Inland Real Estate Income Trust, Inc.: Form 10-Q for the period ended Jun 30, 2026

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, 2025, as filed with the Securities and Exchange Commission on March 11, 2026, some of which are summarized below:

• As part of the review of strategic alternatives, our board decided not to pursue the sale of the Company or a listing of the Company’s common stock on a national securities exchange at the present time. There is no assurance that we will pursue an alternative liquidity event in the near future, if at all. We have limited sources of capital and thus a limited ability to increase our asset base or to fund other needs including share repurchases;
• 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 the financial markets and challenging economic conditions including market disruptions and uncertainties resulting from any future global pandemic or epidemic, ongoing hostilities in various parts of the world and other geopolitical events affecting the financing markets generally such as 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. Volatility and market disruptions could adversely affect our ability to secure debt financing on attractive terms and our ability to service any future indebtedness that we may incur;
• Our Business Manager and its affiliates face conflicts of interest caused by, among other things, their compensation arrangements with us, the allocation of personnel and resources between its affiliates, our Business Manager and our Real Estate Manager and overlapping leadership roles that certain of our executive officers have with the Business Manager and its affiliates, which could result in actions that are not in our long-term best interests;
• We do not have arm’s-length agreements with our Business Manager, our Real Estate Manager or any other affiliates of our Sponsor and we pay fees, which may be significant, to our Business Manager, Real Estate Manager and other affiliates of our Sponsor;
• Unless renewed, the agreement with our Business Manager expires on March 31, 2027 and the agreement with our Real Estate Manager expires on December 31, 2026;
• Our properties may compete with the properties owned by other programs sponsored by an affiliate of our Sponsor;
• 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 and six months ended June 30, 2026 and 2025 and as of June 30, 2026 and December 31, 2025. 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 business plan focuses primarily on acquiring and owning a portfolio substantially all of which is comprised of grocery-anchored properties. The Business Manager continues to evaluate our business plan and strategy, including considering and presenting alternatives and enhancements for board review with a view towards being able to increase the Company’s assets and cash flow on an accretive basis as well as to enhance the Company’s capital (primarily equity). The board decided not to pursue a sale of the Company or a listing of its common stock on a national securities exchange at this time. In the future, the Company may pursue other alternatives to raise capital, including but not limited to, for example, a joint venture with a third party.

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 not raised any further equity capital on an underwritten or best-efforts basis since the offering was completed. We have also generated equity capital through the sale of shares through our DRP. As noted herein, the DRP was suspended effective October 1, 2024 and reinstated effective February 1, 2026. From inception through June 30, 2026, we had issued a total of 6,761,869 shares through the DRP generating aggregate proceeds of $148.2 million. Although the DRP was recently reinstated, there is no assurance that stockholders will continue to participate at the level before suspension. We have also used, and may continue to use, various sources of debt capital to fund acquisitions and other capital and operating needs as further described.

As of June 30, 2026, we owned 51 retail properties, totaling 7.0 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 June 30, 2026, 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 June 30, 2026, our portfolio had physical and economic occupancy of 92.9% and 93.1%, respectively. Physical and economic occupancy both increased approximately 0.5% compared to March 31, 2026, and has increased compared to physical and economic occupancy of 92.0% and 92.2%, respectively, as of December 31, 2025. As of June 30, 2026, annualized base rent (“ABR”) per square foot averaged $20.17 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 $17.21 as of June 30, 2026.

There were no acquisitions during the three and six months ended June 30, 2026.

On March 12, 2026, we entered into a purchase and sale agreement for the sale of The Village at Burlington Creek property for a purchase price of $34.0 million. On June 25, 2026, we completed the sale of the property generating net proceeds of $30.3 million after transaction costs and $2.8 million of escrow credits provided to the buyer related to roof replacement. We recognized a gain of $5.0 million on the transaction. On June 26, 2026, we repaid $30 million of outstanding borrowings under the Credit Facility using the net proceeds from the transaction.

We have no employees and are externally managed and advised by IREIT Business Manager & Advisor, Inc. (the “Business Manager”), an indirect wholly-owned subsidiary of Inland Real Estate Investment Corporation, referred to herein as our “Sponsor” pursuant to an agreement that expires on March 31, 2027. Either party may terminate the agreement upon giving 60 days’ prior notice. Currently, we pay fees to and reimburse certain expenses incurred by the Business Manager for the services provided to us. This fee was reduced dollar-for-dollar for amounts we paid to Mark Zalatoris during the time he served as the Company’s president and chief executive officer. Mr. Zalatoris resigned from his positions as president and chief executive officer effective February 2, 2026. Effective as of the same date, Bernard Michael was appointed as the Company’s president and chief executive officer. As a result of this transition, the Business Manager now directly compensates Mr. Michael. Accordingly, beginning in February 2026, we pay the Business Manager the full fee it is entitled to under our agreement with the Business Manager. We do not reimburse the Business Manager for any compensation it pays to any person serving as one of our executive officers. Our properties are managed by Inland Commercial Real Estate Services LLC, also an indirect wholly-owned subsidiary of our Sponsor. The agreement governing these services expires on

December 31, 2026 but will automatically renew for another one year term unless either party provides notice of intent to terminate not less than 60 days prior to the expiration date.

Inflation and Interest Rates

Inflationary pressures, volatility in interest rates, and the imposition of new duties, tariffs, trade barriers and retaliatory countermeasures by the U.S. and other governments, could all 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 remains 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 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

(a) Weighted average remaining lease term is based on a weighting by ABR as of June 30, 2026.

The table below presents information for each of our investment properties as of June 30, 2026.

(a) All of our properties are included in the pool of properties comprising the borrowing base under our Credit Facility as of June 30, 2026.

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 June 30, 2026.

The following table sets forth a summary of our tenant diversity for our entire portfolio and is based on leases in-place as of June 30, 2026.

The following table sets forth a summary, as of June 30, 2026, of the percent of total annualized base rent and the weighted average lease expiration by size of tenant.

American Freight, which leased space at one of our properties, filed for bankruptcy in November 2024. American Freight closed this location, and the lease was rejected in December 2024. We are marketing the space.

Party City, which leased 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 its leases at all four of our locations and we currently have possession of these spaces. We have executed new leases with replacement tenants for two of these spaces. We are marketing the remaining two spaces.

Rite Aid, which leased space at one of our properties, filed for bankruptcy in May 2025. Rite Aid closed this location, and the lease was rejected at the end of August 2025. We are marketing the space.

Painted Tree, which leased space at one of our properties, closed its location and filed for bankruptcy in April 2026. We have executed a replacement lease to backfill the space.

Lease Expirations

The following table sets forth a summary, as of June 30, 2026, of lease expirations scheduled to occur during the remainder of 2026 and each of the calendar years from 2027 to 2035 and thereafter, assuming no exercise of renewal options or early termination rights for leases commenced on or prior to June 30, 2026. Annualized base rent represents the rent in-place for the applicable property as of June 30, 2026. The table below includes ground leases. If ground leases are excluded, annualized base rent would equal $102,624 or $20.17 per square foot for total expiring leases.

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 six months ended June 30, 2026.

Liquidity and Capital Resources

General

Our primary uses and sources of cash are as follows:

We have funded our capital needs primarily through cash flow from operations and through draws on the Credit Facility, if needed.

As of June 30, 2026, we had total debt outstanding of $810 million, excluding unamortized debt issuance costs, which bore interest at a weighted average interest rate of 4.62% per annum. As of June 30, 2026, the weighted average years to maturity for our debt was 2.8 years, not taking into account any extension options that may be exercised at our option. As of June 30, 2026 and December 31, 2025, our borrowings were 51% and 52%, respectively, of the purchase price of our investment properties. As of June 30, 2026, our cash and cash equivalents balance was $11 million.

As of June 30, 2026, we had $235 million outstanding under the Revolving Credit Facility and $575 million outstanding under the Term Loan. As of June 30, 2026, the interest rates on the Revolving Credit Facility and the Term Loan were 5.55% per annum and 4.23% per annum, respectively. As of June 30, 2025, the interest rates on the Revolving Credit Facility and the Term Loan were 6.32% per annum and 4.30% per annum, respectively. As of June 30, 2026, we have hedged $525 million of the Term Loan using interest rate swap contracts that mature on February 3, 2027. We have entered into forward-starting interest rate swap contracts with an aggregate notional amount of $525 million that become effective on February 3, 2027 and mature on April 1, 2029. The fixed rates payable under the forward-starting swaps are higher than those payable under the current swaps. Refer to Note 7–“Debt and Derivative Instruments,” which is included in our June 30, 2026 Notes to Consolidated Financial Statements in Item 1, for additional information on these interest rate swap contracts. Each of the Revolving Credit Facility and the Term Loan matures on April 1, 2029, subject to a twelve month extension at our option. As of both August 5, 2026 and June 30, 2026, we had $50 million available for borrowing under the Revolving Credit Facility, subject to various terms and conditions, including compliance with the covenants which could further limit the amount available of the credit agreement that governs the Credit Facility. See “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” in our Annual Report on Form 10-K for the year ended December 31, 2025 for further information.

On January 30, 2026, we drew $19 million on the Revolving Credit Facility to repay indebtedness secured by a mortgage on the Milford Marketplace property, which had an outstanding principal balance of $18.7 million and was repaid in full on January 30, 2026. Subsequent to the payoff, the property was added to the borrowing base for the Credit Facility.

As of both August 5, 2026 and June 30, 2026, all of our properties comprised the borrowing base for the Credit Facility. We may not use any property to secure debt on any particular property without removing the property from the borrowing base. Doing so would, however, reduce the amount that we may draw under the Credit Facility. As of June 30, 2026, we have paid all interest and principal amounts when due, and were in compliance with all financial covenants under the Credit Facility, as amended.

During the six months ended June 30, 2026, we used $9.5 million to invest in capital expenditures and tenant improvements, which was approximately $1.5 million more than we invested during the six months ended June 30, 2025. For the remainder of 2026, we anticipate investing approximately $9.1 million for capital expenditures and tenant improvements. Capital expenditures and tenant improvements are funded by cash flows generated from operations during current or prior periods.

Cash Flow Analysis

(Dollar amounts in thousands)

Operating activities

The decrease in cash from operating activities during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to timing of receipts from tenants.

Investing activities

(Dollar amounts in thousands)

The increase in cash provided by investing activities during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to the sale of the Village at Burlington Creek property.

Financing activities

(Dollar amounts in thousands)

During the six months ended June 30, 2026, cash used related to debt increased $28.6 million from the six months ended June 30, 2025 primarily due to a $32 million paydown on the credit facility. During the six months ended June 30, 2026, share repurchases were $1.0 million. During the six months ended June 30, 2026, we paid $9.8 million in distributions on our common stock. As noted herein, in connection with the board’s review of strategic alternatives, the DRP and SRP were both suspended effective October 1, 2024 and have been reinstated effective February 1, 2026.

Although the DRP was reinstated effective February 1, 2026, stockholders were required to affirmatively elect reinvestment of any future distributions we may pay through the DRP. Since the reinstatement of the DRP, we have generated significantly lower proceeds than we generated prior to its suspension. There can be no assurance that future proceeds will be comparable to those generated before the suspension. In addition, the terms of the SRP were recently revised. Although shares were previously repurchased at a discount to the then-current Estimated Per Share NAV at the time of repurchase, under the Sixth SRP, to the extent the board authorizes repurchases during any particular period, the repurchase price will be equal to the then-current Estimated Per Share NAV for “Exceptional Repurchases” and equal to 80% of the then-current Estimated Per Share NAV for “Ordinary Repurchases” as those terms are defined in the SRP.

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 six months ended June 30, 2026 and 2025 follows (Dollar amounts in thousands except per share amounts):

(1) Distributions were funded by cash flows from operating activities during the six months ended June 30, 2026 and 2025.

Results of Operations

This section describes and compares our results of operations for the three and six months ended June 30, 2026 and 2025. Dollar amounts are stated in thousands.

We generate our net operating income from property operations. A total of 51 investment properties that were acquired on or before January 1, 2025 represent our “same store” properties during the three and six months ended June 30, 2026 and 2025. “Non-same store,” as reflected in the tables below, consists of a property that was sold after April 1, 2026. For the three and six months ended June 30, 2026 and 2025, one property that was sold constituted our non-same store property.

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 and six months ended June 30, 2026 and 2025, along with a reconciliation to net income (loss), calculated in accordance with GAAP.

Comparison of the three months ended June 30, 2026 and 2025

(Dollar amounts in thousands)

Net income (loss). Net income (loss) was $1,067 and $(2,156) for the three months ended June 30, 2026 and 2025, respectively.

Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties owned during the three months ended June 30, 2026 with the results of the same investment properties owned during the three months ended June 30, 2025, property net operating income increased $694, total property income increased $633, and total property operating expenses including real estate tax expense decreased $61.

The increase in “same store” 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 percentage rent. The decrease in property operating expenses is primarily due to decreases in the following: (i) $173 in direct recovery expense (ii) $87 of non-recoverable expense and (iii) $74 in management fee and payroll expense, partially offset by increases in the following: (i) $130 in repairs and maintenance expense due to the timing of projects, (ii) $68 in landscaping expense and (iii) $45 in insurance expense.

“Non-same store” total property net operating income decreased $174 during the three months ended June 30, 2026 as compared to the same period in 2025. On a “non-same store” basis, total property income decreased $147 and total property operating expenses increased $27 during the three months ended June 30, 2026 as compared to the same period in 2025.

The decrease in “non-same store” total property income is primarily due to an increase in bad debt expense. The increase in property operating expenses is primarily due to an increase in repairs and maintenance expense.

Straight-line (expense) income, net. Straight-line (expense) income, net increased $644 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write-offs due to early tenant move-outs in 2026.

Amortization of intangibles and lease incentives. Income from the amortization of intangibles and lease incentives decreased $126 in 2026 compared to the same period in 2025. The decrease is primarily due to fully amortized acquired above market leases.

General and administrative expenses. General and administrative expenses increased $30 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in state tax estimates.

Business management fee. Business management fees increased $98 in 2026 compared to the same period in 2025. The increase is primarily due to a reduction in amounts paid to Mr. Zalatoris in 2026 under the CEO Agreement as a result of Mr. Zalatoris’ resignation from his positions as president and chief executive officer of the Company effective February 2, 2026, which amounts had previously reduced our payment under the Business Management Agreement on a dollar-for-dollar basis. Because we do not reimburse the Business Manager for any amounts it pays to Mr. Michael, our newly elected president and chief executive officer, effective February 2, 2026, the fee that we pay to the Business Manager is no longer reduced, resulting in increased fees in 2026.

Depreciation and amortization. Depreciation and amortization increased $1,125 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write offs.

Interest expense. Interest expense increased $244 in 2026 compared to the same period in 2025. The increase is primarily due to higher average borrowings and higher average interest rate.

Gain on sale of investment property. Gain on sale of investment property increased $4,985 in 2026 compared to the same period in 2025. The increase is due to the sale of the Village at Burlington Creek property.

Interest and other income. Interest and other income decreased $15 in 2026 compared to the same period in 2025.

Comparison of the six months ended June 30, 2026 and 2025

(Dollar amounts in thousands)

Net loss. Net loss was $1,182 and $4,757 for the six months ended June 30, 2026 and 2025, respectively.

Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties owned during the six months ended June 30, 2026 with the results of the same investment properties owned during the full six months ended

June 30, 2025, property net operating income increased $631, total property income increased $755, and total property operating expenses including real estate tax expense increased $124.

The increase in “same store” 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 percentage rent. The decrease in property operating expenses is primarily due to a decrease of $522 in non-recoverable expenses due to lower legal costs and landlord work in 2026 and a $129 decrease in direct recovery expenses, partially offset by increases in the following: (i) $251 in repairs and maintenance due to timing of projects, (ii) $152 in landscaping expenses due to additional landscape projects and (iii) $103 in insurance expense.

“Non-same store” total property net operating income decreased $214 during 2026 as compared to the same period in 2025. On a “non-same store” basis, total property income decreased $102 and total property operating expenses increased $112 during the six months ended June 30, 2026 as compared to the same period in 2025.

The decrease in “non-same store” total property income is primarily due to an increase in bad debt expense. The increase in property operating expenses is primarily due to an increase in repairs and maintenance expense.

Straight-line (expense) income, net. Straight-line (expense) income, net increased $731 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write-offs due to early tenant move-outs in 2026.

Amortization of intangibles and lease incentives. Income from intangibles and lease incentives decreased $101 in 2026 compared to the same period in 2025. The decrease is primarily due to fully amortized acquired above market leases.

General and administrative expenses. General and administrative expenses decreased $570 in 2026 compared to the same period in 2025. The decrease is primarily due to professional fees incurred in connection with the review of strategic alternatives in 2025 that did not recur in 2026.

Business management fee. Business management fees increased $183 in 2026 compared to the same period in 2025. The increase is primarily due to a reduction in amounts paid to Mr. Zalatoris in 2026 under the CEO Agreement as a result of Mr. Zalatoris’ resignation from his positions as president and chief executive officer of the Company effective February 2, 2026, which amounts had previously reduced our payment under the Business Management Agreement on a dollar-for-dollar basis. Because we do not reimburse the Business Manager for any amounts it pays to Mr. Michael, our newly elected president and chief executive officer, effective February 2, 2026, the fee that we pay to the Business Manager is no longer reduced, resulting in increased fees in 2026.

Depreciation and amortization. Depreciation and amortization increased $954 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write-offs.

Interest expense. Interest expense increased $411 in 2026 compared to the same period in 2025. The increase is primarily due to higher average borrowings and higher average interest rate.

Gain on sale of investment property. Gain on sale of investment property increased $4,985 in 2026 compared to the same period in 2025. The increase is due to the sale of the Village at Burlington Creek property.

Interest and other income. Interest and other income decreased $17 in 2026 compared to the same period in 2025.

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.

Critical Accounting Estimates

“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 11, 2026, contains a description of our critical accounting estimates. There have been no changes to our critical accounting estimates during the six months ended June 30, 2026.

Leasing Activity

The following table sets forth leasing activity during the six months ended June 30, 2026. Leases with terms of less than 12 months have been excluded from the table.

(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 six months ended June 30, 2026 and 2025 are calculated as follows:

(Dollar amounts in thousands)

Subsequent Events

For information related to subsequent events, reference is made to Note 15 – “Subsequent Events” which is included in our June 30, 2026 Notes to Consolidated Financial Statements in Item 1.

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 June 30, 2026, we had outstanding debt of $810 million, excluding unamortized debt issuance costs, bearing interest rates ranging from 4.23% to 5.55% per annum. The weighted average interest rate was 4.62% per annum, which includes the effect of interest rate swaps. As of June 30, 2026, the weighted average years to maturity for our Credit Facility payable was 2.8 years.

As of June 30, 2026, we had $285 million of debt or 35% of our total debt, excluding unamortized debt issuance costs, bearing interest at variable rates with a weighted average interest rate equal to 5.53% per annum. We had additional variable rate debt subject to swap agreements of $525 million, or 65% of our total debt, excluding unamortized debt issuance costs, as of June 30, 2026.

If interest rates on all debt which bears interest at variable rates as of June 30, 2026 increased by 1% (100 basis points), the increase in interest expense would decrease earnings and cash flows by $2.9 million annually. If interest rates on all debt which bears interest at variable rates as of June 30, 2026 decreased by 1% (100 basis points), the decrease in interest expense would increase earnings and cash flows by $2.9 million annually.

Regarding 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 considering 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 7–“Debt and Derivative Instruments” which is included in our June 30, 2026 Notes to Consolidated Financial Statements in Item 1.

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 June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The following risk factors amend and supplement, and should be read in conjunction with, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2025:

We may be unable to retain key personnel if we were to internalize our management functions.

We are externally managed but, in certain circumstances, such as in connection with a listing of our common stock, our board may decide to internalize our management functions. Doing so would expose us to the risk of being unable to hire certain key employees of the Business Manager and its affiliates, including as a result of the non-solicitation provisions contained in the Business Management Agreement. Subject to certain exceptions, during the term of the Business Management Agreement and for one year following its termination, we may not, without the Business Manager’s prior written consent, solicit or hire employees of the Business Manager or its affiliates. The Business Management Agreement also restricts our ability to hire certain persons who cease to be employed by the Business Manager or its affiliates during or shortly following the term of the agreement. These restrictions could make it more difficult or costly for us to retain personnel familiar with our business and operations and could delay or impede an internalization of our management functions. Failure to hire or retain key personnel could result in increased costs and deficiencies in our disclosure controls and procedures or our internal control over financial reporting. These deficiencies could cause us to incur additional costs and divert management’s attention from most effectively managing our investments, which could result in us being sued and incurring litigation-associated costs in connection with the internalization transaction. In addition, the costs that we would incur to internalize our management functions may be substantial including amounts due the Business Manager if the Business Management Agreement is terminated including a fee in one lump sum for the remainder of the term ending on March 31, 2027, plus any incentive fee to which the Business Manager might be entitled in the event of “Qualifying Internalization” as defined in the Business Management Agreement. We would also lose the benefit of the experience of our Business Manager.

Further, if we seek to internalize the functions performed for us by our Real Estate Manager, the purchase price will be separately negotiated by our independent directors, or a committee thereof, and will not be subject to the transition procedures described in our Business Management Agreement.