NETSTREIT Corp.: Form 10-Q for the period ended Jun 30, 2025

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Quarterly Report on Form 10-Q may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” Part I, Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2025, and other reports filed with the Securities and Exchange Commission from time to time.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report on Form 10-Q. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

Business Overview

We are an internally managed real estate company that acquires, owns, and manages a diversified portfolio of single-tenant commercial retail properties, subject to long-term net leases with high-credit-quality tenants across the United States. We also invest in property developments and mortgage loans secured by real estate. As of June 30, 2025, we owned or had investments in 707 properties diversified by tenant, industry, and geography, comprising 106 different tenants across 27 retail sectors in 45 states. This includes two property developments where rent has not yet commenced. We focus on tenants in industries where a physical location is critical to the generation of sales and profits, with a focus on necessity goods and essential services in the retail sector, including home improvement, auto parts, drug stores and pharmacies, general retail, grocers, convenience stores, discount stores, and quick-service restaurants, all of which we refer to as defensive retail industries. As of June 30, 2025, our investments generated ABR1 of $172.9 million. Approximately 52% of our ABR is from investment grade2 credit rated tenants and an additional 17% of our ABR is derived from tenants with an investment grade profile3. Our portfolio was 99.9% occupied and, excluding mortgage loans receivable, had a weighted average remaining lease term (“WALT”) of 9.8 years, which we believe provides a strong, stable source of recurring cash flow.

1 Annualized base rent (“ABR”) is annualized base rent for all leases that commenced and annualized cash interest for all executed mortgage loans as of June 30, 2025.

2 We define “investment grade” tenants as tenants, or tenants that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody’s), or NAIC2 (National Association of Insurance Commissioners) or higher.

3 We define “investment grade profile” tenants as tenants with metrics of more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x but do not carry a published rating from S&P, Moody’s, or NAIC.

January 2025 Debt Transactions

On January 15, 2025, we amended our existing credit agreements agented by PNC Bank, National Association (the “PNC Credit Agreement”), Wells Fargo Bank, National Association (the “Wells Fargo Credit Agreement”) and Truist Bank (the “Truist Credit Agreement”). The PNC Credit Agreement was amended and restated and provides for: a new $175.0 million senior unsecured term loan (the “2030 Term Loan B”); an existing $200.0 million senior unsecured term loan, which was fully funded under the existing PNC Credit Agreement (the “2028 Term Loan”); and an upsized $500.0 million senior unsecured revolving credit facility (increased from $400.0 million under the existing PNC Credit Agreement) (the “Revolver”). The 2030 Term Loan B and the upsized Revolver initially mature in January 2029 and include, at our election, a one-year option to extend the maturity to January 2030. The 2030 Term Loan B was fully funded on the closing date and we have hedged the entire $175.0 million 2030 Term Loan B at an all-in fixed interest rate of 5.12% through January 2030. The Wells Fargo Credit Agreement was amended and restated to extend the maturity date of the existing $175.0 million senior unsecured term loan (the “2030 Term Loan A”) thereunder from January 2027 to January 2029 with an option, at our election, to extend the maturity to January 2030. The Truist Credit Agreement governs existing term loans thereunder (the “2029 Term Loan”). Among other changes, each of the PNC Credit Agreement, Wells Fargo Credit Agreement, and Truist Credit Agreement were also amended to remove certain financial covenants and provide for revised, improved pricing when we meet certain investment grade rating and leverage targets.

2024 ATM Program

On August 12, 2024, we entered into a $300.0 million at-the-market equity program (the “2024 ATM Program”) through which, from time to time, we may sell shares of our common stock in registered transactions.

During 2025, we entered into forward sale agreements with respect to an aggregate 2,190,299 shares of its common stock under the 2024 ATM Program at a weighted average price of $16.40 per share. As of June 30, 2025, 1,085,000 shares remain unsettled under the forward sale agreements. We may physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than the stated maturity dates of April 30, 2026 and June 11, 2026.

The following table details information related to activity under the 2024 ATM Program for the three and six months ended June 30, 2025 (in thousands, except share and per share data). There was no activity during the three months ended March 31, 2025; therefore, the amounts presented are the same for the three- and six-month periods.

(1) Includes 1,105,299 shares of common stock that were physically settled at a weighted-average price of $16.37 per share under the forward sale agreements with respect to the 2024 ATM Program.

Results of Operations

Overall

We continued to grow our assets held for investment during the first half of 2025 through the acquisition of properties, property developments, and investment in mortgage loans receivable, with an underwritten weighted-average capitalization rate of approximately 7.7%. This growth was financed through the amendment of our PNC Credit Agreement and receipt of proceeds of $175.0 million under the 2030 Term Loan B, settlement of shares of common stock through our forward sale agreements in an amount of $17.9 million, the issuance of common stock under the 2024 ATM Program in an amount of $10.5 million, the usage of cash balances as a result of borrowings on our Revolver, the usage of restricted cash balances as a result of tax-free exchanges under Section 1031 of the Internal Revenue Code of 1986, and cash flows from operations during the six months ended June 30, 2025.

Acquisitions

During the three months ended June 30, 2025, we acquired 23 properties for a total purchase price of $96.5 million, inclusive of $1.0 million of capitalized acquisition costs. The acquisitions were all accounted for as asset acquisitions. These properties are located in nine states with a WALT of approximately 15.9 years.

During the six months ended June 30, 2025, we acquired 41 properties for a total purchase price of $174.0 million, inclusive of $1.9 million of capitalized acquisition costs. The acquisitions were all accounted for as asset acquisitions. These properties are located in 20 states with a WALT of approximately 12.9 years.

Development

As of June 30, 2025, we had two property developments under construction. During the three and six months ended June 30, 2025, we invested $1.4 million and $2.2 million, respectively, in property developments. During the six months ended June 30, 2025, we completed development on two projects and reclassified approximately $6.5 million from property under development to land, buildings and improvements, and other assets (leasing commissions) in the accompanying condensed consolidated balance sheets. Rent commenced for both of the completed developments in the second quarter of 2025. The remaining two developments are expected to be substantially completed with rent commencing at various points throughout 2025. The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of June 30, 2025.

Dispositions

During the three months ended June 30, 2025, we sold 20 properties for a total sales price, net of disposal costs, of $55.6 million, recognizing a net gain of $3.5 million on the sales. During the six months ended June 30, 2025, we sold 36 properties for a total sales price, net of disposal costs, of $94.2 million, recognizing a net gain of $5.6 million on the sales.

Investment in Mortgage Loans Receivable

During the three and six months ended June 30, 2025, we invested an additional $15.3 million and $25.7 million, respectively, in fully collateralized mortgage loans receivable with stated interest rates ranging from 7.00% to 10.25%. In addition, during the three and six months ended June 30, 2025, we collected $7.4 million and $12.1 million, respectively in principal on our mortgage loans receivable. The mortgage loans receivable are collateralized by real estate, primarily leased by investment grade credit rated tenants. See discussion of our mortgage loans receivable portfolio included in “Note 4 – Real Estate Investments” of our condensed consolidated financial statements, included in “Item 1 – Financial Statements (unaudited)”.

Economic and Financial Environment

Changes in global or national market and economic conditions, such as global economic and financial market volatility and global geopolitical conflict, have caused, and may continue to cause, among other things, tightening in the credit markets, lower levels of liquidity, fluctuating interest rates and inflation, increases in the rate of default and bankruptcy, and lower consumer and business spending, which could materially and adversely affect us. For example, the current and continuing macro-economic conditions of fluctuating inflation and fluctuating interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find attractive, which has reduced our ability to acquire properties at our historical rate with attractive terms. Additionally, other macroeconomic pressures in the U.S. and the global economy, including new and proposed tariffs on imports into the United States and current and potential countermeasures by foreign governments and recession fears, may impact our tenants as consumers reduce discretionary spending. A decline in consumer spending has had and may continue to have an adverse effect on tenants which, in turn, could impact our performance if tenants terminate leases or otherwise fail to pay rents. Other potential consequences of changes in economic and financial conditions include: changes in the performance of our tenants, which may result in lower rent and lower recoverable expenses, and tenant defaults under the lease; current or potential tenants may delay or postpone entering into long-term leases with us; continuing increased costs of acquiring new properties on attractive terms; inability to borrow on terms and conditions that we find to be acceptable, which could continue to reduce our ability to pursue acquisition opportunities or increase future interest expense; and the recognition of impairment charges on or reduced values of our properties, which may adversely affect our results of operations or limit our ability to dispose of assets at attractive prices and may reduce the availability of buyer financing. We are also limited in our ability to reduce costs to offset the results of a prolonged or severe economic downturn given certain fixed costs and commitments associated with our operations. We continually monitor the commercial real estate and credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly.

Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024

The following table sets forth our operating results for the periods indicated (in thousands):

Revenue. Revenue for the three months ended June 30, 2025 increased by $8.7 million to $48.3 million from $39.6 million for the three months ended June 30, 2024, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans. The increase includes additional cash rental receipts of $6.7 million, an increase of $0.4 million related to interest income on mortgage loans receivable, combined net increases of property expense reimbursements of $1.0 million, and an increase of $0.6 million in straight-line rental revenue.

Total operating expenses. Total expenses increased by $4.3 million to $36.0 million for the three months ended June 30, 2025 as compared to $31.7 million for the three months ended June 30, 2024. The increase is primarily attributed to an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, provisions for impairment, property-specific reimbursable expenses, and payroll-related costs. Total operating expenses include the following:

• Property expenses. Property expenses increased $0.5 million to $4.5 million for the three months ended June 30, 2025 from $4.0 million for the three months ended June 30, 2024. The increase is primarily attributed to the increase in the number of operating properties, including combined net increases of reimbursable property expenses of $0.3 million, of which $0.4 million were related to reimbursable property taxes, partially offset by a decrease of $0.1 million of other reimbursable costs, and combined net increases of non-reimbursable property expenses of $0.2 million, primarily related to property insurance.
• General and administrative expenses. General and administrative expenses increased $0.2 million to $5.5 million for the three months ended June 30, 2025 from $5.3 million for the three months ended June 30, 2024. The increases within general and administrative expense were primarily related to an increase of $0.5 million of bonus expense, an increase of $0.2 million of stock-based compensation, an increase of $0.1 million of payroll expense, and other combined net increases of $0.1 million. These expenses were partially offset by decreases of $0.6 million of severance expenses and $0.1 million of legal expenses. While our general and administrative expenses will continue to rise in some measure as our portfolio grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies and economies of scale.
• Depreciation and amortization. Depreciation and amortization expense increased $3.0 million to $21.5 million for the three months ended June 30, 2025 from $18.5 million for the three months ended June 30, 2024. The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases primarily in building depreciation expense of $1.7 million, building improvements depreciation expense of $0.8 million, and in-place lease amortization expense of $0.5 million.
• Provision for impairment. For the three months ended June 30, 2025, we recorded provisions for impairment of $4.4 million on nine properties, all of which were either previously classified as held-for-sale, newly classified as held-for-sale, or disposed of during three months ended June 30, 2025. For the three months ended June 30, 2024, we recorded provisions for impairment of $3.8 million on 12 properties, the majority of which were classified as held-for-sale or disposed of during the three months ended June 30, 2024. Two of the properties were held for investment as of June 30, 2024. Property disposals relate to management’s continuous assessment of the Company’s portfolio in an effort to improve returns and manage risk exposure.

Interest expense, net. Interest expense increased by $5.0 million to $12.6 million for the three months ended June 30, 2025 from $7.6 million for the three months ended June 30, 2024. The increase is attributed to an increase of $2.5 million of interest related to our term loans, primarily related to our new 2030 Term Loan B, $0.4 million of interest incurred under our Revolver, primarily due to an increase in average borrowings outstanding, an increase of $1.7 million in amortization of deferred losses on interest rate swaps, an increase of $0.2 million in amortization of loan fees associated with the January 2025 debt transactions, and an increase of $0.2 million of capitalized interest on our property developments.

Gain on sales of real estate, net. Net gain on sales of real estate increased by $3.5 million for the three months ended June 30, 2025 from less than $0.1 million for the three months ended June 30, 2024. For the three months ended June 30, 2025, 20 properties were sold for a sales price, net of disposal costs, of $55.6 million. For the three months ended June 30, 2024, six properties were sold for a sales price, net of disposal costs, of $12.1 million.

Other income (expense), net. Other income (expense), net increased by $2.7 million to $0.1 million of net other income for the three months ended June 30, 2025 from $2.6 million of net expense for the three months ended June 30, 2024. The net decrease to expense is primarily related to events that occurred during the three months ended June 30, 2024, including a transfer fraud loss of $2.8 million, net of insurance recoveries, $0.5 million of losses associated with property damages related to flooding, partially offset by $0.5 million of proceeds received from the settlement of a lease escrow agreement during the three months ended June 30, 2024.

Net income (loss). Net income increased $5.6 million to net income of $3.3 million for the three months ended June 30, 2025 from a net loss of $2.3 million for the three months ended June 30, 2024. Net income increased primarily due to additional rental revenues associated with the growth of our real estate investment portfolio, an increase in the net gain on the sales of real estate, and the occurrence of a transfer fraud loss in the prior year. These increases are partially offset by increases in interest expense and depreciation and amortization expense.

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

The following table sets forth our operating results for the periods indicated (in thousands):

Revenue. Revenue for the six months ended June 30, 2025 increased by $17.0 million to $94.2 million from $77.2 million for the six months ended June 30, 2024, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans. The increase includes additional cash rental receipts of $13.5 million, an increase of $1.1 million related to interest income on mortgage loans receivable, combined net increases of property expense reimbursements of $1.1 million, an increase of $1.0 million in straight-line rental revenue, and an increase of $0.2 million of other revenue related to settlement proceeds associated with a lease termination.

Total operating expenses. Total expenses increased by $7.7 million to $70.5 million for the six months ended June 30, 2025 as compared to $62.8 million for the six months ended June 30, 2024. The increase is primarily attributed to an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, provisions for impairment, property-specific reimbursable expenses, and payroll-related costs, offset by a decrease in employee severance. Total operating expenses include the following:

• Property expenses. Property expenses increased $1.2 million to $9.3 million for the six months ended June 30, 2025 from $8.1 million for the six months ended June 30, 2024. The increase is primarily attributed to the increase in the number of operating properties, including combined net increases of reimbursable property expenses of $0.8 million, of which $0.7 million were related to reimbursable property taxes, and combined net increases of non-reimbursable property expenses of $0.4 million, of which $0.3 million were related to property insurance.
• General and administrative expenses. General and administrative expenses decreased $0.4 million to $10.6 million for the six months ended June 30, 2025 from $11.0 million for the six months ended June 30, 2024. The decrease is primarily due to a decrease of employee severance of $1.4 million, partially offset by an increase of $0.7 million of bonus expense and an increase of $0.2 million of stock-based compensation. While our general and administrative expenses will continue to rise in some measure as our portfolio grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies and economies of scale.
• Depreciation and amortization. Depreciation and amortization expense increased $6.3 million to $42.4 million for the six months ended June 30, 2025 from $36.1 million for the six months ended June 30, 2024. The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases primarily in building depreciation expense of $3.5 million, building improvements depreciation expense of $1.6 million, and in-place lease amortization expense of $1.1 million.
• Provision for impairment. For the six months ended June 30, 2025, we recorded provisions for impairment of $8.0 million on 21 properties, the majority of which were either previously classified as held-for-sale, newly classified as held-for-sale, or disposed of during six months ended June 30, 2025. One of the properties was held for investment as of June 30, 2025. For the six months ended June 30, 2024, we recorded provisions for impairment of $7.5 million on 23 properties, the majority of which were either previously classified as held-for-sale, newly classified as held-for-sale, or disposed of during six months ended June 30, 2024. Six properties were held for investment as of June 30, 2024. Property disposals relate to management’s continuous assessment of the Company’s portfolio in an effort to improve returns and manage risk exposure.

Interest expense, net. Interest expense increased by $10.3 million to $24.1 million for the six months ended June 30, 2025 from $13.8 million for the six months ended June 30, 2024. The increase is primarily attributed to an increase of $5.3 million of interest related to our term loans, of which $4.2 million, $0.8 million, and $0.4 million is related to our new 2030 Term Loan B, our 2029 Term Loan, and our 2030 Term Loan A, respectively. Additional increases are related to $0.8 million of interest incurred under our Revolver, primarily due to an increase in average borrowings outstanding, an increase of $3.4 million in amortization of deferred losses on interest rate swaps, an increase of $0.3 million in amortization of loan fees associated with the January 2025 debt transactions, and an increase of $0.5 million of capitalized interest on our property developments.

Gain on sales of real estate, net. Net gain on sales of real estate increased by $4.6 million to $5.6 million for the six months ended June 30, 2025 from $1.0 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, 36 properties were sold for a sales price, net of disposal costs, of $94.2 million. For the six months ended June 30, 2024, 18 properties were sold for a sales price, net of disposal costs, of $32.5 million.

Other expense, net. Other expense, net decreased by $2.8 million to $0.1 million for the six months ended June 30, 2025 from $2.9 million for the six months ended June 30, 2024. The net decrease to expense is primarily related to events that occurred during the six months ended June 30, 2024, including a transfer fraud loss of $2.8 million, net of insurance recoveries, and $0.9 million of losses associated with property damages related to flooding and foundation issues, offset by $0.5 million of proceeds received from the settlement of a lease escrow agreement during the six months ended June 30, 2024 and $0.4 million of third-party debt issuance costs expensed as a result of the January 2025 debt transaction.

Net income (loss). Net income increased $6.3 million to net income of $5.0 million for the six months ended June 30, 2025 from a net loss of $1.3 million for the six months ended June 30, 2024. Net income increased due to additional rental revenues associated with the growth of our real estate investment portfolio, in addition to increased interest income associated with our mortgage loans receivable, an increase in the net gain on the sales of real estate, a decrease of employee severance, and the occurrence of a transfer fraud loss in the prior year. The increase in net income is partially offset by increases in interest expense and depreciation and amortization expense.

Liquidity and Capital Resources

Our primary capital requirements are to fund property acquisitions and developments, fund investments in mortgage loans receivable and required interest payments, and fund working capital needs, operating expenses, and capital expenditures. Our capital resources primarily consist of cash from operations, sales of equity securities, and available borrowing facilities. As of June 30, 2025, we had $200.0 million outstanding principal amount under the 2028 Term Loan, $250.0 million outstanding principal amount under the 2029 Term Loan, $175.0 million outstanding principal amount under the 2030 Term Loan A, $175.0 million outstanding principal amount under the 2030 Term Loan B, and $127.0 million of borrowings outstanding under the Revolver. Additionally, as of June 30, 2025, we had $30.3 million and $20.3 million of unsettled forward equity under our prior at-the-market equity program and our $300.0 million at-the-market equity program entered into in August 2024 (the “2024 ATM Program”), respectively. As of June 30, 2025, $271.3 million of remaining gross proceeds were available for future issuances of shares of our common stock under the 2024 ATM Program, inclusive of unsettled shares under forward sale agreements. Lastly, we had $151.0 million of unsettled forward equity under the January 2024 follow-on offering forward sale agreements as of June 30, 2025.

On January 15, 2025, we amended our PNC Credit Agreement to provide for: a new $175.0 million 2030 Term Loan B and an upsized $500.0 million Revolver. The 2030 Term Loan B and the upsized Revolver initially mature in January 2029 and include, at our election, a one-year option to extend the maturity to January 2030. The 2030 Term Loan B was fully funded on the closing date and we have hedged the entire $175.0 million 2030 Term Loan B at an all-in fixed interest rate of 5.12% through January 2030. The Wells Fargo Credit Agreement was amended and restated to extend the maturity date of the existing $175.0 million 2030 Term Loan A from January 2027 to January 2029 with an option, at our election, to extend the maturity to January 2030.

We believe the availability of proceeds from the settlement of unsettled outstanding forward sale agreements, future issuances of shares of our common stock under the 2024 ATM Program, or subsequent at-the-market sale programs, as well as our cash flows from operations and available borrowing capacity under the Revolver, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures, and working capital requirements for at least the next 12 months. We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our Revolver, and issuances of common stock.

Contractual Obligations and Commitments

As of June 30, 2025, our contractual debt obligations primarily include the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, the maturity of our 2029 Term Loan with the scheduled principal payment due on July 3, 2026, the maturities of our 2030 Term Loan A and 2030 Term Loan B with the scheduled principal payments due on January 15, 2029, and the repayment of borrowings on our Revolver with a contractual maturity of January 15, 2029. During the six months ended June 30, 2025, we borrowed $143.0 million at a weighted average interest rate of 5.42% and also repaid $255.0 million on our Revolver.

The following table provides information with respect to our commitments as of June 30, 2025 (in thousands):

(1) We have three interest rate derivative contracts to fix the base interest rate (daily simple SOFR) on our 2028 Term Loan. Accordingly, the projected interest rate obligations for the variable rate 2028 Term Loan are based on the weighted-average hedged fixed rate of 2.63% compared to the variable 2028 Term Loan daily simple SOFR rate as of June 30, 2025 of 4.32%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $200.0 million 2028 Term Loan outstanding through the maturity date of February 11, 2028.

(2) We have four interest rate derivative contracts to fix the base interest rate (daily simple SOFR) on our 2029 Term Loan. Accordingly, the projected interest rate obligations for the variable rate 2029 Term Loan are based on the weighted-average hedged fixed rate of 3.74% compared to the variable 2029 Term Loan daily simple SOFR rate as of June 30, 2025 of 4.40%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $250.0 million of the 2029 Term Loan outstanding through the contractual maturity date of July 3, 2026.

(3) We have four interest rate derivative contracts to fix the base interest rate (daily simple SOFR) on our 2030 Term Loan A. Accordingly, the projected interest rate obligations for the variable rate 2030 Term Loan A are based on the weighted-average hedged fixed rate of 2.40%, compared to the variable 2030 Term Loan A daily simple SOFR rate as of June 30, 2025 of 4.29%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $175.0 million 2030 Term Loan A outstanding through the contractual maturity date of January 15, 2029.

(4) We have seven interest rate derivative contracts to fix the base interest rate (daily simple SOFR) on our 2030 Term Loan B. Accordingly, the projected interest rate obligations for the variable rate 2030 Term Loan B are based on the weighted-average hedged fixed rate of 3.87%, compared to the variable 2030 Term Loan B daily simple SOFR rate as of June 30, 2025 of 4.36%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $175.0 million 2030 Term Loan B outstanding through the contractual maturity date of January 15, 2029.

(5) We are subject to a facility fee of 0.15% on our Revolver.

In August 2021, we entered into a lease agreement related to our corporate office space, which is classified as an operating lease. We began operating out of the office in February 2022. The lease has a remaining noncancellable term of 7.1 years that expires on July 31, 2032 and is renewable at our option for two additional periods of five years. Annual rent expense, excluding operating expenses, is approximately $0.5 million during the initial term.

Additionally, in the normal course of business, we enter into various types of commitments to purchase real estate properties, fund development projects, or extend funds under mortgage loans receivable. These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before we are obligated to purchase or extend funding. As of June 30, 2025, we had commitments to fund property developments and extend funds under mortgage loans receivable totaling $6.6 million and $14.0 million, respectively, which is expected to be funded over the next 18 months.

Debt

See discussion of our debt and interest rate hedges included in “Note 6 – Debt” and “Note 7 – Derivative Financial Instruments” in “Item 1 – Financial Statements (unaudited).”

Historical Cash Flow Information

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

(In thousands)

(Unaudited)

Cash Flows Provided By Operating Activities. Net cash provided by operating activities increased by $15.7 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was largely attributed to the increase in the size of our real estate investment portfolio with an increase in rental receipts of $13.5 million, additional interest received under our mortgage loans receivable, and changes in working capital accounts, partially offset by an increase in cash paid for interest of $7.4 million, and an increase in operating expenses paid associated with our larger portfolio.

Cash Flows Used In Investing Activities. Net cash used in investing activities decreased by $107.2 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease was primarily due to an increase of $53.2 million in proceeds from the sale of real estate, a decrease of $26.5 million in real estate development and improvements, a decrease of $16.8 million in acquisitions of real estate, an increase of $9.8 million in principal collections on mortgage loans receivable, and a decrease in cash invested in mortgage loans receivable of $0.9 million.

Cash Flows Provided By Financing Activities. Net cash provided by financing activities decreased by $101.3 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease was primarily attributed to an increase in net repayments of $130.0 million under our Revolver and $36.9 million of less proceeds received due to fewer issuances of common stock in connection with our ATM Programs and forward sale agreements. Additional items contributing to the decrease are an increase of $6.3 million in deferred financing costs and an increase in payments of common stock dividends of $4.2 million. The decrease is partially offset by an increase in net term loan proceeds of $75.0 million, a decrease in the repurchase of common stock for tax withholding obligations of $0.6 million, and a decrease in deferred offering costs of $0.4 million.

Income Taxes

We elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with our short taxable year ended December 31, 2019. To qualify as a REIT, we must meet certain organizational, income, asset, and distribution tests. Accordingly, we will generally not be subject to corporate U.S. federal or state income tax to the extent that we make qualifying distributions of all of our taxable income to our stockholders and provided we satisfy on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution, and share ownership tests. We intend to make sufficient distributions during 2025 to receive a full dividends paid deduction.

We maintain a taxable REIT subsidiary (“TRS”) which may be subject to U.S. federal, state, and local income taxes on its taxable income. In general, our TRS may perform services for our tenants, hold assets that we cannot hold directly, and may engage in any real estate or non-real estate-related business.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements and their possible effects on our condensed consolidated financial statements is included in “Note 2 – Summary of Significant Accounting Policies” in “Item 1 – Financial Statements (unaudited).”

Critical Accounting Policies and Estimates

Our accounting policies have been established to conform with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. A summary of our critical accounting policies is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, which is accessible on the SEC’s website at www.sec.gov (http://www.sec.gov). There have been no material changes to these policies during the periods covered by this quarterly report.

Non-GAAP Financial Measures

Our reported results are presented in accordance with GAAP. We also disclose the following non-GAAP financial measures: Funds From Operations (“FFO”), Core FFO, Adjusted FFO (“AFFO”), earnings before interest expense, income tax expense, and depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) from the sales of depreciable property and real estate impairment losses (“EBITDAre”), Adjusted EBITDAre, Annualized Adjusted EBITDAre, Net Debt, Adjusted Net Debt, property-level net operating income (“Property-Level NOI”), property-level cash net operating income (“Property-Level Cash NOI”), and property-level cash net operating income estimated run rate (“Property-Level Cash NOI - Estimated Run Rate”), all of which are detailed below. We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.

FFO, Core FFO, and AFFO

The National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as FFO. Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property.

Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, other non-recurring losses (gains), and losses on debt extinguishments and other related costs.

AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense and earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination costs.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance.

We further consider FFO, Core FFO, and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO, and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO, and AFFO to be alternatives to net income as a reliable measure of our operating performance nor should you consider FFO, Core FFO, and AFFO to be alternatives to cash flows from operating, investing, or financing activities (as defined by GAAP) as measures of liquidity.

FFO, Core FFO, and AFFO do not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements, and distributions to stockholders. FFO, Core FFO, and AFFO do not represent cash flows from operating, investing, or financing activities as defined by GAAP. Further, FFO, Core FFO, and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO, and AFFO.

The following table sets forth a reconciliation of FFO, Core FFO, and AFFO for the periods presented to net income (loss) before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

(Unaudited)

(Unaudited)

EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre

We compute EBITDA as earnings before interest expense, income tax expense, and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property.

Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, transaction costs, other non-recurring loss (gain), net, other non-recurring expenses (income) including lease termination fees, as well as adjustments for construction in process and for intraquarter activities. Annualized Adjusted EBITDAre is Adjusted EBITDAre multiplied by four.

We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity.

EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

The following table sets forth a reconciliation of EBITDA and EBITDAre for the periods presented to net income (loss) before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

(Unaudited)

(Unaudited)

The following table sets forth a reconciliation of EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre for the period presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (dollars in thousands):

(Unaudited)

(1) Adjustment reflects the estimated cash yield on developments in process as of June 30, 2025.

(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended June 30, 2025 had occurred on April 1, 2025.

(3) We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four.

Net Debt and Adjusted Net Debt

We calculate our Net Debt as our principal amount of total debt outstanding excluding deferred financing costs, net discounts, and debt issuance costs less cash, cash equivalents, and restricted cash available for future investment.

We further adjust Net Debt by the net value of unsettled forward equity as of period end to derive Adjusted Net Debt. We believe excluding cash, cash equivalents, and restricted cash available for future investment from our principal amount in addition to excluding the net value of unsettled forward equity, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysts.

The following table reconciles the principal amount of total debt to Net Debt and Adjusted Net Debt (in thousands):

(1) There were 11,820,647 unsettled shares under forward equity contracts as of June 30, 2025 at the available weighted-average net settlement price of $17.06.

Property-Level NOI, Property-Level Cash NOI, and Property-Level Cash NOI - Estimated Run Rate

Property-Level NOI, Property-Level Cash NOI, and Property-Level Cash NOI - Estimated Run Rate are non-GAAP financial measures which we use to assess our operating results. We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense, net, income tax expense, amortization of loan origination costs and discounts, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, losses on debt extinguishments, and other expense (income), net, including lease termination fees. We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions, and completed development to derive Property-Level Cash NOI - Estimated Run Rate. We believe Property-Level NOI, Property-Level Cash NOI, and Property-Level Cash NOI - Estimated Run Rate provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis.

Property-Level NOI, Property-Level Cash NOI, and Property-Level Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP and may not be comparable to similarly titled measures of other companies. You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

The following table sets forth a reconciliation of Property-Level NOI, Property-Level Cash NOI, and Property-Level Cash NOI - Estimated Run Rate for the period presented (in thousands):

(Unaudited)

(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended June 30, 2025 had occurred on April 1, 2025.

Our future income, cash flows, and fair value relevant to our financial instruments depend upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Based upon the nature of our operations, the principal market risk to which we are exposed is the risk related to interest rate fluctuations. As of June 30, 2025, we had total indebtedness of approximately $200.0 million under the 2028 Term Loan, $250.0 million under the 2029 Term Loan, $175.0 million under the 2030 Term Loan A, $175.0 million under the 2030 Term Loan B, and $127.0 million of borrowings under the Revolver, all of which are floating rate debt with a variable interest rate. For the three and six months ended June 30, 2025, we had average daily outstanding borrowings on our Revolver of $141.1 million and $118.9 million, respectively.

We have entered into interest rate derivative contracts in order to hedge our market risk associated with the term loans. The 2028 Term Loan, 2029 Term Loan, and 2030 Term Loan B have interest rate hedges that coincide with the extended maturity dates of the loans. The 2030 Term Loan A interest rate hedge matures on January 23, 2027. The interest rate derivative contracts convert the variable rate debt on our term loans to a fixed interest rate (as further described in “Note 6 – Debt” in our condensed consolidated financial statements).

Additionally, we will occasionally fund acquisitions through the use of our Revolver which, as of June 30, 2025, bore an interest rate determined by either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on our consolidated total leverage ratio, or (ii) a Base Rate (as defined in the PNC Credit Agreement), plus a margin ranging from 0.00% to 0.45%, based on our consolidated total leverage ratio. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to our interest rate risk. Based on the results of our sensitivity analysis and daily outstanding borrowings on the Revolver during 2025, which assumes a 1% adverse change in the interest rate as of June 30, 2025, the estimated market risk exposure was approximately $1.2 million.

Evaluation of 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 June 30, 2025 to ensure that information required to be disclosed 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.

Changes in Internal Control over Financial Reporting.

During the period covered by this report, there were no changes to the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

For a discussion of the most significant factors that may adversely affect us, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which is accessible on the SEC’s website at www.sec.gov (http://www.sec.gov). There have been no material changes to the risk factors disclosed in the Annual Report. These risk factors may not describe every risk facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and results of operations.