What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-08 compared with 2022-02-09 · 213 added, 199 removed, 463 unchanged (47% of the section changed)

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Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Table of Content s

We acquire, own and operate industrial real estate in six major coastal U.S.

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Infill locations are geographic locations surrounded by high concentrations of already developed land and existing buildings.

As of December 31, 2021, we owned a total of 253 buildings aggregating approximately 15.1 million square feet, 36 improved land parcels consisting of approximately 127.1 acres and four properties under redevelopment that, upon completion, will consist of two properties aggregating approximately 0.2 million square feet and two improved land parcels aggregating approximately 12.1 acres.

As of December 31, 2021, our buildings and improved land parcels were approximately 95.5% and 94.8% leased (including 0.4 million square feet of vacancy acquired during the fourth quarter of 2021), respectively, to 554 customers, the largest of which accounted for approximately 4.9% of our total annualized base rent.

As of December 31, 2022, we owned a total of 252 buildings aggregating approximately 15.3 million square feet, 46 improved land parcels consisting of approximately 161.4 acres and three properties under redevelopment that, upon completion, will consist of one building of approximately 34,000 square feet and two improved land parcels aggregating approximately 12.1 acres.

As of December 31, 2022, our buildings and improved land parcels were approximately 98.6% and 92.5% leased, respectively, to 569 customers, the largest of which accounted for approximately 4.3% of our total annualized base rent.

We are an internally managed Maryland corporation and elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 2010.

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This expectation is based upon prevailing market conditions and may change over time in response to different prevailing market conditions.

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The properties we acquire may be stabilized (fully leased) or unstabilized (have near term lease expirations, be partially or fully vacant and may require physical repositioning).

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2022 Developments

The COVID-19 pandemic, including the emergence of various variants, has caused significant disruption to the U.S.

and global economies and has contributed to significant volatility and negative pressure in financial markets.

Our operations, including our occupancy, rent collections and acquisition volume, largely returned to pre-COVID levels during the year ended December 31, 2021.

However, there can be no assurance that our business, and that of our tenants, will not be materially and adversely impacted by COVID-19 in the future.

See "Item 1A - Risk Factors" in this Annual Report on Form 10-K for additional discussion regarding the risks to which we are and may be subject to as a result of the COVID-19 pandemic.

Acquisition Activity

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(in thousands) 1

256 Paterson Plank Carlstadt, NJ January 13, 2021 1 16,159 $ 10,625 5.2 % —

117th Place NE Kirkland, WA February 25, 2021 1 126,721 33,750 2.9 % —

Countyline #24 & #25 Hialeah, FL March 17, 2021 2 273,577 48,114 3.7 % —

Edison San Leandro, CA March 31, 2021 3 112,392 17,600 5.6 % —

73rd Street Miami, FL April 6, 2021 — — 5,800 5.1 % 5.8

68th Kent Kent, WA April 13, 2021 2 67,120 10,000 5.5 % —

East Gish San Jose, CA April 22, 2021 — — 8,004 4.8 % 2.2

Gramercy Place Torrance, CA May 12, 2021 1 17,407 6,290 4.7 % —

Occidental Avenue Seattle, WA May 12, 2021 3 51,853 16,450 4.6 % —

SW 16th Street Renton, WA June 14, 2021 — — 7,615 1.5 % 2.9

Countyline #26 Hialeah, FL July 14, 2021 1 220,942 39,409 3.7 % —

13020 & 13030 Cerise Hawthorne, CA July 14, 2021 2 21,846 8,075 5.4 % —

1150 & 1250 W.

Trenton Ave Orange, CA July 30, 2021 2 34,224 9,335 3.6 % —

MLK 9801 Seattle, WA August 11, 2021 — — 11,900 2.4 % 3.1

MLK 9845 Seattle, WA August 11, 2021 — — 15,750 3.4 % 3.4

MLK 9600 Seattle, WA August 11, 2021 — — 22,350 4.9 % 5.2

Foley Street Hayward, CA August 26, 2021 2 40,504 8,250 4.9 % —

Paterson Plank III Carlstadt, NJ August 27, 2021 — — 17,850 4.5 % 4.9

97 Third Street Kearny, NJ September 27, 2021 — — 26,250 3.1 % 5.4

13025 Cerise Hawthorne, CA September 30, 2021 1 21,000 7,875 2.9 % —

Woodinville Woodinville, WA October 1, 2021 1 84,238 23,600 3.1 % —

190 Morgan Brooklyn, NY October 12, 2021 1 11,881 4,450 4.9 % —

San Pedro Gardena, CA October 15, 2021 — — 8,800 7.0 % 2.0

228 North Avenue Elizabeth, NJ October 20, 2021 1 30,978 44,000 4.8 % —

Pickett Alexandria, VA October 29, 2021 1 27,683 9,000 4.5 % —

Berryessa San Jose, CA October 29, 2021 — — 23,000 5.2 % 7.2

768 772 Ceres Los Angeles, CA November 18, 2021 2 16,887 7,661 3.4 % —

Tuxedo Hyattsville, MD November 23, 2021 — — 8,000 5.6 % 2.9

Maple II Rancho Dominguez, CA November 30, 2021 — — 13,800 4.9 % 2.3

Eisenhower Alexandria, VA December 10, 2021 3 199,396 60,750 3.0 % —

4501 46th Street Bladensburg, MD December 13, 2021 — — 11,850 3.8 % 4.4

Countyline #27 & #28 Hialeah, FL December 15, 2021 2 401,906 74,142 3.8 % —

Woodinville II Woodinville, WA December 23, 2021 2 118,310 33,500 3.7 % —

Willows Redmond, WA December 27, 2021 — — 3,500 4.9 % 0.8

Improved Land Acreage

Countyline #29 & #30 Hialeah, FL February 9, 2022 2 407,000 $ 73,200 3.8 % —

33rd Place Bellevue, WA February 23, 2022 2 29,000 13,040 3.4 % 1.2

NE 91st Redmond, WA April 8, 2022 2 32,000 9,780 4.1 % —

87 Doremus Newark, NJ April 18, 2022 — — 17,300 5.3 % 9.7

3660 Thomas Road Santa Clara, CA May 4, 2022 1 135,000 54,600 2.5 % —

127 Doremus Avenue Newark, NJ May 19, 2022 — — 11,900 6.9 % 2.4

3660 Fee Ana Anaheim, CA May 24, 2022 — — 15,000 4.7 % 2.1

332 Hindry Avenue Inglewood, CA May 25, 2022 1 19,000 9,280 2.4 % —

8320-8400 Isis Avenue Los Angeles, CA May 25, 2022 1 40,000 17,902 3.2 % —

Teagarden San Leandro, CA June 1, 2022 5 104,000 34,600 3.5 % —

293 Roanoke Avenue Newark, NJ June 7, 2022 — — 13,000 5.4 % 1.8

8660 Willows Road Redmond, WA June 17, 2022 — — 19,900 4.3 % 3.5

8050 NW 90th St Medley, FL July 5, 2022 — — 20,000 5.6 % 6.7

4857 W 147th St Hawthorne, CA August 2, 2022 — — 6,500 5.0 % 1.3

19500 South Alameda St Rancho Dominguez, CA August 3, 2022 — — 32,075 5.5 % 3.0

3091 East Coronado St Anaheim, CA September 6, 2022 — — 7,325 5.0 % 1.2

7045 NW 46th St Miami, FL October 24, 2022 1 16,000 4,703 5.2 % —

5401 West 104th St Los Angeles, CA November 1, 2022 1 26,000 17,000 2.5 % —

629 Henry Elizabeth, NJ November 29, 2022 1 23,000 15,350 5.4 % —

14805 S Maple Ave Rancho Dominguez, CA December 30, 2022 — — 22,358 6.2 % 2.8

Total/Weighted Average 17 831,000 $ 414,813 4.2 % 35.7

Table of Content s

1 Excludes intangible liabilities and mortgage premiums, if any.

The total aggregate initial investment was approximately $682.0 million, including $12.6 million in capitalized closing costs and acquisition costs and $34.2 million in assumed intangible liabilities and $22.1 million in other credits related to near term capital expenditures at the Countyline #24 & #25, Countyline #26 and Countyline #27 & #28 properties.

The total aggregate initial investment was approximately $422.3 million, including $13.0 million in capitalized closing costs and acquisition costs and $14.1 million in assumed intangible liabilities and $19.6 million in other credits related to near term capital expenditures at the Countyline #29 & #30 properties.

2 Stabilized capitalization rates, referred to herein as stabilized cap rates, are calculated, at the time of acquisition, as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property.

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We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles.

These stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in this Annual Report on Form 10-K.

Redevelopment Activity

As of December 31, 2021, we had four properties under redevelopment that, upon completion, will consist of two properties aggregating approximately 0.2 million square feet and two improved land parcels aggregating approximately 12.1 acres with a total expected investment of approximately $75.8 million, including redevelopment costs, capitalized interest and other costs as follows:

As of December 31, 2022, we had three properties under redevelopment that, upon completion, will consist of one building of approximately 34,000 square feet and two improved land parcels aggregating approximately 12.1 acres.

The following table summarizes certain information with respect to the properties under redevelopment as of December 31, 2022:

Property Name Total Expected

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Stabilized Cap

Estimated Post-Development Square Feet Estimated

Estimated Post-Development Acreage Estimated Post-Development Square Feet Estimated

Quarter % Pre-leased December 31, 2022

Americas Gateway $ 7,429 $ 6,392 $ 1,037 5.5 % 51,800 Q4 2022 50.9 %

Paterson Plank III 3

$ 25,961 $ 24,863 $ 1,098 4.9 % 7.2 N/A Q3 2023 — %

73rd Street 20,136 16,254 3,882 5.1 % 128,844 Q4 2022 — %

Paterson Plank III

25,303 20,116 5,187 4.4 % 4.9 N/A Q4 2023 — %

18,060 6,917 11,143 6.1 % — 34,000 Q3 2024 — %

Total/Weighted Average $ 69,324 $ 51,896 $ 17,428 5.0 % 12.1 34,000 — %

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We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles.

These estimated stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in this Annual Report on Form 10-K.

3 Improved land parcel of approximately 4.9 acres.

4 Improved land parcel of approximately 7.2 acres.

During the fourth quarter of 2021, we completed redevelopment of our Sodo Row - North & South property in Seattle, Washington, an approximately 0.2 million square foot redevelopment property.

The total investment was approximately $62.8 million.

During 2022, we completed redevelopment of three properties aggregating approximately 0.6 million square feet.

The following table summarizes certain information with respect to the redevelopment properties completed during the year ended December 31, 2022:

Property Name Location Total

Investment (in thousands) 1

Stabilized Cap

Square Feet Completion Quarter

America's Gateway Miami, FL $ 7,500 6.6 % 51,800 Q1 2022

Countyline #29 & #30 Hialeah, FL 75,539 3.8 % 407,084 Q2/Q3 2022

73rd Street Miami, FL 20,200 8.1 % 128,844 Q3 2022

Total/Weighted Average $ 103,239 4.8 % 587,728

1 Total investment for the properties includes the initial purchase price, buyer’s due diligence and closing costs, redevelopment expenditures, capitalized interest and leasing costs necessary to achieve stabilization.

2 Estimated stabilized cap rates are calculated as estimated annualized cash basis net operating income for the properties stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property.

We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles.

We capitalized interest associated with redevelopment and expansion activities of approximately $2.6 million, $0.7 million and $1.6 million during the years ended December 31, 2022, 2021 and 2020, respectively.

Disposition Activity

During the year ended December 31, 2021, we sold one property located in the Seattle, Washington market for a sales price of approximately $10.3 million, resulting in a gain of approximately $3.2 million, and one property located in the New York/New Jersey market for a sales price of approximately $32.7 million, resulting in a gain of approximately $13.4 million.

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During the year ended December 31, 2022, we sold three properties located in the Northern New Jersey/New York City market for a total aggregate sales price of approximately $159.7 million, resulting in a gain of approximately $107.1 million

and one property located in the Seattle market for a sales price of approximately $8.6 million, resulting in a gain of approximately $5.1 million.

The following summarizes the condensed results of operations of the properties sold during the year ended December 31, 2022 for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands):

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Income from operations $ 2,681 $ 4,213 $ 3,174

Public Offering

On November 8, 2021, we completed a public offering of 3,500,000 shares of our common stock at a price per share of $74.50.

On November 10, 2021, we sold an additional 525,000 shares upon the exercise by the underwriters of their option to purchase additional shares.

The net proceeds of the offering were approximately $296.5 million after deducting the underwriting discount and offering costs of approximately $3.3 million.

We intend to use the net proceeds for general corporate purposes, which may include, without limitation, working capital, repayment of indebtedness, future acquisitions and redevelopments.

Credit Facility

On June 29, 2022, we entered into the First Amendment (the “First Amendment”) to the Sixth Amended and Restated Senior Credit Agreement which (i) increased the borrowing capacity of the revolving credit facility by $150.0 million to $400.0 million, (ii) decreased the accordion feature by $150.0 million to $500.0 million, and (iii) provided for the calculation of interest, pricing and fees based on SOFR instead of LIBOR.

O n September 2, 2022, we entered into the Second Amendment (the “Second Amendment”) to the Sixth Amended and Restated Senior Credit Agreement (as amended by the First Amendment and the Second Amendment, the “Amended Facility”) to add an additional $100.0 million term loan that matures in January 2028.

We drew the full amount available under the term loan upon entry into the Second Amendment.

See “Note 6 - Debt” in our notes to consolidated financial statements for more information regarding the Amended Facility.

Senior Unsecured Notes

On August 1, 2022, we prepaid a $50.0 million tranche of 7-year senior unsecured notes using borrowings from our revolving credit facility.

The notes bore interest at 4.23% and had an original maturity date of September 1, 2022.

We have an at-the-market equity offering program (the “$300 Million ATM Program”) pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million ($142.6 million remaining as of December 31, 2022) in amounts and at times as we determine from time to time.

Prior to the implementation of the $300 Million ATM Program, we had a previous at-the-market equity program (the “Previous $300.0 million ATM Program”), which was substantially utilized as of June 10, 2021 and which is no longer active.

We intend to use the net proceeds from the offering of the shares under the $300 Million ATM Program, if any, for general corporate purposes, which may include future acquisitions, redevelopments and repayment of indebtedness, including borrowings under our revolving credit facility.

During 2021, we issued an aggregate of 2,569,771 shares of common stock at a weighted average offering price of $63.23 per share under the Previous $300 Million ATM and the $300 Million ATM Program, resulting in net proceeds of approximately $160.1 million and paying total compensation to the applicable sales agents of approximately $2.4 million.

During 2022, we issued an aggregate of 1,286,125 shares of common stock at a weighted average offering price of $61.31 per share under the $300 Million ATM Program, resulting in net proceeds of approximately $77.7 million and paying total compensation to the applicable sales agents of approximately $1.1 million.

Share Repurchase Program

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As of December 31, 2022, we had not repurchased any shares of our common stock pursuant to our share repurchase program.

Senior Unsecured Notes

On July 15, 2021, we issued (i) $100.0 million of senior guaranteed green notes (the “Series A Notes”) and (ii) $50.0 million of senior guaranteed notes (the “Series B Notes”) in a private placement.

The Series A Notes bear interest at a fixed annual interest rate of 2.41% and mature in July 2028, and the Series B Notes bear interest at a fixed annual interest rate of 2.84% and mature in July 2031.

On October 28, 2021, we issued $125.0 million of senior guaranteed notes (the “2.38% Notes”) in a private placement.

The 2.38% Notes bear interest at a fixed rate of 2.38% and mature in August 2030.

The 2.38% Notes and, together with the Series A Notes and the Series B Notes, the “Notes”, are guaranteed by us and by substantially all of the current and to-be-formed subsidiaries of the borrower that own an unencumbered property.

The Notes are not secured by our properties or by interests in the subsidiaries that hold such properties.

The Notes include a series of financial and other covenants with which we must comply.

Dividend and Distribution Activity

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On February 7, 2023, our board of directors declared a cash dividend in the amount of $0.40 per share of our common stock payable on April 6, 2023 to the stockholders of record as of the close of business on March 31, 2023.

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June 30, 2022 Common stock $ 0.34 May 3, 2022 June 30, 2022 July 14, 2022

September 30, 2021 Common stock $ 0.34 August 3, 2021 October 1, 2021 October 15, 2021

September 30, 2022 Common stock $ 0.40 August 2, 2022 September 30, 2022 October 14, 2022

December 31, 2022 Common stock $ 0.40 November 1, 2022 December 30, 2022 January 13, 2023

Contractual Commitments

As of February 8, 2022, we have outstanding contracts with third-party sellers to acquire five industrial properties for a total aggregate purchase price of $125.8 million, as described under the heading “Material Cash Commitments” in this Annual Report on Form 10-K.

As of February 7, 2023, we have outstanding contracts with third-party sellers to acquire four industrial properties for a total aggregate purchase price of $259.5 million, as described under the heading “Material Cash Commitments” in this Annual Report on Form 10-K.

There is no assurance that we will acquire the properties under contract because the proposed acquisitions are subject to the completion of satisfactory due diligence and various closing conditions.

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Within our six markets we have increasingly focused on urban infill locations.

While our net growth will remain limited to a size where we can make directly informed operational decisions, we feel more strongly today than we did twelve years ago about the long-term investment merits of our strategy and the growth opportunities ahead.

While our net growth will remain limited to a size where we can make directly informed operational decisions, we feel more strongly today than we did thirteen years ago about the long-term investment merits of our strategy and the growth opportunities ahead.

We are mindful, always, that it is per share rather than aggregate results that matter.

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Our outlook is subject to the risks set forth in this Annual Report on Form 10-K, including the risks set form in “Item 1A - Risk Factors”.

economy has experienced an increase in inflation rates recently.

economy experienced a significant increase in inflation rates throughout 2022.

A wide variety of industries and sectors are affected by increasing commodity prices.

Inflation has increased construction costs, including tenant improvements and capital projects, and operating costs, recently.

In recent years, inflation has increased construction costs, including tenant improvements and capital projects, goods and labor, and operating costs.

Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.

In addition, leases with respect to approximately 71.1% of our total rentable square feet expire within five years which enables us to seek to replace existing leases with new leases at the then-existing market rate.

Supplemental Material U.S.

Federal Income Tax Considerations

The following discussion supplements and updates the disclosures under “Material U.S.

Federal Income Tax Considerations” in the prospectus dated February 10, 2021 contained in our Registration Statement on Form S-3 filed with the Securities and Exchange Commission on February 10, 2021 (such disclosure, the “Base Disclosure”).

Capitalized terms used in this section that are not otherwise defined shall have the same meaning as when used in the Base Disclosure.

On December 29, 2022, the IRS promulgated final Treasury Regulations under Sections 897, 1441, 1445, and 1446 of the Code that were, in part, intended to coordinate various withholding regimes for non-U.S.

stockholders.

The new Treasury Regulations provide that:

The withholding rules applicable to ordinary REIT dividends paid to a non-U.S.

stockholder (generally, a 30% rate of withholding on gross amounts unless otherwise reduced by treaty or effectively connected with such non-U.S.

stockholder’s trade or business within the United States and proper certifications are provided) will apply to (a) that portion of any distribution paid by us that is not designated as a capital gain dividend, a return of basis or a distribution in excess of the non-U.S.

stockholder’s adjusted basis in its stock that is treated as gain from the disposition of such stock and (b) any portion of a capital gain dividend paid by us that is not treated as gain attributable to the sale or exchange of a U.S.

real property interest by reason of the recipient not owning more than 10% of a class of our stock that is regularly traded on an established securities market during the one-year period ending on the date of the capital gain dividend.

The withholding rules under Foreign Investment in Real Property Tax Act (“FIRPTA”) will apply to a distribution paid by us in excess of a non-U.S.

stockholder’s adjusted basis in our stock, unless the interest in our stock is not a U.S.

real property interest (for example, because we are a domestically controlled qualified investment entity) or the distribution is paid to a “withholding qualified holder.” A “withholding qualified holder” means a qualified holder (as defined below) and a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships.

The withholding rules under FIRPTA will apply to any portion of a capital gain dividend paid to a non-U.S.

stockholder that is attributable to the sale or exchange of a U.S.

real property interest, unless it is paid to a withholding qualified holder.

In the case of FIRPTA withholding under clause (ii) above, the applicable withholding rate is currently 15%, and in the case of FIRPTA withholding under clause (iii) above, the withholding rate is currently 21%.

For purposes of FIRPTA withholding under clause (iii), whether a capital gain dividend is attributable to the sale or exchange of a U.S.

real property interest is determined taking into account the general exception from FIRPTA distribution treatment for distributions paid to certain non-U.S.

stockholders under which any distribution paid by us to a non-U.S.

stockholder with respect to any class of stock which is regularly traded on an established securities market located in the United States is not treated as gain recognized from the sale or exchange of a U.S.

real property interest if such non-U.S.

stockholder did not own more than 10% of such class of stock at any time during the one-year period ending on the date of such distribution.

To the extent inconsistent, these Treasury Regulations supersede the discussion on withholding contained in the Base Disclosure under the heading “ Material U.S.

Federal Income Tax Considerations—U.S.

Taxation of Non-U.S.

Stockholders .” However, if, notwithstanding these Treasury Regulations, we encounter difficulties in properly characterizing a distribution for purposes of the withholding rules, we may decide to withhold on such distribution at the highest possible U.S.

federal withholding rate that we determine could apply.

Additionally, the second paragraph under the heading “ Material U.S.

Federal Income Tax Considerations—U.S.

Taxation of Non-U.S.

Stockholders—Distributions by Us ” is hereby deleted and replaced with the following:

Distributions in excess of our current and accumulated earnings and profits (not attributable to gains from disposition of U.S.

real property interests) that exceed the non-U.S.

stockholder’s basis in its capital stock will be taxable to a non-U.S.

stockholder as gain from the sale of such stock, which is discussed below.

Distributions in excess of our current or accumulated earnings and profits and not attributable to gains from our sales or exchanges of U.S.

real property interests will not be taxable to a non-U.S.

stockholder to the extent they do not exceed the adjusted basis of the non-U.S.

stockholder in its capital stock (determined separately for each share of capital stock).

Instead, they will reduce the adjusted basis of the non-U.S.

stockholder in such capital stock.

To the extent that such distributions exceed the adjusted basis of a non-U.S.

stockholder’s capital stock, they will be treated as gain from the sale or disposition of the non-U.S.

stockholder’s capital stock and may be subject to tax as described in the “ —Sale of Stock ” portion of this section below.

The new Treasury Regulations also provide new guidance regarding qualified foreign pension funds.

Accordingly, the fourth paragraph under the heading “ Material U.S.

Federal Income Tax Considerations—U.S.

Taxation of Non-U.S.

Stockholders—Sale of Stock ” is hereby deleted and replaced with the following:

For purposes of the effectively connected income provisions of FIRPTA, and subject to the discussion below regarding “qualified holders,” neither a “qualified foreign pension fund” (as defined below) nor any entity all of the interests of which are held by a qualified foreign pension fund is treated as a foreign person, thereby exempting such entities from tax under FIRPTA.

A “qualified foreign pension fund” is an organization or arrangement (i) created or organized in a foreign country, (ii) established by a foreign country (or one or more political subdivisions thereof) or one or more employers to provide retirement or pension benefits to current or former employees (including self-employed

individuals) or their designees or, in consideration for, services rendered, (iii) which does not have a single participant or beneficiary that has a right to more than 5% of its assets or income, (iv) which is subject to government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise available, to relevant local tax authorities, and (v) with respect to which, under its local laws, (A) contributions that would otherwise be subject to tax are deductible or excluded from its gross income or taxed at a reduced rate, or (B) taxation of its investment income is deferred, or such income is excluded from its gross income or taxed at a reduced rate.

Under Treasury Regulations, subject to the discussion below regarding “qualified holders,” a “qualified controlled entity” also is not treated as a foreign person for purposes of the effectively connected income provisions of FIRPTA.

A qualified controlled entity generally includes a trust or corporation organized under the laws of a foreign country all of the interests of which are held by one or more qualified foreign pension funds either directly or indirectly through one or more qualified controlled entities.

Treasury Regulations further provide that a qualified foreign pension fund or qualified controlled entity will not be exempt from FIRPTA with respect to dispositions of U.S.

real property interests or REIT distributions attributable to the same unless the qualified foreign pension fund or qualified controlled entity is a “qualified holder.” To be a qualified holder, a qualified foreign pension fund or qualified controlled entity must satisfy one of two alternative tests at the time of the disposition of the U.S.

real property interest or the REIT distribution.

Under the first test, a qualified foreign pension fund or qualified controlled entity is a qualified holder if it owned no U.S.

real property interests as of the earliest date during an uninterrupted period ending on the date of the disposition or distribution during which it qualified as a qualified foreign pension fund or qualified controlled entity.

Alternatively, if a qualified foreign pension fund or qualified controlled entity held U.S.

real property interests as of the earliest date during the period described in the preceding sentence, it can be a qualified holder only if it satisfies certain testing period requirements.

Treasury Regulations also provide that a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships, may certify its status as such and will not be treated as a foreign person for purposes of withholding under FIRPTA.

We intend to comply with these Treasury Regulations as applicable for any non-U.S.

stockholders.

Financial Condition and Results of Operations

Table of Content s

We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties.

These revenues include fixed base rents and recoveries of certain property operating expenses that we have incurred and that we pass through to the individual tenants.

Approxi mately 94.2% o f our leased space includes fixed rental increases or Consumer Price Index-based rental increases.

Approxi ma tely 93.5% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases.

Lease terms typically range from three to ten years.

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The same store pool for the comparison of the years ended December 31, 2022 and 2021 includes all properties that were owned and in operation as of December 31, 2022 and since January 1, 2021 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of December 31, 2022.

As of December 31, 2021, the same store pool consisted of 210 buildings aggregating approximately 12.5 million square feet representing approximately 83.0% of our total square feet owned and 19 improved land parcels consisting of approximately 79.6 acres.

As of December 31, 2021, the non-same store properties, which we acquired, redeveloped, or sold during 2020 and 2021 or were held for sale (if any) or in redevelopment as of December 31, 2021, consisted of 43 buildings aggregating approximately 2.6 million square feet, 17 improved land parcels consisting of approximately 47.5 acres and four properties under redevelopment that, upon completion, will consist of two properties aggregating approximately 0.2 million square feet and two improved land parcels aggregating approximately 12.1 acres.

As of December 31, 2022, the same store pool consisted of 197 buildings aggregating approximately 12.1 million square feet representing approximately 79.4% of our total square feet owned and 24 improved land parcels consisting of approximately 91.5 acres representing approximately 56.7% of our total acreage owned.

As of December 31, 2022, the non-same store properties, which we acquired, redeveloped, or sold during 2022 and 2021 or were held for sale (if any) or in redevelopment as of December 31, 2022, consisted of 55 buildings aggregating approximately 3.1 million square feet, 22 improved land parcels consisting of approximately 69.9 acres and three properties under redevelopment that, upon completion, will consist of one building of approximately 34,000 square feet and two improved land parcels aggregating approximately 12.1 acres.

As of December 31, 2022 and 2021, our consolidated same store pool occupancy was approximately 99.5% and 98.1%, respectively.

Our future financial condition and results of operations, including rental revenues, straight-line rents and amortization of lease intangibles, may be impacted by the acquisitions of additional properties, and expenses may vary materially from historical results.

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Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021:

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General and administrative 31,192 26,964 4,228 15.7 %

Acquisition costs 172 271 (99) (36.5) %

Acquisition costs and other 1,465 172 1,293 751.7 %

Total other costs and expenses 98,420 77,823 20,597 26.5 %

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See “Note 2 - Significant Accounting Policies” in our notes to consolidated financial statements for more information regarding our adoption of this standard.

2 Includes 2020 and 2021 acquisitions and dispositions, seventeen improved land parcels and four properties under redevelopment as of December 31, 2021.

2 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels and three properties under redevelopment as of December 31, 2022.

3 Includes straight-line rents and amortization of lease intangibles.

See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a definition and reconciliation of net operating income and same store net operating income from net income and a discussion of why we believe net operating income and same store net operating income are useful supplemental measures of our operating performance.

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Total revenues increased approximately $35.0 million for the year ended December 31, 2021 compared to the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2021 and 2020.

Cash rents on new and renewed leases totaling approximately 2.6 million square feet commencing during the year ended December 31, 2021 increased approximately 28.4% compared to the same period from the prior year.

Total revenues increased approximately $54.3 million for the year ended December 31, 2022 compared to the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2022 and 2021 and an increase in occupancy rate.

Cash rents on new and renewed leases totaling approximately 2.2 million square feet and 19.1 acres commencing during the year ended December 31, 2022 increased approximately 49.5% compared to the prior year.

For the years ended December 31, 2022 and 2021, approximately $7.5 million and $5.3 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.9 million and $1.0 million, respectively, was recorded in lease termination revenue.

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Total property operating expenses increased approximately $12.7 million during the year ended December 31, 2022 compared to the prior year.

The increase in total property operating expenses was primarily due to an increase of approximately $4.6 million attributable to property acquisitions during 2021 and 2020 as well as increases in real estate taxes related to annual rate increases at certain of our properties.

The increase in total property operating expenses was primarily due to an increase of approximately $8.7 million attributable to property acquisitions during 2022 and 2021 as well increases in insurance premiums, real estate taxes related to annual rate increases and utilities expenses incurred at certain of our properties.

Depreciation and amortization.

Depreciation and amortization increased approximately $4.8 million during the year ended December 31, 2021 compared to the prior year primarily due to property acquisitions during 2020 and 2021.

Depreciation and amortization increased approximately $15.1 million during the year ended December 31, 2022 compared to the prior year primarily due to property acquisitions during 2022 and 2021 and the sale of four properties during the year ended December 31, 2022.

General and administrative expenses.

General and administrative expenses increased approximately $3.5 million for the year ended December 31, 2021 primarily due to increased restricted stock amortization and other compensation expenses, including an increase in bonus expense of approximately $1.8 million and an increase in the number of employees compared to the prior year.

General and administrative expenses increased approximately $4.2 million for the year ended December 31, 2022 compared to the prior year primarily due to increased restricted stock amortization and other compensation expenses, including an increase in bonus expense and an increase in the number of employees and salaries compared to the prior year.

Acquisition costs and other.

Acquisition costs and other increased approximately $1.3 million during the year ended December 31, 2022 compared to the prior year primarily due to environmental remediation at our Avenue A property of approximately $1.0 million.

Interest and other income.

Interest and other income decreased approximately $0.1 million for the year ended December 31, 2021 compared to the prior year primarily due to the pay down of our outstanding senior secured loan balance.

Interest and other income for the year ended December 31, 2022 remained consistent with the prior year.

Interest expense, including amortization.

Interest expense increased approximately $5.8 million for the year ended December 31, 2022 compared to the prior year.

This increase was primarily due to the issuance of approximately $275 million of senior unsecured notes during 2021, partially offset by the repayment of a $32.7 million mortgage loan in 2020 and an $11.3 million mortgage loan in 2021.

This increase was primarily due to borrowing the full amount available under the new $100.0 million unsecured term loan on September 2, 2022, more borrowings on our revolving credit facility throughout the year ended December 31, 2022 compared to the prior year and higher average interest rates on the unsecured term loans and revolving credit facility throughout the year ended December 31, 2022 compared to the prior year.

The increase was partially offset by the repayment of $50.0 million of senior unsecured notes on August 1, 2022 that bore interest at 4.23% and repayment of all borrowings on the revolving credit facility as of December 31, 2022.

Gain on sales of real estate investments.

Gain on sales of real estate investments decreased approximately $10.1 million for the year ended December 31, 2021 compared to the prior year.

The aggregate sales price for property sales for the year ended December 31, 2021 was approximately $43.0 million as compared to approximately $73.5 million for the prior year.

Gain on sales of real estate investments increased approximately $95.5 million for the year ended December 31, 2022 compared to the prior year.

We recognized an aggregate gain of approximately $112.2 million from the sale of four properties during the year ended December 31, 2022, as compared to an aggregate gain of approximately $16.6 million from the sale of two properties in the prior year.

Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020:

Discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019 was included in our Annual Report on Form 10-K for the year ended December 31, 2020 on page 34 under Part II, Item 7, “Management's Discussion and Analysis of Financial Position and Results of Operations”, which was filed with the Securities and Exchange Commission on February 10, 2021.

Discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020 was included in our Annual Report on Form 10-K for the year ended December 31, 2021 on page 37 under Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations”, which was filed with the Securities and Exchange Commission on February 9, 2022.

Liquidity and Capital Resources

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• limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness;

• have staggered debt maturities that are aligned to our expected average lease term (5-7 years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions.

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• have staggered debt maturities that are aligned to our expected average lease term (five to seven years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions.

We intend to preserve a flexible capital structure with a long-term goal to maintain our investment grade rating and be in a position to issue additional unsecured debt and perpetual preferred stock.

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Equity Sources of Liquidity

On November 8, 2021, we completed a public offering of 3,500,000 shares of our common stock at a price per share of $74.50.

On November 10, 2021, we sold an additional 525,000 shares upon the exercise by the underwriters of their option to purchase additional shares.

The net proceeds of the offering were approximately $296.5 million after deducting the underwriting discount and offering costs of approximately $3.3 million.

We intend to use the net proceeds for general corporate purposes, which may include, without limitation, working capital, repayment of indebtedness, future acquisitions and redevelopments.

The following sets forth certain information regarding our current at-the-market common stock offering program as of December 31, 2022:

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$300 Million ATM Program June 11, 2021 $ 300,000 $ 142,583

The table below sets forth the activity under our at-the-market common stock offering programs during the years ended December 31, 2021 and 2020, respectively (in thousands, except share and price per share data):

For the Year Ended December 31,

The table below sets forth the activity under our at-the-market common stock offering programs during the years ended December 31, 2022 and 2021, respectively:

For the Year Ended

Shares Sold Weighted Average

Price Per Share Net Proceeds (in thousands) Sales Commissions

Price Per Share Net Proceeds

(in thousands) Sales Commissions

(in thousands)

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December 31, 2021 2,569,771 $ 63.23 $ 160,127 $ 2,356

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Debt Sources of Liquidity

On October 28, 2021, we issued $125.0 million of senior guaranteed notes (the “2.38% Notes”) in a private placement.

The 2.38% Notes bear interest at a fixed rate of 2.38% and mature in August 2030.

The Notes are not secured by our properties or by interests in the subsidiaries that hold such properties.

The Notes include a series of financial and other covenants with which we must comply.

As of December 31, 2021, we had $50.0 million of senior unsecured notes that mature in September 2022, $100.0 million of senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million of senior unsecured notes that mature in October 2027, $100.0 million of Series A Notes, $100.0 million of senior unsecured notes that mature in December 2029, $125.0 million of 2.38% Notes, and $50.0 million of Series B Notes (collectively, the “Senior Unsecured Notes”).

On August 20, 2021, our subsidiary entered into a Sixth Amended and Restated Senior Credit Agreement (the “Amended Facility”) which consists of a $250.0 million revolving credit facility that matures in August 2025 and a $100.0 million term loan that matures in January 2027.

Among other things, the Amended Facility extended the maturity date of the revolving credit facility and the $100.0 million term loan.

As of both December 31, 2021 and 2020, there were no borrowings outstanding on our revolving credit facility and $100.0 million of borrowings outstanding on our term loan.

The aggregate amount of the Amended Facility may be increased to a total of up to $650.0 million, 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 $100.0 million term loan and the $250.0 million revolving credit facility, or (ii) 60.0% of the value of the unencumbered properties.

Interest on the Amended Facility, including the term loan is generally to be paid based upon, at our option, either (i) LIBOR plus the applicable LIBOR 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, or thirty-day LIBOR plus the applicable LIBOR margin for LIBOR rate loans under the Amended Facility plus 1.25%.

The applicable LIBOR margin will range from 1.00% to 1.45% (1.00% as of December 31, 2021) for the revolving credit facility and 1.15% to 1.65% (1.15% as of December 31, 2021) for the $100.0 million term loan, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value.

As of December 31, 2022, we had $100.0 million of senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million of senior unsecured notes that mature in October 2027, $100.0 million of senior unsecured notes that mature in July 2028, $100.0 million of senior unsecured notes that mature in December 2029, $125.0 million of senior unsecured notes that mature in August 2030, and $50.0 million of senior unsecured notes that mature in July 2031 (collectively, the “Senior Unsecured Notes”).

We are a party to the Amended Facility, which 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.

On September 2, 2022, upon our entry into the Second Amendment to the Amended Facility, we drew the full amount available under the $100.0 million term loan that matures in January 2028.

As of December 31, 2022 and December 31, 2021, there were no 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 our 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 December 31, 2022) for the revolving credit facility and 1.25% to 1.75% (1.25% as of December 31, 2022) for the term loans, depending on the ratio of our outstanding consolidated indebtedness to the value of our 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 our outstanding consolidated indebtedness to the value of our consolidated gross asset value.

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We were in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of December 31, 2022 and 2021.

As of December 31, 2021 and 2020, we had an outstanding mortgage loan payable, net of deferred financing costs, of approximately $0 and $11.3 million, respectively, and held cash and cash equivalents totaling approximately $204.4 million and $107.2 million, respectively.

The mortgage loan payable was fully repaid in January 2021.

As of December 31, 2022 and 2021, we held cash and cash equivalents totaling approximately $26.4 million and $204.4 million, respectively.

The following tables summarize our debt maturities and principal payments as of and for the year ended December 31, 2022, and market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the years ended December 31, 2022 and 2021 (dollars in thousands, except per share data):

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2026 — — 50,000 50,000

2027 — 100,000 50,000 150,000

Thereafter — 100,000 375,000 475,000

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Floating Rate Debt as a % of Total Debt 5

Unhedged Floating Rate Debt as a % of Total Debt 6

Mortgage Loans Payable as a % of Total Debt 7

Mortgage Loans Payable as a % of Total Investments in Properties 8

Net Income $ 198,014 $ 87,254

Adjusted EBITDA 6

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Also includes 417,665 and 275,727 shares held in the Deferred Compensation Plan as of December 31, 2022 and 2021, respectively.

2 Closing price of our shares of common stock on the New York Stock Exchange on December 31, 2021 and 2020, respectively, in dollars per share.

2 Closing price of a share of our common stock on the New York Stock Exchange on December 30, 2022 and 2021, respectively, in dollars per share.

3 Total debt-to-total investments in properties is calculated as total debt, including premiums and net of deferred financing costs, divided by total investments in properties.

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5 Floating rate debt as a percentage of total debt is calculated as floating rate debt, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing costs.

Floating rate debt includes our $100.0 million variable-rate term loan borrowings, of which $50.0 million was subject to an interest rate cap of 4.0% plus 1.20% to 1.70%, depending on leverage, as of December 31, 2020.

The interest rate cap expired on May 4, 2021.

See “Note 8 - Derivative Financial Instruments” in our notes to consolidated financial statements for more information regarding our prior interest rate cap.

6 Unhedged floating rate debt as a percentage of total debt is calculated as unhedged floating rate debt, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing

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Hedged debt includes our $100.0 million variable-rate term loan borrowings, of which $50.0 million was subject to an interest rate cap of 4.0% plus 1.20% to 1.70%, depending on leverage, as of December 31, 2020.

The interest rate cap expired on May 4, 2021.

See “Note 8 - Derivative Financial Instruments” in our notes to consolidated financial statements for more information regarding our prior interest rate cap.

7 Mortgage loans payable as a percentage of total debt is calculated as mortgage loans payable, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing costs.

8 Mortgage loans payable as a percentage of total investments in properties is calculated as mortgage loans payable, including premiums and net of deferred financing costs, divided by total investments in properties.

6 Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the years ended December 31, 2022 and 2021, respectively.

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The following table sets forth the cash dividends paid or payable per share during the years ended December 31, 2022 and 2021:

For the Three Months Ended Security Dividend per

For the Three

Months Ended Security Dividend per

Share Declaration Date Record Date Date Paid

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June 30, 2022 Common stock $ 0.34 May 3, 2022 June 30, 2022 July 14, 2022

September 30, 2021 Common stock $ 0.34 August 3, 2021 October 1, 2021 October 15, 2021

September 30, 2022 Common stock $ 0.40 August 2, 2022 September 30, 2022 October 14, 2022

December 31, 2022 Common stock $ 0.40 November 1, 2022 December 30, 2022 January 13, 2023

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Net cash provided by operating activities totaled approximately $143.2 million for the year ended December 31, 2022 compared to approximately $132.2 million for the year ended December 31, 2021.

This increase in cash provided by operating activities is primarily attributable to additional cash flows generated from the properties acquired during 2021 and 2020, as we acquired 34 properties during year ended December 31, 2021 compared to 11 properties acquired in the prior year, and increased rents on new and renewed leases at our same store properties.

This increase in cash provided by operating activities is primarily attributable to additional cash flows generated from the properties acquired during 2022 and 2021 and increased rents on new and renewed leases at our same store properties.

Cash From Investing Activities.

Net cash used in investing activities was approximately $666.4 million and $52.1 million for the years ended December 31, 2021 and 2020, respectively, which consisted primarily of cash paid for property acquisitions of approximately $645.0 million and $98.1 million, respectively, additions to capital improvements of approximately $62.6

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million and $40.6 million, respectively, partially offset by net cash received for the senior secured loan of $0 and $15.9 million, respectively, and net proceeds from sales of real estate investments of approximately $41.1 million and $70.7 million, respectively, in each case for the years ended December 31, 2021 and 2020.

Net cash used in investing activities was approximately $337.7 million and $666.4 million for the years ended December 31, 2022 and 2021, respectively, which consisted primarily of cash paid for property acquisitions of approximately $407.6 million and $645.0 million, respectively, additions to capital improvements of approximately $92.2 million and $62.6 million, respectively, partially offset by net proceeds from sales of real estate investments of approximately $162.1 million and $41.1 million, respectively.

Cash From Financing Activities.

Net cash provided by financing activities was approximately $631.2 million for the year ended December 31, 2021, which consisted primarily of approximately $456.7 million in net common stock issuance proceeds and borrowings of $275.0 million in connection with our issuance of senior unsecured notes partially offset by approximately $84.6 million in equity dividend payments and approximately $11.3 million in mortgage loan payments.

Net cash used in financing activities was approximately $53.9 million for the year ended December 31, 2020, which consisted primarily of approximately $63.8 million in net common stock issuance proceeds, partially offset by approximately $74.8 million in equity dividend payments and approximately $33.0 million in mortgage loan payments.

Critical Accounting Policies

Net cash provided by financing activities was approximately $17.7 million for the year ended December 31, 2022, which consisted primarily of borrowing the full amount available under the new $100.0 million unsecured term loan and approximately $77.7 million in net proceeds from the issuance of common stock, partially offset by payment of a $50.0 million tranche of the senior unsecured notes, and approximately $107.4 million in equity dividend payments.

Net cash provided by financing activities was approximately $631.2 million for the year ended December 31, 2021, which consisted primarily of approximately $456.7 million in net proceeds from the issuance of common stock and the issuance of approximately $275.0 million of senior unsecured notes, partially offset by approximately $84.6 million in equity dividend payments and approximately $11.3 million in mortgage loan payments.

Critical Accounting Policies And Estimates

Below is a discussion of the accounting policies that we believe are critical.

We consider these policies critical because they require estimates about matters that are inherently uncertain, involve various assumptions and require significant management judgment, and because they are important for understanding and evaluating our reported financial results.

We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

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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.

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.

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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,

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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 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.

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.

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The amount of the expense may be subject to adjustment in future periods depending on the specific characteristics of the stock-based award.

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In addition, we have awarded long-term incentive target awards (the “Performance Share awards”) under the Amended and Restated Long-Term Incentive Plan (as amended and restated, the “Amended LTIP”), which we amended and restated on January 8, 2019, to our executives that are payable in shares of our common stock after the conclusion of each pre-established performance measurement period, which is generally three years.

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Material Cash Commitments

As of February 8, 2022, we have five outstanding contracts with third-party sellers to acquire five industrial properties for a total aggregate purchase price of $125.8 million.

As of February 7, 2023, we had four outstanding contracts with third-party sellers to acquire four industrial properties for a total purchase price of $259.5 million.

There is no assurance that we will acquire the properties under contract because the proposed acquisitions are subject to the completion of satisfactory due diligence and various closing conditions.

One of our purchase contracts is for the acquisition, for a total purchase price of approximately $173.6 million, of a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings in Miami’s Countyline Corporate Park (“Countyline”), immediately adjacent to our seven fully-leased buildings within Countyline.

The project, a landfill redevelopment adjacent to Florida’s Turnpike and the southern terminus of I-75, is 29.8% pre-leased with one 191,000 square

foot rear-load industrial distribution building and one 506,000 square foot cross-dock industrial distribution building under construction.

The pre-leased buildings are expected to generate an estimated stabilized cap rate of 5.0% and the remaining eight entitled buildings an estimated stabilized cap rate of 6.0% upon completion.

At expected completion in 2025 the project is expected to contain ten LEED-certified industrial distribution buildings totaling approximately 2.2 million square feet for a total expected investment of approximately $491.1 million.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – 2022 Developments – Acquisition Activity” for more information regarding stabilized capitalization rates, including in footnote 2 to the table contained in that section.

The following table summarizes our material cash commitments due by period as of December 31, 2022 (dollars in thousands):

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1 As of February 7, 2023

As of February 8, 2022, we executed four non-binding letters of intent with third-party sellers to acquire four industrial properties for a total anticipated purchase price of approximately $94.9 million.

In the normal course of its business, we enter into non-binding letters of intent to purchase properties from third parties that may obligate us 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 we will enter into purchase and sale agreements with respect to these properties or otherwise complete any such prospective purchases on the terms described or at all.

Non-GAAP Financial Measures

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We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), which defines FFO as net income (loss) (determined in accordance with GAAP), excluding gains (losses) from sales of property and impairment write-downs of depreciable real estate, plus depreciation and amortization on real estate assets and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis).

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believe that presenting FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets.

We believe that presenting FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets.

We believe that FFO is a meaningful supplemental measure of our operating performance because historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time.

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As a result, we believe that the use of FFO, together with the required GAAP presentations, provide a more complete understanding of our operating performance.

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The following table reflects the calculation of FFO reconciled from net income for the three months and years ended December 31, 2021, 2020 and 2019 (dollars in thousands except per share data):

The following table reflects the calculation of FFO reconciled from net income for the three months and years ended December 31, 2022, 2021 and 2020:

For the Three Months Ended December 31, For the Three Months Ended December 31,

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$ 58,880 $ 32,259 $ 26,621 82.5 % $ 32,259 $ 13,513 $ 18,746 138.7 %

Gain on sales of real estate investments (13,442) — (13,442) n/a — (3,144) 3,144 n/a

Gain on sales of real estate investments (36,118) (13,442) (22,676) 168.7 % (13,442) — (13,442) n/a

Depreciation and amortization 18,536 13,707 4,829 35.2 % 13,707 11,192 2,515 22.5 %

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2022 2021 $ Change % Change 2021 2020 $ Change % Change

$ 87,254 $ 79,795 $ 7,459 9.3 % $ 79,795 $ 55,516 $ 24,279 43.7 %

Net income $ 198,014 $ 87,254 $ 110,760 126.9 % $ 87,254 $ 79,795 $ 7,459 9.3 %

Gain on sales of real estate investments (112,166) (16,627) (95,539) 574.6 % (16,627) (26,766) 10,139 (37.9) %

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Basic FFO per common share $ 2.00 $ 1.71 $ 0.29 17.0 % $ 1.71 $ 1.45 $ 0.26 17.9 %

1.71 $ 1.45 $ 0.26 17.9 % 1.45 $ 1.39 $ 0.06 4.3 %

Diluted FFO per common share $ 2.00 $ 1.71 $ 0.29 17.0 % $ 1.71 $ 1.44 $ 0.27 18.8 %

1.71 $ 1.44 $ 0.27 18.8 % 1.44 $ 1.38 $ 0.06 4.3 %

Weighted average basic common shares 75,498,107 70,534,202 70,534,202 67,762,927

70,534,202 67,762,927 67,762,927 64,428,406

Weighted average diluted common shares 75,586,480 70,793,670 70,793,670 68,170,066

70,793,670 68,170,066 68,170,066 64,722,976

1 To be consistent with our policies of determining whether instruments granted in share-based payment transactions are participating securities and accounting for earnings per share, the FFO per common share is adjusted for FFO 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 288,976, 203,729 and 426,985 of weighted average unvested restricted shares outstanding for the three months ended December 31, 2021, 2020 and 2019, respectively, and 245,075, 341,673 and 402,380 of weighted average unvested restricted shares outstanding for the years ended December 31, 2021, 2020 and 2019, respectively.

2 Includes performance share award expense of approximately $1.3 million, $2.9 million and $1.8 million for the three months ended December 31, 2021, 2020 and 2019, respectively, and approximately $5.3 million, $6.6 million and

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$8.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Under this method, allocations were made to 356,796, 288,976 and 203,729 of weighted average unvested restricted shares outstanding for

the three months ended December 31, 2022, 2021 and 2020, respectively, and 322,866, 245,075 and 341,673 of weighted average unvested restricted shares outstanding for the years ended December 31, 2022, 2021 and 2020, respectively.

2 Includes performance share award expense of approximately $1.3 million, $1.3 million and $2.9 million for the three months ended December 31, 2022, 2021 and 2020, respectively, and approximately $4.5 million, $5.3 million and $6.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

See “Note 10 – Stockholders’ Equity” in our notes to consolidated financial statements for more information regarding our performance share awards.

FFO increased by approximately $7.8 million and $22.5 million for the three months and years ended December 31, 2021, respectively, compared to the same periods from the prior year due primarily to same store NOI growth of approximately $4.2 million and $15.5 million for the three months and years ended December 31, 2021, respectively, compared to the same periods from the prior year, as well as property acquisitions during 2021.

The FFO increase was partially offset by increased weighted average common shares outstanding and increased general and administrative expenses due to additional headcount, for the three months and year ended December 31, 2021 compared to the same periods from the prior year.

FFO increased by approximately $8.7 million and $30.1 million for the three months and year ended December 31, 2022, respectively, compared to the same periods from the prior year due primarily to property acquisitions during 2021 and 2022 as well as same store NOI growth of approximately $2.5 million and $11.0 million for the three months and year ended December 31, 2022, respectively, compared to the same periods from the prior year.

The FFO increase was partially offset by increased weighted average common shares outstanding and increased general and administrative expenses due to increased restricted stock amortization and other compensation expenses, including an increase in bonus expense and an increase in the number of employees and salaries for the three months and year ended December 31, 2022 compared to the same periods from the prior year.

Acquisition costs and other also increased for the year ended December 31, 2022 due to environmental remediation at our Avenue A property.

Additionally, for the three months ended December 31, 2022, we wrote off $2.0 million in below market leases related to early lease terminations at multiple properties.

We compute Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, gain on sales of real estate investments, acquisition costs and stock-based compensation.

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As we are currently in a growth phase, acquisition costs are excluded from Adjusted EBITDA to allow for the comparison of our operating performance to that of stabilized companies.

The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three months and years ended December 31, 2021, 2020 and 2019 (dollars in thousands):

The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three months and years ended December 31, 2022, 2021 and 2020:

For the Three Months Ended December 31, For the Three Months Ended December 31,

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Net income $ 58,880 $ 32,259 $ 26,621 82.5 % $ 32,259 $ 13,513 $ 18,746 138.7 %

Gain on sales of real estate investments (13,442) — (13,442) n/a — (3,144) 3,144 n/a

Gain on sales of real estate investments (36,118) (13,442) (22,676) 168.7 % (13,442) — (13,442) n/a

Depreciation and amortization 18,536 13,707 4,829 35.2 % 13,707 11,192 2,515 22.5 %

Interest expense, including amortization 7,457 5,207 2,250 43.2 % 5,207 4,195 1,012 24.1 %

Loss on extinguishment of debt — — — n/a — 189 (189) n/a

Stock-based compensation 2,653 2,547 106 4.2 % 2,547 3,472 (925) (26.6) %

Acquisition costs — 85 (85) n/a 85 (3) 88 n/a

Acquisition costs and other 374 — 374 n/a — 85 (85) n/a

Adjusted EBITDA $ 51,782 $ 40,278 $ 11,504 28.6 % $ 40,278 $ 32,457 $ 7,821 24.1 %

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Interest expense, including amortization 23,850 18,054 5,796 32.1 % 18,054 15,997 2,057 12.9 %

Loss on extinguishment of debt — — — n/a — 189 (189) n/a

Stock-based compensation 10,171 9,554 617 6.5 % 9,554 9,826 (272) (2.8) %

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We compute NOI as rental revenues, including tenant expense reimbursements, less property operating expenses.

We compute same store NOI as rental revenues, including tenant expense reimbursements, less property operating expenses on a

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same store basis.

We compute same store NOI as rental revenues, including tenant expense reimbursements, less property operating expenses on a same store basis.

NOI excludes depreciation, amortization, general and administrative expenses, acquisition costs and interest expense, including amortization.

We compute cash-basis same store NOI as same store NOI excluding straight-line rents and amortization o f lease intangibles.

We compute cash-basis same store NOI as same store NOI excluding straight-line rents and amortization of lease intangibles.

The same store pool includes all properties that were owned and in operation as of December 31, 2022 and since January 1, 2021 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of December 31, 2022.

As of December 31, 2022, the same store pool consisted of 197 buildings aggregating approximately 12.1 million square feet representing approximately 79.4% of our total square feet owned and 24 improved land parcels containing approximately 91.5 acres representing approximately 56.7% of our total acreage owned.

The same store pool for the comparison of the three months and years ended December 31, 2021 and 2020 includes all properties that were owned and in operation as of December 31, 2021 and since January 1, 2020 and excludes properties that were either disposed of prior to, held for sale to a third-party or in redevelopment as of December 31, 2021.

The same store pool for the comparison of the three months and years ended December 31, 2020 and 2019 includes all properties that were owned as of December 31, 2020 and since January 1, 2019 and excludes properties that were either disposed of prior to, held for sale to a third-party or in redevelopment as of December 31, 2020.

As of December 31, 2020, the same store pool consisted of 198 buildings aggregating approximately 12.0 million square feet representing approximately 91.1% of our total square feet owned and 14 improved land parcels containing approximately 54.2 acres.

We believe that presenting NOI, same store NOI and cash-basis same store NOI provides useful information to investors regarding the operating performance of our properties because NOI excludes certain items that are not considered to be controllable in connection with the management of the properties, such as depreciation, amortization, general and administrative expenses, acquisition costs and interest expense.

By presenting same store NOI and cash-basis same store NOI, the operating results on a same store basis are directly comparable from period to period.

The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three months and years ended December 31, 2021, 2020 and 2019 (dollars in thousands):

The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three months and years ended December 31, 2022, 2021 and 2020:

For the Three Months Ended December 31, For the Three Months Ended December 31,

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General and administrative 8,193 7,716 477 6.2 % 7,716 6,936 780 11.2 %

Acquisition costs — 85 (85) n/a 85 (3) 88 n/a

Acquisition costs and other 374 — 374 n/a — 85 (85) n/a

Total other income and expenses (29,059) (8,372) (20,687) 247.1 % (8,372) 4,127 (12,499) n/a

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(9,130) 134.3 % (7,094) 3

(5,235) 281.6 %

Same store NOI 4

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Cash-basis same store NOI excluding termination fees $ 39,539 $ 35,713 $ 3,826 10.7 % $ 35,680 $ 31,802 $ 3,878 12.2 %

1 Includes approximately $0.6 million, $0.1 million and $0.1 million of lease termination income for the three months ended December 31, 2022, 2021 and 2020, respectively.

2 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels, three properties under redevelopment and four completed redevelopment properties as of December 31, 2022.

3 Includes 2020 and 2021 acquisitions and dispositions, 17 improved land parcels, four properties under redevelopment and one completed redevelopment property as of December 31, 2022.

4 Includes approximately $0.1 million of lease termination income for the three months ended December 31, 2022, 2021 and 2020.

2 Includes 2020 and 2021 acquisitions and dispositions, seventeen improved land parcels consisting of approximately 47.5 acres, four properties under redevelopment and one completed redevelopment property with an aggregate book value of approximately $66.6 million as of December 31, 2021.

3 Includes 2019 and 2020 acquisitions and dispositions, eleven improved land parcels consisting of approximately 37.3 acres, one property under redevelopment and two completed redevelopment properties with an aggregate gross book value of approximately $49.3 million as of December 31, 2020.

4 Includes $0.1 million of lease termination income for the three months ended December 31, 2021, 2020 and 2019.

5 Includes straight-line rents and amortization of lease intangibles for the same store pool only.

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For the Year Ended December 31, For the Year Ended December 31,

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Cash-basis same store NOI excluding termination fees $ 151,333 $ 136,433 $ 14,900 10.9 % $ 135,796 $ 122,583 $ 13,213 10.8 %

1 Includes approximately $1.0 million, $3.8 million and $0.3 million of lease termination income for the year ended December 31, 2021, 2020 and 2019, respectively.

1 Includes approximately $0.9 million, $1.0 million and $3.8 million of lease termination income for the years ended December 31, 2022, 2021 and 2020, respectively.

2 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels consisting of approximately 69.9 acres, three properties under redevelopment and four completed redevelopment properties as of December 31, 2022.

3 Includes 2020 and 2021 acquisitions and dispositions, 17 improved land parcels consisting of approximately 47.5 acres, four properties under redevelopment and one completed redevelopment property as of December 31, 2022.

4 Includes approximately $0.4 million, $0.8 million and $3.7 million of lease termination income for the years ended December 31, 2022, 2021 and 2020, respectively.

5 Includes straight-line rents and amortization of lease intangibles for the same store pool only.

Cash-basis same store NOI increased by approximately $4.0 million for the three months ended December 31, 2021 compared to the same period from the prior year due to increased rental revenue on new and renewed leases and contractual rent increases.

Cash-basis same store NOI increased by approximately $3.8 million for the three months ended December 31, 2022 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases and contractual rent increases included in pre-existing leases.

For the three months ended December 31, 2022 and 2021, total contractual rent abatements of approximately $1.1 million and $0.7 million, respectively, were given to certain tenants in the same-store pool and approximately $0.1 million and $0.1 million, respectively, in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $0.2 million of the increase in cash-basis same store NOI for the three months ended December 31, 2022 related to properties that were acquired vacant or with near term expirations in 2020.

Cash-basis same store NOI increased by approximately $9.8 million for the year ended December 31, 2021 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases and increased occupancy.

For the year ended December 31, 2021 and 2020, total contractual rent abatements of approximately $2.7 million and $3.2 million, respectively, were given to certain tenants in the same-store pool and approximately $0.3 million and $3.7 million, respectively, in lease termination income was received from certain tenants in the same store pool.

Cash-basis same store NOI increased by approximately $14.6 million for the year ended December 31, 2022 compared to the prior year primarily due to increased rental revenue on new and renewed leases and increased occupancy.

For the years ended December 31, 2022 and 2021, total contractual rent abatements of approximately $3.5 million and $3.0 million, respectively, were given to certain tenants in the same-store pool and approximately $0.4 million and $0.8 million, respectively, in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $0.6 million of the increase in cash-basis same store NOI for the year ended December 31, 2022 related to properties that were acquired vacant or with near term expirations in 2020.

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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-K

Item 7. Management’s Discussion and Analysis