ended March 31, 2023, primarily due to an increase in income received from advisory services.

Operating Expenses

Real estate taxes – Real estate taxes increased by $0.3 million to $2.3 million for the three months ended March 31, 2024 from $2.0 million for the three months ended March 31, 2023, primarily due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by $0.7 million to $2.4 million for the three months ended March 31, 2024 from $1.6 million for the three months ended March 31, 2023.

Property management expenses are included within property operating expenses and increased by $0.1 million to $0.9 million for the three months ended March 31, 2024 from $0.8 million for the three months ended March 31, 2023.

The remainder of the increase in property operating expenses of $0.5 million was related to an increase in insurance and repairs and maintenance expenses.

General and administrative – General and administrative expenses increased by $0.1 million to $4.3 million for the three months ended March 31, 2024 from $4.2 million for the three months ended March 31, 2023, primarily due to an increase in net compensation costs, partially offset by a decrease in public company-related expenses.

Depreciation and amortization – Depreciation and amortization expense increased by $0.5 million to $5.3 million for the three months ended March 31, 2024 from $4.8 million for three months ended March 31, 2023, primarily due to the volume of our acquisitions.

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

Other income decreased by $0.2 million to $0.5 million for the nine months ended September 30, 2023 from $0.7 million for the nine months ended September 30, 2022, primarily due to lower insurance recoveries.

Other income decreased by $0.06 million to $0.05 million for the three months ended March 31, 2024 from $0.1 million for the three months ended March 31, 2023, primarily due to a decrease in property related insurance recoveries from claims.

Total Interest Expense, Net

During the nine months ended September 30, 2023, we incurred total interest expense, net of $7.3 million compared to $3.9 million for the nine months ended September 30, 2022.

The increase in interest expense is primarily related due to additional borrowings under the Credit Facilities and increased interest rates.

Comparison of the Nine Months Ended September 30, 2023 and the Nine Months Ended September 30, 2022

We had $2.5 million of cash and $0.4 million of escrows and reserves as of September 30, 2023 compared to $4.6 million of cash and $0.3 million of escrows and reserves as of September 30, 2022.

Cash flows from operating activities – Net cash provided by operating activities increased by $2.8 million to $21.3 million for the nine months ended September 30, 2023 compared to $18.6 million for the same period in 2022.

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

Cash flows to investing activities – Net cash used in investing activities for the nine months ended September 30, 2023 primarily consisted of $54.9 million of acquisitions and $2.4 million of escrow deposits for acquisition and construction, capital improvements and other 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.

Cash flows from financing activities – Net cash provided by financing activities decreased by $42.9 million to $36.4 million for the nine months ended September 30, 2023 compared to $79.3 million for the nine months ended September 30, 2022.

The decrease was primarily related to less proceeds received on the Credit Facilities and an increase in dividends and distributions.

This is offset by an increase in net proceeds received from issuance of shares in 2023.

During the three months ended March 31, 2024, we incurred total interest expense, net of $2.8 million compared to $2.2 million for the three months ended March 31, 2023.

The increase in interest expense was primarily due to additional borrowings under the Credit Facilities and increased interest rates.

Comparison of the Three Months Ended March 31, 2024 and the Three Months Ended March 31, 2023

We had $1.9 million of cash and $0.8 million of escrows and reserves as of March 31, 2024 compared to $2.1 million of cash and $0.7 million of escrows and reserves as of March 31, 2023.

Cash flows from operating activities – Net cash provided by operating activities decreased by $1.3 million to $6.4 million for the three months ended March 31, 2024 compared to $7.7 million for the same period in 2023.

The decrease was mainly attributable to the timing of receivables and payables.

Cash flows used in investing activities – Net cash used in investing activities for the three months ended March 31, 2024 primarily consisted of $13.0 million of acquisitions and $0.9 million of escrow deposits for acquisition and construction, capital improvements and other investing activities.

Net cash used in investing activities for the three months ended March 31, 2023 primarily consisted of $17.4 million of acquisitions and $0.6 million of escrow deposits for acquisition and construction, capital improvements and other investing activities.

Cash flows from financing activities – Net cash provided by financing activities decreased by $3.8 million to $7.3 million for the three months ended March 31, 2024 compared to $11.0 million for the three months ended March 31, 2023.

The decrease was primarily related to increased paydown of the Revolving Credit Facility and an increase in dividends and distributions during the three months ended March 31, 2024, partially offset by an increase in net proceeds received from issuance of shares during the same period.

Liquidity and Capital Resources

We had approximately $2.5 million of cash and $0.4 million of escrows and reserves as of September 30, 2023.

We had approximately $1.9 million of cash and $0.8 million of escrows and reserves as of March 31, 2024.

Revolving Credit Facility and Term Loans

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

We have entered into the Credit Facilities, which include the $150.0 million Revolving Credit Facility.

the 2021 Term Loan and the 2022 Term Loan (and, together with the 2021 Term Loan, the "Term Loans") , with Bank of Montreal, as administrative agent, and BMO Capital Markets Corp., M&T Bank, JPMorgan Chase Bank, N.A.

and Truist Securities, Inc.

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Additional participants in the Credit Facilities include Stifel Bank & Trust and TriState Capital Bank.

On May 11, 2022, we entered into the First Amendment to, among other things, add the 2022 Term Loan (and, together with the 2021 Term Loan, the "Term Loans").

On December 6, 2022, we exercised $40.0 million of accordion feature under the 2022 Term Loan.

On July 24, 2023, we entered into the Second Amendment and further exercised $25.0 million of term loan accordion under the 2021 Term Loan and, on a delayed-draw basis, $10.0 million of term loan accordion under the 2022 Term Loan (which was fully drawn down on September 27, 2023).

As of September 30, 2023, we had $200.0 million of aggregate principal amount outstanding under our Credit Facilities, with $75.0 million drawn on the 2021 Term Loan, $125.0 million drawn on the 2022 Term Loan and no amount drawn on the Revolving Credit Facility.

As of March 31, 2024, we had $216.0 million of aggregate principal amount outstanding under our

Credit Facilities, with $75.0 million drawn on the 2021 Term Loan, $125.0 million drawn on the 2022 Term Loan and $16.0 million drawn on the Revolving Credit Facility.

The Credit Facilities include an accordion feature which permit us to borrow up to an additional $150.0 million under the Revolving Credit Facility 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 September 30, 2023, we were in compliance with all of the Credit Facilities’ debt covenants.

As of September 30, 2023, we had seven interest rate swaps with a total notional amount of $200.0 million that are used to manage our interest rate risk and fix the SOFR component on the Term Loans of the Credit Facilities (together, the "Interest Rate Swaps").

As of March 31, 2024, we were in compliance with all of the Credit Facilities’ debt covenants.

As of March 31, 2024, we had seven interest rate swaps with a total notional amount of $200.0 million that are used to manage our interest rate risk and fix the SOFR component on the Term Loans of the Credit Facilities (together, the "Interest Rate Swaps").

Derivatives and Hedging Activities in the Notes to our unaudited Consolidated Financial Statements included under Item 1 herein for further details regarding the Interest Rate Swaps.

Capital Resources and Financing Strategy

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.

We expect to meet our short-term liquidity requirements through net cash provided by operations, cash, borrowings under our Credit Facilities and the potential issuance of securities.

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To maintain our qualification as a REIT, we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income determined without regard to the deduction for dividends paid and excluding capital gains.

As a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs.

a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs.

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.

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Consolidated Indebtedness

As of September 30, 2023, we had approximately $233.0 million of outstanding consolidated principal indebtedness.

The following table sets forth information as of September 30, 2023 with respect to our outstanding indebtedness (in thousands):

Balance as of September 30, 2023

Rate at September 30, 2023

As of March 31, 2024, we had approximately $248.9 million of outstanding consolidated principal indebtedness.

The following table sets forth information as of March 31, 2024 with respect to our outstanding indebtedness (in thousands):

Balance as of March 31, 2024

Rate at March 31, 2024

Revolving Credit Facility (1)

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(1) See above under "— Revolving Credit Facility and Term Loans " for details regarding the Credit Facilities.

During the three and nine months ended September 30, 2023, we incurred $0.07 million and $0.2 million, respectively, of unused facility fees related to the 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”) .

During the three months ended March 31, 2024, we incurred $0.07 million of unused facility fees related to the Revolving Credit Facility.

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

Upon our achievement of certain sustainability targets for 2023 , the applicable margins for the Credit Facilities were reduced by 0.02% for the year ending December 31, 2024, which is reflected in the margins noted in the table above.

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(7) The loan is secured by a first mortgage lien on an industrial property located in Warrendale, Pennsylvania.

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 September 30, 2023

As of September 30, 2023, we had approximately $33.0 million of secured borrowings outstanding, all of which are currently fixed-rate debt with a weighted average interest rate of 2.89% per annum.

The loan has a fixed interest rate of 2.80% with interest-only payments for the first five years (ending in January 2026) and fixed payments of principal and interest thereafter based on a 30-year amortization schedule.

Secured Borrowings as of March 31, 2024

As of March 31, 2024, we had approximately $32.9 million of secured borrowings outstanding, all of which are currently fixed-rate debt with a weighted average interest rate of 2.88% 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 nine months ended September 30, 2023, we paid cash dividends of $0.2375 and $0.713 per share, respectively.

Our Board of Directors approved, and o n October 23, 2023 , we declared a third quarter common stock dividend of $0.2375 per share, which will be paid on November 30, 2023 to stockholders of record as of November 1, 2023.

During the three months ended March 31, 2024, we paid cash dividends of $0.24 per share.

Our Board of Directors approved, and o n April 30, 2024 , we declared a first quarter 2024 common stock dividend of $0.24 per share, which will be paid on May 31, 2024 to stockholders of record as of May 8, 2024.

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.

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Subsequent Real Estate Acquisitions

As of October 30, 2023 and d uring the period s ubsequent to September 30, 2023, we have acquired six properties in individual or portfolio transactions for an aggregate of approximately $1.9 million, excluding closing costs.

As of May 7, 2024 and d uring the period s ubsequent to March 31, 2024, we have acquired six properties in individual or portfolio transactions for an aggregate of approximately $4.1 million, excluding closing costs.

Critical Accounting Estimates

Refer to the heading titled “Critical Accounting Estimates” under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our critical accounting estimates.

Recently Adopted Accounting Pronouncements

For a discussion of our adoption of new accounting pronouncements, please see Note 2.

Summary of Significant Accounting Policies in the Notes to our unaudited Consolidated Financial Statements included under Item 1 herein.

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