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Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-02 · 159 added, 155 removed, 509 unchanged (38% of the section changed)

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Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

• the factors included under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission on February 8, 2023, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which was filed with the Securities and Exchange Commission on May 3, 2023, in this Quarterly Report on Form 10-Q, and in our other public filings;

• the factors included under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission on February 8, 2023, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which was filed with the Securities and Exchange Commission on May 3, 2023, in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, which was filed with the Securities and Exchange Commission on August 2, 2023, in this Quarterly Report on Form 10-Q, and in our other public filings;

• our ability to identify and acquire industrial properties on terms favorable to us;

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Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.

We invest in several types of industrial real estate, including warehouse/distribution (approximately 76.0% of our total annualized base rent as of June 30, 2023), flex (including light industrial and research and development, or R&D) (approximately 4.0%), transshipment (approximately 6.6%) and improved land (approximately 13.4%).

We invest in several types of industrial real estate, including warehouse/distribution (approximately 76.3% of our total annualized base rent as of September 30, 2023), flex (including light industrial and research and development, or R&D) (approximately 3.8%), transshipment (approximately 6.7%) and improved land (approximately 13.2%).

We target functional properties in infill locations that may be shared by multiple tenants and that cater to customer demand within the various submarkets in which we operate.

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

As of June 30, 2023, we owned a total of 257 buildings aggregating approximately 15.8 million square feet, 46 improved land parcels consisting of approximately 165.8 acres, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development.

As of June 30, 2023, our buildings and improved land parcels were approximately 97.8% and 96.3% leased, respectively, to 566 customers, the largest of which accounted for approximately 3.6% of our total annualized base rent.

As of September 30, 2023, we owned a total of 257 buildings aggregating approximately 15.8 million square feet, 46 improved land parcels (including one improved land parcel held for sale) consisting of approximately 165.8 acres, eight properties under development or redevelopment and approximately 62.7 acres of land entitled for future development.

As of September 30, 2023, our buildings and improved land parcels were approximately 98.3% and 96.3% leased, respectively, to 563 customers, the largest of which accounted for approximately 3.6% of our total annualized base rent.

See “Item 1 – Our Investment Strategy – Industrial Facility General Characteristics” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a general description of these types of industrial real estate.

We are an internally managed Maryland corporation and elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with our taxable year ended December 31, 2010.

The following table summarizes by type our investments in real estate as of June 30, 2023:

The following table summarizes by type our investments in real estate as of September 30, 2023:

Type Number of Buildings or Improved Land Parcels Annualized Base Rent (in thousands) 1

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Total 303 $ 246,910 100.0 %

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of June 30, 2023, multiplied by 12.

The following table summarizes by market our investments in real estate as of June 30, 2023:

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of September 30, 2023, multiplied by 12.

The following table summarizes by market our investments in real estate as of September 30, 2023:

Los Angeles Northern New Jersey/New York City San Francisco Bay Area Seattle Miami Washington, D.C.

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% of Total 17.5 % 16.6 % 19.2 % 17.6 % 17.8 % 11.3 % 100.0 %

Occupancy % as of June 30, 2023

Occupancy % as of September 30, 2023

98.7 % 99.1 % 97.1 % 96.4 % 100.0 % 99.1 % 98.3 %

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% of Total 16.3 % 41.0 % 8.6 % 15.6 % 6.0 % 12.5 % 100.0 %

Occupancy % as of June 30, 2023

Occupancy % as of September 30, 2023

96.2 % 92.4 % 100.0 % 100.0 % 100.0 % 100.0 % 96.3 %

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% of Total Gross Book Value 17.9 % 20.0 % 19.4 % 15.4 % 18.7 % 8.6 % 100.0 %

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of June 30, 2023, multiplied by 12.

2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of June 30, 2023, weighted by the respective square footage.

3 Includes seven properties under development or redevelopment that, upon completion, will consist of six buildings aggregating approximately 1.1 million square feet and one approximately 2.8 acre improved land parcel, and approximately 62.7 acres of land entitled for future development.

As of June 30, 2023, we owned seven properties under development or redevelopment that, upon completion, will consist of six buildings aggregating approximately 1.1 million square feet and one approximately 2.8 acre improved land parcel, and approximately 62.7 acres of land entitled for future development, with a total expected investment of approximately $573.3 million, including redevelopment costs, capitalized interest and other costs.

The following table summarizes our capital expenditures incurred during the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of September 30, 2023, multiplied by 12.

2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of September 30, 2023, weighted by the respective square footage.

3 Includes eight properties under development or redevelopment that, upon completion, will consist of seven buildings aggregating approximately 1.2 million square feet and one approximately 2.8 acre improved land parcel, approximately 62.7 acres of land entitled for future development and one property held for sale with a gross book value of approximately $8.6 million.

As of September 30, 2023, we owned eight properties under development or redevelopment that, upon completion, will consist of seven buildings aggregating approximately 1.2 million square feet and one approximately 2.8 acre improved land parcel, and approximately 62.7 acres of land entitled for future development, with a total expected investment of approximately $631.8 million, including redevelopment costs, capitalized interest and other costs.

The following table summarizes our capital expenditures incurred during the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

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$ 63,083 $ 20,457 $ 122,892 $ 81,572

1 Includes approximately $30.2 million and $19.2 million for the three months ended June 30, 2023 and 2022, respectively, and approximately $47.2 million and $42.7 million for the six months ended June 30, 2023 and 2022, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 26 and 29 properties for the three months ended June 30, 2023 and 2022, respectively, and at 29 and 34 properties for the six months ended June 30, 2023 and 2022, respectively.

1 Includes approximately $55.5 million and $12.2 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $102.7 million and $54.9 million for the nine months ended September 30, 2023 and 2022, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 23 and 26 properties for the three months ended September 30, 2023 and 2022, respectively, and at 30 and 34 properties for the nine months ended September 30, 2023 and 2022, respectively.

Our industrial properties are typically subject to leases on a “triple net basis,” in which tenants pay their proportionate share of real estate taxes, insurance and operating costs, or are subject to leases on a “modified gross basis,” in which tenants pay expenses over certain threshold levels.

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As needed, we hold discussions with the tenant’s management about their business and we conduct site visits of the tenant’s operations.

Our top 20 customers based on annualized base rent as of June 30, 2023 are as follows:

Our top 20 customers based on annualized base rent as of September 30, 2023 are as follows:

Customer Leases Rentable

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2 429,692 2.7 % — 4,339 1.8 %

3 171,707 1.1 % — 4,078 1.7 %

4 United States Government

8 300,732 1.9 % — 4,212 1.7 %

6 District of Columbia

3 171,707 1.1 % — 4,078 1.7 %

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1 230,891 1.5 % — 3,585 1.4 %

7 District of Columbia

8 245,888 1.6 % — 3,508 1.4 %

8 International Cargo Terminals Inc.

1 31,601 0.2 % — 3,300 1.3 %

9 Motivate LLC

3 101,234 0.6 % — 2,973 1.2 %

10 Meta Platforms, Inc.

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2 28,124 0.2 % 4.9 2,239 0.9 %

14 Bar Logistics, Inc.

1 243,513 1.5 % — 2,180 0.9 %

15 L3 Harris Technologies, Inc.

2 170,114 1.1 % — 2,163 0.9 %

16 B&B Granite Block Sales, LLC

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2 180,717 1.1 % — 1,877 0.7 %

18 Team Alliance Logistics Inc.

2 — — % 4.4 1,848 0.8 %

19 L3 Harris Technologies, Inc.

1 147,898 0.9 % — 1,804 0.8 %

20 The RK Logistics Group, Inc.

1 141,275 0.9 % — 1,729 0.7 %

Total 51 3,680,647 23.2 % 39.5 $ 64,530 26.1 %

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of June 30, 2023, multiplied by 12.

2 Total annualized base rent is calculated as contractual monthly base rent per the leases, for all buildings and improved land parcels, excluding any partial or full rent abatements, as of June 30, 2023, multiplied by 12.

The following tables summarize the anticipated lease expirations for leases in place as of June 30, 2023, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations:

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of September 30, 2023, multiplied by 12.

3 On October 16, 2023, DirectBuy Home Improvement filed for Chapter 11 bankruptcy and we had fully reserved for all receivables as of September 30, 2023.

Any ultimate recovery of past due rent is undetermined at this time.

The following tables summarize the anticipated lease expirations for leases in place as of September 30, 2023, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations:

Year Rentable Square Feet % of Total Rentable

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Total $ 278,005 100.0 %

1 Includes leases that expire on or after June 30, 2023 and month-to-month leases totaling approximately 133,846 square feet.

2 Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of June 30, 2023, multiplied by 12.

3 Total annualized base rent is calculated as contractual monthly base rent per the leases at expiration, for all buildings and/or improved land parcels, excluding any partial or full rent abatements, as of June 30, 2023, multiplied by 12.

4 Includes leases that expire on or after June 30, 2023 and month-to-month leases totaling approximately 2.4 acres.

5 Includes leases that expire on or after June 30, 2023 and month-to-month leases disclosed in footnotes 1 and 4 of the table.

1 Includes leases that expire on or after September 30, 2023 and month-to-month leases totaling approximately 97,612 square feet.

2 Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of September 30, 2023, multiplied by 12.

4 Includes leases that expire on or after September 30, 2023 and month-to-month leases totaling approximately 2.4 acres.

5 Includes leases that expire on or after September 30, 2023 and month-to-month leases disclosed in footnotes 1 and 4 of the table.

Our ability to re-lease or renew expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations.

As of June 30, 2023, leases representing approximately 3.0% of the total annualized base rent of our portfolio are scheduled to expire during the year ending December 31, 2023.

We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2023 expirations will be above the rates currently being paid for the same space.

Cash rent changes on new and renewed leases totaling approximately 0.8 million square feet and 3.0 acres of improved land commencing during the three months ended June 30, 2023 were approximately 59.2% higher as compared to the previous rental rates for that same space, and cash rent changes on new and renewed leases totaling approximately 1.3 million square feet and 8.6 acres commencing during the six months ended June 30, 2023 were approximately 64.3% higher as compared to the previous rental rates for that same space.

We had a tenant retention ratio for the operating portfolio of 51.7% and 52.9%, respectively, for the three and six months ended June 30, 2023.

We had a tenant retention ratio for the improved land portfolio of 0.0% for both the three and six months ended June 30, 2023.

As of September 30, 2023, leases representing approximately 12.1% of the total annualized base rent of our portfolio are scheduled to expire through December 31, 2024.

We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2023 and 2024 expirations will be above the rates currently being paid for the same space.

Cash rent changes on new and renewed leases totaling approximately 0.5 million square feet and 2.8 acres of improved land commencing during the three months ended September 30, 2023 were approximately 38.9% higher as compared to the previous rental rates for that same space.

Excluding one fixed-rate lease renewal for approximately 0.1 million square feet in Oakland, California, cash rents on new and renewed leases increased approximately 48.6% during the three months ended September 30, 2023.

Cash rent changes on new and renewed leases totaling approximately 1.8 million square feet and 11.4 acres commencing during the nine months ended September 30, 2023 were approximately 57.1% higher as compared to the previous rental rates for that same space.

We had a tenant retention ratio for the operating portfolio of 61.4% and 55.0%, respectively, for the three and nine months ended September 30, 2023.

We had a tenant retention ratio for the improved land portfolio of 100.0% and 19.4%, respectively, for the three and nine months ended September 30, 2023.

We define tenant retention ratio as the square footage or acreage of all leases commenced during the period that are rented by existing tenants divided by the square footage or acreage of all expiring leases during the reporting period.

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Acquisition Activity

During the three months ended June 30, 2023, we acquired one industrial property for a total purchase price of approximately $13.4 million.

The property was acquired from an unrelated third party using existing cash on hand, net proceeds from the issuance of common stock and debt.

The following table sets forth the industrial property we acquired during the three months ended June 30, 2023:

During the three months ended September 30, 2023, we acquired one industrial property for a total purchase price of approximately $14.8 million.

Upon acquisition, the property was placed into redevelopment with a total expected investment of approximately $40.6 million.

The property was acquired from an unrelated third party using existing cash on hand and net proceeds from the issuance of common stock.

The following table sets forth the industrial property we acquired during the three months ended September 30, 2023:

Property Name Location Acquisition Date Number of

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(in thousands) 1

25th Place NE Washington DC May 23, 2023 1 33,000 — $ 13,426 5.3 %

East Garry Avenue Santa Ana, CA September 6, 2023 — — 4.9 $ 14,800 5.1 %

1 Excludes intangible liabilities.

The total aggregate initial investment was approximately $13.8 million, including $0.6 million in capitalized closing costs and acquisition costs and $0.2 million in assumed intangible liabilities and $0.4 million in other credits related to free rent and tenant improvements at 25th Place NE.

The total aggregate initial investment was approximately $16.5 million, including $0.5 million in capitalized closing costs and acquisition costs and $1.6 million in assumed intangible liabilities and $0.4 million in other credits related to tenant improvements at East Garry Avenue.

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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Development and Redevelopment Activity

As of June 30, 2023, we had seven properties under development or redevelopment that, upon completion, will consist of six buildings aggregating approximately 1.1 million square feet and one approximately 2.8 acre improved land parcel.

As of September 30, 2023, we had eight properties under development or redevelopment that, upon completion, will consist of seven buildings aggregating approximately 1.2 million square feet and one approximately 2.8 acre improved land parcel.

Additionally, we owned approximately 62.7 acres of land entitled for future development that, upon completion, will consist of six buildings aggregating approximately 1.1 million square feet.

The following table summarizes certain information with respect to the properties under development or redevelopment and the land entitled for future development as of June 30, 2023:

The following table summarizes certain information with respect to the properties under development or redevelopment and the land entitled for future development as of September 30, 2023:

Property Name Total Expected

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Stabilization

Quarter % Pre-leased June 30, 2023

Quarter % Pre-leased September 30, 2023

Properties under development or redevelopment:

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18,095 8,279 6.1 % 31,378 — Q4 2024 — %

East Garry Avenue

40,553 18,144 5.1 % 91,500 — Q1 2025 100.0 %

Paterson Plank III

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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 our Annual Report on Form 10-K for the year ended December 31, 2022 and in our other public filings.

4 Collectively, “Countyline Phase IV”, a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings located in Miami’s Countyline Corporate Park (“Countyline”), immediately adjacent to our seven buildings within Countyline.

within Countyline.

Countyline Phase IV, a landfill redevelopment adjacent to Florida’s Turnpike and the southern terminus of I-75, is expected to contain ten LEED-certified industrial distribution buildings at completion.

During the six months ended June 30, 2023, we completed redevelopment of one improved land parcel consisting of approximately 6.3 acres.

The following table summarizes certain information with respect to the completed redevelopment property as of June 30, 2023:

During the nine months ended September 30, 2023, we completed redevelopment of one improved land parcel consisting of approximately 6.3 acres.

The following table summarizes certain information with respect to the completed redevelopment property as of September 30, 2023:

Property Name Location Total

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Disposition Activity

During the six months ended June 30, 2023, we sold one property located in the Northern New Jersey/New York City market for a sales price of approximately $25.5 million, resulting in a gain of approximately $12.3 million.

The following summarizes the condensed results of operations of the property sold during the three and six months ended June 30, 2023 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

During the nine months ended September 30, 2023, we sold one property located in the Northern New Jersey/New York City market for a sales price of approximately $25.5 million, resulting in a gain of approximately $12.3 million.

The following summarizes the condensed results of operations of the property sold during the three and nine months ended September 30, 2023 (dollars in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

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We used the net proceeds for acquisitions.

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 ($81.7 million remaining as of June 30, 2023) in amounts and at times as we determine from time to time.

We have an at-the-market equity offering program (the "$500 Million ATM Program") pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $500.0 million ($464.3 million remaining as of September 30, 2023) in amounts and at times as we determine from time to time.

Prior to the implementation of the $500 Million ATM Program, we had a previous at-the-market equity program (the "$300 Million ATM Program"), which was substantially utilized as of September 5, 2023 and which is no longer active.

We intend to use the net proceeds from the offering of the shares under the $500 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 the three and six months ended June 30, 2023, we issued an aggregate of 617,106 and 967,106 shares, respectively, of common stock at a weighted average offering price of $62.75 and $62.95 per share, respectively, under the $300 Million ATM Program, resulting in net proceeds of approximately $38.2 million and $60.0 million, respectively, and paying total compensation to the applicable sales agents of approximately $0.6 million and $0.9 million, respectively.

During the three and nine months ended September 30, 2023, we issued an aggregate of 1,575,173 and 2,542,279 shares, respectively, of common stock at a weighted average offering price of $60.78 and $61.61 per share, respectively, under the $300 Million ATM Program and the $500 Million ATM Program, resulting in net proceeds of approximately $94.4 million and $154.4 million, respectively, and paying total compensation to the applicable sales agents of approximately $1.4 million and $2.3 million, respectively.

Share Repurchase Program

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The program may be suspended or discontinued at any time.

As of June 30, 2023, we had not repurchased any shares of our common stock pursuant to our share repurchase program.

As of September 30, 2023, we had not repurchased any shares of our common stock pursuant to our share repurchase program.

Dividend and Distribution Activity

On August 1, 2023, our board of directors declared a cash dividend in the amount of $0.45 per share of our common stock payable on October 13, 2023 to the stockholders of record as of the close of business on September 29, 2023.

On October 31, 2023, our board of directors declared a cash dividend in the amount of $0.45 per share of our common stock payable on January 5, 2024 to the stockholders of record as of the close of business on December 15, 2023.

Contractual Commitments

As of August 1, 2023, we had three outstanding contracts with third-party sellers to acquire three industrial properties for a total purchase price of $67.4 million, as described under the heading “Material Cash Commitments” in this Quarterly Report on Form 10-Q.

As of October 31, 2023, we had two outstanding contracts with third-party sellers to acquire two industrial properties for a total purchase price of $9.6 million, as described under the heading “Material Cash Commitments” in this Quarterly Report on Form 10-Q.

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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The results of operations of any acquired property are included in our financial statements as of the date of its acquisition.

The analysis of our results below for the three and six months ended June 30, 2023 and 2022 includes the changes attributable to same store properties.

The same store pool for the comparison of the three and six months ended June 30, 2023 and 2022 includes all properties that were owned and in operation as of June 30, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of June 30, 2023.

As of June 30, 2023, the same store pool consisted of 226 buildings aggregating approximately 13.2 million square feet representing approximately 83.7% of our total square feet owned and 37 improved land parcels consisting of approximately 127.1 acres representing approximately 76.6% of our total acreage owned.

As of June 30, 2023, the non-same store properties, which we acquired, redeveloped, or sold during 2023 and 2022 or were held for sale or in development or redevelopment as of June 30, 2023, consisted of 31 buildings aggregating approximately 2.6 million square feet, nine improved land parcels consisting of approximately 38.7 acres, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development.

As of June 30, 2023 and 2022, our consolidated same store pool occupancy was approximately 98.4% and 97.1%, respectively.

The analysis of our results below for the three and nine months ended September 30, 2023 and 2022 includes the changes attributable to same store properties.

The same store pool for the comparison of the three and nine months ended September 30, 2023 and 2022 includes all properties that were owned and in operation as of September 30, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of September 30, 2023.

As of September 30, 2023, the same store pool consisted of 226 buildings aggregating approximately 13.2 million square feet representing approximately 83.7% of our total square feet owned and 36 improved land parcels consisting of approximately 113.7 acres representing approximately 68.6% of our total acreage owned.

As of September 30, 2023, the non-same store properties, which we acquired, redeveloped, or sold during 2023 and 2022 or were held for sale or in development or redevelopment as of September 30, 2023, consisted of 31 buildings aggregating approximately 2.6 million square feet, ten improved land parcels (including one improved land parcel held for sale) consisting of approximately 52.1 acres, eight properties under development or redevelopment and approximately 62.7 acres of land entitled for future development.

As of September 30, 2023 and 2022, our consolidated same store pool occupancy was approximately 98.5% 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.

Comparison of the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022:

For the Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022:

For the Three Months Ended September 30,

2023 2022 $ Change % Change

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Interest expense, including amortization (5,814) (6,265) 451 (7.2) %

Gain on sales of real estate investments 12,257 76,048 (63,791) (83.9) %

Total other income (expense) (4,721) (6,090) 1,369 (22.5) %

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

2 Includes 2023 and 2022 acquisitions and dispositions, nine improved land parcels, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development as of June 30, 2023.

2 Includes 2023 and 2022 acquisitions and dispositions, ten improved land parcels, eight properties under development or redevelopment, approximately 62.7 acres of land entitled for future development and one property held for sale as of September 30, 2023.

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

See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q 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.

Total revenues increased approximately $14.2 million for the three months ended June 30, 2023 compared to the same period from the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2023 and 2022 and increased occupancy in the same store pool.

Cash rents on new and renewed leases totaling approximately 0.8 million square feet and 3.0 acres of improved land commencing during the three months ended June 30, 2023 increased approximately 59.2% compared to the previous rental rates for that same space.

For the three months ended June 30, 2023 and 2022, approximately $2.3 million and $1.4 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.2 million and $0.1 million, respectively, was recorded in lease termination revenue.

Total revenues increased approximately $12.1 million for the three months ended September 30, 2023 compared to the same period from the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2023 and 2022 and increased occupancy in the same store pool.

Cash rents on new and renewed leases totaling approximately 0.5 million square feet and 2.8 acres of improved land commencing during the three months ended September 30, 2023 increased approximately 38.9% compared to the previous rental rates for that same space.

For the three months ended September 30, 2023 and 2022, approximately $1.8 million and $2.4 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.1 million was recorded in lease termination revenue for both periods.

In addition, during the three months ended September 30, 2023, approximately $0.4 million was recorded as bad debt expense related to DirectBuy Home Improvement.

Property operating expenses.

Total property operating expenses increased approximately $2.8 million during the three months ended June 30, 2023 compared to the same period from the prior year.

Total property operating expenses increased approximately $3.3 million during the three months ended September 30, 2023 compared to the same period from the prior year.

The increase in total property operating expenses was primarily due to an increase of approximately $2.0 million attributable to property acquisitions during 2023 and 2022 as well as increases in insurance premiums and real estate taxes related to annual rate increases.

Depreciation and amortization.

Depreciation and amortization increased approximately $2.9 million during the three months ended June 30, 2023 compared to the same period from the prior year primarily due to property acquisitions during 2023 and 2022.

Depreciation and amortization increased approximately $1.3 million during the three months ended September 30, 2023 compared to the same period from the prior year primarily due to property acquisitions during 2023 and 2022.

General and administrative expenses.

General and administrative expenses increased approximately $2.4 million during the three months ended June 30, 2023 compared to the same period from the prior year primarily due to increased compensation expenses including increased restricted stock amortization, LTIP expense and bonus expense, and an increase in the number of employees and salaries compared to the same period from the prior year.

Acquisition costs and other.

Acquisition costs and other decreased approximately $1.0 million during the three months ended June 30, 2023 compared to the same period from the prior year primarily due to environmental remediation at our Avenue A property of approximately $1.0 million during the three months ended June 30, 2022 .

General and administrative expenses increased approximately $1.0 million during the three months ended September 30, 2023 compared to the same period from the prior year primarily due to increased compensation expenses including increased restricted stock amortization and LTIP expense, and an increase in the number of employees and salaries compared to the same period from the prior year.

Interest and other income.

Interest and other income increased approximately $0.9 million for the three months ended June 30, 2023 compared to the same period from the prior year primarily due to higher interest rates on our cash and cash equivalent balances.

Interest and other income increased approximately $0.9 million for the three months ended September 30, 2023 compared to the same period from the prior year primarily due to higher interest rates on our cash and cash equivalent balances.

Interest expense, including amortization.

Interest expense increased approximately $0.9 million for the three months ended June 30, 2023 compared to the same period from the prior year.

This increase was primarily due to borrowing the full amount available under the $100.0 million unsecured term loan on September 2, 2022 and higher average interest rates on the unsecured term loans and credit facility during the three months ended June 30, 2023.

Gain on sales of real estate investments.

Gain on sales of real estate investments decreased approximately $63.8 million for the three months ended June 30, 2023 compared to the same period from the prior year.

We recognized a gain of approximately $12.3 million from the sale of one property during the three months ended June 30, 2023, as compared to a gain of approximately $76.0 million from the sale of one property in the same period from the prior year.

Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022:

For the Six Months Ended June 30,

Interest expense decreased approximately $0.5 million for the three months ended September 30, 2023 compared to the same period from the prior year.

This was primarily due to an increase in capitalized interest for the development and redevelopment properties, partially offset by higher average interest rates on the unsecured term loans and credit facility during the three months ended September 30, 2023.

Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022:

For the Nine Months Ended September 30,

2023 2022 $ Change % Change

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Gain on sales of real estate investments 12,257 76,048 (63,791) (83.9) %

Total other income (expense) 1,918 66,156 (64,238) (97.1) %

Total other income (expense) (2,803) 60,066 (62,869) n/a

Net income $ 93,900 $ 139,134 $ (45,234) (32.5) %

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We believe this information is frequently used by management, investors, and other interested parties to evaluate our performance.

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

2 Includes 2022 and 2023 acquisitions and dispositions, nine improved land parcels, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development as of June 30, 2023.

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

2 Includes 2022 and 2023 acquisitions and dispositions, ten improved land parcels, eight properties under development or redevelopment, approximately 62.7 acres of land entitled for future development and one property held for sale as of September 30, 2023.

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

Total revenues increased approximately $24.8 million for the six months ended June 30, 2023 compared to the same period from the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2023 and 2022 and increased occupancy in the same store pool.

Cash rents on new and renewed leases totaling approximately 1.3 million square feet and 8.6 acres commencing during the six months ended June 30, 2023 increased approximately 64.3% compared to the prior year.

For the six months ended June 30, 2023 and 2022, approximately $4.1 million and $3.2 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.2 million was recorded in lease termination revenue for both periods.

Total revenues increased approximately $36.9 million for the nine months ended September 30, 2023 compared to the same period from the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2023 and 2022 and increased occupancy in the same store pool.

Cash rents on new and renewed leases totaling approximately 1.8 million square feet and 11.4 acres commencing during the nine months ended September 30, 2023 increased approximately 57.1% compared to the prior year.

For the nine months ended September 30, 2023 and 2022, approximately $5.9 million and $5.6 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.3 million was recorded in lease termination revenue for both periods.

Property operating expenses.

Total property operating expenses increased approximately $4.3 million during the six months ended June 30, 2023 compared to the same period from the prior year.

Total property operating expenses increased approximately $7.6 million during the nine months ended September 30, 2023 compared to the same period from the prior year.

The increase in total property operating expenses was primarily due to an increase of approximately $5.4 million attributable to property acquisitions during 2023 and 2022 as well as increases in insurance premiums and real estate taxes related to annual rate increases.

Depreciation and amortization.

Depreciation and amortization increased approximately $6.1 million during the six months ended June 30, 2023 compared to the same period from the prior year primarily due to property acquisitions during 2023 and 2022.

Depreciation and amortization increased approximately $7.4 million during the nine months ended September 30, 2023 compared to the same period from the prior year primarily due to property acquisitions during 2023 and 2022.

General and administrative expenses.

General and administrative expenses increased approximately $4.2 million for the six months ended June 30, 2023 compared to the same period from the prior year primarily due to increased compensation expenses including increased restricted stock amortization, LTIP expense and bonus expense, and an increase in the number of employees and salaries compared to the same period from the prior year.

General and administrative expenses increased approximately $5.2 million for the nine months ended September 30, 2023 compared to the same period from the prior year primarily due to increased compensation expenses including increased restricted stock amortization, LTIP expense and bonus expense, and an increase in the number of employees and salaries compared to the same period from the prior year.

Acquisition costs and other.

Acquisition costs and other decreased approximately $1.0 million during the six months ended June 30, 2023 compared to the same period from the prior year primarily due to environmental remediation at our Avenue A property of approximately $1.0 million during the six months ended June 30, 2022 .

Acquisition costs and other decreased approximately $1.0 million during the nine months ended September 30, 2023 compared to the same period from the prior year primarily due to environmental remediation at our Avenue A property of approximately $1.0 million during the nine months ended September 30, 2022 .

Interest and other income.

Interest and other income increased approximately $2.7 million during the six months ended June 30, 2023 compared to the same period from the prior year primarily due to higher interest rates on our cash and cash equivalent balances.

Interest and other income increased approximately $3.6 million during the nine months ended September 30, 2023 compared to the same period from the prior year primarily due to higher interest rates on our cash and cash equivalent balances.

Interest expense, including amortization.

Interest expense increased approximately $3.1 million for the six months ended June 30, 2023 compared to the same period from the prior year.

Interest expense increased approximately $2.7 million for the nine months ended September 30, 2023 compared to the same period from the prior year.

This was primarily due to higher average interest rates on the unsecured term loans and credit facility, partially offset by an increase in capitalized interest for the development and redevelopment properties during the nine months ended September 30, 2023.

Gain on sales of real estate investments.

Gain on sales of real estate investments decreased approximately $63.8 million for the six months ended June 30, 2023 compared to the same period from the prior year.

We recognized a gain of approximately $12.3 million from the sale of one property during the six months ended June 30, 2023, as compared to a gain of approximately $76.0 million from the sale of one property in the same period from the prior year.

Gain on sales of real estate investments decreased approximately $63.8 million for the nine months ended September 30, 2023 compared to the same period from the prior year.

We recognized a gain of approximately $12.3 million from the sale of one property during the nine months ended September 30, 2023, as compared to a gain of approximately $76.0 million from the sale of one property in the same period from the prior year.

Liquidity and Capital Resources

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We believe that our net cash provided by operations will be adequate to fund operating requirements, pay interest on any borrowings and fund distributions in accordance with the REIT requirements of the federal income tax laws.

In the near-term, we intend to fund future investments in properties, property developments and redevelopments and scheduled debt maturities with cash on hand, term loans, senior unsecured notes, mortgages, borrowings under our revolving credit facility, perpetual preferred and common stock issuances and, from time to time, property dispositions.

In the near-term, we intend to fund future investments in properties, property developments and redevelopments and scheduled debt maturities with cash on hand, term loans, senior unsecured notes, borrowings under our revolving credit facility, perpetual preferred and common stock issuances and, from time to time, property dispositions.

We expect to meet our long-term liquidity requirements, including with respect to other investments in industrial properties, property acquisitions, property developments and redevelopments, renovations and expansions and scheduled debt maturities, through borrowings under our revolving credit facility, periodic issuances of common stock, perpetual preferred stock, and long-term unsecured and secured debt, and, from time to time, with proceeds from the disposition of properties.

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We used the net proceeds for acquisitions.

The following sets forth certain information regarding our current at-the-market common stock offering program as of June 30, 2023:

The following sets forth certain information regarding our current at-the-market common stock offering program as of September 30, 2023:

ATM Stock Offering Program Date Implemented Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available (in thousands)

$300 Million ATM Program June 11, 2021 $ 300,000 $ 81,702

The following tables set forth the activity under our at-the-market common stock offering program during the three and six months ended June 30, 2023 and 2022:

$500 Million ATM Program September 6, 2023 $ 500,000 $ 464,259

The following tables set forth the activity under our at-the-market common stock offering programs during the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended Shares Sold Weighted Average Price Per Share Net Proceeds

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(in thousands)

June 30, 2023 617,106 $ 62.75 $ 38,164 $ 562

June 30, 2022 27,087 $ 76.03 $ 2,030 $ 29

For the Six Months Ended

September 30, 2023 1,575,173 $ 60.78 $ 94,357 $ 1,388

September 30, 2022 444,512 $ 64.97 $ 28,463 $ 419

For the Nine Months Ended

Shares Sold Weighted Average

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(in thousands)

June 30, 2023 967,106 $ 62.95 $ 59,998 $ 883

June 30, 2022 27,087 $ 76.03 $ 2,030 $ 29

September 30, 2023 2,542,279 $ 61.61 $ 154,355 $ 2,271

September 30, 2022 471,599 $ 65.61 $ 30,493 $ 449

Debt Sources of Liquidity

As of June 30, 2023, 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”).

As of September 30, 2023, 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”).

Our Sixth Amended and Restated Senior Credit Agreement (as amended, 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 both June 30, 2023 and December 31, 2022, there were no borrowings outstanding on the revolving credit facility and $200.0 million of borrowings outstanding on the term loans.

As of both September 30, 2023 and December 31, 2022, there were no borrowings outstanding on the revolving credit facility and $200.0 million 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.

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Interest on the Amended Facility, including the term loans, is generally to be paid based upon, at our option, either (i) the Secured Overnight Financing Rate (“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 June 30, 2023) for the revolving credit facility and 1.25% to 1.75% (1.25% as of June 30, 2023) 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 applicable SOFR margin will range from 1.10% to 1.55% (1.10% as of September 30, 2023) for the revolving credit facility and 1.25% to 1.75% (1.25% as of September 30, 2023) 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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The Amended Facility and the Senior Unsecured Notes include a series of financial and other covenants with which we must comply.

We were in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December 31, 2022, we held cash and cash equivalents totaling approximately $58.9 million and $26.4 million, respectively.

The following tables summarize our debt maturities and principal payments as of June 30, 2023 and our market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the six months ended June 30, 2023 and 2022 (dollars in thousands, except per share data):

We were in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of September 30, 2023 and December 31, 2022.

As of September 30, 2023 and December 31, 2022, we held cash and cash equivalents totaling approximately $96.2 million and $26.4 million, respectively.

The following tables summarize our debt maturities and principal payments as of September 30, 2023 and our market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the nine months ended September 30, 2023 and 2022 (dollars in thousands, except per share data):

Facility Term Loan Senior

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Weighted average interest rate n/a 6.6% 3.1% 4.0%

As of June 30, 2023 As of June 30, 2022

As of September 30, 2023 As of September 30, 2022

Total Debt, net $ 771,355 $ 780,615

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Weighted Average Maturity of Total Debt (years) 4.6 5.5

1 Includes 373,897 and 292,524 shares of unvested restricted stock outstanding as of June 30, 2023 and 2022, respectively.

Also includes 514,539 and 426,594 shares held in the Deferred Compensation Plan as of June 30, 2023 and 2022, respectively.

2 Closing price of a share of our common stock on the New York Stock Exchange on June 30, 2023 and 2022, respectively, in dollars per share.

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

1 Includes 419,500 and 357,076 shares of unvested restricted stock outstanding as of September 30, 2023 and 2022, respectively.

Also includes 514,539 and 426,594 shares held in the Deferred Compensation Plan as of September 30, 2023 and 2022, respectively.

2 Closing price of a share of our common stock on the New York Stock Exchange on September 30, 2023 and 2022, respectively, in dollars per share.

3 Total debt-to-total investments in properties is calculated as total debt, net of deferred financing costs, divided by total investments in properties, including one property held for sale as of September 30, 2023.

4 Total debt-to-total market capitalization is calculated as total debt, net of deferred financing costs, divided by total market capitalization.

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, net of deferred financing costs.

6 Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the six months ended June 30, 2023 and 2022, respectively.

6 Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the nine months ended September 30, 2023 and 2022, respectively.

See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance.

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The following table sets forth the cash dividends paid or payable per share during the six months ended June 30, 2023:

The following table sets forth the cash dividends paid or payable per share during the nine months ended September 30, 2023:

For the Three

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June 30, 2023 Common Stock $ 0.40 May 2, 2023 June 30, 2023 July 14, 2023

September 30, 2023 Common Stock $ 0.45 August 1, 2023 September 29, 2023 October 13, 2023

Sources and Uses of Cash

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Cash From Operating Activities.

Net cash provided by operating activities totaled approximately $87.4 million for the six months ended June 30, 2023 compared to approximately $63.2 million for the six months ended June 30, 2022.

Net cash provided by operating activities totaled approximately $140.6 million for the nine months ended September 30, 2023 compared to approximately $109.0 million for the nine months ended September 30, 2022.

This increase in cash provided by operating activities is primarily attributable to additional cash flows generated from the properties acquired during 2023 and 2022, increased rents on new and renewed leases at our same store properties and increased occupancy in the same store pool.

Cash From Investing Activities.

Net cash used in investing activities was approximately $406.5 million and $219.1 million for the six months ended June 30, 2023 and 2022, respectively, which consisted primarily of cash paid for property acquisitions of approximately $378.1 million and $277.0 million, respectively, additions to capital improvements of approximately $53.0 million and $48.9 million, respectively, and was partially offset by proceeds from dispositions of approximately $24.6 million and $106.8 million, respectively.

Net cash used in investing activities was approximately $479.6 million and $313.8 million for the nine months ended September 30, 2023 and 2022, respectively, which consisted primarily of cash paid for property acquisitions of approximately $392.5 million and $344.8 million, respectively, additions to capital improvements of approximately $111.7 million and $75.8 million, respectively, and was partially offset by proceeds from dispositions of approximately $24.6 million and $106.8 million, respectively.

Cash From Financing Activities.

Net cash provided by financing activities was approximately $351.1 million for the six months ended June 30, 2023, which consisted primarily of approximately $415.8 million in net proceeds from the issuance of common stock, partially offset by approximately $63.9 million in equity dividend payments.

Net cash used in financing activities was approximately $38.6 million for the six months ended June 30, 2022, which consisted primarily of approximately $51.3 million in equity dividend payments, partially offset by a $12.0 million draw on our revolving credit facility and approximately $1.5 million in net proceeds from the issuance of common stock.

Net cash provided by financing activities was approximately $411.2 million for the nine months ended September 30, 2023, which consisted primarily of approximately $510.2 million in net proceeds from the issuance of common stock, partially offset by approximately $97.4 million in equity dividend payments.

Net cash provided by financing activities was approximately $11.0 million for the nine months ended September 30, 2022, which consisted primarily of a $162.0 million draw on our revolving credit facility, borrowing the full amount available under the new $100.0 million unsecured term loan and approximately $29.5 million in net proceeds from the issuance of common stock, partially offset by a $152.0 million payment on our revolving credit facility, payment of a $50.0 million tranche of the Senior Unsecured Notes, and approximately $77.0 million in equity dividend payments.

Critical Accounting Policies And Estimates

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Material Cash Commitments

As of August 1, 2023, we had three outstanding contracts with third-party sellers to acquire three industrial properties for a total purchase price of $67.4 million.

As of October 31, 2023, we had two outstanding contracts with third-party sellers to acquire two industrial properties for a total purchase price of $9.6 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.

The following table summarizes our material cash commitments due by period as of June 30, 2023 (dollars in thousands):

The following table summarizes our material cash commitments due by period as of September 30, 2023 (dollars in thousands):

Material Cash Commitments Less than 1

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Total $ 128,262 $ 79,935 $ 374,607 $ 290,405 $ 873,209

1 As of August 1, 2023

As of August 1, 2023, we executed one non-binding letter of intent with a third-party seller to acquire one industrial property for a total anticipated purchase price of approximately $27.5 million.

In the normal course of our 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 a purchase and sale agreement with respect to this property or otherwise complete any such prospective purchase on the terms described or at all.

1 As of October 31, 2023

Non-GAAP Financial Measures

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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.

The following table reflects the calculation of FFO reconciled from net income for the three and six months ended June 30, 2023 and 2022 (dollars in thousands except per share data):

For the Three Months Ended June 30, For the Six Months Ended June 30,

The following table reflects the calculation of FFO reconciled from net income for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands except per share data):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 $ Change % Change 2023 2022 $ Change % Change

$ 30,315 $ 22,439 $ 7,876 35.1 % $ 93,900 $ 139,134 $ (45,234) (32.5) %

Gain on sales of real estate investments (12,257) (76,048) 63,791 (83.9) % (12,257) (76,048) 63,791 (83.9) %

Gain on sales of real estate investments — — — n/a (12,257) (76,048) 63,791 (83.9) %

Depreciation and amortization 18,245 16,957 1,288 7.6 % 54,636 47,227 7,409 15.7 %

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84,266,740 75,588,750 82,597,824 75,402,846

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 374,514 and 295,247 of weighted average unvested restricted shares outstanding for the three months ended June 30, 2023 and 2022, respectively, and 374,251 and 299,433 of weighted average unvested restricted shares outstanding for the six months ended June 30, 2023 and 2022, respectively.

FFO increased by approximately $9.9 million and $16.7 million for the three and six months ended June 30, 2023, respectively, compared to the same periods from the prior year due primarily to property acquisitions during 2022 and 2023 as well as same store NOI growth of approximately $5.0 million and $9.9 million for the three and six months ended June 30, 2023, respectively, compared to the same periods from the prior year.

shares outstanding and unvested restricted shares outstanding) under the two-class method.

Under this method, allocations were made to 404,010 and 335,038 of weighted average unvested restricted shares outstanding for the three months ended September 30, 2023 and 2022, respectively, and 384,239 and 311,432 of weighted average unvested restricted shares outstanding for the nine months ended September 30, 2023 and 2022, respectively.

FFO increased by approximately $9.1 million and $25.7 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods from the prior year due primarily to property acquisitions during 2022 and 2023 as well as same store NOI growth of approximately $4.1 million and $14.0 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods from the prior year.

The FFO increase was partially offset by increased weighted average common shares outstanding, increased interest expense due to higher average interest rates on the unsecured term loans and credit facility and increased general and administrative expenses.

The increase in general and administrative expenses was primarily due to increased compensation expenses, including increased restricted stock amortization, LTIP expense and bonus expense, and an increase in the number of employees and salaries for the three and six months ended June 30, 2023 compared to the same periods from the prior year.

In addition, during the three months ended September 30, 2023, approximately $0.4 million was recorded as bad debt expense related to DirectBuy Home Improvement.

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 and six months ended June 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 $ Change % Change 2023 2022 $ Change % Change

Net income $ 30,315 $ 22,439 $ 7,876 35.1 % $ 93,900 $ 139,134 $ (45,234) (32.5) %

Gain on sales of real estate investments (12,257) (76,048) 63,791 (83.9) % (12,257) (76,048) 63,791 (83.9) %

Gain on sales of real estate investments — — — n/a (12,257) (76,048) 63,791 (83.9) %

Depreciation and amortization 18,245 16,957 1,288 7.6 % 54,636 47,227 7,409 15.7 %

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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 June 30, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of June 30, 2023.

As of June 30, 2023, the same store pool consisted of 226 buildings aggregating approximately 13.2 million square feet representing approximately 83.7% of our total square feet owned and 37 improved land parcels containing approximately 127.1 acres representing approximately 76.6% of our total acreage owned.

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.

The same store pool includes all properties that were owned and in operation as of September 30, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of September 30, 2023.

As of September 30, 2023, the same store pool consisted of 226 buildings aggregating approximately 13.2 million square feet representing approximately 83.7% of our total square feet owned and 36 improved land parcels containing approximately 113.7 acres representing approximately 68.6% of our total acreage owned.

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 and six months ended June 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 $ Change % Change 2023 2022 $ Change % Change

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Acquisition costs and other 51 36 15 41.7 % 126 1,091 (965) (88.5) %

Total other income and expenses (7,330) (71,116) 63,786 (89.7) % (1,918) (66,156) 64,238 (97.1) %

Total other income and expenses 4,721 6,090 (1,369) (22.5) % 2,803 (60,066) 62,869 n/a

Net operating income 62,451 53,661 8,790 16.4 % 179,670 150,385 29,285 19.5 %

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$ 48,811 $ 43,144 $ 5,667 13.1 % $ 142,141 $ 124,277 $ 17,864 14.4 %

Less termination fee income — (100) 100 n/a (20) (248) 228 (91.9) %

Less termination fee income (118) (96) (22) 22.9 % (138) (345) 207 (60.0) %

Cash-basis same store NOI excluding termination fees $ 48,693 $ 43,048 $ 5,645 13.1 % $ 142,003 $ 123,932 $ 18,071 14.6 %

1 Includes approximately $0.2 million and $0.1 million of lease termination income for the three months ended June 30, 2023 and 2022, respectively, and approximately $0.2 million of lease termination income for both the six months ended June 30, 2023 and 2022.

1 Includes approximately $0.1 million of lease termination income for both the three months ended September 30, 2023 and 2022, and approximately $0.3 million of lease termination income for both the nine months ended September 30, 2023 and 2022.

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

Cash-basis same store NOI increased by approximately $6.0 million for the three months ended June 30, 2023 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases, contractual rent increases on pre-existing leases and increased occupancy in the same store pool.

Additionally, at our Kent 188 and Kent 190 properties, the cash-basis NOI increased by approximately $0.6 million for the three months ended June 30, 2023 due to vacancy during the three months ended June 30, 2022.

For the three months ended June 30, 2023 and 2022, total contractual rent abatements of approximately $1.5 million and $0.6 million, respectively, were given to certain tenants in the same store pool and approximately $0 and $0.1 million, respectively, in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $0.7 million of the increase in cash-basis same store NOI for the three months ended June 30, 2023 related to properties that were acquired vacant or with near term expirations in 2021.

Cash-basis same store NOI increased by approximately $12.2 million for the six months ended June 30, 2023 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases and increased occupancy in the same store pool.

For the six months ended June 30, 2023 and 2022, total contractual rent abatements of approximately $2.3 million and $1.6 million, respectively, were given to certain tenants in the same-store pool and approximately $20,000 and $0.2 million, respectively, in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $1.6 million of the increase in cash-basis same store NOI for the six months ended June 30, 2023 related to properties that were acquired vacant or with near term expirations in 2020.

Cash-basis same store NOI increased by approximately $5.7 million for the three months ended September 30, 2023 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases, contractual rent increases on pre-existing leases and increased occupancy in the same store pool.

For the three months ended September 30, 2023 and 2022, total contractual rent abatements of approximately $0.6 million and $1.4 million, respectively, were given to certain tenants in the same store pool and approximately $0.1 million in lease termination income was received from certain tenants in the same store pool during both periods.

In addition, approximately $0.2 million of the increase in cash-basis same store NOI for the three months ended September 30, 2023 related to properties that were acquired vacant or with near term expirations in 2021.

Cash-basis same store NOI increased by approximately $17.9 million for the nine months ended September 30, 2023 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases and increased occupancy in the same store pool.

For the nine months ended September 30, 2023 and 2022, total contractual rent abatements of approximately $2.9 million and $3.0 million, respectively, were given to certain tenants in the same-store pool and approximately $0.1 million and $0.3 million, respectively, in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $1.7 million of the increase in cash-basis same store NOI for the nine months ended September 30, 2023 related to properties that were acquired vacant or with near term expirations in 2020.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis