# FrontView REIT, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [FrontView REIT, Inc.](/companies/fvr.md) (CIK 1988494)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 16:30 ET
- Period: 2024-09-30
- Accession: 0000950170-24-127114
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1988494/000095017024127114/fvr-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1988494/000095017024127114/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cash and equivalents | at 2024-09-30 | $1.0k | us-gaap:Cash |
| Total assets | at 2024-09-30 | $1.0k | us-gaap:Assets |
| Shareholders' equity | at 2024-09-30 | $1.0k | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 60,600 characters.

*Except where the context suggests otherwise, as used in this Quarterly Report on Form 10-Q, the terms “FVR,” “we,” “us,” “our,” and “our company” refer to FrontView REIT, Inc., a Maryland corporation incorporated on June 23, 2023, and, as required by context, FrontView Operating Partnership LP, a Delaware limited partnership, which we refer to as the or our "OP,” and to their respective subsidiaries.*

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying Notes to the Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.

The following discussion is based on our predecessor’s unaudited condensed consolidated financial statements and notes thereto as of and for the nine months ended September 30, 2024 and 2023. We have not had any corporate activity since our formation, other than the issuance of 100 shares of our Common Stock in connection with our initial capitalization and activities in preparation for our initial public offering on October 2, 2024. Accordingly, we believe that a discussion of our results of operations would not be meaningful, and this discussion and analysis therefore only discusses the consolidated results of our predecessor. Where appropriate, the following discussion includes the effects of the 50/50 Joint Venture Acquisition (as defined below), REIT Contribution Transactions (as defined below), Internalization (as defined below), and our initial public offering. Refer to Item 1 for our pro forma consolidated financial statements that reflect the pro forma impact of these transactions.

### Explanatory Note and Certain Defined Terms

Unless the context otherwise requires, the following terms and phrases are used throughout this MD&A as described below:

- “50/50 Joint Venture” means the joint venture previously held by our predecessor and entities representing certain Canadian investors for the ownership of 54 properties;
- “50/50 Joint Venture Acquisition” means our predecessor’s acquisition, for cash, of the remaining 50% interest held indirectly by our predecessor in the 50/50 Joint Venture;
- “annualized base rent” or “ABR” means the annualized contractual cash rent due for the last month of the reporting period, and adjusted to remove rent from properties sold during the month and to include a full month of contractual cash rent for properties acquired during the last month of the reporting period;
- “Canadian Investment Entities” means the intermediate entities through which Canadian investors will hold interests in the OP that will be issued pursuant to the REIT Contribution Transactions;
- “Contribution Agreements” means (i) the Contribution Agreement, dated as of the closing date of our initial public offering, by and between certain individual investors in our predecessor and the OP, (ii) the Contribution Agreement, dated as of closing date of our initial public offering, by and between the individual investors in one of the Subsidiary REITs and the OP, (iii) the Contribution Agreement, dated as of the closing date of our initial public offering, by and between one of the Canadian Investment Entities and the OP, and (iv) the Contribution Agreement, dated as of the closing date of our initial public offering, by and between the other Canadian Investment Entity and the OP;
- “CPI” means the Consumer Price Index for All Urban Consumers (CPI-U): U.S. City Average, All Items, as published by the U.S. Bureau of Labor Statistics, or other similar index which is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services;
- “Internalization” means the internalization of the external management team, assets and functions previously performed for our predecessor by our external manager and its affiliates, pursuant to the terms of the Internalization Agreement, which closed contemporaneously with the closing of our initial public offering;
- “New Delayed Draw Term Loan” means our $200 million unsecured delayed draw term loan under the Credit Agreement that became effective concurrently with the completion of our initial public offering on October 2, 2024;
- “New Revolving Credit Facility” means our $250 million unsecured revolving credit facility under the Credit Agreement that became effective concurrently with the completion of our initial public offering;
- “occupancy” or a specified percentage of our portfolio that is “occupied” or “leased” means as of a specified date (i) the number of properties that are subject to a signed lease *divided* by (ii) the total number of properties in our portfolio;
- “outparcel properties” or “outparcels” means individual building properties (small or large formats) leased to one or more tenants that are in locations with direct frontage on high-traffic roads that are visible to consumers;
- “predecessor” means NADG NNN Property Fund LP, a Delaware limited partnership, and its subsidiaries;
- “REIT Contribution Transactions” means the contributions of the interests in entities within our predecessor’s private REIT fund structure that directly or indirectly own our predecessor’s properties, pursuant to the terms of the Contribution Agreements, which closed contemporaneously with the closing of our initial public offering;
- “Revolving Credit Facility” means the $202.5 million secured revolving credit facility, dated March 8, 2021 and amended on July 31, 2021 by and among the OP, CIBC Bank USA, as Administrative Agent and the other Lenders parties thereto, as amended from time to time;
- “SOFR” means the Secured Overnight Financing Rate, which is a new index calculated by short-term repurchase agreements, backed by Treasury securities;
- “Term Loan Credit Facility” means the $17.0 million loan and security facility, dated as of March 31, 2022 by and among the 50/50 Joint Venture and CIBC Bank USA, as Administrative Agent, and the other parties thereto, as amended from time to time; and
- “we,” “our,” “us,” “FrontView,” and “Company” mean FrontView REIT, Inc., a Maryland corporation, together with its consolidated subsidiaries, including the OP, after giving effect to the REIT Contribution Transactions and Internalization, except where it is clear from the context that the term only means FrontView REIT, Inc. before giving effect to such transactions.

### Overview

We are an internally-managed net-lease REIT that is experienced in acquiring, owning and managing outparcel properties that are net leased to a diversified group of tenants. We are a growing net-lease REIT and own a well-diversified portfolio of 278 outparcel properties across 31 U.S. states as of September 30, 2024. Our tenants include service-oriented businesses, such as restaurants, cellular stores, financial institutions, automotive stores and dealers, medical and dental providers, pharmacies, convenience and gas stores, car washes, home improvement stores, grocery stores, professional services as well as general retail tenants.

We currently derive a majority of our revenue from rents received from individual tenants of each of our outparcel properties in our portfolio. Our properties are typically leased under long-term net leases. As of September 30, 2024, the ABR weighted average remaining term of our leases was approximately 6.7 years, excluding renewal options. Approximately 97.4% of our leases (based on ABR) had contractual rent escalations, with an ABR weighted average annual minimum increase of 1.7%. As of September 30, 2024, we had 293 tenants that represented 137 different brands. Our top 10 tenant brands (based on ABR) represented approximately 23.3% of our portfolio ABR as of September 30, 2024.

In connection with our initial public offering on October 2, 2024, we completed the Internalization pursuant to which we began directly employing 15 employees and entered into employment agreements with each of our named executive officers. In addition, the Internalization eliminated the management and other fees and carried interest provisions that were previously paid by our predecessor. The historical results of operations for our predecessor through September 30, 2024, include the payment of management fees that we will no longer pay following the Internalization and do not include the direct compensation expense associated with our aforementioned approximately 15 employees, or other asset management, acquisition or general and administrative expenses not previously incurred based upon our externally managed structure.

As a private company, we historically have maintained higher leverage than we intend to maintain as a publicly-traded REIT following our initial public offering. As of September 30, 2024, we had total debt of $419.5 million, Net Debt of $409.6 million, a Net Debt to Annualized Adjusted EBITDAre ratio of 9.8x, and a pro forma Net Debt to Annualized Adjusted EBITDAre ratio of 3.9x after giving effect to the repayment of debt with the net proceeds of our initial public offering and borrowings under our New Revolving Credit Facility and New Delayed Draw Term Loan. Over time we plan to target a net debt to annualized adjusted EBITDAre ratio below 6.0x on a sustained basis. Net Debt and Annualized Adjusted EBITDAre are non-GAAP financial measures, and Annualized Adjusted EBITDAre is calculated based upon EBITDA, EBITDAre, and Adjusted EBITDAre, each of which is also a non-GAAP financial measure. Refer to *Non-GAAP Measures* below for further details concerning our calculation of non-GAAP measures and reconciliations to the comparable GAAP measure.

### Our Real Estate Investment Portfolio

To achieve an appropriate risk-adjusted return, we intend to maintain a highly-diversified portfolio of outparcel properties that are in prominent locations with direct frontage on high-traffic roads that are highly visible to consumers and maintain diversity across geographic locations, tenants, and brands and that have cross-diversification within each. We discuss below our portfolio diversification based on several different metrics and information provided as of September 30, 2024.

### Diversification by Tenant Brand

We primarily seek tenants that operate service-oriented businesses, such as restaurants, cellular stores, financial institutions, automotive stores and dealers, medical and dental providers, pharmacies, convenience and gas stores, car washes, home improvement stores, grocery stores, professional services as well as general retail tenants. As of September 30, 2024, our properties were occupied by 293 tenants that operated 137 different brands, with no single tenant brand accounting for more than 3.4% of our ABR.

The following table sets forth information with respect to each of our top 20 tenant brands (based on ABR) as of September 30, 2024:

#### (in thousands, except for percentages and # of Properties)

| Tenant Brand | # of Properties(1) | Square Feet | ABR | % of ABR | % of Square Feet |
| --- | ---: | ---: | ---: | ---: | ---: |
| Verizon | 8.5 | 36 | $1,761 | 3.4% | 1.7% |
| Oak Street Health | 5.5 | 66 | 1,314 | 2.6% | 3.1% |
| Adams Auto Group | 3 | 29 | 1,284 | 2.5% | 1.4% |
| Raising Canes | 5 | 17 | 1,262 | 2.4% | 0.9% |
| IHOP | 6 | 33 | 1,213 | 2.3% | 1.6% |
| Mammoth Car Wash | 6 | 22 | 1,205 | 2.3% | 1.1% |
| CVS | 4 | 42 | 1,081 | 2.1% | 2.0% |
| AT&T | 4 | 24 | 1,052 | 2.0% | 1.1% |
| Walgreens | 4 | 50 | 1,014 | 1.9% | 2.4% |
| Chili's | 3 | 18 | 959 | 1.8% | 0.9% |
| Wendy's | 7 | 21 | 940 | 1.8% | 1.0% |
| Bank of America | 4 | 21 | 936 | 1.8% | 1.0% |
| Advance Auto Parts | 7 | 66 | 857 | 1.6% | 3.1% |
| Heartland Dental | 5 | 20 | 792 | 1.5% | 0.9% |
| LA-Z-Boy | 2 | 38 | 762 | 1.5% | 1.8% |
| Burger King | 5 | 20 | 752 | 1.4% | 0.9% |
| Lowe's Home Improvement | 1 | 168 | 750 | 1.4% | 8.0% |
| Hooters | 4 | 20 | 723 | 1.4% | 0.9% |
| PNC Bank | 4 | 26 | 719 | 1.4% | 1.2% |
| T-Mobile | 4.5 | 19 | 710 | 1.4% | 0.9% |
| Other | 185.5 | 1,351 | 32,014 | 61.5% | 64.1% |
| **Total** | **278** | **2,107** | **$52,100** | **100.0%** | **100.0%** |

#### (1) Includes two-tenant properties.

### Diversification by Tenant Industry

The following chart shows a breakdown of our ABR by the tenant industries that comprised our portfolio as of September 30, 2024:

### Industry Pie Chart

### Diversification by Geography

As of September 30, 2024, our outparcel properties were located in 96 MSAs in 31 U.S. states, with no single state exceeding 12.1% of our ABR.

The following table sets forth information with respect to geographic diversification by state in our portfolio (based on ABR) as of September 30, 2024:

#### (in thousands, except for percentages and # of Properties)

| State | # of Properties(1) | Square Feet | ABR | % of ABR | % of Square Feet |
| --- | ---: | ---: | ---: | ---: | ---: |
| IL | 28 | 208 | $6,281 | 12.1% | 9.9% |
| TX | 22 | 116 | 4,473 | 8.6% | 5.5% |
| GA | 21 | 112 | 3,468 | 6.7% | 5.3% |
| OH | 21 | 127 | 3,269 | 6.3% | 6.0% |
| NC | 16 | 93 | 2,990 | 5.7% | 4.4% |
| FL | 14 | 96 | 2,659 | 5.1% | 4.6% |
| TN | 15 | 83 | 2,596 | 5.0% | 3.9% |
| VA | 15 | 76 | 2,521 | 4.8% | 3.6% |
| PA | 8 | 145 | 2,491 | 4.8% | 6.9% |
| NY | 8 | 242 | 2,114 | 4.1% | 11.5% |
| IN | 11 | 67 | 1,951 | 3.7% | 3.2% |
| MO | 10 | 60 | 1,858 | 3.6% | 2.8% |
| NJ | 10 | 55 | 1,694 | 3.3% | 2.6% |
| OK | 8 | 38 | 1,543 | 3.0% | 1.8% |
| MN | 7 | 72 | 1,449 | 2.8% | 3.4% |
| AL | 9 | 43 | 1,352 | 2.6% | 2.0% |
| SC | 7 | 54 | 1,133 | 2.2% | 2.6% |
| ME | 3 | 186 | 1,067 | 2.0% | 8.8% |
| KY | 8 | 40 | 1,063 | 2.0% | 1.9% |
| MI | 7 | 34 | 1,051 | 2.0% | 1.6% |
| MD | 5 | 41 | 856 | 1.6% | 1.9% |
| AZ | 5 | 18 | 838 | 1.6% | 0.9% |
| KS | 5 | 25 | 668 | 1.3% | 1.2% |
| CT | 3 | 9 | 590 | 1.1% | 0.4% |
| CO | 3 | 13 | 469 | 0.9% | 0.6% |
| MS | 2 | 13 | 417 | 0.8% | 0.6% |
| LA | 2 | 10 | 360 | 0.7% | 0.5% |
| UT | 2 | 22 | 336 | 0.6% | 1.0% |
| NV | 1 | 4 | 246 | 0.5% | 0.2% |
| RI | 1 | 0 | 182 | 0.3% | 0.0% |
| WI | 1 | 5 | 115 | 0.2% | 0.2% |
| **Total** | **278** | **2,107** | **$52,100** | **100.0%** | **100.0%** |

#### (1) Includes two-tenant properties.

### Our Leases

#### Lease Maturity

Our portfolio was approximately 98.9% leased as of September 30, 2024. Our cash flows from operations are primarily generated through our real estate investment portfolio and the monthly lease payments received under our long-term leases with our tenants. As of September 30, 2024, the ABR weighted average remaining term of our leases was approximately 6.7 years, excluding renewal options, and approximately 96.3% of such leases (based on ABR) have renewal options remaining. As of September 30, 2024, no more than 13.7% of our rental revenue was derived from leases that expire in any single year prior to 2030.

The following chart sets forth our annual lease expirations based upon the terms of our leases in place as of September 30, 2024 (percentages based on rental revenue):

Because substantially all of our properties are leased under long-term leases, we are not currently required to perform significant ongoing leasing activities on our properties. We have three leases, representing approximately 0.9% of our ABR, that will expire prior to December 31, 2024, each with tenant renewal options.

The following table presents our lease expirations by year as of September 30, 2024:

#### (in thousands, except for percentages and # of Properties)

| Year | ABR | % of ABR | Square Feet | % of Square Feet |
| --- | ---: | ---: | ---: | ---: |
| 2024 | $456 | 0.9% | 15 | 0.7% |
| 2025 | 2,206 | 4.2% | 72 | 3.4% |
| 2026 | 3,736 | 7.2% | 125 | 5.9% |
| 2027 | 7,158 | 13.7% | 390 | 18.5% |
| 2028 | 4,310 | 8.3% | 145 | 6.9% |
| 2029 | 5,007 | 9.6% | 187 | 8.9% |
| 2030 | 4,970 | 9.5% | 163 | 7.7% |
| 2031 | 4,483 | 8.6% | 141 | 6.7% |
| 2032 | 5,283 | 10.1% | 406 | 19.3% |
| 2033 | 2,549 | 4.9% | 67 | 3.2% |
| 2034 | 2,194 | 4.2% | 56 | 2.7% |
| 2035 | 451 | 0.9% | 20 | 0.9% |
| 2036 | 2,015 | 3.9% | 56 | 2.7% |
| 2037 | 1,327 | 2.5% | 51 | 2.4% |
| 2038 | 2,231 | 4.3% | 118 | 5.6% |
| 2039 | 634 | 1.2% | 17 | 0.8% |
| Thereafter | 3,090 | 6.0% | 61 | 2.9% |
| Untenanted Properties | - | 0.0% | 17 | 0.8% |
| **Total** | **$52,100** | **100.0%** | **2,107** | **100.0%** |

40

We typically purchase properties that are subject to existing long-term net leases with a range of lease terms (initial terms of 10 years or more at lease signing that often have renewal options as well). Substantially all of our leases are net leases, meaning our tenant generally is obligated to pay customary expenses associated with the leased property (such as real estate taxes, insurance, maintenance and repairs, and in many cases, capital costs, subject to caps and exclusions in some leases). For the nine months ended September 30, 2024, we incurred an aggregate of approximately $1.3 million of expenses not reimbursed or paid by our tenants, which includes non-recurring legal costs and property operating expenses incurred on vacant properties.

Approximately 97.4% of our leases (based on ABR) provide for periodic contractual rent escalations, generally ranging from 1.0% to 3.0% annually, with an ABR weighted average minimum increase of 1.7% per annum.

The following chart breaks down the type of rent increase provided in our leases (based on ABR) as of September 30, 2024:

### Lease Escalations

In general, when negotiating a new lease or an amendment to an existing lease in connection with an acquisition, redevelopment or new development, we seek to negotiate, among other things, relatively long lease terms and tenant renewal options; market rents; annual rent escalation provisions; landlord-favorable going dark, assignment, change of control provisions; limited or no exclusive or co-tenancy clauses that favor the tenant and obligations for certain tenants and certain guarantors to periodically provide us with financial information.

In the future, we may seek to use master lease structures where it fits market practice in the particular property type, pursuant to which we seek to lease multiple properties to an individual tenant on an all or none basis. In a master lease structure, a tenant is responsible for a single lease payment relating to the entire portfolio of leased properties, as opposed to multiple lease payments relating to individually leased properties. The master lease structure prevents a tenant from “cherry picking” locations, where it unilaterally gives up underperforming properties while maintaining its leasehold interest in well-performing properties.

### Results of Operations

The following discussion includes the results of our operations for the periods presented.

#### Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

#### (in thousands)

| For the three months ended September 30, Revenues | 2024 | 2023 | $% |  |
| --- | ---: | ---: | ---: | ---: |
| Rental revenues | $14,534 | $11,623 | $2,911 | 25% |
| **Operating expenses** |  |  |  |  |
| Depreciation and amortization | 7,119 | 6,159 | 960 | 16% |
| Property operating expenses | 2,003 | 1,314 | 689 | 52% |
| Property management fees | 494 | 397 | 97 | 24% |
| Asset management fees | 1,034 | 1,035 | (1) | (0)% |
| General and administrative expenses | 697 | 2,947 | (2,250) | (76)% |
| Total operating expenses | 11,347 | 11,852 | (505) | (4)% |
| **Other expenses** |  |  |  |  |
| Interest expense | 6,463 | 4,611 | 1,852 | 40% |
| Income taxes | 63 | 48 | 15 | 31% |
| Total other expenses | 6,526 | 4,659 | 1,867 | 40% |
| Operating loss | (3,339) | (4,888) | 1,549 | 32% |
| Equity loss from investment in an unconsolidated entity | — | (7) | 7 | 100% |
| Net loss | $(3,339) | $(4,895) | $1,556 | 32% |

#### Rental Revenues

#### (in thousands)

| For the three months ended September 30, Revenues: | 2024 | 2023 | $% |  |
| --- | ---: | ---: | ---: | ---: |
| Contractual rental amounts billed | $13,971 | $11,473 | $2,498 | 22% |
| Adjustment to recognize contractual rental amounts on a straight-line basis | 187 | 328 | (141) | (43)% |
| Variable rental amounts earned | 798 | 58 | 740 | \> 100% |
| Above/below market lease amortization, net | (423) | (316) | (107) | (34)% |
| Other income | 1 | 80 | (79) | (99)% |
| Total rental revenues | $14,534 | $11,623 | $2,911 | 25% |

The $2.5 million increase in contractual rental amounts billed was primarily attributable to a $2.0 million increase in contractual base rent from the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition, a $0.2 million increase in contractual base rent from the growth of our real estate portfolio through new acquisitions during 2023, and $0.7 million in same-store rent growth from our in-place lease escalations, partially offset by a $0.4 million decrease in contractual base rent from properties sold throughout the latter part of 2023 and the first nine months of 2024.

The $0.7 million increase in variable rental amounts earned was mainly due to lease termination fees received during the three months ended September 30, 2024.

#### Operating Expenses

#### Depreciation and amortization

The $1.0 million increase in depreciation and amortization for the three months ended September 30, 2024 was primarily due the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition and the growth of our real estate portfolio through new acquisitions in 2023.

#### Property operating expenses

The $0.7 million increase in property operating expenses was mainly due to the increase in number of properties in our portfolio. For the three months ended September 30, 2024 and 2023, we incurred $2.0 million and $1.3 million of property operating expenses, respectively, and recorded $1.2 million and $1.0 million of additional rent and recovery income included in the contract rental amounts billed, respectively. Substantially all of our leases are net leases pursuant to which our tenants generally are obligated to pay customary expenses associated with the leased property such as real estate taxes, insurance, maintenance and repairs, and in many cases capital costs. For the three months ended September 30, 2024, we incurred $0.8 million in aggregate of expenses that were not tenant obligations, which includes non-recurring legal costs and property operating expenses incurred on vacant properties.

#### General and Administrative expenses

The $2.3 million decrease in general and administrative expenses is primarily due to approximately $1.4 million in structuring and public company readiness costs and $1.3 million in Internalization expenses incurred during the three months ended September 30, 2023.

Upon completion of the Internalization and the initial public offering, our future general and administrative expenses will include, among other things, the direct employee compensation expense of 15 new employees.

#### Other expenses and income

#### Interest expense

During the year ended December 31, 2023, we drew an additional $73.9 million from the Revolving Credit Facility, which bears interest at a rate of SOFR plus 2.36%, to fund new acquisitions of real estate properties. In addition, as part of the 50/50 Joint Venture Acquisition, we consolidated the 50/50 Joint Venture’s share of the ABS debt of approximately $69.7 million, which bears interest at approximately 3.4% and the Term Loan of $17 million, which bears interest at Term SOFR plus 1.8%. The increase in borrowings from the Revolving Credit Facility and the assumption of debt relating to the 50/50 Joint Venture Acquisition, resulted in an increase in interest expense of approximately $0.9 million for CIBC debt (Revolving Credit Facility and Term Loan) and $0.6 million for ABS debt, in addition to amortization of discount costs of $0.6 million, for the three months ended September 30, 2024. This $2.1 million increase is offset by a decrease in amortization of financing costs of approximately $0.2 million. As of September 30, 2024 and September 30, 2023, the aggregate debt outstanding has a weighted average interest rate excluding amortization of deferred financing costs of 4.96% and 5.20%, respectively.

#### Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

#### (in thousands)

| For the nine months ended September 30, Revenues | 2024 | 2023 | $% |  |
| --- | ---: | ---: | ---: | ---: |
| Rental revenues | $44,403 | $33,923 | $10,480 | 31% |
| **Operating expenses** |  |  |  |  |
| Depreciation and amortization | 21,415 | 17,315 | 4,100 | 24% |
| Property operating expenses | 5,694 | 3,941 | 1,753 | 44% |
| Property management fees | 1,501 | 1,122 | 379 | 34% |
| Asset management fees | 3,102 | 3,105 | (3) | (0)% |
| General and administrative expenses | 2,059 | 6,028 | (3,969) | (66)% |
| Total operating expenses | 33,771 | 31,511 | 2,260 | 7% |
| **Other expenses (income)** |  |  |  |  |
| Interest expense | 19,755 | 11,879 | 7,876 | 66% |
| (Gain)/ loss on sale of real estate | (337) | 332 | (669) | \< (100)% |
| Impairment loss | 591 | — | 591 | 100% |
| Income taxes | 344 | 206 | 138 | 67% |
| Total other expenses | 20,353 | 12,417 | 7,936 | 64% |
| Operating loss | (9,721) | (10,005) | 284 | 3% |
| Equity income from investment in an unconsolidated entity | — | 53 | (53) | (100)% |
| Net loss | $(9,721) | $(9,952) | $231 | 2% |

43

#### Rental Revenues

#### (in thousands)

| For the nine months ended September 30, Revenues: | 2024 | 2023 | $% |  |
| --- | ---: | ---: | ---: | ---: |
| Contractual rental amounts billed | $42,987 | $33,511 | $9,476 | 28% |
| Adjustment to recognize contractual rental amounts on a straight-line basis | 964 | 901 | 63 | 7% |
| Variable rental amounts earned | 1,547 | 182 | 1,365 | \> 100% |
| Above/below market lease amortization, net | (1,338) | (892) | (446) | (50)% |
| Other income | 243 | 221 | 22 | 10% |
| Total rental revenues | $44,403 | $33,923 | $10,480 | 31% |

The $9.5 million increase in contractual rental amounts billed was primarily attributable to a $7.0 million increase in contractual base rent from the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition, a $2.3 million increase from growth of our real estate portfolio through new acquisitions during 2023, and $1.5 million of same-store rent growth from our in-place lease escalations, partially offset by a $1.2 million decrease in contractual base rent from properties sold throughout the latter part of 2023 and the first nine months of 2024.

The $1.4 million increase in variable rental amounts earned was mainly due to lease termination fees received during the nine months ended September 30 2024.

#### Operating Expenses

#### Depreciation and amortization

The $4.1 million increase in depreciation and amortization for the nine months ended September 30, 2024 was primarily due to the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition and the growth of our real estate portfolio through new acquisitions in 2023.

#### Property operating expenses

The $1.8 million increase in property operating expenses was mainly due to the increase in number of properties in our portfolio. For the nine months ended September 30, 2024 and September 30, 2023, we incurred $5.7 million and $3.9 million of property operating expenses, respectively, and recorded $4.4 million and $3.4 million of additional rent and recovery income included in the contract rental amounts billed, respectively. Substantially all of our leases are net leases pursuant to which our tenants generally are obligated to pay customary expenses associated with the leased property such as real estate taxes, insurance, maintenance and repairs, and in many cases capital costs. For the nine months ended September 30, 2024, we incurred $1.3 million in aggregate of expenses that were not tenant obligations, which includes non-recurring legal costs and property operating expenses incurred on vacant properties.

#### General and Administrative expenses

The $4.0 million decrease in general and administrative expenses is primarily due to approximately $3.1 million in structuring and public company readiness costs and $1.8 million in Internalization expenses incurred during the nine months ended September 30, 2023. This $4.9 million is offset by a $0.8 million increase in audit, tax and consulting incurred during the nine months ended September 30, 2024.

Upon completion of the Internalization and the IPO, our future general and administrative expenses will include, among other things, the direct employee compensation expense of 15 new employees.

#### Other expenses and income

#### Interest expense

During the year ended December 31, 2023, we drew an additional $73.9 million from the Revolving Credit Facility, which bears interest at a rate of SOFR plus 2.36%, to fund new acquisitions of real estate properties. In addition, as part of the 50/50 Joint Venture Acquisition, we consolidated the 50/50 Joint Venture’s share of the ABS debt of approximately $69.7 million, which bears interest at approximately 3.4% and the Term Loan of $17 million, which bears interest at Term SOFR plus 1.8%. The increase in borrowings from the Revolving Credit Facility and the assumption of debt relating to the 50/50 Joint Venture Acquisition, resulted in an increase in interest expense of approximately $5.0 million for CIBC debt (Revolving Credit Facility and Term Loan) and $1.7 million for ABS debt, in addition to amortization of discount costs of $1.8 million, for the nine months ended September 30, 2024. This $8.5 million increase is offset by a decrease in amortization of financing costs of approximately $0.5 million. As of September 30, 2024 and September 30, 2023, the aggregate debt outstanding has a weighted average interest rate excluding amortization of deferred financing costs of 4.96% and 5.20%, respectively.

#### Gain on sale of real estate

During the nine months ended September 30, 2024, we sold five properties at a net gain of approximately $0.3 million. During the nine months ended September 30, 2023, we sold one property at loss of approximately $0.3 million.

#### Impairment loss

During the nine months ended September 30, 2024, we recorded an impairment loss of $0.6 million relating to an asset held for investment. The amount of impairment fluctuates each period based on existing facts and circumstances.

### Liquidity and Capital Resources

#### Liquidity/REIT Requirements

Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs. As a REIT, we are required to distribute to our stockholders at least 90% of our taxable income determined without regard to the dividends paid deduction and excluding net capital gain, on an annual basis. As a result, it is unlikely that we will be able to retain substantial cash balances to meet our liquidity needs from our annual taxable income. Instead, we expect to meet our liquidity needs primarily by relying upon external sources of capital, such as borrowings under our debt facilities or additional equity or preferred offerings or other capital raises, which would all be subject to a number of market and other factors in order to be successfully accessible.

#### Short-term Liquidity Requirements

Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt and to pay distributions. Since our portfolio has had a historically strong occupancy level and substantially all of our leases are net leases, we do not currently anticipate making significant capital expenditures or incurring other significant property operating costs (unless vacancies adjust beyond historical norms) that would materially adversely impact short-term financial liquidity. We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances, net cash provided by operating activities, and borrowings under our New Revolving Credit Facility and New Delayed Draw Term Loan or through the issuance of debt or equity instruments subject to market conditions.

#### Long-term Liquidity Requirements

Our long-term liquidity requirements consist primarily of funds necessary to repay debt, including $253.2 million of debt (net of fees) that is anticipated to be repaid in December 2024, and to invest in additional revenue generating properties. Debt capital is provided through our New Revolving Credit Facility and New Delayed Draw Term Loan, as well as potentially through the issuance of debt and equity instruments subject to market conditions and Company operating performance. The source and mix of our debt capital in the future will be impacted by market conditions. We plan to prudently balance our debt portfolio with a combination of fixed and floating rate debt and will evaluate opportunities to hedge certain interest rate risk where appropriate.

We expect to meet our long-term liquidity requirements primarily from borrowings under our New Revolving Credit Facility and New Delayed Draw Term Loan, any future debt and equity financings, and proceeds from limited sales of our properties. Our ability to access these capital sources may be impacted by unfavorable market conditions, particularly in the debt and equity capital markets and the real estate market in general, that are outside of our control. In addition, our success will depend on our operating performance, our borrowing restrictions, our degree of leverage, market perceptions of the Company, our access to debt, equity or other capital instruments and other factors. Our acquisition growth strategy significantly depends on our ability to obtain acquisition-financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization.

#### Pro Forma Liquidity and Capital

As of September 30, 2024, we had on a pro forma basis $93.3 million of cash and cash equivalents. In addition, upon completion of the initial public offering and following the repayment of our obligations under the ABS Notes in December, we expect to have $196.5 million of available borrowing capacity under our New Revolving Credit Facility. We believe that following completion of our initial public offering, we have access to capital sufficient to meet our capital needs for the reasonably foreseeable future.

#### Target Leverage

We have pro forma total debt outstanding of $249.9 million (net of fees), pro forma Net Debt of $160.2 million, and a pro forma Net Debt-to-Annualized Adjusted EBITDAre ratio of approximately 3.9x. Our long-term goal is to target a net debt-to-annualized adjusted EBITDAre ratio of 6.0x or below. We may from time to time modify our leverage policy in light of then current economic conditions, relative costs and availability of debt and equity capital, changes in the market price of our Common Stock, acquisition opportunities, and other factors.

#### Equity Capital Resources

As a new publicly traded REIT we plan to access the public equity markets to maintain an appropriate mix of debt and equity in line with our leverage policy, primarily through follow-on equity offerings and eventually through an at-the-market common equity offering program (“ATM Program”) once we are shelf eligible. Our public offerings will be used to repay debt, fund acquisitions, and for other general corporate purposes.

### Description of Certain Debt Outstanding After Our Initial Public Offering

The following is a summary of the material provisions of our ABS Notes, New Revolving Credit Facility and New Delayed Draw Term Loan.

#### ABS Notes

As of September 30, 2024, $253.2 million aggregate principal amount of the ABS Notes issued by affiliates of our predecessor were outstanding (net of fees) and interest on the ABS Notes accrues at an annual rate equal to 3.4%. The anticipated repayment date for the ABS Notes is in December 2024. The ABS Notes are secured by liens on 132 outparcel properties, which represented 47.5% of our total outparcel properties based on the number of properties as of September 30, 2024.

#### New Revolving Credit Facility

Upon closing of our initial public offering, a group of lenders, including JPMorgan Chase Bank, N.A. acts as administrative agent, provided commitments for our New Revolving Credit Facility, allowing borrowings of up to $250 million, including $20 million available for issuance of letters of credit. Our New Revolving Credit Facility has an initial maturity in October 2027 together with two 12-month extension options, subject to certain conditions, including payment of a 0.125% fee on the aggregate outstanding amount of the revolving commitments.

The New Revolving Credit Facility contains a commitment fee of 0.15% per annum if average daily usage in such quarter is over 50% of total revolving commitments and 0.25% per annum if average daily usage in such quarter is equal to or less than 50% of total revolving commitments. Borrowings under our New Revolving Credit Facility will bear interest at floating rates based on adjusted SOFR plus an applicable margin based on our leverage ratio ranging between 1.20% and 1.75% per annum. As of September 30, 2024, the applicable margin was 1.20%.

The New Revolving Credit Facility contains an applicable facility fee based on our credit rating ranging between 0.125% and 0.30% per annum. As of September 30, 2024, the applicable facility fee was 0.30%.

#### New Delayed Draw Term Loan

Upon closing of our initial public offering, a group of lenders, including JPMorgan Chase Bank, N.A. as administrative agent, provided commitments for our New Delayed Draw Term Loan, allowing borrowings of up to $200 million. Our New Delayed Draw Term Loan is available to be drawn until October 2025 and has an initial maturity of October 2027 together with two 12-month extension options, at our election, subject to certain conditions including payment of a 0.125% fee on the aggregate outstanding principal amount of the term loan. We plan to use the New Delayed Draw Term Loan to repay our ABS Notes when they mature in December 2024. Our New Delayed Draw Term Loan includes a ticking fee of 0.20% per annum on the average daily amount of unfunded term loan commitments.

Borrowings under our New Delayed Draw Term Loan bear interest at floating rates based on Adjusted SOFR plus an applicable margin based on our leverage ratio ranging between 1.20% and 1.75% per annum. As of September 30, 2024, the applicable margin was 1.20%.

#### Covenants

We will be subject to various covenants and financial reporting requirements pursuant to our New Revolving Credit Facility and New Delayed Draw Term Loan. The table below summarizes the applicable financial covenants. If a default or event of default exists, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification.

| Covenants | Required | Revolving Credit Facility |
| --- | --- | ---: |
| Total Leverage Ratio | ≤ 60% | 30.9% |
| Adjusted EBITDA to Fixed Charges Ratio | ≥ 1.50 to 1.00 | 2.3x |
| Secured Leverage Ratio(1) | ≤ 40% | 0.0% |
| Unencumbered NOI to Unsecured Interest Expense Ratio | ≥ 1.75 to 1.00 | 3.2x |
| Unsecured Leverage Ratio | ≤ 60% | 30.9% |
| Tangible Net Worth | ≥ sum of 75% of the Tangible Net Worth on completion of this offering plus 70% of equity issuance proceeds | (2) |

#### (1) IPO Proceeds used to pay off debt such that there are no secured borrowings.

#### (2) Prospective covenant

#### Contractual Obligations

The following table provides information with respect to our contractual commitments and obligations as of September 30, 2024. Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations.

#### (in thousands)

| Year of Maturity | New Revolving Credit Facility (a) | New Delayed Draw Term Loan (a) | ABS Notes | Interest Expense (b) | Commitments to Fund Investments (c) | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Remainder of 2024 | $— | $— | $253,499 | $2,134 | $37,808 | $293,441 |
| 2025 | — | — | — | — | — | — |
| 2026 | — | — | — | — | — | — |
| 2027 | — | — | — | — | — | — |
| 2028 | — | — | — | — | — | — |
| Thereafter | — | — | — | — | — | — |
| Total | $— | $— | $253,499 | $2,134 | $37,808 | $293,441 |

*(a) Our New Revolving Credit Facility and New Delayed Draw Term Loan contain two 12-month extension options subject to certain conditions, including the payment of an extension fee equal to 0.125% of the commitments.*

*(b) Interest expense is projected based on the outstanding borrowings and interest rates in effect as of September 30, 2024.*

*(c) Amounts include acquisitions under control, defined as under contract or executed letter of intent.*

### Derivative Instruments and Hedging Activities

We may be exposed to interest rate risk arising from changes in interest rates on any floating-rate borrowings that we make under our New Revolving Credit Facility and New Delayed Draw Term Loan or other debt or capital instruments that bear interest. Borrowings under our New Revolving Credit Facility and New Delayed Draw Term Loan will bear interest at floating rates based on SOFR plus an applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, decrease or increase our net income and cash flow.

In the future, we may attempt to manage our interest rate risk by entering into interest rate swaps or other hedging arrangements. Under these agreements, we will receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our variable-rate borrowings. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.

### Cash Flows

Cash, cash equivalents and restricted cash totaled $9.9 million as of September 30, 2024 as compared to $15.2 million as of September 30, 2023. The table below shows information concerning cash flows for the nine months ended September 30, 2024 and 2023:

*(in thousands)*

|  | For the nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $15,272 | $15,590 |
| Net cash provided by/ (used in) investing activities | 7,934 | (72,202) |
| Net cash (used in)/ provided by financing activities | (30,440) | 30,708 |
| Net decrease in cash and cash equivalents and restricted cash | $(7,234) | $(25,904) |

The change in net cash provided by operating activities during the nine months ended September 30, 2024 as compared to nine months ended September 30, 2023 was mainly due to increase in rental revenues of approximately $10.5 million offset by approximately $7.9 million increase in interest expense during the nine months ended September 30, 2024 and approximately $1.3 million of one-time structuring and public company readiness costs paid during the nine months ended September 30, 2024. The remainder of the change in net cash provided by operating activities relates to timing of payment of payables and accrued liabilities.

During the nine months ended September 30, 2024, there were five properties sold and no properties acquired compared to one property sold and 25 properties acquired during the nine months ended September 30, 2023 which is reflected in the change in net cash provided by (used in) investing activities.

The decrease in net cash provided by financing activities during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 is mainly due to a net repayment of debt, net of $20.9 million compared to $39.8 million net proceeds from debt, net, respectively.

### Non-GAAP Financial Measures

Our reported results and net earnings per diluted share are presented in accordance with GAAP. We also disclose FFO, AFFO, EBITDA, EBITDAre, adjusted EBITDAre, annualized adjusted EBITDAre and net debt, each of which are non-GAAP measures. We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.

We compute FFO in accordance with the standards established by the Board of Governors of Nareit. Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets. To derive AFFO, we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash or non-recurring revenues and expenses, including straight-line rents, cost of debt extinguishments, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, Internalization expenses, structuring and public company readiness costs, extraordinary items, and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.

Our leases typically include cash rents that increase through lease escalations over the term of the lease. Our leases do not typically include significant front-loading or back-loading of payments, or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. We further exclude costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, Internalization expenses, and structuring and public company readiness costs, as these items are not indicative of ongoing operational results. We use AFFO as a measure of our performance when we formulate corporate goals.

FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers, primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by one-time cash and non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO and AFFO with the same or similar measures disclosed by other REITs may not be meaningful. FFO and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures.

Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments to FFO that we use to calculate AFFO. In the future, the SEC, Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of AFFO accordingly.

The following is a reconciliation of historical and pro forma net income (which is the most comparable GAAP measure) to FFO and AFFO:

### Reconciliation of Historical and pro forma net income to FFO and AFFO

*(unaudited, in thousands)*

|  | For the three months ended September 30, Pro Forma 2024 | Historical 2024 | Historical 2023 | For the nine months ended September 30, Pro Forma 2024 | Historical 2024 | Historical 2023 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Net loss** | $(1,764) | $(3,339) | $(4,895) | $(6,603) | $(9,721) | $(9,952) |
| Depreciation on real property and amortization of real estate intangibles | 7,114 | 7,119 | 6,159 | 21,363 | 21,415 | 17,315 |
| Share of 50/50 Joint Venture's depreciation on real property and amortization of real estate intangibles | — | — | 566 | — | — | 1,683 |
| (Gain) loss on sale of real estate | — | — | — | — | (337) | 332 |
| Share of 50/50 Joint Venture's gain on sale of real estate | — | — | — | — | — | (260) |
| Impairment loss on real estate held for investment | — | — | — | 591 | 591 | — |
| **FFO** | $5,350 | $3,780 | $1,830 | $15,351 | $11,948 | $9,118 |
| Straight-line rent adjustments | (187) | (187) | (328) | (915) | (964) | (901) |
| Share of 50/50 Joint Venture's straight-line rent adjustments | — | — | 24 | — | — | (35) |
| Amortization of financing transaction and discount costs | 396 | 1,053 | 608 | 1,188 | 3,145 | 1,774 |
| Share of 50/50 Joint Venture's amortization of debt issuance cost | — | — | 72 | — | — | 210 |
| Amortization of above/below market lease intangibles | 423 | 423 | 316 | 1,326 | 1,338 | 892 |
| Share of 50/50 Joint Venture's amortization of above/below market lease intangibles | — | — | 28 | — | — | 84 |
| Stock-based compensation | 986 | — | — | 2,957 | — | — |
| Lease termination fees | (747) | (747) | — | (747) | (1,384) | — |
| Adjustment for structuring and public company readiness costs | — | 440 | 1,162 | — | 514 | 3,113 |
| Adjustment for Internalization expenses | — | — | 1,339 | — | — | 1,787 |
| **AFFO** | $6,221 | $4,762 | $5,051 | $19,160 | $14,597 | $16,042 |

We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry. We believe that this ratio provides investors and analysts with a measure of our leverage that includes our operating results unaffected by the differences in capital structures, capital investment cycles and useful life of related assets compared to other companies in our industry. In 2017, Nareit issued a white paper recommending that companies that report EBITDA also report EBITDAre in financial reports. We compute EBITDAre in accordance with the definition adopted by Nareit. Nareit defines EBITDAre as EBITDA (as defined above) excluding gains (loss) from the sales of depreciable property and provisions for impairment on investment in real estate. We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs.

EBITDA and EBITDAre are not measures of financial performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

We compute adjusted EBITDAre as EBITDAre for the applicable quarter, as adjusted to (i) reflect all investment and disposition activity that took place during the applicable quarter as if each transaction had been completed on the first day of the quarter, (ii) exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, (iii) eliminate the impact of lease termination fees from certain of our tenants, and (iv) exclude non-cash stock-based compensation expense. Annualized adjusted EBITDAre is calculated by multiplying adjusted EBITDAre for the applicable quarter by four, which we believe provides a meaningful estimate of our current run rate for all of our investments as of the end of the most recently completed quarter given the contractual nature of our long term net leases. You should not unduly rely on this measure as it is based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre for future periods may be significantly different from our annualized adjusted EBITDAre.

The following table reconciles net income (which is the most comparable to GAAP measure) to EBITDA, EBITDAre, adjusted EBITDAre, and annualized adjusted EBITDAre.

### Reconciliation of net income to EBITDA and EBITDAre

*(unaudited, in thousands)*

|  | For the three months ended September 30, Pro Forma 2024 | Historical 2024 | Historical 2023 |
| --- | ---: | ---: | ---: |
| **Net loss** | $(1,764) | $(3,339) | $(4,895) |
| Depreciation and amortization | 7,537 | 7,542 | 6,475 |
| Share of 50/50 Joint Venture's depreciation and amortization | — | — | 594 |
| Interest expense | 4,269 | 6,463 | 4,611 |
| Share of 50/50 Joint Venture's interest expense | — | — | 523 |
| Income taxes | 63 | 63 | 48 |
| Share of 50/50 Joint Venture's income taxes | — | — | 9 |
| **EBITDA** | $10,105 | $10,729 | $7,365 |
| (Gain) loss on sale of real estate | — | — | — |
| Share of 50/50 Joint Venture's gain on sale of real estate | — | — | — |
| **EBITDAre** | $10,105 | $10,729 | $7,365 |
| Adjustment for non-cash compensation expense (1) | 986 | — | — |
| Adjustment to exclude non-recurring expenses (income) (2) | (747) | (307) | 2,501 |
| Adjusted EBITDAre | 10,344 | 10,422 | 9,866 |
| Annualized EBITDAre | 40,420 | 42,916 | 29,460 |
| Annualized adjusted EBITDAre | $41,376 | $41,688 | $39,464 |

#### (1) Reflects an adjustment to exclude non-cash stock-based compensation expense.

*(2) Reflects an adjustment to exclude non-recurring expenses including IPO costs and lease termination fees.*

Net Debt is a non-GAAP financial measure. We define Net Debt as our Gross Debt less cash, cash equivalents and restricted cash. The ratios of Net Debt to EBITDAre and Net Debt to Annualized Adjusted EBITDAre represent Net Debt as of the end of the applicable period divided by EBITDAre or Annualized Adjusted EBITDAre for the period, respectively. We believe that these ratios are useful to investors and analysts because they provide information about Gross Debt less cash and cash equivalents, which could be useful to repay debt, compared to our performance as measured using EBITDAre and Annualized Adjusted EBITDAre, which are described above.

The following table reconciles total debt (which is the most comparable GAAP measure) to Net Debt, and presents the ratios of Net Debt to EBITDAre and Net Debt to Annualized Adjusted EBITDAre:

### Reconciliation of total debt to Net Debt and ratio of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre

*(in thousands)*

| Debt | September 30, Pro Forma 2024 | Historical 2024 |
| --- | ---: | ---: |
| New Delayed Draw Term Loan | $200,000 | $— |
| New Revolving Credit Facility | 53,499 | — |
| ABS Notes | — | 253,499 |
| Revolving Credit Facility | — | 150,000 |
| Term Loan Credit Facility | — | 15,967 |
| **Gross Debt** | 253,499 | 419,466 |
| Cash, cash equivalents and restricted cash | (93,261) | (9,895) |
| **Net Debt** | $160,238 | $409,571 |
| **Leverage Ratios:** |  |  |
| Net Debt to Annualized EBITDAre | 4.0 | 9.5 |
| Net Debt to Annualized Adjusted EBITDAre | 3.9 | 9.8 |

### Critical Accounting Policies and Estimates

The preparation of the historical consolidated financial statements in conformance with GAAP requires management to make estimates and assumptions that are subjective in nature and affect the reported amounts of assets, liabilities, revenues, and expenses as well as other disclosures in the consolidated financial statements. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates and assumptions, however, our actual results could differ materially from our estimates. A summary of our significant accounting policies is included in Note 2—Accounting Policies for Financial Statements, contained in the condensed consolidated financial statements included elsewhere in this Form 10-Q. Management believes the following critical accounting policies affect its more significant estimates and assumptions used in the preparation of our consolidated financial statements.

#### Purchase Price Allocation of Acquired Properties

Upon acquisition of real estate held for investment considered to be an asset acquisition, we capitalized the purchase price (including related acquisition costs) as part of the cost basis. We allocate the purchase price between land, buildings and improvements, site improvements, and identifiable intangible assets and liabilities such as amounts related to in-place leases and origination costs acquired, above- and below-market leases, based upon their fair values. The allocation of the purchase price requires judgment and significant estimates. The fair value of the land and building assets is determined on an as-if-vacant basis.

Above- and below-market leases are based upon a comparison between existing leases upon acquisition and current market rents for similar real estate. The fair value of above- and below-market leases is equal to the aggregate present value of the spread between the contract and the market rate of each of the in-place leases over their remaining term. The fair values of in-place leases and origination costs are determined based on the estimates of carrying costs during the expected lease-up periods and costs that would be incurred to put the existing leases in place under the same market terms and conditions.

We use multiple sources to estimate fair value, including information obtained about each property as a result of our pre-acquisition due diligence and marketing and leasing activities. We also consider information and other factors that impact the determination of fair value such as market conditions, industry conditions that the tenant operates in, characteristics of the real estate (e.g., location, size, value of comparative rental rates, traffic count) and tenant credit profile.

#### Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If such impairment is present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The net recoverable amount represents the undiscounted estimated future cash flow expected to be earned from the long-lived asset. In the case of real estate, the undiscounted estimated future cash flows are based on expected cash flows from the use and eventual disposition of the property. We estimate fair value using data such as operating income, estimated capitalization rates or multiples, and with regards to assets held for sale, negotiated selling price, less estimated costs of disposal.

### Impact of Recent Accounting Pronouncements

For information on the impact of recent accounting pronouncements on our business, see Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this Form 10-Q.

## Market risk

As filed, 1,530 characters.

We may be exposed to interest rate risk arising from changes in interest rates on any floating-rate borrowings we make under our New Revolving Credit Facility or New Delayed Draw Term Loan or other debt or other capital instruments that bear interest. Borrowings under our New Revolving Credit Facility and New Delayed Draw Term Loan will bear interest at floating rates based on SOFR plus an applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, decrease or increase our net income and cash flow. In the future, we may manage a portion of our interest rate risk by entering into interest rate swaps or other hedging arrangements. To the extent that we seek to do so, our interest rate risk management strategy will be intended to stabilize cash flow requirements by maintaining interest rate swaps to convert certain variable-rate debt to a fixed rate. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes. Refinancing of any of our debt instruments would also be subject to market conditions at the time of such refinancing and our operational performance, which could require principal paydowns and equity injections due to limited financing sources being available at the time.

As of September 30, 2024 and December 31, 2023, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk or other relevant market rates or prices.

## Controls and procedures

As filed, 1,110 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of and for the quarter ended September 30, 2024, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Co-Chief Executive Officers and Chief Financial Officer. Based on the foregoing, our Co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

## Risk factors

As filed, 124 characters.

There have been no material changes from the risk factors set forth in our Prospectus filed with the SEC on October 2, 2024.

Filed Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-127114. Last ingested by Listed: Nov 5, 2026, 16:50 ET. No prices; not investment advice.