Terreno Realty Corp 10-Q

Item 1. Financial Statements of Terreno Realty Corporation Terreno Realty Corporation Consolidated Balance Sheets (in thousands – except share and per share data) September 30, 2022 December 31, 2021 (unaudited) ASSETS Investments in real estate Land $ 1,806,657 $ 1,556,952 Buildings and improvements 1,363,240 1,210,591 Construction in progress 44,320 65,157 Intangible assets 125,715 114,126 Total investments in properties 3,339,932 2,946,826 Accumulated depreciation and amortization ( 310,496 ) ( 279,062 ) Net investments in properties 3,029,436 2,667,764 Properties held for sale, net 10,198 — Net investments in real estate 3,039,634 2,667,764 Cash and cash equivalents 10,153 204,404 Restricted cash 844 397 Other assets, net 58,043 51,650 Total assets $ 3,108,674 $ 2,924,215 LIABILITIES AND EQUITY Liabilities Credit facility $ 10,000 $ — Term loans payable, net 198,939 99,495 Senior unsecured notes, net 571,676 621,175 Security deposits 27,247 23,914 Intangible liabilities, net 60,478 51,025 Dividends payable 30,427 25,618 Accounts payable and other liabilities 57,814 45,025 Total liabilities 956,581 866,252 Commitments and contingencies (Note 12) Equity Stockholders’ equity Common stock: $ 0.01 par value, 400,000,000 shares authorized, and 75,640,135 and 75,068,575 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. 757 752 Additional paid-in capital 2,118,173 2,069,604 Common stock held in deferred compensation plan, 426,594 and 275,727 shares at September 30, 2022 and December 31, 2021, respectively. ( 26,982 ) ( 15,197 ) Retained earnings 60,145 2,804 Total stockholders’ equity 2,152,093 2,057,963 Total liabilities and equity $ 3,108,674 $ 2,924,215 The accompanying condensed notes are an integral part of these consolidated financial statements. 2 Table of Contents Terreno Realty Corporation Consolidated Statements of Operations (in thousands – except share and per share data) (Unaudited) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 REVENUES Rental revenues and tenant expense reimbursements $ 70,801 $ 57,269 $ 200,205 $ 161,255 Total revenues 70,801 57,269 200,205 161,255 COSTS AND EXPENSES Property operating expenses 17,140 14,200 49,820 40,883 Depreciation and amortization 16,957 13,636 47,227 36,980 General and administrative 8,139 6,800 22,999 19,248 Acquisition costs and other 36 — 1,091 172 Total costs and expenses 42,272 34,636 121,137 97,283 OTHER INCOME (EXPENSE) Interest and other income 175 228 411 685 Interest expense, including amortization ( 6,265 ) ( 4,686 ) ( 16,393 ) ( 12,847 ) Gain on sales of real estate investments — 3,185 76,048 3,185 Total other income (expense) ( 6,090 ) ( 1,273 ) 60,066 ( 8,977 ) Net income 22,439 21,360 139,134 54,995 Allocation to participating securities ( 107 ) ( 87 ) ( 583 ) ( 191 ) Net income available to common stockholders $ 22,332 $ 21,273 $ 138,551 $ 54,804 EARNINGS PER COMMON SHARE - BASIC AND DILUTED: Net income available to common stockholders - basic $ 0.30 $ 0.30 $ 1.84 $ 0.79 Net income available to common stockholders - diluted $ 0.30 $ 0.30 $ 1.84 $ 0.79 BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 75,495,232 70,516,787 75,316,222 69,571,511 DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 75,588,750 70,752,863 75,402,846 69,799,206 The accompanying condensed notes are an integral part of these consolidated financial statements. 3 Table of Contents Terreno Realty Corporation Consolidated Statements of Comprehensive Income (in thousands) (Unaudited) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Net income $ 22,439 $ 21,360 $ 139,134 $ 54,995 Other comprehensive income: Cash flow hedge adjustment — — — 183 Comprehensive income $ 22,439 $ 21,360 $ 139,134 $ 55,178 The accompanying condensed notes are an integral part of these consolidated financial statements. 4 Table of Contents Terreno Realty Corporation Consolidated Statements of Equity (in thousands – except share data) (Unaudited) Nine months ended September 30, 2022: Common Stock Additional Paid- in Capital Common Shares Held in Deferred Compensation Plan Deferred Compensation Plan Retained (Deficit) Earnings Accumulated Other Comprehensive Loss Number of Shares Amount Total Balance as of December 31, 2021 75,068,575 $ 752 $ 2,069,604 275,727 $ ( 15,197 ) $ 2,804 $ — $ 2,057,963 Net income — — — — — 19,662 — 19,662 Issuance of common stock, net of issuance costs of $ — 147,285 — — — — — — — Forfeiture of common stock related to employee awards ( 1,206 ) — — — — — — — Common shares acquired related to employee awards ( 6,348 ) — ( 493 ) — — — — ( 493 ) Issuance of restricted stock 41,255 — — — — — — — Stock-based compensation — — 2,829 — — — — 2,829 Common stock dividends ($ 0.34 per share) — — — — — ( 25,680 ) — ( 25,680 ) Deposits to deferred compensation plan ( 147,285 ) — 11,535 147,285 ( 11,535 ) — — — Balance as of March 31, 2022 75,102,276 $ 752 $ 2,083,475 423,012 $ ( 26,732 ) $ ( 3,214 ) $ — $ 2,054,281 Net income — — — — — 97,033 — 97,033 Issuance of common stock, net of issuance costs of $ 112 37,833 — 1,947 — — — — 1,947 Forfeiture of common stock related to employee awards ( 28,185 ) — — — — — — — Stock-based compensation — — 2,010 — — — — 2,010 Common stock dividends ($ 0.34 per share) — — — — — ( 25,686 ) — ( 25,686 ) Deposits to deferred compensation plan ( 3,582 ) — 250 3,582 ( 250 ) — — — Balance as of June 30, 2022 75,108,342 $ 752 $ 2,087,682 426,594 $ ( 26,982 ) $ 68,133 $ — $ 2,129,585 Net income — — — — — 22,439 — 22,439 Issuance of common stock, net of issuance costs of $ 548 444,512 5 28,330 — — — — 28,335 Common shares acquired related to employee awards ( 8,367 ) — ( 518 ) — — — — ( 518 ) Issuance of restricted stock 95,648 — — — — — — — Stock-based compensation — — 2,679 — — — — 2,679 Common stock dividends ($ 0.40 per share) — — — — — ( 30,427 ) — ( 30,427 ) Balance as of September 30, 2022 75,640,135 $ 757 $ 2,118,173 426,594 $ ( 26,982 ) $ 60,145 $ — $ 2,152,093 Nine months ended September 30, 2021: Common Stock Additional Paid- in Capital Common Shares Held in Deferred Compensation Plan Deferred Compensation Plan Retained (Deficit) Earnings Accumulated Other Comprehensive Loss Number of Shares Amount Total Balance as of December 31, 2020 68,376,364 $ 686 $ 1,589,301 139,224 $ ( 7,546 ) $ 5,926 $ ( 183 ) $ 1,588,184 Net income — — — — — 16,257 — 16,257 Issuance of common stock, net of issuance costs of $ 731 837,846 7 47,866 — — — — 47,873 Common shares acquired related to employee awards ( 6,534 ) — ( 582 ) — — — — ( 582 ) Issuance of restricted stock 25,654 — — — — — — — Stock-based compensation — — 1,970 — — — — 1,970 Common stock dividends ($ 0.29 per share) — — — — — ( 20,091 ) — ( 20,091 ) Deposits to deferred compensation plan ( 131,322 ) — 7,321 131,322 ( 7,321 ) — — — Other comprehensive income — — — — — — 106 106 Balance as of March 31, 2021 69,102,008 $ 693 $ 1,645,876 270,546 $ ( 14,867 ) $ 2,092 $ ( 77 ) $ 1,633,717 Net income — — — — — 17,378 — 17,378 Issuance of common stock, net of issuance costs of $ 1,228 1,094,656 11 68,382 — — — — 68,393 Forfeiture of common stock related to employee awards ( 85 ) — — — — — — — Stock-based compensation — — 2,677 — — — — 2,677 Common stock dividends ($ 0.29 per share) — — — — — ( 20,428 ) — ( 20,428 ) Deposits to deferred compensation plan ( 5,181 ) — 330 5,181 ( 330 ) — — — Other comprehensive income — — — — — — 77 77 Balance as of June 30, 2021 70,191,398 $ 704 $ 1,717,265 275,727 $ ( 15,197 ) $ ( 958 ) $ — $ 1,701,814 Net income — — — — — 21,360 — 21,360 Issuance of common stock, net of issuance costs of $ 807 751,539 8 49,169 — — — — 49,177 Issuance of restricted stock 72,586 — — — — — — — Stock-based compensation — — 2,360 — — — — 2,360 Common stock dividends ($ 0.34 per share) — — — — — ( 24,239 ) — ( 24,239 ) Balance as of September 30, 2021 71,015,523 $ 712 $ 1,768,794 275,727 $ ( 15,197 ) $ ( 3,837 ) $ — $ 1,750,472 The accompanying condensed notes are an integral part of these consolidated financial statements. 5 Table of Contents Terreno Realty Corporation Consolidated Statements of Cash Flows (in thousands) (Unaudited) For the Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 139,134 $ 54,995 Adjustments to reconcile net income to net cash provided by operating activities Straight-line rents ( 7,326 ) ( 5,845 ) Amortization of lease intangibles ( 10,807 ) ( 5,117 ) Depreciation and amortization 47,227 36,980 Gain on sales of real estate investments ( 76,048 ) ( 3,185 ) Deferred financing cost amortization 988 1,035 Stock-based compensation 7,518 7,007 Changes in assets and liabilities Other assets 543 ( 1,913 ) Accounts payable and other liabilities 7,790 14,484 Net cash provided by operating activities 109,019 98,441 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for property acquisitions ( 344,833 ) ( 325,039 ) Proceeds from sales of real estate investments, net 106,835 9,596 Additions to construction in progress ( 24,978 ) ( 6,181 ) Additions to buildings, improvements and leasing costs ( 50,827 ) ( 38,324 ) Net cash used in investing activities ( 313,803 ) ( 359,948 ) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 30,941 154,806 Issuance costs on issuance of common stock ( 468 ) ( 2,331 ) Repurchase of common stock related to employee awards ( 1,011 ) ( 582 ) Borrowings on credit facility 162,000 45,000 Payments on credit facility ( 152,000 ) ( 45,000 ) Borrowings on term loans payable 100,000 — Borrowings on senior unsecured notes — 150,000 Payments on senior unsecured notes ( 50,000 ) — Payments on mortgage loan payable — ( 11,271 ) Payment of deferred financing costs ( 1,498 ) ( 2,860 ) Dividends paid to common stockholders ( 76,984 ) ( 60,389 ) Net cash provided by financing activities 10,980 227,373 Net decrease in cash and cash equivalents and restricted cash ( 193,804 ) ( 34,134 ) Cash and cash equivalents and restricted cash at beginning of period 204,801 107,836 Cash and cash equivalents and restricted cash at end of period $ 10,997 $ 73,702 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest, net of capitalized interest $ 19,572 $ 11,975 Supplemental disclosures of non-cash transactions Accounts payable related to capital improvements 22,861 16,938 Non-cash issuance of common stock to the deferred compensation plan ( 11,785 ) ( 7,651 ) Lease liability arising from recognition of right-of-use asset — 424 Acquisition of properties $ 360,818 $ 344,452 Assumption of other assets and liabilities ( 15,985 ) ( 19,413 ) Net cash paid for property acquisitions $ 344,833 $ 325,039 The accompanying condensed notes are an integral part of these consolidated financial statements. 6 Table of Contents Terreno Realty Corporation Condensed Notes to Consolidated Financial Statements (Unaudited) Note 1. Organization Terreno Realty Corporation (“Terreno”, and together with its subsidiaries, the “Company”) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. All square feet, acres, occupancy and number of properties disclosed in these condensed notes to the consolidated financial statements are unaudited. As of September 30, 2022, the Company owned 252 buildings (including two buildings held for sale) aggregating approximately 15.4 million square feet, 46 improved land parcels consisting of approximately 159.9 acres and two properties under redevelopment that, upon completion, will consist of two improved land parcels aggregating approximately 12.1 acres. The Company is an internally managed Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2010. Note 2. Significant Accounting Policies Basis of Presentation. The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. In management’s opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The interim consolidated financial statements include all of the Company’s accounts and its subsidiaries and all intercompany balances and transactions have been eliminated in consolidation. The financial statements should be read in conjunction with the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and the notes thereto, which was filed with the Securities and Exchange Commission on February 9, 2022. Use of Estimates. The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Capitalization of Costs. The Company capitalizes costs directly related to the redevelopment, renovation and expansion of its investment in real estate. Costs associated with such projects are capitalized as incurred. If the project is abandoned, these costs are expensed during the period in which the redevelopment, renovation or expansion project is abandoned. Costs considered for capitalization include, but are not limited to, construction costs, interest, real estate taxes and insurance, if appropriate. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress. In the event that the activities to ready the asset for its intended use are suspended, the capitalization period will cease until such activities are resumed. Costs incurred for maintaining and repairing properties, which do not extend their useful lives, are expensed as incurred. Interest is capitalized based on actual capital expenditures from the period when redevelopment, renovation or expansion commences until the asset is ready for its intended use, at the weighted average borrowing rate during the period. Investments in Real Estate. Investments in real estate, including tenant improvements, leasehold improvements and leasing costs, are stated at cost, less accumulated depreciation, unless circumstances indicate that the cost cannot be recovered, in which case, an adjustment to the carrying value of the property is made to reduce it to its estimated fair value. The Company also reviews the impact of above and below-market leases, in-place leases and lease origination costs for acquisitions and records an intangible asset or liability accordingly. Impairment. Carrying values for financial reporting purposes are reviewed for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. Examples of such events or changes in circumstances may include classifying an asset to be held for sale, changing the intended hold period or when an asset remains vacant significantly longer than expected. The intended use of an asset either held for sale or held for use can significantly impact how impairment is measured. If an asset is intended to be held for the long-term, the recoverability is based on the undiscounted future cash flows. If the asset carrying value is not supported on an undiscounted 7 Table of Contents future cash flow basis, then the asset carrying value is measured against the lower of cost or the present value of expected cash flows over the expected hold period. An impairment charge to earnings is recognized for the excess of the asset’s carrying value over the lower of cost or the present values of expected cash flows over the expected hold period. If an asset is intended to be sold, impairment is determined using the estimated fair value less costs to sell. The estimation of expected future net cash flows is inherently uncertain and relies on assumptions, among other things, regarding current and future economic and market conditions and the availability of capital. The Company determines the estimated fair values based on its assumptions regarding rental rates, lease-up and holding periods, as well as sales prices. When available, current market information is used to determine capitalization and rental growth rates. If available, current comparative sales values may also be used to establish fair value. When market information is not readily available, the inputs are based on the Company’s understanding of market conditions and the experience of the Company’s management team. Actual results could differ significantly from the Company’s estimates. The discount rates used in the fair value estimates represent a rate commensurate with the indicated holding period with a premium layered on for risk. There were no impairment charges recorded to the carrying values of the Company’s properties during the three or nine months ended September 30, 2022 or 2021. Property Acquisitions. In accordance with Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not considered a business. To be a business, the set of acquired activities and assets must include inputs and one or more substantive processes that together contribute to the ability to create outputs. The Company has determined that its real estate property acquisitions will generally be accounted for as asset acquisitions under the clarified definition. Upon acquisition of a property the Company estimates the fair value of acquired tangible assets (consisting generally of land, buildings and improvements) and intangible assets and liabilities (consisting generally of the above and below-market leases and the origination value of all in-place leases). The Company determines fair values using Level 3 inputs such as replacement cost, estimated cash flow projections and other valuation techniques and applying appropriate discount and capitalization rates based on available market information. Mortgage loans assumed in connection with acquisitions are recorded at their fair value using current market interest rates for similar debt at the date of acquisition. Acquisition-related costs associated with asset acquisitions are capitalized to individual tangible and intangible assets and liabilities assumed on a relative fair value basis and acquisition-related costs associated with business combinations are expensed as incurred. The fair value of the tangible assets is determined by valuing the property as if it were vacant. Land values are derived from current comparative sales values, when available, or management’s estimates of the fair value based on market conditions and the experience of the Company’s management team. Building and improvement values are calculated as replacement cost less depreciation, or management’s estimates of the fair value of these assets using discounted cash flow analyses or similar methods. The fair value of the above and below-market leases is based on the present value of the difference between the contractual amounts to be received pursuant to the acquired leases (using a discount rate that reflects the risks associated with the acquired leases) and the Company’s estimate of the market lease rates measured over a period equal to the remaining term of the leases plus the term of any below-market fixed rate renewal options. The above and below-market lease values are amortized to rental revenues over the remaining initial term plus the term of any below-market fixed rate renewal options that are considered bargain renewal options of the respective leases. The total net impact to rental revenues due to the amortization of above and below-market leases was a net increase of approximately $ 4.2 million and $ 2.0 million for the three months ended September 30, 2022 and 2021, respectively, and approximately $ 10.8 million and $ 5.1 million for the nine months ended September 30, 2022 and 2021, respectively. The origination value of in-place leases is based on costs to execute similar leases, including commissions and other related costs. The origination value of in-place leases also includes real estate taxes, insurance and an estimate of lost rental revenue at market rates during the estimated time required to lease up the property from vacant to the occupancy level at the date of acquisition. The remaining weighted average lease term related to these intangible assets and liabilities as of September 30, 2022 was 6.5 years. As of September 30, 2022 and December 31, 2021, the Company’s intangible assets and liabilities, including properties held for sale, consisted of the following (dollars in thousands): September 30, 2022 December 31, 2021 Gross Accumulated Amortization Net Gross Accumulated Amortization Net In-place leases $ 122,121 $ ( 81,005 ) $ 41,116 $ 110,351 $ ( 72,266 ) $ 38,085 Above-market leases 3,594 ( 3,559 ) 35 3,775 ( 3,706 ) 69 Below-market leases ( 97,675 ) 37,197 ( 60,478 ) ( 78,753 ) 27,728 ( 51,025 ) Total $ 28,040 $ ( 47,367 ) $ ( 19,327 ) $ 35,373 $ ( 48,244 ) $ ( 12,871 ) 8 Table of Contents Depreciation and Useful Lives of Real Estate and Intangible Assets. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets or liabilities. The following table reflects the standard depreciable lives typically used to compute depreciation and amortization. However, such depreciable lives may be different based on the estimated useful life of such assets or liabilities. Description Standard Depreciable Life Land Not depreciated Building 40 years Building Improvements 5 - 40 years Tenant Improvements Shorter of lease term or useful life Leasing Costs Lease term In-place Leases Lease term Above/Below-Market Leases Lease term Held for Sale Assets. The Company considers a property to be held for sale when it meets the criteria established under Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment (See “Note 5 - Held for Sale/Disposed Assets”). Properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale. Cash and Cash Equivalents. Cash and cash equivalents consists of cash held in a major banking institution and other highly liquid short-term investments with original maturities of three months or less. Cash equivalents are generally invested in U.S. government securities, government agency securities or money market accounts. Restricted Cash. Restricted cash includes cash held in escrow in connection with property acquisitions and reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain mortgage loan obligations. The following summarizes the reconciliation of cash and cash equivalents and restricted cash as presented in the accompanying consolidated statements of cash flows (dollars in thousands): For the Nine Months Ended September 30, 2022 2021 Beginning Cash and cash equivalents at beginning of period $ 204,404 $ 107,180 Restricted cash 397 656 Cash and cash equivalents and restricted cash 204,801 107,836 Ending Cash and cash equivalents at end of period 10,153 68,732 Restricted cash 844 4,970 Cash and cash equivalents and restricted cash 10,997 73,702 Net decrease in cash and cash equivalents and restricted cash $ ( 193,804 ) $ ( 34,134 ) Revenue Recognition. The Company records rental revenue from operating leases on a straight-line basis over the term of the leases and maintains an allowance for estimated losses that may result from the inability of its tenants to make required payments. If tenants fail to make contractual lease payments that are greater than the Company’s allowance for doubtful accounts, security deposits and letters of credit, then the Company may have to recognize additional doubtful account charges in future periods. The Company monitors the liquidity and creditworthiness of its tenants on an on-going basis by reviewing their financial condition periodically as appropriate. Each period the Company reviews its outstanding accounts receivable, including straight-line rents, for doubtful accounts and provides allowances as needed. The Company also records lease termination fees when a tenant has executed a definitive termination agreement with the Company and the payment of the termination fee is not subject to any conditions that must be met or waived before the fee is due to the Company. If a tenant remains in the leased space following the execution of a definitive termination agreement, the applicable termination will be deferred and recognized over the term of such tenant’s occupancy. Tenant expense reimbursement income includes payments and amounts due from tenants pursuant to their leases for real estate taxes, insurance and other recoverable property operating expenses and is recognized as revenues during the same period the related expenses are incurred. 9 Table of Contents As of September 30, 2022 and December 31, 2021, approximately $ 44.1 million and $ 39.7 million, respectively, of straight-line rent and accounts receivable, net of allowances of approximately $ 0.7 million and $ 0.5 million as of September 30, 2022 and December 31, 2021, respectively, were included as a component of other assets in the accompanying consolidated balance sheets. Deferred Financing Costs. Costs incurred in connection with financings are capitalized and amortized to interest expense using the effective interest method over the term of the related loan. Deferred financing costs associated with the Company’s revolving credit facility are classified as an asset, as a component of other assets in the accompanying consolidated balance sheets, and deferred financing costs associated with debt liabilities are reported as a direct deduction from the carrying amount of the debt liability in the accompanying consolidated balance sheets. Deferred financing costs related to the revolving credit facility and debt liabilities are carried at cost, net of accumulated amortization in the aggregate of approximately $ 11.5 million and $ 10.6 million as of September 30, 2022 and December 31, 2021, respectively. Income Taxes. The Company elected to be taxed as a REIT under the Code and operates as such beginning with its taxable year ended December 31, 2010. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If it fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the IRS grants it relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes it is organized and operates in such a manner as to qualify for treatment as a REIT. ASC 740-10, Income Taxes (“ASC 740-10”) , provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740-10 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold are recorded as a tax expense in the current year. As of September 30, 2022 and December 31, 2021, the Company did not have any unrecognized tax benefits and does not believe that there will be any material changes in unrecognized tax positions over the next 12 months. The Company’s tax returns are subject to examination by federal, state and local tax jurisdictions, which as of September 30, 2022, include years 2018 to 2021 for federal purposes. Stock-Based Compensation and Other Long-Term Incentive Compensation. The Company follows the provisions of ASC 718, Compensation-Stock Compensation, to account for its stock-based compensation plan, which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued. The Company’s 2019 Equity Incentive Plan (the “2019 Plan”) provides for the grant of restricted stock awards, performance share awards, unrestricted shares or any combination of the foregoing. Stock-based compensation is recognized as a general and administrative expense in the accompanying consolidated statements of operations and measured at the fair value of the award on the date of grant. The Company estimates the forfeiture rate based on historical experience as well as expected behavior. The amount of the expense may be subject to adjustment in future periods depending on the specific characteristics of the stock-based award. In addition, the Company has awarded long-term incentive target awards (the “Performance Share awards”) under its Amended and Restated Long-Term Incentive Plan (as amended and restated, the “Amended LTIP”), which the Company amended and restated on January 8, 2019, to its executives that may be payable in shares of the Company’s common stock after the conclusion of each pre-established performance measurement period, which is generally three years . The amount that may be earned is variable depending on the relative total shareholder return of the Company’s common stock as compared to the total shareholder return of the MSCI U.S. REIT Index (RMS) and the FTSE Nareit Equity Industrial Index over the pre-established performance measurement period. Under the Amended LTIP, each participant’s Performance Share award granted will be expressed as a number of shares of common stock and settled in shares of common stock. The grant date fair value of the Performance Share awards will be determined using a Monte Carlo simulation model on the date of grant and recognized on a straight-line basis over the performance period. Use of Derivative Financial Instruments. The Company records all derivatives on the accompanying consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. 10 Table of Contents Fair Value of Financial Instruments . ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (See “Note 9 - Fair Value Measurements”), defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also provides guidance for using fair value to measure financial assets and liabilities. ASC 820 requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3). Segment Disclosure. ASC 280, Segment Reporting , establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has determined that it has one reportable segment, with activities related to investing in real estate. The Company’s investments in real estate are geographically diversified and the chief operating decision makers evaluate operating performance on an individual asset level. As each of the Company’s assets has similar economic characteristics, the assets have been aggregated into one reportable segment. Note 3. Concentration of Credit Risk Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company may maintain deposits in federally insured financial institutions in excess of federally insured limits. However, the Company’s management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. As of September 30, 2022, the Company owned 44 buildings aggregating approximately 2.9 million square feet and 13 improved land parcels consisting of approximately 68.0 acres located in Northern New Jersey/New York City, which accounted for a combined percentage of approximately 24.2 % of its annualized base rent. Such annualized base rent percentages are based on contractual base rent from leases in effect as of September 30, 2022, excluding any partial or full rent abatements. Other real estate companies compete with the Company in its real estate markets. This results in competition for tenants to occupy space. The existence of competing properties could have a material impact on the Company’s ability to lease space and on the level of rent that can be achieved. The Company had no tenant that accounted for greater than 10% of the Company's annualized base rent as of September 30, 2022. Note 4. Investments in Real Estate During the three months ended September 30, 2022, the Company acquired four industrial properties with a total initial investment, including acquisition costs, of approximately $ 68.9 million, of which $ 62.1 million was recorded to land, $ 5.5 million to buildings and improvements, and $ 1.3 million to intangible assets. Additionally, the Company assumed $ 1.1 million in liabilities. During the nine months ended September 30, 2022, the Company acquired 16 industrial properties with a total initial investment, including acquisition costs, of approximately $ 360.8 million, of which $ 261.6 million was recorded to land, $ 88.3 million to buildings and improvements, and $ 10.9 million to intangible assets. Additionally, the Company assumed $ 16.1 million in liabilities. The Company recorded revenues and net income for the three months ended September 30, 2022 of approximately $ 4.1 million and $ 1.0 million, respectively, and recorded revenues and net income for the nine months ended September 30, 2022 of approximately $ 5.8 million and $ 1.7 million, respectively, related to the 2022 acquisitions. During the three months ended September 30, 2021, the Company acquired ten industrial properties with a total initial investment, including acquisition costs, of approximately $ 176.8 million, of which $ 127.3 million was recorded to land, $ 42.1 million to buildings and improvements, and $ 7.4 million to intangible assets. Additionally, the Company assumed $ 11.7 million in liabilities. During the nine months ended September 30, 2021, the Company acquired 20 industrial properties with a total initial investment, including acquisition costs, of approximately $ 344.5 million, of which $ 235.0 million was recorded to land, $ 93.7 million to buildings and improvements, and $ 15.8 million to intangible assets. Additionally, the Company assumed $ 19.5 million in liabilities. 11 Table of Contents The Company recorded revenues and net income for the three months ended September 30, 2021 of approximately $ 3.7 million and $ 1.3 million, respectively, and recorded revenues and net income for the nine months ended September 30, 2021 of approximately $ 6.2 million and $ 2.3 million, respectively, related to the 2021 acquisitions. The above assets and liabilities were recorded at fair value, which uses Level 3 inputs. The properties were acquired from unrelated third parties using existing cash on hand, proceeds from property sales and the issuance of common stock and borrowings on the revolving credit facility. As of September 30, 2022, the Company had two properties under redevelopment that, upon completion, will consist of two improved land parcels aggregating approximately 12.1 acres. The following table summarizes certain information with respect to the properties under redevelopment as of September 30, 2022: Property Name Location Total Expected Investment (in thousands) 1 Estimated Post-Development Acreage Berryessa San Jose, CA $ 25,961 7.2 Paterson Plank III Carlstadt, NJ 25,303 4.9 Total/Weighted Average $ 51,264 12.1 1 Total expected investment for the properties include the initial purchase price, buyer’s due diligence and closing costs, estimated near-term redevelopment expenditures, capitalized interest and leasing costs necessary to achieve stabilization. During 2022, the Company completed redevelopment of three properties aggregating approximately 0.6 million square feet. The following table summarizes certain information with respect to the completed redevelopment properties as of September 30, 2022: Property Name Location Total Investment (in thousands) 1 Square Feet Completion Quarter America's Gateway Miami, FL $ 7,500 128,844 Q1 2022 Countyline #29 & #30 Hialeah, FL 75,539 407,084 Q2/Q3 2022 73rd Street Miami, FL 20,200 51,800 Q3 2022 Total/Weighted Average $ 103,239 587,728 1 Total investment for the properties include the initial purchase price, buyer’s due diligence and closing costs, redevelopment expenditures, capitalized interest and leasing costs necessary to achieve stabilization. The Company capitalized interest associated with redevelopment and expansion activities of approximately $ 2.2 million and $ 0.3 million during the nine months ended September 30, 2022 and 2021, respectively. Note 5. Held for Sale/Disposed Assets As of September 30, 2022, the Company had entered into agreements with third-party purchasers to sell one property located in the Northern New Jersey/New York City market for a sales price of approximately $ 26.5 million (net book value of approximately $ 7.3 million) and one property located in the Seattle market for a sales price of approximately $ 8.7 million (net book value of approximately $ 2.9 million). There is no assurance that the sales of these properties will be effected, as they are subject to various closing conditions. During the nine months ended September 30, 2022, the Company sold one property (consisting of 18 buildings) located in the Northern New Jersey/New York City market for a sales price of approximately $ 110.4 million, resulting in a gain of approximately $ 76.0 million. During the nine months ended September 30, 2021, the Company sold one property located in the Seattle market for a sales price of approximately $ 10.3 million, resulting in a gain of approximately $ 3.2 million. 12 Table of Contents Note 6. Debt The following table summarizes the components of the Company’s indebtedness as of September 30, 2022 and December 31, 2021 (dollars in thousands). The Company has no secured debt: September 30, 2022 December 31, 2021 Margin Above SOFR Interest Rate 1 Contractual Maturity Date Unsecured Debt: Unsecured Debt: Credit Facility $ 10,000 $ — 1.1 % 2 3.9 % 8/20/2025 5 -Year Term Loan 100,000 100,000 1.3 % 2 4.3 % 1/15/2027 5 -Year Term Loan 100,000 — 1.3 % 2 3.8 % 1/15/2028 $ 50 M 7 -Year Unsecured 3, 4 — 50,000 n/a 4.2 % 9/1/2022 $ 100 M 7 -Year Unsecured 3 100,000 100,000 n/a 3.8 % 7/14/2024 $ 50 M 10 -Year Unsecured 3 50,000 50,000 n/a 4.0 % 7/7/2026 $ 50 M 12 -Year Unsecured 3 50,000 50,000 n/a 4.7 % 10/31/2027 $ 100 M 7 -Year Unsecured 3 100,000 100,000 n/a 2.4 % 7/15/2028 $ 100 M 10 -Year Unsecured 3 100,000 100,000 n/a 3.1 % 12/3/2029 $ 125 M 9 -Year Unsecured 3 125,000 125,000 n/a 2.4 % 8/17/2030 $ 50 M 10 -Year Unsecured 3 50,000 50,000 n/a 2.8 % 7/15/2031 Total Unsecured Debt 785,000 725,000 Less: Unamortized premium/discount and debt issuance costs ( 4,385 ) ( 4,330 ) Total $ 780,615 $ 720,670 1 Reflects the contractual interest rate under the terms of each loan as of September 30, 2022. Excludes the effects of unamortized debt issuance costs and unamortized fair market value premiums, if any. 2 The interest rates on these loans are comprised of the Secured Overnight Financing Rate (“SOFR”) plus a SOFR margin. The SOFR margins will range from 1.10 % to 1.55 % ( 1.10 % as of September 30, 2022) for the revolving credit facility and 1.25 % to 1.75 % ( 1.25 % as of September 30, 2022) for the term loans, depending on the ratio of the Company’s outstanding consolidated indebtedness to the value of the Company’s consolidated gross asset value and includes a 10 basis points SOFR credit adjustment. 3 Collectively, the “Senior Unsecured Notes”. 4 On August 1, 2022, the Company prepaid the $ 50 million tranche of 7-year Senior Unsecured Notes using borrowings from the Company’s revolving credit facility. The notes bore interest at 4.23 % and had an original maturity date of September 1, 2022. On September 2, 2022, the Company entered into the Second Amendment (the “Second Amendment”) to the Sixth Amended and Restated Senior Credit Agreement (as amended, the “Amended Facility”) to add an additional $ 100.0 million term loan that matures in January 2028. The Company drew the full amount available under the term loan upon entry into the Second Amendment. The Amended Facility consists of a $ 400.0 million revolving credit facility that matures in August 2025, a $ 100.0 million term loan that matures in January 2027 and a $ 100.0 million term loan that matures in January 2028. As of September 30, 2022 and December 31, 2021, there were $ 10.0 million and $ 0 , respectively, of borrowings outstanding on the revolving credit facility and $ 200.0 million and $ 100.0 million, respectively, of borrowings outstanding on the term loans. The aggregate amount of the Amended Facility may be increased by up to an additional $ 500.0 million to a maximum amount not to exceed $ 1.1 billion, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. Outstanding borrowings under the Amended Facility are limited to the lesser of (i) the sum of the $ 400.0 million revolving credit facility, the $ 100.0 million term loan maturing in January 2027 and the $ 100.0 million term loan maturing in January 2028, or (ii) 60.0 % of the value of the unencumbered properties. Interest on the Amended Facility, including the term loans, is generally to be paid based upon, at the Company’s option, either (i) SOFR plus the applicable SOFR margin or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, 0.50 % above the federal funds effective rate, thirty-day SOFR plus the applicable SOFR margin for SOFR rate loans under the Amended Facility plus 1.25 %, or 1.25 % per annum. The applicable SOFR margin will range from 1.10 % to 1.55 % ( 1.10 % as of September 30, 2022) for the revolving credit facility and 1.25 % to 1.75 % ( 1.25 % as of September 30, 2022) for the term loans, depending on 13 Table of Contents the ratio of the Company’s outstanding consolidated indebtedness to the value of the Company’s consolidated gross asset value and includes a 10 basis points SOFR credit adjustment. The Amended Facility requires quarterly payments of an annual facility fee in an amount ranging from 0.15 % to 0.30 %, depending on the ratio of the Company’s outstanding consolidated indebtedness to the value of the Company’s consolidated gross asset value. The Amended Facility and the Senior Unsecured Notes are guaranteed by the Company and by substantially all of the current and to-be-formed subsidiaries of the Company that own an unencumbered property. The Amended Facility and the Senior Unsecured Notes are not secured by the Company’s properties or by interests in the subsidiaries that hold such properties. The Amended Facility and the Senior Unsecured Notes include a series of financial and other covenants with which the Company must comply. The Company was in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of September 30, 2022 and December 31, 2021. The scheduled principal payments of the Company’s debt as of September 30, 2022 were as follows (dollars in thousands): Credit Facility Term Loan Senior Unsecured Notes Total Debt 2022 (3 months) $ — $ — $ — $ — 2023 — — — — 2024 — — 100,000 100,000 2025 10,000 — — 10,000 2026 — — 50,000 50,000 Thereafter — 200,000 425,000 625,000 Total debt 10,000 200,000 575,000 785,000 Deferred financing costs, net — ( 1,061 ) ( 3,324 ) ( 4,385 ) Total debt, net $ 10,000 $ 198,939 $ 571,676 $ 780,615 Weighted average interest rate 3.9 % 4.0 % 3.1 % 3.4 % Note 7. Leasing The following is a schedule of minimum future cash rentals on tenant operating leases in effect as of September 30, 2022. The schedule does not reflect future rental revenues from the renewal or replacement of existing leases and excludes property operating expense reimbursements (dollars in thousands): 2022 (3 months) $ 51,493 2023 203,939 2024 186,673 2025 160,412 2026 129,752 Thereafter 264,037 Total $ 996,306 Note 8. Derivative Financial Instruments The Company had no interest rate caps as of September 30, 2022 or December 31, 2021. 14 Table of Contents The following table presents the effect of the Company’s derivative financial instruments on its accompanying consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Interest rate caps in cash flow hedging relationships: Amount of gain recognized in accumulated other comprehensive income (loss) (“AOCI”) on derivatives (effective portion) $ — $ — $ — $ — Amount of gain reclassified from AOCI into interest expense (effective portion) $ — $ — $ — $ 183 Note 9. Fair Value Measurements ASC 820 requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3). Financial Instruments Disclosed at Fair Value As of September 30, 2022 and December 31, 2021, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values because of the short-term nature of these investments or liabilities based on Level 1 inputs. The fair values of the Company’s Senior Unsecured Notes were estimated by calculating the present value of principal and interest payments, based on borrowing rates available to the Company, which are Level 2 inputs, adjusted with a credit spread, as applicable, and assuming the loans are outstanding through maturity. The fair value of the Company’s Amended Facility approximated its carrying value because the variable interest rates approximate market borrowing rates available to the Company, which are Level 2 inputs. The following table sets forth the carrying value and the estimated fair value of the Company’s debt as of September 30, 2022 and December 31, 2021 (dollars in thousands): Fair Value Measurement Using Total Fair Value Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Carrying Value Liabilities Debt at: September 30, 2022 $ 611,685 $ — $ 611,685 $ — $ 780,615 December 31, 2021 $ 743,592 $ — $ 743,592 $ — $ 720,670 Note 10. Stockholders’ Equity The Company’s authorized capital stock consists of 400,000,000 shares of common stock, $ 0.01 par value per share, and 100,000,000 shares of preferred stock, $ 0.01 par value per share. The Company has an at-the-market equity offering program (the “$ 300 Million ATM Program”) pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $ 300.0 million ($ 190.5 million remaining as of September 30, 2022) in amounts and at times to be determined by the Company from time to time. Prior to the implementation of the $ 300 Million ATM Program, the Company had a previous at-the-market equity offering program (the “Previous $300 Million ATM Program”), which was substantially utilized as of June 10, 2021 and is no longer active. Actual sales under the $ 300 Million ATM Program, if any, will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Company’s common stock, determinations by the Company of the appropriate sources of funding for the Company and potential uses of funding available to the Company. During the three and nine months ended September 30, 2022, the Company issued an aggregate of 444,512 and 471,599 shares of common stock, respectively, at a weighted average offering price of $ 64.97 and $ 65.61 per share, respectively, under the $ 300 Million ATM Program, resulting in net proceeds of approximately $ 28.5 million and $ 30.5 million, respectively, and paying total compensation to the applicable sales agents of approximately $ 0.4 million and $ 0.4 million, respectively. During the three and nine months ended 15 Table of Contents September 30, 2021, the Company issued an aggregate of 751,539 and 2,542,357 shares, respectively, of common stock at a weighted average offering price of $ 66.51 and $ 63.22 per share, respectively, under the Previous $300 Million ATM Program and the $ 300 Million ATM Program, resulting in net proceeds of approximately $ 49.3 million and $ 158.4 million, respectively, and paying total compensation to the applicable sales agents of approximately $ 0.7 million and $ 2.3 million, respectively. The Company has a share repurchase program authorizing the Company to repurchase up to 3,000,000 shares of its outstanding common stock from time to time through December 31, 2024. Purchases made pursuant to the program will be made in either the open market or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. As of September 30, 2022, the Company had not repurchased any shares of common stock pursuant to its share repurchase program. In connection with the Annual Meeting of Stockholders on May 3, 2022, the Company granted a total of 10,746 unrestricted shares of the Company's common stock to its independent directors under the 2019 Plan with a grant date fair value per share of $ 69.82 . The grant date fair value of the common stock was determined using the closing price of the Company’s common stock on the date of the grant. The Company recognized approximately $ 0 and $ 0.8 million, respectively, in compensation costs for the three and nine months ended September 30, 2022 related to this issuance. The Company has a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) maintained for the benefit of select employees and members of the Company’s Board of Directors, in which certain of their cash and equity-based compensation may be deposited. Deferred Compensation Plan assets are held in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of bankruptcy or insolvency. The shares held in the Deferred Compensation Plan are classified within stockholders’ equity in a manner similar to the manner in which treasury stock is classified. Subsequent changes in the fair value of the shares are not recognized. During both the three months ended September 30, 2022 and 2021, no shares of common stock were deposited into the Deferred Compensation Plan and during the nine months ended September 30, 2022 and 2021, 150,867 and 136,503 shares of common stock, respectively, were deposited into the Deferred Compensation Plan. As of September 30, 2022, there were 1,898,961 shares of common stock authorized for issuance as restricted stock grants, unrestricted stock awards or Performance Share awards under the 2019 Plan, of which 735,392 were remaining and available for issuance. The grant date fair value per share of restricted stock awards issued during the period from February 16, 2010 (commencement of operations) to September 30, 2022 ranged from $ 14.20 to $ 78.33 . The fair value of the restricted stock that was granted during the nine months ended September 30, 2022 was approximately $ 9.1 million and the vesting period for the restricted stock is typically between one and five years . As of September 30, 2022, the Company had approximately $ 14.5 million of total unrecognized compensation costs related to restricted stock issuances, which is expected to be recognized over a remaining weighted average period of approximately 3.4 years. The Company recognized compensation costs of approximately $ 1.4 million and $ 1.0 million for the three months ended September 30, 2022 and 2021, respectively, and approximately $ 3.6 million and $ 2.4 million for the nine months ended September 30, 2022 and 2021, respectively, related to the restricted stock issuances. 16 Table of Contents The following is a summary of the total restricted shares granted to the Company’s executive officers and employees with the related weighted average grant date fair value share prices for the nine months ended September 30, 2022: Restricted Stock Activity: Shares Weighted Average Grant Date Fair Value Non-vested shares outstanding as of December 31, 2021 289,186 $ 55.90 Granted 136,903 66.35 Forfeited ( 29,391 ) 59.69 Vested ( 39,622 ) 56.06 Non-vested shares outstanding as of September 30, 2022 357,076 $ 59.58 The following is a vesting schedule of the total non-vested shares of restricted stock outstanding as of September 30, 2022: Non-vested Shares Vesting Schedule Number of Shares 2022 (3 months) 444 2023 63,160 2024 99,177 2025 66,689 2026 43,990 Thereafter 83,616 Total Non-vested Shares 357,076 Long-Term Incentive Plan: As of September 30, 2022, there were three open performance measurement periods for the Performance Share awards: January 1, 2020 to December 31, 2022, January 1, 2021 to December 31, 2023, and January 1, 2022 to December 31, 2024. The following table summarizes certain information with respect to the Performance Share awards granted on or after January 1, 2019 and includes the forfeiture of certain of the Performance Share awards during the three and nine months ended September 30, 2022 (dollars in thousands): Performance Share Period Fair Value on Date of Grant 1 Expense for the Three Months Ended September 30, Expense for the Nine Months Ended September 30, 2022 2021 2022 2021 January 1, 2019 - December 31, 2021 $ 4,829 $ — $ 402 $ — $ 1,207 January 1, 2020 - December 31, 2022 4,882 407 465 761 1,394 January 1, 2021 - December 31, 2023 4,820 402 455 991 1,366 January 1, 2022 - December 31, 2024 5,789 482 — 1,447 — Total $ 20,320 $ 1,291 $ 1,322 $ 3,199 $ 3,967 1 Reflects the fair value on date of grant for all performance shares outstanding at September 30, 2022. Dividends: The following table sets forth the cash dividends paid or payable per share during the nine months ended September 30, 2022: For the Three Months Ended Security Dividend per Share Declaration Date Record Date Date Paid March 31, 2022 Common stock $ 0.34 February 8, 2022 March 25, 2022 April 8, 2022 June 30, 2022 Common stock $ 0.34 May 3, 2022 June 30, 2022 July 14, 2022 September 30, 2022 Common stock $ 0.40 August 2, 2022 September 30, 2022 October 14, 2022 Note 11. Net Income (Loss) Per Share 17 Table of Contents Pursuant to ASC 260-10-45, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities , unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share allocates earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. The Company’s non-vested shares of restricted stock are considered participating securities since these share-based awards contain non-forfeitable rights to dividends irrespective of whether the awards ultimately vest or expire. The Company had no antidilutive securities or dilutive restricted stock awards outstanding for the nine months ended September 30, 2022 and 2021. In accordance with the Company’s policies of determining whether instruments granted in share-based payment transactions are participating securities and accounting for earnings per share, the net income (loss) per common share is adjusted for earnings distributed through declared dividends (if any) and allocated to all participating securities (weighted average common shares outstanding and unvested restricted shares outstanding) under the two-class method. Under this method, allocations were made to 335,038 and 262,512 of weighted average unvested restricted shares outstanding for the three months ended September 30, 2022 and 2021, respectively, and 311,432 and 230,280 of weighted average unvested restricted shares outstanding for the nine months ended September 30, 2022 and 2021, respectively. Performance Share awards which may be payable in shares of the Company’s common stock after the conclusion of each pre-established performance measurement period are included as contingently issuable shares in the calculation of diluted weighted average common shares of stock outstanding assuming the reporting period is the end of the measurement period, and the effect is dilutive. Diluted shares related to the Performance Share awards were 93,518 and 86,624 for the three and nine months ended September 30, 2022, respectively, and 236,076 and 227,695 for the three and nine months ended September 30, 2021, respectively. Note 12. Commitments and Contingencies Contractual Commitments. As of November 1, 2022, the Company had one outstanding contract with a third-party seller to acquire one industrial property for a total purchase price of approximately $ 15.6 million. There is no assurance that the Company will acquire the property under contract because the proposed acquisition is subject to due diligence and various closing conditions. As of November 1, 2022, the Company had one non-binding letter of intent with a third-party seller to acquire one industrial property for a total anticipated purchase price of approximately $ 49.5 million. In the normal course of its business, the Company enters into non-binding letters of intent to purchase properties from third parties that may obligate the Company to make payments or perform other obligations upon the occurrence of certain events, including the execution of a purchase and sale agreement and satisfactory completion of various due diligence matters. There can be no assurance that the Company will enter into a purchase and sale agreement with respect to this property or otherwise complete any such prospective purchases on the terms described or at all. As of November 1, 2022, the Company had one outstanding contract with a third-party purchaser to sell one industrial property for a sales price of approximately $ 26.5 million (net book value of approximately $ 7.3 million). There is no assurance that the Company will sell the property under contract because the proposed disposition is subject to due diligence and various closing conditions. Note 13. Subsequent Events On October 13, 2022, the Company sold one industrial property in Kent, WA, for a total sale price of approximately $ 8.7 million (net book value of approximately $ 2.9 million). This property was classified as held for sale as of September 30, 2022. On October 24, 2022, the Company acquired one industrial property in Miami, FL, for a total purchase price of approximately $ 4.7 million. The property was acquired from an unrelated third party using existing cash on hand and borrowings from the Company’s revolving credit facility. On November 1, 2022, the Company acquired one industrial property in Los Angeles, CA, for a total purchase price of approximately $ 17.0 million. The property was acquired from an unrelated third party using existing cash on hand and borrowings from the Company’s revolving credit facility. 18 Table of Contents On November 1, 2022, the Company’s board of directors declared a cash dividend in the amount of $ 0.40 per share of its common stock payable on January 13, 2023 to the stockholders of record as of the close of business on December 30, 2022. 19 Table of Contents