# Inland Real Estate Income Trust, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Inland Real Estate Income Trust, Inc.](/companies/inre.md) (CIK 1528985)
- Form: 10-Q
- Filed: 2025-05-07
- Accepted by EDGAR: May 7, 2025, 16:31 ET
- Period: 2025-03-31
- Accession: 0000950170-25-065772
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1528985/000095017025065772/ireit-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1528985/000095017025065772/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $38.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $9.7m | us-gaap:InterestExpense |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$2.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 36,104,130 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $11.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $4.9m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2025-03-31 | $8.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2025-03-31 | $1.28bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $920.7m | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $836.0m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2025-03-31 | $356.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 44,022 characters.

*Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words such as “may,” “could,” “should,” “expect,” “intend,” “plan,” “goal,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “variables,” “potential,” “continue,” “expand,” “maintain,” “create,” “strategies,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions, are intended to identify forward-looking statements.*

*These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of the management of Inland Real Estate Income Trust, Inc. (which we refer to herein as the “Company,” “we,” “our” or “us”) based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described under “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on March 5, 2025, some of which are summarized below:*

- *Our board is reviewing strategic alternatives, including sale of the Company. There is no set timeline for completing this review and no assurance that the review of strategic alternatives will lead to a sale of the Company or some other liquidity event or the price that stockholders may receive in a sale or have available in an alternative liquidity event;*
- *During the pendency of our board’s review of strategic alternatives, we do not expect to acquire new properties or engage in redevelopment activities which may negatively impact our ability to grow our assets and income;*
- *There are inherent risks with real estate investments. For example, an investment in real estate cannot generally be quickly sold, limiting our ability to promptly vary our portfolio in response to changing economic, financial and investment conditions. Investments in real estate assets also are subject to adverse changes in general economic conditions which, for example, reduce the demand for rental space;*
- *Volatility in financial markets and challenging economic conditions may adversely affect our ability to refinance maturing debt on terms and conditions acceptable to us, if at all;*
- *Market disruptions and uncertainties resulting from any future global pandemic or epidemic, the ongoing hostilities between Israel and Hamas and between Russia and Ukraine, NATO and the international community’s response thereto and other geopolitical events affecting the financing markets generally, inflation, tariffs, changes in governmental programs or spending, volatility in interest rates, supply chain shortages that affect our tenants or other disruptions caused by events beyond our control may adversely impact the economy generally and the retail sector in particular;*
- *We have incurred net losses on a GAAP basis for the three months ended March 31, 2025 and 2024, and for the year ended December 31, 2024, and future net losses could have a material adverse impact on our financial condition, operations, cash flow, and our ability to service our indebtedness or pay distributions to our stockholders;*
- *Our Business Manager and its affiliates face conflicts of interest caused by, among other things, their compensation arrangements with us, and the simultaneous overlapping leadership roles certain of our executive officers have at the Business Manager and its affiliates, which could result in actions that are not in the long-term best interests of our stockholders;*
- *Our Sponsor may face a conflict of interest in allocating personnel and resources between its affiliates, our Business Manager and our Real Estate Manager;*
- *We do not have arm’s-length agreements with our Business Manager, our Real Estate Manager or any other affiliates of our Sponsor;*
- *We pay fees, which may be significant, to our Business Manager, Real Estate Manager and other affiliates of our Sponsor;*
- *Our properties may compete with the properties owned by other programs sponsored by our Sponsor or Inland Private Capital Corporation for, among other things, tenants;*
- *Our Business Manager is under no obligation, and may not agree, to forgo or defer its business management fee; and*
- *If we fail to continue to qualify as a REIT, our operations and distributions to stockholders, if any, will be adversely affected.*

*Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Quarterly Report, and may ultimately prove to be incorrect or false. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results except as required by* *applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.*

The following discussion and analysis relates to the three months ended March 31, 2025 and 2024 and as of March 31, 2025 and December 31, 2024. Our stockholders should read the following discussion and analysis along with our consolidated financial statements and the related notes included in this Quarterly Report on Form 10-Q.

We routinely post important information about us and our business, including financial and other information for investors, on our website. We encourage investors to visit our website at inland-investments.com/inland-income-trust from time to time, as information is updated and new information is posted.

### Overview

We were formed as a Maryland corporation on August 24, 2011 to acquire and manage a portfolio of commercial real estate investments located in the United States. We elected to be taxed as a real estate investment trust for U.S. federal income tax purposes (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the tax year ended December 31, 2013. Our strategic plan, implemented with a view toward creating a liquidity event for stockholders, has recently focused primarily on acquiring and owning a portfolio substantially all of which is comprised of grocery-anchored properties. On September 18, 2024, we announced our board’s decision to review strategic alternatives, including the sale of the Company. The board engaged a financial advisor to assist with this review and has conducted an outreach to entities viewed as potential purchasers seeking offers for the entire Company. This process is continuing but there is no timeline for completing this review, especially in light of volatility and uncertainty existing in the market relating to tariffs, interest rates and economic conditions. There is no assurance that a sale, merger or other transaction creating a liquidity event will result from the process or the price or value that may be agreed upon in any such transaction. The board may further reevaluate other alternatives or decide to suspend or terminate its review of strategic alternatives and continue operating pursuant to our existing strategic plan. During the pendency of this review, we do not expect to acquire any properties or redevelop existing properties although we may sell properties on an individual basis.

We raised equity capital through a “best efforts” offering that commenced on October 18, 2012, and concluded on October 16, 2015. We sold 33,534,022 shares of common stock in the offering generating gross proceeds of $834.4 million. We have also generated equity capital through the sale of shares through our DRP. As of March 31, 2025, we had issued a total of 6,760,659 shares through the DRP generating aggregate proceeds of $148.1 million. The DRP has, however, been suspended pending the board’s review of strategic alternatives.

As of March 31, 2025, we owned 52 retail properties, totaling 7.2 million square feet located in 24 states. A majority of our properties are multi-tenant, necessity-based retail shopping centers located primarily in major regional markets and growing secondary markets throughout the United States. As of March 31, 2025, grocery-anchored or grocery shadow-anchored shopping center properties represented 87% of our annualized base rent. A grocery shadow-anchored shopping center is a shopping center near a grocery store that we do not own and is not a part of our shopping center but that we believe generates traffic for our shopping center. As of March 31, 2025, our portfolio had physical and economic occupancy of 90.9% and 91.5%, respectively. Physical and economic occupancy declined approximately 2.2% and 1.9%, respectively, from December 31, 2024, as a result of certain anchor tenants vacating their locations. As of March 31, 2025, annualized base rent (“ABR”) per square foot averaged $19.96 for all owned properties. ABR is calculated by annualizing the monthly base rent for leases in-place as of the applicable date, excluding ground leases. ABR including ground leases averaged $17.06 as of March 31, 2025. There were no acquisitions or dispositions during the three months ended March 31, 2025.

We have no employees and are externally managed and advised by IREIT Business Manager & Advisor, Inc., referred to herein as our “Business Manager,” to whom we pay fees and reimburse certain expenses for the services provided to us. Our president and chief executive officer, Mark Zalatoris, serves in these capacities pursuant to an agreement we entered into with Mr. Zalatoris which, as amended, is referred to herein as the “CEO Agreement.” Under this agreement, we compensate Mr. Zalatoris directly for his services. Our relationship with the Business Manager is governed by the Amended and Restated Fourth Business Management Agreement (the “Fourth Business Management Agreement”) that we have entered into with the Business Manager. Under the Fourth Business Management Agreement, we pay the Business Manager a fee for the services it provides to the Company and reimburse the Business Manager for certain expenses that it incurs on the Company’s behalf. The fee that we pay to the Business Manager is reduced dollar for dollar for amounts we pay to Mr. Zalatoris under the CEO Agreement. Mr. Zalatoris is not an employee of the Company and is not an officer or director of the Business Manager but has the authority under the CEO Agreement and the Fourth Business Management Agreement to direct the day-to-day operations of the Business Manager. Our properties are managed by Inland Commercial Real Estate Services LLC, an indirect wholly owned subsidiary of our Sponsor.

### Inflation and Interest Rates

Inflationary pressures and volatility in interest rates, as well as the imposition of new duties, tariffs, trade barriers and retaliatory countermeasures by the U.S. and other governments, could reduce consumer spending and adversely impact retailer profitability, particularly if rates rise which may impact our ability to increase rents as well as tenant demand for new and existing store locations. Regardless of inflation levels, base rent under most of our long-term anchor leases remain constant (subject to tenants’ exercise of renewal options at pre-negotiated rent increases) until the expiration of their lease terms, regardless of the inflation rate for any particular period. While many of our leases require tenants to pay their share of shopping center operating expenses (including common area maintenance, real estate tax and insurance expenses), our ability to collect the expense increases passed through to tenants is dependent on their ability to absorb and pay these increases. Inflation may also impact other aspects of our operating costs, including fees paid to service providers, the cost to complete redevelopments and build-outs of recently leased vacancies and interest rate costs relating to variable rate loans and refinancing of lower fixed-rate indebtedness. While we have not been significantly impacted by any of these items to date, no assurances can be provided that these inflationary pressures will not have a material adverse effect on our business in the future.

**SELECT PROPERTY INFORMATION** (All dollar amounts in thousands, except per square foot amounts)

### Investment Properties

|  | As of March 31, 2025 |
| --- | ---: |
| Number of properties | 52 |
| Purchase price | $1,624,667 |
| Total square footage | 7,168,608 |
| Physical occupancy | 90.9% |
| Economic occupancy | 91.5% |
| Weighted average remaining lease term (years) (a) | 4.5 |

(a) Weighted average remaining lease term is based on a weighting by ABR as of March 31, 2025.

The table below presents information for each of our investment properties as of March 31, 2025.

| Property | Location | Square Footage | Physical Occupancy | Economic Occupancy | Mortgage Balance | Interest Rate (b) |
| --- | --- | ---: | ---: | ---: | ---: | ---: |
| Newington Fair (a) | Newington, CT | 186,205 | 72.3% | 72.3% | $— | — |
| Wedgewood Commons (a) | Olive Branch, MS | 169,558 | 89.8% | 91.9% | — | — |
| Park Avenue (a) | Little Rock, AR | 78,702 | 95.6% | 95.6% | — | — |
| North Hills Square (a) | Coral Springs, FL | 63,829 | 98.1% | 98.1% | — | — |
| Mansfield Shopping Center (a) | Mansfield, TX | 148,529 | 83.7% | 83.7% | — | — |
| Lakeside Crossing (a) | Lynchburg, VA | 67,034 | 100.0% | 100.0% | — | — |
| MidTowne Shopping Center (a) | Little Rock, AR | 126,288 | 74.6% | 74.6% | — | — |
| Dogwood Festival (a) | Flowood, MS | 188,770 | 85.2% | 85.2% | — | — |
| Pick N Save Center (a) | West Bend, WI | 94,446 | 97.4% | 97.4% | — | — |
| Harris Plaza (a) | Layton, UT | 125,814 | 71.1% | 71.1% | — | — |
| Dixie Valley (a) | Louisville, KY | 119,911 | 81.2% | 81.2% | — | — |
| The Landings at Ocean Isle (a) | Ocean Isle, NC | 53,203 | 97.4% | 97.4% | — | — |
| Shoppes at Prairie Ridge (a) | Pleasant Prairie, WI | 232,606 | 98.0% | 100.0% | — | — |
| Harvest Square (a) | Harvest, AL | 70,590 | 98.0% | 98.0% | — | — |
| Heritage Square (a) | Conyers, GA | 22,510 | 84.9% | 84.9% | — | — |
| The Shoppes at Branson Hills (a) | Branson, MO | 256,244 | 95.3% | 95.3% | — | — |
| Branson Hills Plaza (a) | Branson, MO | 210,201 | 100.0% | 100.0% | — | — |
| Copps Grocery Store (a) | Stevens Point, WI | 69,911 | 100.0% | 100.0% | — | — |
| Fox Point Plaza (a) | Neenah, WI | 171,121 | 99.1% | 99.1% | — | — |
| Shoppes at Lake Park (a) | W. Valley City, UT | 52,997 | 88.2% | 88.2% | — | — |
| Plaza at Prairie Ridge (a) | Pleasant Prairie, WI | 9,035 | 100.0% | 100.0% | — | — |
| Green Tree Shopping Center (a) | Katy, TX | 147,621 | 80.3% | 95.1% | — | — |
| Eastside Junction (a) | Athens, AL | 79,675 | 94.6% | 94.6% | — | — |
| Fairgrounds Crossing (a) | Hot Springs, AR | 155,127 | 100.0% | 100.0% | — | — |
| Prattville Town Center (a) | Prattville, AL | 168,842 | 99.1% | 99.1% | — | — |
| Regal Court | Shreveport, LA | 363,061 | 92.5% | 92.5% | 26,000 | 4.55% |
| Shops at Hawk Ridge (a) | St. Louis, MO | 75,951 | 100.0% | 100.0% | — | — |
| Walgreens Plaza (a) | Jacksonville, NC | 42,219 | 52.8% | 52.8% | — | — |
| Frisco Marketplace (a) | Frisco, TX | 112,024 | 90.6% | 90.6% | — | — |
| White City (a) | Shrewsbury, MA | 256,974 | 80.1% | 80.1% | — | — |
| Yorkville Marketplace (a) | Yorkville, IL | 111,591 | 94.7% | 94.7% | — | — |
| Shoppes at Market Pointe (a) | Papillion, NE | 253,793 | 97.9% | 97.9% | — | — |
| Marketplace at El Paseo (a) | Fresno, CA | 224,683 | 99.2% | 100.0% | — | — |
| The Village at Burlington Creek | Kansas City, MO | 157,937 | 80.5% | 80.5% | 16,332 | 4.25% |
| Milford Marketplace | Milford, CT | 111,959 | 95.9% | 95.9% | 18,727 | 4.02% |
| Settlers Ridge | Pittsburgh, PA | 473,871 | 90.8% | 90.8% | 76,532 | 3.70% |
| Blossom Valley Plaza (a) | Turlock, CA | 111,435 | 98.7% | 98.7% | — | — |
| Oquirrh Mountain Marketplace (a) | South Jordan, UT | 75,950 | 97.1% | 97.1% | — | — |
| Marketplace at Tech Center (a) | Newport News, VA | 210,666 | 88.1% | 91.9% | — | — |
| Coastal North Town Center (a) | Myrtle Beach, SC | 304,662 | 98.2% | 98.2% | — | — |
| Oquirrh Mountain Marketplace II (a) | South Jordan, UT | 10,150 | 84.7% | 84.7% | — | — |
| Wilson Marketplace (a) | Wilson, NC | 311,030 | 100.0% | 100.0% | — | — |
| Pentucket Shopping Center (a) | Plaistow, NH | 198,469 | 85.8% | 85.8% | — | — |
| Hickory Tavern | Myrtle Beach, SC | 6,588 | 100.0% | 100.0% | — | — |
| New Town (a) | Owings Mill, MD | 117,593 | 45.1% | 45.1% | — | — |
| Olde Ivy Village (a) | Smyrna, GA | 46,500 | 88.5% | 96.7% | — | — |
| Northpark Village Square (a) | Santa Clarita, CA | 87,103 | 77.3% | 77.3% | — | — |
| Lower Makefield Shopping Center (a) | Lower Makefield, PA | 74,953 | 94.9% | 94.9% | — | — |
| Denton Village (a) | Denton, TX | 48,280 | 96.9% | 96.9% | — | — |
| Rusty Leaf Plaza (a) | Orange, CA | 59,188 | 95.3% | 95.3% | — | — |
| Northville Park Place (a) | Northville, MI | 78,421 | 94.3% | 94.3% | — | — |
| CityPlace (a) | Woodbury, MN | 174,788 | 98.4% | 98.4% | — | — |
| Portfolio total |  | 7,168,608 | 90.9% | 91.5% | $137,591 | 3.97% |

(a) Property is included in the pool of unencumbered properties under our Credit Facility.

(b) Portfolio total is equal to the weighted average interest rate.

### Tenancy Highlights

The following table presents information regarding the top ten tenants in our portfolio based on annualized base rent for leases in-place as of March 31, 2025.

| Tenant Name | Number of Leases | Annualized Base Rent | Percent of Total Portfolio Annualized Base Rent | Annualized Base Rent Per Square Foot | Square Footage | Percent of Total Portfolio Square Footage |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| The Kroger Co | 5 | $4,899 | 4.4% | $16.54 | 296,150 | 4.1% |
| The TJX Companies, Inc. | 14 | 3,821 | 3.4% | 10.79 | 354,070 | 4.9% |
| Ross Dress for Less, Inc. | 10 | 2,828 | 2.5% | 10.79 | 262,080 | 3.7% |
| Ulta Salon, Cosmetics & Fragrance Inc. | 11 | 2,391 | 2.1% | 21.55 | 110,958 | 1.6% |
| Amazon/Whole Foods Market Group, Inc. | 3 | 2,377 | 2.1% | 20.60 | 115,396 | 1.6% |
| Dick’s Sporting Goods, Inc. | 4 | 2,158 | 1.9% | 11.94 | 180,766 | 2.5% |
| PetSmart | 7 | 2,117 | 1.9% | 15.27 | 138,578 | 1.9% |
| Albertsons/Jewel/Shaw's | 2 | 2,090 | 1.9% | 16.34 | 127,892 | 1.8% |
| Sprouts Farmers Market, LLC | 4 | 2,051 | 1.8% | 18.14 | 113,092 | 1.6% |
| Five Below | 12 | 1,954 | 1.7% | 17.09 | 114,369 | 1.6% |
| **Top Ten Tenants** | 72 | $26,686 | 23.7% | $14.72 | 1,813,351 | 25.3% |

The following table sets forth a summary of our tenant diversity for our entire portfolio and is based on leases in-place as of March 31, 2025.

| Tenant Type | Gross Leasable Area – Square Footage | Percent of Total Gross Leasable Area | Percent of Total Annualized Base Rent |
| --- | ---: | ---: | ---: |
| Discount and Department Stores | 1,433,846 | 21.9% | 11.0% |
| Grocery | 1,331,575 | 20.3% | 17.0% |
| Home Goods | 819,541 | 12.5% | 6.9% |
| Lifestyle, Health Clubs, Books & Phones | 818,141 | 12.5% | 15.0% |
| Restaurant | 638,371 | 9.7% | 18.8% |
| Apparel & Accessories | 442,542 | 6.7% | 9.1% |
| Consumer Services, Salons, Cleaners, Banks | 341,824 | 5.2% | 9.5% |
| Pet Supplies | 261,509 | 4.0% | 4.1% |
| Sporting Goods | 201,977 | 3.1% | 2.4% |
| Health, Doctors & Health Foods | 194,663 | 3.0% | 5.2% |
| Other | 73,368 | 1.1% | 1.0% |
| Total | 6,557,357 | 100.0% | 100.0% |

The following table sets forth a summary, as of March 31, 2025, of the percent of total annualized base rent and the weighted average lease expiration by size of tenant.

| Size of Tenant | Description – Square Footage | Percent of Total Annualized Base Rent | Weighted Average Lease Expiration – Years |
| --- | --- | ---: | ---: |
| Anchor | 10,000 and over | 48% | 5.5 |
| Junior Box | 5,000-9,999 | 14% | 3.9 |
| Small Shop | Less than 5,000 | 38% | 3.5 |
| Total |  | 100% | 4.5 |

Party City, which leases space at four of our properties, filed for bankruptcy protection in December 2024. All four stores were closed as of March 31, 2025. Party City rejected their leases at all four of our locations and we currently have possession of these spaces. We are marketing all four of our spaces.

With respect to our location affected by the Container Store bankruptcy, the location is operating and that lease was assumed on January 28, 2025. Container Store exited bankruptcy in late January 2025.

With respect to our location affected by the American Freight bankruptcy, the location closed and that lease was rejected in December 2024. We are marketing the space.

### Lease Expirations

The following table sets forth a summary, as of March 31, 2025, of lease expirations scheduled to occur during the remainder of 2025 and each of the calendar years from 2026 to 2034 and thereafter, assuming no exercise of renewal options or early termination rights for leases commenced on or prior to March 31, 2025. Annualized base rent represents the rent in-place for the applicable property as of March 31, 2025. The table below includes ground leases. If ground leases are excluded, annualized base rent would equal $101,949 or $19.96 per square foot for total expiring leases.

| Lease Expiration Year | Number of Expiring Leases | Gross Leasable Area of Expiring Leases – Square Footage | Percent of Total Gross Leasable Area of Expiring Leases | Total Annualized Base Rent of Expiring Leases | Percent of Total Annualized Base Rent of Expiring Leases | Annualized Base Rent per Leased Square Foot |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| 2025 (including month-to-month) | 92 | 305,907 | 4.7% | $8,510 | 7.6% | $27.82 |
| 2026 | 104 | 461,542 | 7.0% | 10,074 | 9.0% | 21.83 |
| 2027 | 124 | 857,326 | 13.1% | 15,174 | 13.6% | 17.70 |
| 2028 | 148 | 1,425,078 | 21.7% | 18,987 | 17.0% | 13.32 |
| 2029 | 130 | 887,861 | 13.6% | 16,764 | 15.0% | 18.88 |
| 2030 | 86 | 749,718 | 11.4% | 14,271 | 12.8% | 19.03 |
| 2031 | 25 | 226,917 | 3.5% | 4,288 | 3.8% | 18.90 |
| 2032 | 29 | 198,351 | 3.0% | 4,700 | 4.2% | 23.69 |
| 2033 | 28 | 200,064 | 3.1% | 3,737 | 3.3% | 18.68 |
| 2034 | 26 | 592,405 | 9.0% | 7,365 | 6.6% | 12.43 |
| Thereafter | 21 | 652,188 | 9.9% | 7,970 | 7.1% | 12.22 |
| Leased Total | 813 | 6,557,357 | 100.0% | $111,840 | 100.0% | $17.06 |

Refer to “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Leasing Activity” for details regarding the leasing activity during the three months ended March 31, 2025.

### Liquidity and Capital Resources

### General

Our primary uses and sources of cash are as follows:

| Uses |  | Sources |  |
| --- | --- | --- | --- |
| • | Interest and principal payments on mortgage loans and Credit Facility | • | Cash receipts from our tenants |
| • | Property operating expenses | • | Sale of shares through the DRP (if reinstated) |
| • | General and administrative expenses | • | Proceeds from new or refinanced mortgage loans |
| • | Distributions to stockholders | • | Borrowing on our Credit Facility |
| • | Fees payable to our Business Manager and Real Estate Manager | • | Proceeds from sales of real estate (if any) |
| • | Repurchases of shares under the SRP (if reinstated) | • | Proceeds from issuance of securities (if any) other than through the DRP |
| • | Capital expenditures, tenant improvements and leasing commissions |  |  |
| • | Acquisitions of real estate directly or through joint ventures |  |  |
| • | Redevelopments of entire properties or certain spaces within our properties |  |  |

Historically, we have generated capital through the issuance of shares of our common stock through a best-efforts offering and through issuances pursuant to the DRP and by borrowing monies on either a secured or unsecured basis. Since 2015, we have generated the bulk of our capital through borrowings.

As of March 31, 2025, we had $125 million outstanding under the Revolving Credit Facility and $575 million outstanding under the Term Loan. As of March 31, 2025, the interest rates on the Revolving Credit Facility and the Term Loan were 6.33% and 4.30%, respectively. As of March 31, 2024, the interest rates on the Revolving Credit Facility and the Term Loan were 7.33% and 4.39%, respectively. The Revolving Credit Facility matures on February 3, 2026 subject to a twelve month extension, at the Company’s option. The Term Loan matures on February 3, 2027. As of both May 7, 2025 and March 31, 2025, we had $75 million available for borrowing under the Revolving Credit Facility, subject to the terms and conditions, including compliance with the covenants which could further limit the amount available, of the Credit Agreement that governs the Credit Facility. Although $75 million is the maximum available as of both May 7, 2025 and March 31, 2025, covenant limitations affect what we can actually draw. As of both May 7, 2025 and March 31, 2025, approximately $42 million is available to draw as additional debt under the Revolving Credit Facility. By “additional debt,” we mean debt in addition to existing debt such as existing mortgages. The properties comprising the borrowing base for the Credit Facility are not available to be used as collateral for other debt unless removed from the borrowing base, which would shrink availability under the Credit Facility.

As of March 31, 2025, we had total debt outstanding of $838 million, excluding unamortized debt issuance costs, which bore interest at a weighted average interest rate of 4.55% per annum. As of March 31, 2025, the weighted average years to maturity for our debt was 1.5 years. As of both March 31, 2025 and December 31, 2024, our borrowings were 52% of the purchase price of our investment properties. As of March 31, 2025, our cash and cash equivalents balance was $8.1 million. See *Item 1A. – “Risk Factors — The financial covenants under our credit agreement may restrict our ability to make distributions and our operating and acquisition activities. If we breach the financial covenants we could be held in default under the credit agreement, which could accelerate our repayment date and materially adversely affect our liquidity and financial condition.”* for further information.

As of May 7, 2025, in the next twelve months, we have four mortgage loans maturing with an aggregate principal balance of $137.6 million, which we intend to repay with cash flows from operating activities, cash on hand, proceeds available under the Revolving Credit Facility or proceeds from refinancing of mortgage loans. The weighted average interest rate on these four mortgage loans is 3.97% per annum as of March 31, 2025, which includes the effects of interest rate swaps. See *Item 1A. – “Risk Factors — The financial covenants under our credit agreement may restrict our ability to make distributions and our operating and acquisition activities. If we breach the financial covenants we could be held in default under the credit agreement, which could accelerate our repayment date and materially adversely affect our liquidity and financial condition.”* for further information.

During the three months ended March 31, 2025, we invested $5.2 million on capital expenditures and tenant improvements, which is approximately $2.0 million more than we did during the three months ended March 31, 2024. For the remainder of 2025, we have budgeted approximately $17.4 million for capital expenditures and tenant improvements.

As of March 31, 2025, we have paid all interest and principal amounts when due, and were in compliance with all financial covenants under the Credit Facility as amended.

### Cash Flow Analysis

*(Dollar amounts in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change 2025 vs. 2024 |
| --- | ---: | ---: | ---: |
| Net cash flows provided by operating activities | $11,794 | $11,866 | $(72) |
| Net cash flows used in investing activities | $(5,173) | $(3,144) | $(2,029) |
| Net cash flows used in financing activities | $(4,986) | $(6,989) | $2,003 |

#### Operating activities

The decrease in cash from operating activities during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to timing of receipts from tenants.

#### Investing activities

*(Dollar amounts in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change 2025 vs. 2024 |
| --- | ---: | ---: | ---: |
| Capital expenditures | $(5,173) | $(3,144) | $(2,029) |
| Net cash used in investing activities | $(5,173) | $(3,144) | $(2,029) |

The increase in cash used in investing activities during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due to an increase in capital expenditures.

#### Financing activities

*(Dollar amounts in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change 2025 vs. 2024 |
| --- | ---: | ---: | ---: |
| Total net changes related to debt | $(88) | $(2,084) | $1,996 |
| Proceeds from DRP | — | 1,691 | (1,691) |
| Shares repurchased | — | (1,691) | 1,691 |
| Distributions paid | (4,898) | (4,905) | 7 |
| Net cash used in financing activities | $(4,986) | $(6,989) | $2,003 |

During the three months ended March 31, 2025, changes in total debt decreased $2.0 million from the three months ended March 31, 2024 primarily due to lower net repayment on the credit facility in 2025 compared to 2024. During the three months ended March 31, 2025, we paid $4.9 million in distributions. As noted herein, in connection with the board’s review of strategic alternatives, the DRP and SRP have both been suspended effective October 1, 2024.

### Distributions

Distributions when declared are paid quarterly in arrears. A summary of the distributions declared, distributions paid and cash flows provided by operations for the three months ended March 31, 2025 and 2024 follows (Dollar amounts in thousands except per share amounts):

| Three Months Ended March 31, | Distributions Declared | Distributions Declared Per Share | Distributions Paid (1) Cash | Reinvested via DRP | Total | Cash Flows From Operating Activities |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| 2025 | $4,898 | $0.135600 | $4,898 | $— | $4,898 | $11,794 |
| 2024 | $4,902 | $0.135600 | $3,214 | $1,691 | $4,905 | $11,866 |

24

(1) Distributions were funded by cash flows from operating activities during the three months ended March 31, 2025 and 2024.

### Results of Operations

This section describes and compares our results of operations for the three months ended March 31, 2025 and 2024. Dollar amounts are stated in thousands.

We generate primarily all of our net operating income from property operations. All 52 investment properties we currently own were held for the entirety of both the three months ended March 31, 2025 and 2024.

Net operating income is a supplemental non-GAAP performance measure that we believe is useful to investors in measuring the operating performance of our property portfolio because our primary business is the ownership of real estate, and net operating income excludes various items included in GAAP net income that do not relate to, or are not indicative of, our property operating performance, such as depreciation and amortization and parent-level corporate expenses (including general and administrative expenses).

The following tables present the property net operating income prior to straight-line income (expense), net, amortization of intangibles, interest, and depreciation and amortization for the three months ended March 31, 2025 and 2024, along with a reconciliation to net loss, calculated in accordance with GAAP.

### Comparison of the three months ended March 31, 2025 and 2024

|  | Three Months Ended March 31, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Rental income | $38,252 | $37,059 | $1,193 |
| Other property income | 49 | 118 | (69) |
| Total income | 38,301 | 37,177 | 1,124 |
| Property operating expenses | 8,414 | 7,146 | 1,268 |
| Real estate tax expense | 4,504 | 4,783 | (279) |
| Total property operating expenses | 12,918 | 11,929 | 989 |
| Property net operating income | 25,383 | 25,248 | 135 |
| Straight-line income (expense), net | 350 | 175 | 175 |
| Amortization of intangibles and lease incentives | (16) | (55) | 39 |
| General and administrative expenses | (1,924) | (1,544) | (380) |
| Business management fee | (2,242) | (2,255) | 13 |
| Depreciation and amortization | (14,465) | (14,559) | 94 |
| Interest expense | (9,727) | (10,430) | 703 |
| Interest and other income | 40 | 82 | (42) |
| Net loss | $(2,601) | $(3,338) | $737 |

**Net loss.** Net loss was $2,601 and $3,338 for the three months ended March 31, 2025 and 2024, respectively.

**Total property net operating income.** During the three months ended March 31, 2025, property net operating income increased $135, total property income increased $1,124, and total property operating expenses including real estate tax expense increased $989.

The increase in total property income is primarily due to an increase in base rent in new leases and step-up rent on existing leases, and an increase in tenant recovery income. The increase in property operating expenses is primarily due to an increase in snow removal costs and higher repairs and maintenance costs due to the timing of projects.

**Straight-line income, net.** Straight-line income, net increased $175 in 2025 compared to 2024. The increase is primarily due to lower straight-line write-offs in 2025 compared to 2024.

**Amortization of intangibles and lease incentives.** Expense for the amortization of intangibles and lease incentives decreased $39 in 2025 compared to 2024. The decrease is primarily due to fully amortized intangible assets.

**General and administrative expenses.** General and administrative expenses increased $380 in 2025 compared to 2024. The increase is primarily due to an increase in costs in connection with the review of strategic alternatives, partially offset by the fact that we did not incur any costs to publish an Estimated Per Share NAV in 2025.

**Business management fee.** Business management fees decreased $13 in 2025 compared to 2024.

**Depreciation and amortization.** Depreciation and amortization decreased $94 in 2025 compared to 2024. The decrease is primarily due to a larger amount of fully amortized assets in 2025 compared to 2024.

**Interest expense.** Interest expense decreased $703 in 2025 compared to 2024. The decrease is primarily due to lower average debt outstanding and a lower average interest rate.

**Interest and other income.** Interest and other income decreased $42 in 2025 compared to 2024.

### Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

### Leasing Activity

The following table sets forth leasing activity during the three months ended March 31, 2025. Leases with terms of less than 12 months have been excluded from the table.

|  | Number of Leases Signed | Gross Leasable Area | New Contractual Rent per Square Foot | Prior Contractual Rent per Square Foot | % Change over Prior Annualized Base Rent | Weighted Average Lease Term | Tenant Allowances per Square Foot |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Comparable Renewal Leases | 18 | 120,074 | $21.03 | $19.58 | 7.4% | 4.7 | $— |
| Comparable New Leases | 2 | 7,396 | $38.37 | $28.82 | 33.1% | 10.0 | $37.33 |
| Non-Comparable New and Renewal Leases (a) | 13 | 37,646 | $18.55 | N/A | N/A | 5.7 | $15.02 |
| Total | 33 | 165,116 |  |  |  |  |  |

(a) Includes leases signed on units that were vacant for over 12 months, leases signed without fixed rent amounts and leases signed where the previous and current lease do not have similar lease structures.

### Non-GAAP Financial Measures

Accounting for real estate assets in accordance with GAAP assumes the value of real estate assets is reduced over time due primarily to non-cash depreciation and amortization expense. Because real estate values may rise and fall with market conditions, operating results from real estate companies that use GAAP accounting may not present a complete view of their performance. We use Funds from Operations, or “FFO”, a widely accepted metric to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or “NAREIT”, has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. On November 7, 2018, NAREIT’s Executive Board approved the White Paper restatement, effective December 15, 2018. The purpose of the restatement was not to change the fundamental definition of FFO but to clarify existing guidance. The restated definition of FFO by NAREIT is net income (loss) computed in accordance with GAAP, excluding depreciation and amortization related to real estate, excluding gains (or losses) from sales of certain real estate assets, excluding impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate and excluding gains and losses from change in control. We have adopted the restated NAREIT definition for computing FFO. Previously presented periods were not impacted.

Under GAAP, acquisition related costs are treated differently if the acquisition is a business combination or an asset acquisition. An acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and acquisition related costs will be capitalized rather than expensed when incurred. Publicly registered, non-listed REITs typically engage in a significant amount of acquisition activity in the early years of their operations, and thus incur significant acquisition related costs, during these initial years. Although other start up entities may engage in significant acquisition activity during their initial years, publicly registered, non-listed REITs are unique in that they typically have a limited timeframe during which they acquire a significant number of properties and thus incur significant acquisition related costs. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Institute for Portfolio Alternatives, or “IPA”, an industry trade group, published a standardized measure known as Modified Funds from Operations, or “MFFO”, which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

MFFO excludes expensed costs associated with investing activities, some of which are acquisition related costs that affect our operations only in periods in which properties are acquired, and other non-operating items that are included in FFO, such as straight-lining of rents as required by GAAP. By excluding costs that we consider more reflective of acquisition activities and other non-operating items, the use of MFFO provides another measure of our operating performance once our portfolio is stabilized. Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of properties. MFFO should only be used as a measurement of our operating performance while we are acquiring a significant amount of properties because it excludes, among other things, acquisition costs incurred during the periods in which properties were acquired.

We believe our definition of MFFO, a non-GAAP measure, is consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the “Practice Guideline,” issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to straight-line rents and amortization of above and below market lease assets and liabilities, accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.

Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.

Our FFO and MFFO for the three months ended March 31, 2025 and 2024 are calculated as follows:

*(Dollar amounts in thousands)*

|  |  | Three Months Ended March 31, 2025 | 2024 |
| --- | --- | ---: | ---: |
|  | Net loss | $(2,601) | $(3,338) |
| Add: | Depreciation and amortization related to investment properties | 14,465 | 14,559 |
|  | Funds from operations (FFO) | 11,864 | 11,221 |
| Less: | Amortization of acquired lease intangibles, net | (33) | 5 |
|  | Straight-line (income) expense, net | (350) | (175) |
|  | Modified funds from operations (MFFO) | $11,481 | $11,051 |

### Subsequent Events

For information related to subsequent events, reference is made to *Note 14 – “Subsequent Events”* which is included in our March 31, 2025 Notes to Consolidated Financial Statements in Item 1.

## Market risk

As filed, 5,134 characters.

### Market Risk

We are exposed to various market risks, including those caused by changes in interest rates and commodity prices. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and commodity prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We have entered into, and may continue to enter into, financial instruments to manage and reduce the impact of changes in interest rates. The counterparties are, and are expected to continue to be, major financial institutions.

### Interest Rate Risk

We are exposed to interest rate changes primarily as a result of long-term debt and the Revolving Credit Facility used to purchase properties or other real estate assets and to fund capital expenditures.

As of March 31, 2025, we had outstanding debt of $837.6 million, excluding unamortized debt issuance costs, bearing interest rates ranging from 3.70% to 6.33% per annum. The weighted average interest rate was 4.55%, which includes the effect of interest rate swaps. As of March 31, 2025, the weighted average years to maturity for our mortgages and Credit Facility payable was 1.5 years.

As of March 31, 2025, our fixed-rate debt consisted of secured mortgage financings with a carrying value of $111.6 million and a fair value of $109.4 million. Changes in interest rates do not affect interest expense incurred on our fixed-rate debt until their maturity or earlier repayment, but interest rates do affect the fair value of our fixed rate debt obligations. If market interest rates were to increase by 1% (100 basis points), the fair market value of our fixed-rate debt would decrease by $0.8 million as of March 31, 2025. If market interest rates were to decrease by 1% (100 basis points), the fair market value of our fixed-rate debt would increase by $0.8 million as of March 31, 2025.

As of March 31, 2025, we had $175 million of debt or 21% of our total debt, excluding unamortized debt issuance costs, bearing interest at variable rates with a weighted average interest rate equal to 6.30% per annum. We had additional variable rate debt subject to swap agreements of $551 million, or 66% of our total debt, excluding unamortized debt issuance costs, as of March 31, 2025.

If interest rates on all debt which bears interest at variable rates as of March 31, 2025 increased by 1% (100 basis points), the increase in interest expense would decrease earnings and cash flows by $1.8 million annually. If interest rates on all debt which bears interest at variable rates as of March 31, 2025 decreased by 1% (100 basis points), the decrease in interest expense would increase earnings and cash flows by $1.8 million annually. For the variable rate debt that matures during 2025 and 2026, if interest rates as of March 31, 2025 increased by 1% (100 basis points), the increase in interest expense would decrease earnings and cash flows by $1.3 million annually. If interest rates on such debt as of March 31, 2025 decreased by 1% (100 basis points), the decrease in interest expense would increase earnings and cash flows by $1.3 million annually.

With regard to variable rate financing, our management assesses our interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We utilize risk management control systems implemented by our Business Manager to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions.

We use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions are determined in light of the facts and circumstances existing at the time of the hedge. We have used derivative financial instruments, specifically interest rate swap contracts, to hedge against interest rate fluctuations on variable rate debt, which exposes us to both credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us because the counterparty may not perform. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We seek to manage the market risk associated with interest-rate contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. There is no assurance we will be successful.

### Derivatives

For information related to derivatives, reference is made to *Note 6 – “Debt and Derivative Instruments”* which is included in our March 31, 2025 Notes to Consolidated Financial Statements in Item 1.

## Controls and procedures

As filed, 901 characters.

### Disclosure Controls and Procedures

Our management has evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

### Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 13,292 characters.

The following risk factors amend and supplement the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2024:

***The review of strategic alternatives may not result in the sale of the Company or any other liquidity event in the near term, if at all.***

The board’s review of strategic alternatives may not result in a sale, merger or other strategic transaction or otherwise result in a liquidity event for stockholders. There is also no assurance as to how long the review will take or the outcome of the process. The outcome of any potential transaction or other liquidity event will depend on several factors many of which will be beyond our control including, among other things, market conditions including interest rates, inflation, industry trends, regulatory approvals, the availability of favorable financing for a potential transaction and the impact and uncertainty resulting from the imposition or threat of new duties, tariffs, trade barriers and retaliatory countermeasures by the U.S. and other governments on the marketplace generally and specifically, our tenants. The process of reviewing strategic alternatives is time consuming and may be distracting to the employees of our Business Manager and Real Estate Manager and may be disruptive to our business. In addition, any perceived uncertainty regarding our future operations or business may limit the ability of our Business Manager or Real Estate Manager to retain or hire qualified personnel and may impact our ability to attract or retain tenants at our properties.

***We may be unable to renew expiring leases with existing tenants or re-lease spaces to new tenants on favorable terms or at all.***

Our results of operations depend to a significant degree on our ability to continue to lease our properties, including renewing expiring leases, leasing vacant space and re-leasing space in properties where leases are expiring. As of March 31, 2025, our portfolio had physical and economic occupancy of 90.9% and 91.5%, respectively, and the weighted average lease expiration for our portfolio was 4.5 years. During the remainder of 2025, leases for approximately 8% of our portfolio, measured by total ABR expire, and in 2026, leases for approximately 9% of our portfolio, measured by total ABR expire. The existing tenants may decline to renew leases and we may not be able to find replacement tenants. We cannot guarantee that leases that are renewed or new leases will have terms that are as economically favorable to us as the expiring leases, or that substantial rent abatements, tenant improvement allowances, early termination rights or below-market renewal options will not be offered to retain tenants or attract new tenants or that we will be able to lease a property at all. We may experience significant costs in connection with re-leasing a significant number of our properties, which could materially and adversely affect us.

***We have entered into both short-term and long-term leases with some of our retail tenants. Our short-term leases may expose us to the effects of declining market rent and our long-term leases may limit our ability to adjust lease rates to fair market rental rates which may adversely affect our revenues and ultimately our ability to make distributions.***

Although as of March 31, 2025, the weighted average lease expiration for our portfolio was 4.5 years, we have entered into both short-term leases, with lease terms of fewer than three years, and long-term leases, with lease terms of greater than seven years, both of which expose us to risk. Our short-term leases expose us to the effects of declining market rent. There is no assurance that we will be able to renew these short-term leases as they expire or attract replacement tenants on comparable terms, if at all. Therefore, the returns we earn on this type of investment may be more volatile than the returns generated by properties with longer term leases.

In contrast, long-term leases do not allow for significant changes in rental payments and do not expire in the near term. If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases, significant increases in future property operating costs could result in receiving less than fair market rental rates from these leases. These circumstances would adversely affect our revenues and funds available for distribution.

***The financial covenants under our credit agreement may restrict our ability to make distributions and our operating and acquisition activities. If we breach the financial covenants we could be held in default under the credit agreement, which could accelerate our repayment date and materially adversely affect our liquidity and financial condition.***

We entered into a second amended and restated credit agreement in February 2022 for a $475.0 million Credit Facility consisting of a revolving credit facility providing initial revolving credit commitments in an aggregate amount of $200.0 million (the “Revolving Credit Facility”) and a term loan facility providing initial term loan commitments in an aggregate amount of $275.0 million (the “Term Loan”). On May 17, 2022, we entered into a First Amendment to Credit Agreement Regarding Incremental Term Loans (the “First Amendment”), amending the terms of the Credit Agreement primarily to draw an additional $300.0 million to fund the acquisition of investment properties during May 2022. The credit agreement provides us with the ability from time to time to increase the size of the Credit Facility in an amount not to exceed $1.2 billion, subject to certain conditions. Our performance of the obligations under the credit agreement, including the payment of any outstanding indebtedness, is secured by a minimum pool of 15 unencumbered properties with an unencumbered pool value of $300.0 million or above and by a guaranty by certain of our subsidiaries. As of both May 7, 2025 and March 31, 2025, we had $125 million outstanding of the $200 million available under the Revolving Credit Facility. Our maximum availability under the Revolving Credit Facility was $75 million as of both May 7, 2025 and March 31, 2025, subject to the terms and conditions, including compliance with the covenants, of the Amended and Restated Credit Agreement that governs the Credit Facility. Although $75 million is the maximum available as of both May 7, 2025 and March 31, 2025, covenant limitations, particularly the leverage ratio, affect what we can actually draw. As of both May 7, 2025 and March 31, 2025, approximately $42 million is available to draw as additional debt under the Revolving Credit Facility. By “additional debt,” we mean debt in addition to existing debt such as existing mortgages. The properties comprising the borrowing base for the Credit Facility are not available to be used as collateral for other debt unless removed from the borrowing base, which would reduce availability under the Credit Facility. Under the terms of the credit agreement, our leverage ratio generally cannot exceed 65%. As of March 31, 2025, our leverage ratio was 57%. There has been substantially less available to actually draw or undertake as additional debt than the maximum amount available, and there may be additional periods during which the amount we can actually draw or otherwise incur as additional debt is considerably less than the maximum amount available, for example, if new variants of the coronavirus, high inflation or high interest rates were to negatively affect our tenants.

The credit agreement requires compliance with certain financial covenants, including, among other conditions, a Consolidated Tangible Net Worth requirement, restrictions on indebtedness, a distribution limitation and other material covenants. Compliance with these covenants could inhibit our ability to make distributions to our stockholders and to pursue certain business initiatives or effect certain transactions that might otherwise be beneficial to us. For example, without lender consent, we may not declare and pay distributions or honor any redemption requests if any default under the agreement then exists or if distributions, excluding any distributions reinvested through our DRP, for the then-current quarter and the three immediately preceding quarters would exceed 95% of our Funds from Operations, or “FFO,” excluding acquisition expenses, or “adjusted FFO,” for that period.

The credit agreement provides for several customary events of default, including, among other things, the failure to comply with our covenants under the credit agreement, such as the “Consolidated Tangible Net Worth” covenant as defined in the credit agreement, and the failure to pay when amounts outstanding under the credit agreement become due or defaulting by us or our subsidiaries in the payment of an amount due under, or in the performance of any term, provision or condition contained in, any agreement providing for another debt arrangement, such as a mortgage, beyond certain dollar thresholds specified in our Credit Facility. Tenant bankruptcies negatively impact our compliance with the Consolidated Tangible Net Worth covenant even if the tenant continues to pay rent. There is no guarantee that our lenders under the credit agreement will grant a waiver of this covenant or any other covenant that we might be in danger of violating or required representation that we cannot make. Any merger, sale of assets, consolidation or change of control may constitute a default under the credit agreement. Defaults under the credit agreement could restrict our ability to borrow additional monies and could cause all amounts to become immediately due and payable, which would materially adversely affect our liquidity and financial condition.

***Volatility in the financial markets and challenging economic conditions could adversely affect our ability to secure debt financing on attractive terms and our ability to service any future indebtedness that we may incur.***

We have funded our capital needs almost exclusively through cash flow from operations (to the extent positive) and through draws on the Credit Facility, if needed. The domestic and international commercial real estate debt markets have been volatile resulting in increases in interest rates or changes in the expected or anticipated rate of decline and, from time to time, the tightening of underwriting standards by lenders and credit rating agencies, which limits the availability of credit and increase costs for what is available. We may also face a heightened level of interest rate risk, for example, if the U.S. Federal Reserve Board increases interest rates or decreases the pace of any reductions in response to, among other things, changing inflationary expectations. All these actions will likely lead to increases in our borrowing costs and may impact our ability to access capital on favorable terms, in a timely manner, or at all, which could adversely affect our ability to obtain funding for our capital needs, such as future acquisitions. As of March 31, 2025, we have a total of approximately $93 million and approximately $170 million of indebtedness bearing interest at a weighted rate of 3.80% and 5.80%, respectively, maturing in calendar year 2025 and 2026, respectively. A total of approximately $138 million of this debt is secured by mortgages on certain of our properties and $125 million relates to draws on the Revolving Credit Facility, the maturity of which may be extended at the Company’s option for an additional 12 months. Interest rates and the costs of hedging variable interest debt by using swaps have increased since the maturing debt was incurred. If the overall cost of borrowing increases, either by increases in the index rates or by increases in lender spreads, the increased costs may result in existing or future acquisitions generating lower overall economic returns and potentially reducing future cash flow available to us. Volatility in the debt markets may negatively impact our ability to borrow monies to finance the purchase of, or other activities related to, real estate assets. Economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio and in the collateral securing any loan investments we may make. There is no assurance that we will be able to refinance any of our indebtedness as it comes due on favorable terms, or at all. Increases in interest rates or changes in underwriting standards imposed by lenders may require us to increase the collateral securing mortgage loans or comprising the borrowing base under the Revolving Credit Facility to the extent we seek to renew the facility. We may have to use cash on hand, draws on our Credit Facility or other sources of cash to the extend available to fund additional monies to repay or refinance any indebtedness or may realize fewer proceeds from new or refinanced mortgage loans or reduced availability under the Revolving Credit Facility. If we are unable to repay or refinance any indebtedness secured by mortgages, we lose the mortgaged property in a foreclosure action.

Filed May 7, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-065772. Last ingested by Listed: Oct 24, 2026, 15:13 ET. No prices; not investment advice.