Agree Realty Corp: Form 10-Q for the period ended Sep 30, 2025

The following should be read in conjunction with the interim condensed consolidated financial statements of Agree Realty Corporation (the “Company”), a Maryland corporation, including the respective notes thereto, which are included in this Quarterly Report on Form 10-Q. The terms “Company,” “Management,” “we,” “our” and “us” refer to Agree Realty Corporation and all of its consolidated subsidiaries, including Agree Limited Partnership (the “Operating Partnership”), a Delaware limited partnership.

Cautionary Note Regarding Forward-Looking Statements

This report contains 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”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “may,” “will,” “seek,” “could,” “project” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect the Company’s results of operations, financial condition, cash flows, performance or future achievements or events. Factors which may cause actual results to differ materially from current expectations include, but are not limited to: the factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, including those set forth under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; changes in general economic, financial and real estate market conditions; the financial failure of, or other default in payment by, tenants under their leases and the potential resulting vacancies; the Company’s concentration with certain tenants and in certain markets, which may make the Company more susceptible to adverse events; changes in the Company’s business strategy; risks that the Company’s acquisition and development projects will fail to perform as expected; adverse changes and disruption in the retail sector, including due to the adverse impacts of tariffs, and the financing stability of the Company’s tenants, which could impact tenants’ ability to pay rent and expense reimbursement; the Company’s ability to pay dividends; risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions; risks related to the impacts of artificial intelligence; loss of key management personnel; the potential need to fund improvements or other capital expenditures out of operating cash flow; financing risks, such as the inability to obtain debt or equity financing on favorable terms or at all; the level and volatility of interest rates; the Company’s ability to renew or re-lease space as leases expire; limitations in the Company’s tenants’ leases on real estate tax, insurance and operating cost reimbursement obligations; loss or bankruptcy of one or more of the Company’s major tenants, and bankruptcy laws that may limit the Company’s remedies if a tenant becomes bankrupt and rejects its leases; potential liability for environmental contamination, which could result in substantial costs; the Company’s level of indebtedness, which could reduce funds available for other business purposes and reduce the Company’s operational flexibility; covenants in the Company’s credit agreements and unsecured notes, which could limit the Company’s flexibility and adversely affect its financial condition; credit market developments that may reduce availability under the Company’s revolving credit facility and commercial paper program; an increase in market interest rates which could raise the Company’s interest costs on existing and future debt; a decrease in interest rates, which may lead to additional competition for the acquisition of real estate or adversely affect the Company’s results of operations; the Company’s hedging strategies, which may not be successful in mitigating the Company’s risks associated with interest rates; legislative or regulatory changes, including changes to laws governing real estate investment trusts (“REITs”); the Company’s ability to maintain its qualification as a REIT for federal income tax purposes and the limitations imposed on its business by its status as a REIT; and the Company’s failure to qualify as a REIT for federal income tax purposes, which could adversely affect the Company’s operations and ability to make distributions.

Overview

The Company is a fully integrated REIT primarily focused on the ownership, acquisition, development and management of retail properties net leased to industry leading tenants. The Company was founded in 1971 by its current Executive Chairman, Richard Agree, and its common stock was listed on the New York Stock Exchange (“NYSE”) in 1994. The Company’s assets are held by, and all of its operations are conducted through, directly or indirectly, the Operating Partnership, of which the Company is the sole general partner and in which it held a 99.7% common interest as of September 30, 2025. Refer to Note 1*- Organization* in the Notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further information on the ownership structure. Under the agreement of limited partnership of the Operating Partnership, the Company, as the sole general partner, has exclusive responsibility and discretion in the management and control of the Operating Partnership.

As of September 30, 2025, the Company’s portfolio consisted of 2,603 properties located in all 50 states and totaling approximately 53.7 million square feet of gross leasable area (“GLA”). The portfolio was approximately 99.7% leased and had a weighted average remaining lease term of approximately 8.0 years. A significant majority of the Company’s properties are leased to national tenants and approximately 66.7% of our annualized base rent was derived from tenants, or parent entities thereof, with an investment grade credit rating from S&P Global Ratings, Moody’s Investors Service, Fitch Ratings or the National Association of Insurance Commissioners. Substantially all of our tenants are subject to net lease agreements. A net lease typically requires the tenant to be responsible for minimum monthly rent and property operating expenses including property taxes, insurance and maintenance.

The Company elected to be taxed as a REIT for federal income tax purposes commencing with the taxable year ended December 31, 1994. We believe that we have been organized and have operated in a manner that has allowed us to qualify as a REIT for federal income tax purposes and we intend to continue operating in such a manner.

Results of Operations

Overall

The Company’s real estate investment portfolio grew from approximately $7.13 billion in net investment amount representing 2,271 properties with 47.2 million square feet of GLA as of September 30, 2024 to approximately $8.30 billion in net investment amount representing 2,603 properties with 53.7 million square feet of GLA at September 30, 2025. The Company’s real estate investments were made throughout and between the periods presented and were not all outstanding for the entire period; accordingly, a portion of the increase in rental income between periods is related to recognizing revenue in 2025 on acquisitions that were made during 2024. Similarly, the full rental income impact of acquisitions made during 2025 to date will not be seen until the remainder of 2025.

Acquisitions

The following summarizes the acquisitions completed by the Company during the periods presented (dollars in thousands):

(1) Weighted-average capitalization rate for acquisitions is the sum of contractual fixed annual rents computed on a straight-line basis over the primary lease terms and anticipated annual net tenant recoveries, divided by the purchase and sales prices for occupied properties.

Development and Developer Funding Platform

The following summarizes the Company’s development and Developer Funding Platform (“DFP”) activity during the periods presented:

Dispositions

The following summarizes the Company’s disposition activity during the periods presented (dollars in thousands):

Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024 (dollars in thousands)

The variances in rental income, real estate tax expense, property operating expense and depreciation and amortization expense shown above were due to the acquisition and the ownership of an increased number of properties during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, as further described under Results of Operations - Overall above.

General and administrative expenses increased $1.8 million, or 19%, to $10.9 million for the three months ended September 30, 2025, compared to $9.1 million for the three months ended September 30, 2024. The increase was primarily the result of growth in compensation costs due to inflationary increases and higher stock-based compensation expense. General and administrative expenses as a percentage of total revenue was 5.9% for the three months ended September 30, 2025 and 2024.

Interest expense, net increased $6.3 million, or 22%, to $35.2 million for the three months ended September 30, 2025, compared to $28.9 million for the three months ended September 30, 2024. The increase in interest expense, net was primarily a result of higher levels of borrowings during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 in order to finance the acquisition and development of additional properties. Interest expense, net increased approximately $4.9 million related to the $400.0 million 2035 Senior Unsecured Public Notes that were issued in May 2025, partially offset by a decrease in interest due to the repayment of the $50.0 million 2025 Senior Unsecured Notes in May 2025. In addition, interest expense on the Revolving Credit Facility (defined below) and Commercial Paper Notes (defined below) increased approximately $1.5 million due to higher levels of borrowings, partially offset by lower average borrowing rates, during the three months ended September 30, 2025 compared to the same period in 2024.

The Company recognized a $3.0 million provision for impairment during the three months ended September 30, 2025, as compared to $2.7 million during the three months ended September 30, 2024. Provisions for impairment are recorded when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through operations plus estimated disposition proceeds and are not necessarily comparable period-to-period.

A net gain on the sale of assets of $0.9 million was recognized on the disposition of eight assets during the three months ended September 30, 2025 as compared to a net gain on the sale of assets of $1.9 million on the disposition of two assets during the three months ended September 30, 2024. Gains and losses on sales of assets are dependent on levels of disposition activity and the carrying value of the assets relative to their sales prices. As a result, such gains on sales, net are not necessarily comparable period-to-period.

Income and other tax expense decreased $0.9 million to $0.2 million for the three months ended September 30, 2025, compared to $1.1 million for the three months ended September 30, 2024 due to decreases in taxes as a result of state tax law changes and related refunds.

Net income increased $7.8 million, or 17%, to $52.3 million for the three months ended September 30, 2025, compared to $44.5 million for the three months ended September 30, 2024. The change was the result of the growth in the portfolio offset by the items discussed above. After allocation of income to non-controlling interest and preferred stockholders, net income attributable to common stockholders increased $7.8 million, or 18%, to $50.3 million for the three months ended September 30, 2025, compared to $42.5 million for the three months ended September 30, 2024.

Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024 (dollars in thousands)

The variances in rental income, real estate tax expense, property operating expense and depreciation and amortization expense shown above were due to the acquisition and the ownership of an increased number of properties during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, as further described under Results of Operations - Overall above.

General and administrative expenses increased $4.7 million, or 16%, to $33.0 million for the nine months ended September 30, 2025, compared to $28.3 million for the nine months ended September 30, 2024. The increase was primarily the result of growth in compensation costs due to inflationary increases and higher stock-based compensation expense. General and administrative expenses as a percentage of total revenue was 6.2% for the nine months ended September 30, 2025 and 2024.

Interest expense, net increased $18.5 million, or 23%, to $98.3 million for the nine months ended September 30, 2025, compared to $79.8 million for the nine months ended September 30, 2024. The increase in interest expense, net was primarily a result of higher levels of borrowings during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 in order to finance the acquisition and development of additional properties. Interest expense, net increased approximately $16.5 million related to the $400.0 million 2035 Senior Unsecured Public Notes that were issued in May 2025 and the $450.0 million 2034 Senior Unsecured Public Notes that were issued in May 2024, partially offset by a decrease in interest due to the repayment of the $50.0 million 2025 Senior Unsecured Notes in May 2025. In addition, interest expense on the Revolving Credit Facility and Commercial Paper Notes increased approximately $2.4 million due to higher levels of borrowings, partially offset by lower average borrowing rates, during nine months ended September 30, 2025 compared to the same period in 2024.

The Company recognized a $10.3 million provision for impairment during the nine months ended September 30, 2025, while $7.2 million was recognized during the nine months ended September 30, 2024. Provisions for impairment are recorded when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through operations plus estimated disposition proceeds and are not necessarily comparable period-to-period.

A net gain on the sale of assets of $3.2 million was recognized on the disposition of 13 assets during the nine months ended September 30, 2025 as compared to a net gain on the sale of assets of $11.1 million on the disposition of 18 assets during the nine months ended September 30, 2024. Gains and losses on sales of assets are dependent on levels of disposition activity and the carrying value of the assets relative to their sales prices. As a result, such gains on sales, net are not necessarily comparable period-to-period.

Income and other tax expense decreased $1.7 million to $1.5 million for the nine months ended September 30, 2025, compared to $3.2 million for the nine months ended September 30, 2024 due to decreases in taxes as a result of state tax law changes and related refunds.

Net income increased $4.3 million, or 3%, to $148.8 million for the nine months ended September 30, 2025, compared to $144.5 million for the nine months ended September 30, 2024. The change was the result of the growth in the portfolio offset by the items discussed above. After allocation of income to non-controlling interest and preferred stockholders, net income attributable to common stockholders increased $4.3 million, or 3%, to $142.7 million for the nine months ended September 30, 2025, compared to $138.4 million for the nine months ended September 30, 2024.

Liquidity and Capital Resources

The Company’s principal demands for funds include payment of operating expenses, payment of principal and interest on its outstanding indebtedness, dividends and distributions to its stockholders and holders of the units of the Operating Partnership (the “Operating Partnership Common Units”), and future property acquisitions and development.

In April 2025, the Company completed a follow-on public offering of 5,175,000 shares of common stock, including the full exercise of the underwriters’ option to purchase an additional 675,000 shares in connection with the forward sale agreements. As of September 30, 2025, the Company has not settled any of these shares. The offering is anticipated to raise net proceeds of approximately $386.7 million after deducting fees and expenses and making certain adjustments as provided in the forward sale agreements.

In May 2025, the Operating Partnership completed an underwritten public offering of $400.0 million in aggregate principal amount of its 5.600% Notes due 2035 (the “2035 Senior Unsecured Public Notes”). The public offering was priced at 99.297% of the principal amount, resulting in proceeds of $397.2 million before deducting debt issuance costs. In connection with the underwritten public offering, the Company terminated $325.0 million of forward-starting interest rate swap agreements that hedged the 2035 Senior Unsecured Public Notes, receiving $13.6 million, net upon termination.

In addition, in May 2025, the Operating Partnership repaid the $50.0 million 2025 Senior Unsecured Notes at maturity.

The Company expects to meet its short-term liquidity requirements through cash and cash equivalents held as of September 30, 2025, cash provided from operations, settlement of outstanding forward equity and borrowings under its Revolving Credit Facility and Commercial Paper Program. As of September 30, 2025, the Company had over $1.91 billion of liquidity, which consists of cash and cash equivalents, including cash held in escrow of $16.9 million, unsettled forward equity of $1.04 billion and $861.0 million of availability under our Revolving Credit Facility, adjusted to reflect the outstanding Commercial Paper Notes, subject to compliance with covenants.

The Company anticipates funding its long-term capital needs through cash provided from operations, borrowings under its Revolving Credit Facility, the issuance of debt and the issuance or settlement of common or preferred equity or other instruments convertible into or exchangeable for common or preferred equity.

We continually evaluate alternative financing and believe that we can obtain financing on reasonable terms. However, there can be no assurance that additional financing or capital will be available, or that the terms will be acceptable or advantageous to us. Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our liquidity needs is uncertain and cannot be predicted and could be affected by various risks and uncertainties, including, but not limited to the risks detailed in Part I, Item 1A titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and in the other reports the Company has filed with the Securities and Exchange Commission (“SEC”).

Capitalization

As of September 30, 2025, the Company’s total enterprise value was approximately $11.68 billion. Total enterprise value consisted of $8.13 billion of common equity (based on the September 30, 2025 closing price of the Company’s common stock on the NYSE of $71.04 per share and assuming the conversion of Operating Partnership Common Units), $175.0 million of preferred equity (stated at liquidation value) and $3.39 billion of total debt principal including (i) $389.0 million of borrowings under its Revolving Credit Facility and outstanding Commercial Paper Notes; (ii) $2.61 billion of senior unsecured notes; (iii) $350.0 million under its unsecured term loan; (iv) $43.1 million of mortgage notes payable; less $16.9 million cash, cash equivalents and cash held in escrow. The Company’s total debt principal to total enterprise value was 29.0% as of September 30, 2025.

At September 30, 2025, the non-controlling interest in the Operating Partnership consisted of a 0.3% common ownership interest in the Operating Partnership. The Operating Partnership Common Units may, under certain circumstances, be exchanged for shares of Company common stock on a one-for-one basis. The Company, as sole general partner of the Operating Partnership, has the option to settle exchanged Operating Partnership Common Units held by others for cash based on the current trading price of our shares. Assuming the exchange of all Operating Partnership Common Units, there would have been 114,481,870 shares of common stock outstanding as of September 30, 2025.

Equity

Authorized Shares of Common Stock

In May 2025, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s common stock from 180 million shares to 360 million shares.

Shelf Registration

On May 5, 2023, the Company filed with the SEC an automatic shelf registration statement on Form S-3ASR, registering an unspecified amount of common stock, preferred stock, depositary shares, warrants of the Company and guarantees of debt securities of the Operating Partnership, as well as an unspecified amount of debt securities of the Operating Partnership, at an indeterminate aggregate initial offering price. The Company may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

Common Stock Offering

In April 2025, the Company completed a follow-on public offering of 5,175,000 shares of common stock, including the full exercise of the underwriters’ option to purchase an additional 675,000 shares in connection with the forward sale agreements. As of September 30, 2025, the Company has not settled any of these shares. The offering is anticipated to raise net proceeds of approximately $386.7 million after deducting fees and expenses and making certain adjustments as provided in the forward sale agreements.

In October 2024, the Company completed a follow-on public offering of 5,060,000 shares of common stock, including the full exercise of the underwriters’ option to purchase an additional 660,000 shares in connection with the forward sale agreements. As of September 30, 2025, the Company has not settled any of these shares. The offering is anticipated to raise net proceeds of approximately $366.4 million after deducting fees and expenses and making certain adjustments as provided in the forward sale agreements.

Preferred Stock Offering

As of September 30, 2025, the Company had 7,000,000 depositary shares (the “Depositary Shares”) outstanding, each representing 1/1,000th of a share of Series A Preferred Stock.

Dividends on the Series A Preferred Shares are payable monthly in arrears on the first day of each month (or, if not on a business day, on the next succeeding business day). The dividend rate is 4.25% per annum of the $25,000 (equivalent to $25.00 per Depositary Share) liquidation preference. Monthly dividends on the Series A Preferred Shares are $0.08854 per Depositary Share, equivalent to $1.0625 per annum.

The Company may not redeem the Series A Preferred Shares before September 2026 except in limited circumstances to preserve its status as a real estate investment trust for federal income tax purposes and except in certain circumstances upon the occurrence of a change of control of the Company. Beginning in September 2026, the Company, at its option, may redeem the Series A Preferred Shares, in whole or from time to time in part, by paying $25.00 per Depositary Share, plus any accrued and unpaid dividends. Upon the occurrence of a change in control of the Company, if the Company does not otherwise redeem the Series A Preferred Shares, the holders have a right to convert their shares into common stock of the Company at the $25.00 per share liquidation value, plus any accrued and unpaid dividends. This conversion value is limited by a share cap if the Company’s stock price falls below a certain threshold.

ATM Programs

The Company enters into at-the-market (“ATM”) programs through which the Company, from time to time, sells shares of common stock and/or enters into forward sale agreements.

The following table summarizes the ATM programs that were in place during 2025 and 2024:

(1) Applicable ATM program terminated and no future forward sales will occur under the program.

(2) After considering the shares of common stock sold subject to forward sale agreements under the program, the Company had approximately $1.03 billion of availability under the October 2024 Program as of September 30, 2025.

(3) The Company is required to settle the outstanding forward shares of common stock under the program in October 2025.

(4) The Company is required to settle the outstanding forward shares of common stock under the program by dates between June 2026 and October 2026.

The following table summarizes the ATM activity completed during the periods presented:

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Debt

The table below summarizes the Company’s outstanding debt as of the dates presented (dollars in thousands):

(1) At September 30, 2025, the Revolving Credit Facility would have incurred interest of 4.99%, which is comprised of SOFR of 4.16%, the pricing grid spread of 72.5 basis points and the 10 basis point SOFR adjustment.

(2) As of September 30, 2025, the weighted-average maturity of the Commercial Paper Notes outstanding was less than one month.

(3) The interest rate of the 2029 Unsecured Term Loan reflects the credit spread of 80 basis points, plus a 10 basis point SOFR adjustment and the impact of the interest rate swaps which convert $350.0 million of SOFR based interest to a fixed weighted average interest rate of 3.57%.

(4) All-in interest rate for Senior Unsecured Notes reflects the straight-line amortization of the terminated swap agreements and original issuance discounts, as applicable.

(5) The principal amounts outstanding are presented excluding their original issue discounts.

Senior Unsecured Revolving Credit Facility

The Company’s Fourth Amended and Restated Revolving Credit Agreement provides for a $1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility's interest rate is based on a pricing grid with a range of 72.5 to 140 basis points over SOFR, determined by the Company's credit ratings and leverage ratio, plus a SOFR adjustment of 10 basis points. The margins for the Revolving Credit Facility are subject to adjustment based on changes in the Company's leverage ratio and credit ratings.

The Revolving Credit Facility serves as a backstop for the Company’s Commercial Paper Notes and includes an accordion option that allows the Company to request additional lender commitments up to a total of $2.00 billion. The Revolving Credit Facility will mature in August 2028 with Company options to extend the maturity date to August 2029.

The Company and Richard Agree, the Executive Chairman of the Company, are parties to a Reimbursement Agreement dated October 3, 2023 (the “Reimbursement Agreement”). Pursuant to the Reimbursement Agreement, Mr. Agree has agreed to reimburse the Company for his proportionate share of loss incurred under the Revolving Credit Facility and/or certain other indebtedness in an amount to be determined by facts and circumstances at the time of loss.

Commercial Paper Program

In March 2025, the Operating Partnership established a commercial paper program (the “Commercial Paper Program”), pursuant to which it may issue short-term, fixed interest rate, unsecured commercial paper notes (the “Commercial Paper Notes”) under the exemption from registration contained in Section 4(a)(2) of the Securities Act. Amounts available under the Commercial Paper Program may be borrowed, repaid and re-borrowed from time to time, with the aggregate principal amount of the Commercial Paper Notes outstanding under the Commercial Paper Program at any time not to exceed $625.0 million. The Commercial Paper Notes can have maturities of up to 397 days from the date of issue and are guaranteed by the Company and certain wholly owned subsidiaries of the Operating Partnership. The Company’s Revolving Credit Facility serves as a liquidity backstop for the repayment of the Commercial Paper Notes outstanding.

Unsecured Term Loan

In July 2023, the Company closed on the unsecured $350.0 million 5.5-year term loan (the “2029 Unsecured Term Loan”) which includes an accordion option that allows the Company to request additional lender commitments up to a total of $500.0 million and matures in January 2029. Borrowings under the 2029 Unsecured Term Loan are priced at SOFR plus a spread of 80 to 160 basis points over SOFR, depending on the Company’s credit ratings, plus a SOFR adjustment of 10 basis points. Due to the Company’s improved credit rating, the credit spread on the 2029 Unsecured Term Loan decreased by five basis points in August 2025. The Company used the existing $350.0 million of forward-starting interest rate swaps to hedge the variable SOFR priced interest to a weighted average fixed rate of 3.57% until January 2029.

Senior Unsecured Notes – Private Placement

The Senior Unsecured Notes were issued in private placements (collectively the “Private Placements”) to individual investors. The Private Placements did not involve a public offering in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act.

Senior Unsecured Notes – Public Offerings

The Senior Unsecured Public Notes (collectively the “Public Notes”) are fully and unconditionally guaranteed by Agree Realty Corporation and certain wholly owned subsidiaries of the Operating Partnership. These guarantees are senior unsecured obligations of the guarantors, rank equally in right of payment with all other existing and future senior unsecured indebtedness and are effectively subordinated to all secured indebtedness of the Operating Partnership and each guarantor (to the extent of the value of the collateral securing such indebtedness).

The Public Notes are governed by an indenture, dated August 17, 2020, among the Operating Partnership, the Company and respective trustee (as amended and supplemented by an officer’s certificate dated at the issuance of each of the Public Notes, the “Indenture”). The Indenture contains various restrictive covenants, including limitations on the ability of the guarantors and the issuer to incur additional indebtedness and requirements to maintain a pool of unencumbered assets.

In May 2025, the Operating Partnership completed an underwritten public offering of $400.0 million in aggregate principal amount of its 5.600% Notes due 2035 (the “2035 Senior Unsecured Public Notes”). The public offering was priced at 99.297% of the principal amount, resulting in proceeds of $397.2 million before deducting debt issuance costs. In connection with the underwritten public offering, the Company terminated $325.0 million of forward-starting interest rate swap agreements that hedged the 2035 Senior Unsecured Public Notes, receiving $13.6 million, net upon termination.

In May 2025, the Operating Partnership repaid the $50.0 million 2025 Senior Unsecured Notes at maturity.

Mortgage Notes Payable

As of September 30, 2025, the Company had total gross mortgage indebtedness of $43.1 million, which was collateralized by related real estate and tenants’ leases with an aggregate net book value of $74.0 million. The weighted average interest rate on the Company’s mortgage notes payable was 3.68% as of September 30, 2025.

The Company has entered into mortgage loans which are secured by multiple properties and contain cross-default and cross-collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that the Company defaults under the loan. Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan.

Loan Covenants

Certain loan agreements contain various restrictive covenants, including the following financial covenants: maximum leverage ratio, maximum secured leverage ratios, consolidated net worth requirements, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, a minimum unsecured interest expense ratio, a minimum interest coverage ratio, a minimum unsecured debt yield and a minimum unencumbered interest expense ratio. As of September 30, 2025, the most restrictive covenant was the minimum unencumbered interest expense ratio. The Company was in compliance with all of its material loan covenants and obligations as of September 30, 2025.

Cash Flows

Operating - Most of the Company’s cash from operations is generated by rental income from its real estate investment portfolio. Net cash provided by operating activities for the nine months ended September 30, 2025 increased by $52.2 million over the same period in 2024, primarily due to the increase in the size of the Company’s real estate investment portfolio, an increase in proceeds from the settlement of interest rate swaps and changes in working capital.

Investing - Net cash used in investing activities was $633.0 million greater during the nine months ended September 30, 2025, compared to the same period in 2024 primarily due to:

• $557.8 million increase in cash used for property acquisitions as a result of the overall increase in the level of acquisition activity;
• $40.8 million decrease in proceeds from asset sales due to decreased disposition volume during the nine months ended September 30, 2025, compared to the same period in 2024. Proceeds from asset sales are dependent on levels of disposition activity and the specific assets sold and are not necessarily comparable period-to-period; and
• $34.9 million increase in cash used for development of real estate investments and other assets due to changes in the scope of development and DFP projects in progress as well as the timing of payments for these projects and other capital additions.

Financing - Net cash provided by financing activities increased by $592.6 million during the nine months ended September 30, 2025, compared to the same period in 2024 primarily due to:

• $409.0 million increase in cash proceeds provided by net borrowings on the Revolving Credit Facility and Commercial Paper Program. Net borrowings on the Revolving Credit Facility and outstanding Commercial Paper Notes were $231.0 million during the nine months ended September 30, 2025, while $178.0 million of net repayments were completed over the same period in 2024;
• $300.9 million increase in net proceeds from the issuance of common stock;
• $50.0 million repayment of the 2025 Senior Unsecured Notes, no similar repayments were made during the nine months ended September 30, 2024;
• $47.5 million decrease in proceeds from the issuance of Senior Unsecured Public Notes; and
• $25.9 million increase in total dividends and distributions paid. The Company’s annualized common stock dividend declared during the three months ended September 30, 2025 of $3.072 per common share represents a 2.4% increase over the annualized dividend amount of $3.000 per common share declared in the same period in 2024.

Material Cash Requirements

In conducting its business, the Company enters into contractual obligations, including those for debt and operating leases for land.

Details on these obligations as of September 30, 2025, including expected settlement periods, are presented below (in thousands):

(1) The Revolving Credit Facility matures in August 2028, with options to extend the maturity date by six months up to two times, for a maximum maturity of August 2029. The weighted-average maturity of the Commercial Paper Notes outstanding at September 30, 2025 was less than one month.

(2) Estimated interest payments calculated for (i) variable rate debt based on the rate in effect at period-end and (ii) fixed rate debt based on the coupon interest rate.

In addition to items reflected in the table above, the Company has preferred stock with cumulative cash dividends, as described under Equity – Preferred Stock Offering above.

During the nine months ended September 30, 2025, the Company had 30 development or DFP projects completed or under construction, for which 12 remain under construction as of September 30, 2025. Anticipated total costs for the 12 projects are approximately $88.6 million. These construction commitments will be funded using cash provided from operations, current capital resources on hand, or other sources of funding available to the Company.

The Company’s recurring obligations under its tenant leases for maintenance, taxes, or insurance will also be funded through the cash sources available to the Company described earlier.

Dividends

During the quarter ended September 30, 2025, the Company declared monthly dividends of $0.256 per common share. Holders of the Operating Partnership Common Units are entitled to an equal distribution per Operating Partnership Common Unit held. The dividends and distributions payable for July and August were paid during the three months ended September 30, 2025, while the September dividends and distributions were recorded as a liability on the condensed consolidated balance sheets at September 30, 2025 and were paid on October 14, 2025.

During the quarter ended September 30, 2025, the Company declared monthly dividends on the Series A Preferred Shares in the amount of $0.08854, per Depositary Share. The dividends payable for July and August were paid during the quarter. The September dividends were recorded as a liability on the condensed consolidated balance sheets at September 30, 2025 and were paid on October 1, 2025.

Recent Accounting Pronouncements

Refer to Note 2 – Summary of Significant Accounting Policies in the condensed consolidated financial statements for a summary and anticipated impact of each applicable accounting pronouncement on the Company’s financial statements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company’s management to use judgment in the application of accounting policies, including making estimates and assumptions. Management bases estimates on the best information available at the time, its experience, and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting principles would have been applied, resulting in a different presentation of the interim condensed consolidated financial statements. From time to time, the Company may re-evaluate its estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of the Company’s critical accounting policies is included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The Company has not made any material changes to these policies during the periods covered by this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

Funds from Operations (“FFO” or “Nareit FFO”)

FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”) to mean net income computed in accordance with GAAP, excluding gains (or losses) from sales of real estate assets and/or changes in control, plus real estate related depreciation and amortization and any impairment charges on depreciable real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations.

FFO should not be considered an alternative to net income as the primary indicator of the Company’s operating performance, or as an alternative to cash flow as a measure of liquidity. Further, while the Company adheres to the Nareit definition of FFO, its presentation of FFO is not necessarily comparable to similarly titled measures of other REITs due to the fact that all REITs may not use the same definition.

Core Funds from Operations (“Core FFO”)

The Company defines Core FFO as Nareit FFO with the addback of (i) noncash amortization of acquisition purchase price related to above- and below- market lease intangibles and discount on assumed mortgage debt and (ii) certain infrequently occurring items that reduce or increase net income in accordance with GAAP. Management believes that its measure of Core FFO facilitates useful comparison of performance to its peers who predominantly transact in sale-leaseback transactions and are thereby not required by GAAP to allocate purchase price to lease intangibles. Unlike many of its peers, the Company has acquired the substantial majority of its net-leased properties through acquisitions of properties from third parties or in connection with the acquisitions of ground leases from third parties.

Core FFO should not be considered an alternative to net income as the primary indicator of the Company’s operating performance, or as an alternative to cash flow as a measure of liquidity. Further, the Company’s presentation of Core FFO is not necessarily comparable to similarly titled measures of other REITs due to the fact that all REITs may not use the same definition.

Adjusted Funds from Operations (“AFFO”)

AFFO is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. AFFO further adjusts FFO and Core FFO for certain non-cash items that reduce or increase net income computed in accordance with GAAP. Management considers AFFO a useful supplemental measure of the Company’s performance; however, AFFO should not be considered an alternative to net income as an indication of its performance, or to cash flow as a measure of liquidity or ability to make distributions. The Company’s computation of AFFO may differ from the methodology for calculating AFFO used by other equity REITs, and therefore may not be comparable to such other REITs.

Reconciliations

The following table provides a reconciliation of net income to FFO, Core FFO and AFFO for the periods presented (dollars in thousands, except for per common share and partnership unit data):

The Company is exposed to interest rate risk primarily through borrowing activities. There is inherent roll-over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and future financing requirements.

The Company’s interest rate risk is monitored using a variety of techniques. The table below presents the principal payments (in thousands) and the weighted average interest rates on outstanding debt, by year of expected maturity, to evaluate the expected cash flow and sensitivity to interest rate changes. Interest rates shown reflect the impact of the swap agreements employed to fix interest rates.

(1) The Revolving Credit Facility had no outstanding balance as of September 30, 2025. The Revolving Credit Facility matures in August 2028 with options to extend the maturity date by six months up to two times, for a maximum maturity of August 2029.

(2) The weighted-average maturity of the Commercial Paper Notes outstanding at September 30, 2025 was less than one month.

(3) The interest rate of the Unsecured Term Loan reflects the credit spread of 80 basis points, plus a 10 basis point SOFR adjustment and the impact of the interest rate swaps which convert $350.0 million of SOFR based interest to a fixed interest rate of 3.57%.

The table above incorporates those exposures that exist as of September 30, 2025; it does not consider those exposures or positions which could arise after that date. As a result, the Company’s ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period and interest rates.

The Company seeks to limit the impact of interest rate changes on earnings and cash flows and to lower the overall borrowing costs by closely monitoring its variable rate debt and converting such debt to fixed rates when the Company deems such conversion advantageous. From time to time, the Company may enter into interest rate swap agreements or other interest rate hedging contracts. While these agreements are intended to lessen the impact of rising interest rates, they also expose the Company to the risks that the other parties to the agreements will not perform. The Company could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly effective cash flow hedges under GAAP guidance.

In June 2023, the Company entered into $350.0 million of interest rate swap agreements to hedge against variability in future cash flows resulting from changes in SOFR. The swaps exchange variable SOFR rate interest on $350.0 million of SOFR indexed debt to a weighted average fixed rate of 3.57% beginning August 1, 2023 through the maturity date of January 1, 2029. The swaps are designated to hedge the variable rate interest payments indexed to SOFR in the 2029 Unsecured Term Loan which matures January 2029. As of September 30, 2025, these interest rate swaps were valued as a liability of approximately $3.0 million.

During 2025, the Company entered into $150.0 million of forward-starting interest rate swap agreements to hedge against variability in future cash flows resulting from changes in interest rates from the trade date through the forecasted issuance date of long-term debt. The swaps are designated to hedge the variability in future cash flows for a forecasted issuance of long-term debt over a maximum period ending January 2027. As of September 30, 2025, these interest rate swaps are valued as a liability of less than $0.1 million.

In addition, during 2025, the Company entered into $150.0 million of interest rate swap agreements to hedge against variability in future cash flows resulting from changes in SOFR. The swaps exchange variable rate SOFR interest on $150.0 million of SOFR indexed debt to a weighted average fixed interest rate of 3.16% beginning April 1, 2026 through the maturity date of June 2, 2031. The swaps are designated to hedge the variable rate interest payments of forecasted variable rate debt indexed to SOFR. As of September 30, 2025, these interest rate swaps are valued as an asset of approximately $1.1 million.

The Company does not use derivative instruments for trading or other speculative purposes and the Company did not have any other derivative instruments or hedging activities as of September 30, 2025. Refer to Note 8 – Derivative Instruments and Hedging Activity in the Notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further information on the Company’s hedging activities.

The fair value of the mortgage notes payable and senior unsecured notes is estimated to be $41.1 million and $2.54 billion, respectively, as of September 30, 2025. The fair value of the Commercial Paper Notes is estimated to equal the carrying amount due to the short-term maturity of the instruments and as the stated interest rates approximate current market rates. The fair value of the Revolving Credit Facility and Unsecured Term Loan approximate their carrying values as they are variable rate debt.

At September 30, 2025, our outstanding mortgage notes payable and Senior Unsecured Notes had fixed interest rates. Interest on our Revolving Credit Facility and Unsecured Term Loan is variable, and as a result, we are subject to interest rate risk with respect to such floating-rate debt. In addition, given the short-term nature of the Commercial Paper Notes, we are subject to interest rate risk related to the borrowings.

There are no borrowings outstanding under the Revolving Credit Facility and $389.0 million of Commercial Paper Notes outstanding at September 30, 2025, as a result a hypothetical 100-basis point increase or decrease in market interest rates, assuming no change in the amount outstanding on these borrowings, would change annual interest expense by $3.9 million.

The variable interest rate feature on our Unsecured Term Loan has been mitigated by interest rate swap agreements.

Disclosure Controls and Procedures

At the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that its disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting during its most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

For a discussion of the Company’s potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.