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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-13 · 108 added, 74 removed, 221 unchanged (45% 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 relocation of postal offices by the USPS;

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

• the competitive market in which we operate;

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• fluctuations in interest rates and increased operating costs;

• general economic conditions (including uncertainty regarding ongoing conflict between Russia and Ukraine and the related impact on macroeconomic conditions);

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

• financial market fluctuations;

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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 three months ended March 31, 2022, we acquired 50 properties leased to the USPS for approximately $27.6 million, including closing costs.

As of March 31, 2022, our portfolio consists of 1,016 owned properties, located in 49 states and one territory and comprising approximately 4.7 million net leasable interior square feet.

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.

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

As of May 11, 2022, we owned approximately 81.9% 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 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”).

Our Board of Directors oversees our business and affairs.

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

As of March 31, 2022, we had approximately $43.1 million of availability remaining 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.

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Geographic Concentration

As of March 31, 2022, we owned a portfolio of 1,016 properties located in 49 states and one territory and leased primarily to the USPS.

For the three months ended March 31, 2022, 17.2% of our total of rental income was concentrated in Pennsylvania.

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.

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, including those outlined in its ten-year plan entitled Delivering for America:

Our Vision and Ten-Year Plan to Achieve Financial Sustainability and Service Excellence , such as higher rates and slower deliveries for certain services , 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 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.

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.

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For additional information regarding the risks associated with the USPS, see the section entitled “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.

Spodek and his affiliates managed by our taxable REIT subsidiary (“TRS”), and income recognized from properties accounted for as financing leases.

We derive revenues primarily from rent and tenant reimbursements under leases with the USPS for our properties, and fee and other from the management agreements with respect to the postal properties owned by Andrew Spodek, our chief executive officer, and his affiliates managed by our taxable REIT subsidiary (“TRS”), income recognized from properties accounted for as financing leases and revenue from providing certain advisory services.

Rental income represents the lease revenue recognized under leases primarily with the USPS which includes the impact of above and below market lease intangibles as well as tenant reimbursements for payments made by our tenants under the leases to reimburse us for the majority of real estate taxes paid at each property.

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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 March 31, 2022, properties leased to our tenants had an average remaining lease term of approximately four years.

As of June 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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Indebtedness and Interest Expense

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

In connection with entering into the credit facilities, we terminated our previous credit facility and paid off the outstanding loans thereunder.

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 2021 Revolving Credit Facility and the 2021 Term Loan, the “Credit Facilities”), replace the London Interbank Offered Rate (“LIBOR”) 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.

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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Under the Code, REITs are subject to numerous organizational and operational requirements, including a requirement that they distribute each year at least 90% of their REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains.

If we fail to qualify for taxation as a REIT in any taxable

year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates, and we would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.

If we fail to qualify for taxation as a REIT in any taxable year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates, and we would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.

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.

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Lease Renewal

As of May 11, 2022, the leases at 22 of our properties, representing approximately 92,000 net leasable interior square feet and $0.8 million in annual contractual rental revenue, were expired and the USPS was occupying such properties as a holdover tenant.

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 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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Results of Operations

Comparison of the Three Months Ended March 31, 2022 and the Three Months Ended March 31, 2021

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

For the Three Months Ended

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Write-off and amortization of deferred financing fees (155) (145) (10) 6.9 %

Loss on early extinguishment of debt — (202) 202 (100.0) %

Interest income 1 1 — 0.0 %

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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 $2.9 million to $11.3 million for the three months ended March 31, 2022 from $8.5 million for the three months ended March 31, 2021 due to the volume of our acquisitions.

Fee and other .

Other revenue increased by $0.2 million to $0.6 million for the three months ended March 31, 2022 from $0.3 million for the three months ended March 31, 2021 primarily due to income received from properties accounted for as financing leases.

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.

Operating Expense

Real estate taxes – Real estate taxes increased by $0.5 million to $1.6 million for the three months ended March 31, 2022 from $1.1 million for the three months ended March 31, 2021 due to the volume of our acquisitions.

Property operating expenses – Property operating expenses increased by $0.6 million to $1.5 million for the three months ended March 31, 2022 from $0.9 million for the three months ended March 31, 2021.

Property management expenses are included within property operating expenses and increased by $0.2 million to $0.6 million for the three months ended March 31, 2022 from $0.4 million for the three months ended March 31, 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 $0.5 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.

The remainder of the increase of $0.2 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 $1.1 million to $3.6 million for the three months ended March 31, 2022 from $2.6 million for the three months ended March 31, 2021 primarily due to expanding our 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 employees in 2021 and during the three months ended March 31, 2022.

Depreciation and amortization – Depreciation and amortization expense increased by $0.9 million to $4.1 million for the three months ended March 31, 2022 from $3.2 million for three months ended March 31, 2021 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.

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

Other income increased by $0.5 million to $0.5 million for the three months ended March 31, 2022 from $0.04 million for the three months ended March 31, 2021, primarily due to higher insurance recoveries.

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.

Total Interest Expense, Net

During the three months ended March 31, 2022, we incurred total interest expense, net of $0.8 million compared to $1.0 million for the three months ended March 31, 2021.

The decrease in interest expense is primarily related to the loss on early extinguishment of debt of $0.2 million incurred in connection with the paydown of two mortgage financings during the three months ended March 31, 2021.

Comparison of the Three Months Ended March 31, 2022 and the Three Months Ended March 31, 2021

We had $6.0 million of cash and $1.3 million of escrows and reserves as of March 31, 2022 compared to $3.3 million of cash and $1.1 million of escrows and reserves as of March 31, 2021.

Cash flow from operating activities – Net cash provided by operating activities increased by $2.1 million to $6.6 million for the three months ended March 31, 2022 compared to $4.5 million for the same period in 2021.

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

2022 2021 $ Change % Change

Rental income $ 23,484 $ 17,464 $ 6,020 34.5 %

Fee and other 1,171 812 359 44.2 %

Total revenues 24,655 18,276 6,379 34.9 %

Operating expenses

Real estate taxes 3,295 2,252 1,043 46.3 %

Property operating expenses 2,760 1,725 1,035 60.0 %

General and administrative 6,950 5,285 1,665 31.5 %

Depreciation and amortization 8,329 6,388 1,941 30.4 %

Total operating expenses 21,334 15,650 5,684 36.3 %

Income from operations 3,321 2,626 695 26.5 %

Other income 674 117 557 476.1 %

Interest expense, net

Contractual interest expense (1,797) (1,266) (531) 41.9 %

Write-off and amortization of deferred financing fees (284) (290) 6 (2.1) %

Loss on early extinguishment of debt — (202) 202 100.0 %

Interest income 1 1 0 0.0 %

Total interest expense, net (2,080) (1,757) (323) 18.4 %

Income before income tax expense 1,915 986 929 94.2 %

Income tax expense (29) (38) 9 (23.7) %

Net income $ 1,886 $ 948 $ 938 98.9 %

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.

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.

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.

The remainder of the increase of $0.6 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.

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.

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.

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 three months ended March 31, 2022 primarily consisted of $25.5 million of acquisitions and $2.6 million of escrow deposits for acquisition, capital improvements and other investing activities, offset by $0.4 million of insurance proceeds that were received.

Net cash used in investing activities for the three months ended March 31, 2021 primarily consisted of $25.4 million of acquisitions.

Cash flow from financing activities – Net cash provided by financing activities decreased by $1.3 million to $21.3 million for the three months ended March 31, 2022 compared to $22.6 million for the three months ended March 31, 2021.

The decrease was primarily related to a decrease in net proceeds from issuance of shares and increased payments of dividends and distributions, offset by an increase in net borrowings under our credit facilities and pay down of two mortgage financings during the three months ended March 31, 2021.

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.

Liquidity and Capital Resources

Analysis of Liquidity and Capital Resources

We had approximately $6.0 million of cash and $1.3 million of escrows and reserves as of March 31, 2022.

We had approximately $4.6 million of cash and $1.4 million of escrows and reserves as of June 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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Additional participants in the Credit Facilities include Stifel Bank & Trust and TriState Capital Bank.

In connection with entering into the Credit Facilities, we terminated our previous credit facility and paid off the

outstanding loans thereunder.

As of March 31, 2022, we had $90.0 million of aggregate principal amount outstanding under our Credit Facilities, with $50.0 million drawn on the 2021 Term Loan and $40.0 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, prior to the First Amendment (as defined below), up to an additional $50.0 million under the 2021 Term Loan, in each case subject to customary terms and conditions.

The 2021 Revolving Credit Facility matures in January 2026, which may be extended for two six-month periods subject to customary conditions, and the 2021 Term Loan matures in January 2027.

Prior to the First Amendment, borrowings under the Credit Facilities carried an interest rate of, (i) in the case of the 2021 Revolving Credit Facility, either a base rate plus a margin ranging from 0.5% to 1.0% per annum or the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 1.5% to 2.0% per annum, or (ii) in the case of the 2021 Term Loan, either a base rate plus a margin ranging from 0.45% to 0.95% per annum or LIBOR plus a margin ranging from 1.45% to 1.95% per annum, in each case depending on a consolidated leverage ratio.

In connection with entering into the Credit Facilities, we terminated our previous credit facility and paid off the outstanding loans thereunder.

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.

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.

The 2021 Revolving Credit Facility matures in January 2026, which may be extended for two six-month periods subject to customary conditions, the 2021 Term Loan matures in January 2027 and the 2022 Term Loan matures in February 2028.

Borrowings under the Credit Facilities carry an interest rate of, (i) in the case of the 2021 Revolving Credit Facility, either a base rate plus a margin ranging from 0.5% to 1.0% per annum or Adjusted Term SOFR (as defined below) plus a margin ranging from 1.5% to 2.0% per annum, or (ii) in the case of the 2021 Term Loan and the 2022 Term Loan, either a base rate plus a margin ranging from 0.45% to 0.95% per annum or Adjusted Term SOFR plus a margin ranging from 1.45% to 1.95% per annum, in each case depending on a consolidated leverage ratio.

With respect to the 2021 Revolving Credit Facility, we will pay, if the usage is equal to or less than 50%, an unused facility fee of 0.20% per annum, or if the usage is greater than 50%, an unused facility fee of 0.15% per annum, in each case on the average daily unused commitments under the 2021 Revolving Credit Facility.

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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 March 31, 2022, we were in compliance with all of the Credit Facilities’ debt covenants.

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") that matures in February 2028, increase the accordion feature under the Credit Facilities for term loans to $75.0 million, replace LIBOR 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 the Company achieves certain sustainability targets.

As amended, the Credit Facilities carry an interest rate of, (i) in the case of the 2021 Revolving Credit Facility, either a base rate plus a margin ranging from 0.5% to 1.0% per annum or Adjusted Term SOFR (as defined below) plus a margin ranging from 1.5% to 2.0% per annum, or (ii) in the case of the 2021 Term Loan and the 2022 Term Loan, either a base rate plus a margin ranging from 0.45% to 0.95% per annum or Adjusted Term SOFR plus a margin ranging from 1.45% to 1.95% per annum, in each case depending on a consolidated leverage ratio .

The Adjusted Term SOFR option is SOFR plus a term SOFR adjustment of 0.10%, subject to a 0% floor (the “Adjusted Term SOFR”).

The transition to SOFR did not materially impact the interest rate applied to our borrowings.

On August 9, 2021, we entered into an interest rate swap (the "2021 Interest Rate Swap") that effectively fixed the LIBOR component of the interest rate on $50.0 million of the Credit Facilities through January 2027.

The 2021 Interest Rate Swap initially applied to the $50.0 million 2021 Term Loan, fixing the interest rate for the 2021 Term Loan at 2.291% as of March 31, 2022 .

Upon entry into the First Amendment, we concurrently amended this interest rate swap to reference SOFR instead of LIBOR.

On May 11, 2022, we entered into two additional interest rate swaps (the "2022 Interest Rate Swaps") that effectively fixed the SOFR component of the interest rate on $50.0 million of the Credit Facilities through February 2028.

The 2022 Interest Rate Swaps initially applied to the $50.0 million amount outstanding under the 2022 Term Loan, fixing the interest rate for the 2022 Term Loan initially at 4.237%.

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%.

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 March 31, 2022, we had approximately $123.1 million of outstanding consolidated principal indebtedness.

The following table sets forth information as of March 31, 2022 with respect to our outstanding indebtedness (in thousands):

Balance as of March 31, 2022

Rate at March 31, 2022

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

Revolving Credit Facility (1) :

2021 Revolving Credit Facility $ 40,000 LIBOR+150bps (2)

2021 Revolving Credit Facility $ 18,000 SOFR+150 bps (2)

2021 Term Loan (1)

50,000 LIBOR+145bps (2)

50,000 SOFR+145 bps (2)

2022 Term Loan (1)

75,000 SOFR+145 bps (2)

February 2028

Secured Borrowings:

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Explanatory Notes :

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

During the three months ended March 31, 2022, we incurred $0.06 million of unused facility fees related to the 2021 Revolving Credit Facility.

(2) Based upon the one-month U.S.

Dollar LIBOR rate.

(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.

(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”) .

(3) Five properties are collateralized under this loan and Mr.

Spodek also provided a personal guarantee of payment for 50% of the outstanding amount thereunder.

The loan has a fixed interest rate of 3.69% for the first five years with interest payments only, then adjusting every subsequent five year period thereafter with principal and interest payments to the rate based on the five year weekly average yield on United States Treasury securities adjusted to a constant maturity of five years, as made available to the Board of Governors of the Federal Reserve System (the "Five-Year Treasury Rate"), plus a margin of 2.75%, with a minimum annual rate of 2.75%.

The loan has a fixed interest rate of 3.69% for the first five years with interest payments only (ending in October 2026), then adjusting every subsequent five year period thereafter with principal and interest payments to the rate based on the five year weekly average yield on United States Treasury securities adjusted to a constant maturity of five years, as made available to the Board of Governors of the Federal Reserve System (the "Five-Year Treasury Rate"), plus a margin of 2.75%, with a minimum annual rate of 2.75%.

(4) The loan is collateralized by first mortgage liens on four properties and a personal guarantee of payment by Mr.

The loan has a fixed interest rate of 3.625% for the first five years, then adjusting annually thereafter to a variable annual rate of Wall Street Journal Prime Rate with a minimum annual rate of 3.625%.

The loan has a fixed interest rate of 3.625% for the first five years (ending in August 2026), then adjusting annually thereafter to a variable annual rate of Wall Street Journal Prime Rate with a minimum annual rate of 3.625%.

(5) The loan is collateralized by first mortgage liens on one property and a personal guarantee of payment by Mr.

(6) In connection with the acquisition of a property, we obtained seller financing secured by the property in the amount of $0.4 million requiring five annual payments of principal and interest of $0.1 million with the first installment due on January 2, 2021 based on a 6.0% interest rate per annum through January 2, 2025.

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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 March 31, 2022

As of March 31, 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 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.

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 months ended March 31, 2022, we paid cash dividends of $0.2275 per share.

Our Board of Directors approved, and o n April 28, 2022 , we declared a first quarter common stock dividend of $0.23 per share, which will be paid on May 27, 2022 to stockholders of record as of May 13, 2022 .

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 .

Subsequent Real Estate Acquisitions

Subsequent to March 31, 2022, we have acquired 44 properties in individual or portfolio transactions for an aggregate of approximately $14.0 million, excluding closing costs.

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.

Critical Accounting Policies and Estimates

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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