UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-55435

SILA REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)


Maryland						46-1854011
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

1001 Water Street, Suite 800 Tampa, FL 33602						(813)~~-287-0101~~ 287-0101
(Address of Principal Executive Offices; Zip Code)						(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class

Trading Symbol

Name of each exchange on which registered

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

��☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~August 4, ~~2022,~~2023, there were approximately ~~168,298,000~~168,933,000 shares of Class A common stock, ~~16,717,000~~16,862,000 shares of Class I common stock, ~~40,990,000~~41,523,000 shares of Class T common stock and 0 shares of Class T2 common stock of Sila Realty Trust, Inc. outstanding.

SILA REALTY TRUST, INC.

(A Maryland Corporation)

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION (Unaudited)	3
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets as of ~~September~~June 30 ~~30, 2022~~, 2023 and December 31, ~~2021~~2022	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30 ~~30,~~, 2023 and 2022 ~~and 2021~~	4
	Condensed Consolidated Statements of Equity for the Three and ~~Nine~~Six Months Ended SeJune 30 ~~ptember~~ ~~30,~~, 2023 and 2022 ~~and 2021~~	5
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30 , 2023 and 2022 ~~and 2021~~	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2319
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3429
Item 4.	Controls and Procedures	3530
PART II.	OTHER INFORMATION	3631
Item 1.	Legal Proceedings	3631
Item 1A.	Risk Factors	3631
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3631
Item 3.	Defaults Upon Senior Securities	3631
Item 4.	Mine Safety Disclosures	3631
Item 5.	Other Information	3631
Item 6.	Exhibits	3732

SIGNATURES

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

SILA REALTY TRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


		(Unaudited) September 30, 2022		December 31, 2021			(Unaudited) June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Real estate:	Real estate:					Real estate:
Land	Land	$	166,037	$	163,992	Land	$	163,455	$	163,419
Buildings and improvements, less accumulated depreciation of $199,236 and $165,784, respectively		1,764,835		1,648,685
Construction in progress		—		14,628
Buildings and improvements, less accumulated depreciation of $233,147 and $209,118, respectively						Buildings and improvements, less accumulated depreciation of $233,147 and $209,118, respectively	1,683,674		1,716,663

Total real estate, net	Total real estate, net	1,930,872		1,827,305		Total real estate, net	1,847,129		1,880,082
Cash and cash equivalents	Cash and cash equivalents	17,291		32,359		Cash and cash equivalents	21,497		12,917
Acquired intangible assets, less accumulated amortization of $85,888 and $71,067, respectively		177,315		181,639
Intangible assets, less accumulated amortization of $99,446 and $90,239, respectively						Intangible assets, less accumulated amortization of $99,446 and $90,239, respectively	155,679		167,483
Goodwill	Goodwill	23,006		23,284		Goodwill	20,128		21,710

Right-of-use assets	Right-of-use assets	38,580		24,033		Right-of-use assets	36,914		37,443
Other assets, net		102,745		66,365
Assets held for sale		—		22,570
Other assets						Other assets	98,904		100,167

Total assets	Total assets	$	2,289,809	$	2,177,555	Total assets	$	2,180,251	$	2,219,802
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:	Liabilities:					Liabilities:
Credit facility, net of deferred financing costs of $2,570 and $3,226, respectively		597,430		496,774
Credit facility, net of deferred financing costs of $2,107 and $2,412, respectively						Credit facility, net of deferred financing costs of $2,107 and $2,412, respectively	562,893		580,588
Accounts payable and other liabilities	Accounts payable and other liabilities	28,579		39,597		Accounts payable and other liabilities	28,936		30,619
Acquired intangible liabilities, less accumulated amortization of $5,550 and $4,444, respectively		12,319		12,962
Intangible liabilities, less accumulated amortization of $6,670 and $5,923, respectively						Intangible liabilities, less accumulated amortization of $6,670 and $5,923, respectively	11,199		11,946

Lease liabilities	Lease liabilities	41,640		26,394		Lease liabilities	41,360		41,554
Liabilities held for sale		—		698

Total liabilities	Total liabilities	679,968		576,425		Total liabilities	644,388		664,707
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized; none issued and outstanding	Preferred stock, $0.01 par value per share, 100,000,000 shares authorized; none issued and outstanding	—		—		Preferred stock, $0.01 par value per share, 100,000,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.01 par value per share, 510,000,000 shares authorized; 240,666,572 and 238,226,119 shares issued, respectively; 225,833,531 and 224,179,939 shares outstanding, respectively		2,258		2,242
Common stock, $0.01 par value per share, 510,000,000 shares authorized; 243,041,697 and 241,425,332 shares issued, respectively; 227,143,142 and 226,255,969 shares outstanding, respectively						Common stock, $0.01 par value per share, 510,000,000 shares authorized; 243,041,697 and 241,425,332 shares issued, respectively; 227,143,142 and 226,255,969 shares outstanding, respectively	2,272		2,263
Additional paid-in capital	Additional paid-in capital	2,019,564		2,004,404		Additional paid-in capital	2,033,110		2,024,176
Distributions in excess of accumulated earnings	Distributions in excess of accumulated earnings	(441,591)		(400,669)		Distributions in excess of accumulated earnings	(526,627)		(499,334)
Accumulated other comprehensive income (loss)		29,610		(4,847)
Accumulated other comprehensive income						Accumulated other comprehensive income	27,108		27,990
Total stockholders’ equity	Total stockholders’ equity	1,609,841		1,601,130		Total stockholders’ equity	1,535,863		1,555,095
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,289,809	$	2,177,555	Total liabilities and stockholders’ equity	$	2,180,251	$	2,219,802

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SILA REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except share data and per share amounts)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Revenue:	Revenue:										Revenue:
Rental revenue	Rental revenue	$	46,881	$	43,063	$	136,081	$	129,232		Rental revenue	$	44,965	$	44,918	$	94,609	$	89,200
Expenses:	Expenses:										Expenses:
Rental expenses	Rental expenses	3,232		3,024		9,267		9,513			Rental expenses	4,873		4,310		9,723		8,629
General and administrative expenses	General and administrative expenses	6,118		6,348		20,718		19,610			General and administrative expenses	5,547		6,444		11,650		12,006

Depreciation and amortization	Depreciation and amortization	18,641		17,259		54,443		53,098			Depreciation and amortization	18,803		17,814		37,355		35,802

Impairment losses	Impairment losses	—		10,241		7,387		27,837			Impairment losses	6,364		—		6,708		7,387
Total expenses	Total expenses	27,991		36,872		91,815		110,058			Total expenses	35,587		28,568		65,436		63,824
Gain on real estate disposition	Gain on real estate disposition	—		—		460		—			Gain on real estate disposition	—		—		21		460

Interest and other expense, net		5,498		11,737		17,942		30,035
Income (loss) from continuing operations		13,392		(5,546)		26,784		(10,861)
Income from discontinued operations		—		377,191		—		401,444
Interest and other expenses, net											Interest and other expenses, net	5,523		4,329		11,139		12,444

Net income attributable to common stockholders	Net income attributable to common stockholders	$	13,392	$	371,645	$	26,784	$	390,583		Net income attributable to common stockholders	$	3,855	$	12,021	$	18,055	$	13,392
Other comprehensive income - unrealized gain on interest rate swaps, net		16,345		2,241		34,457		9,808
Other comprehensive income (loss) - unrealized gain (loss) on interest rate swaps, net											Other comprehensive income (loss) - unrealized gain (loss) on interest rate swaps, net	7,382		5,257		(882)		18,112
Comprehensive income attributable to common stockholders	Comprehensive income attributable to common stockholders	$	29,737	$	373,886	$	61,241	$	400,391		Comprehensive income attributable to common stockholders	$	11,237	$	17,278	$	17,173	$	31,504
Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:										Weighted average number of common shares outstanding:
Basic	Basic	225,638,485		223,661,774		225,052,921		223,079,613			Basic	226,977,364		225,008,452		226,770,697		224,755,285
Diluted	Diluted	226,957,015		223,661,774		226,399,118		223,079,613			Diluted	228,835,132		226,362,977		228,620,896		226,115,545
Net income per common share attributable to common stockholders:	Net income per common share attributable to common stockholders:										Net income per common share attributable to common stockholders:
Basic:
Continuing operations		$	0.06	$	(0.03)	$	0.12	$	(0.05)
Discontinued operations		—		1.69		—		1.80
Net income attributable to common stockholders		$	0.06	$	1.66	$	0.12	$	1.75
Diluted:
Continuing operations		$	0.06	$	(0.03)	$	0.12	$	(0.05)
Discontinued operations		—		1.69		—		1.80
Net income attributable to common stockholders		$	0.06	$	1.66	$	0.12	$	1.75

Basic											Basic	$	0.02	$	0.05	$	0.08	$	0.06

Diluted											Diluted	$	0.02	$	0.05	$	0.08	$	0.06

Distributions declared per common share	Distributions declared per common share	$	0.10	$	1.86	$	0.30	$	2.11		Distributions declared per common share	$	0.10	$	0.10	$	0.20	$	0.20

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SILA REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share data)

(Unaudited)

Common Stock
No. of
Shares Par
Value Additional
Paid-in
Capital Distributions in Excess of Accumulated Earnings Accumulated Other Comprehensive Income Total
Stockholders’
Equity
Balance, June 30, 2022 225,240,223 $ 2,252 $ 2,014,252 $ (432,101) $ 13,265 $ 1,597,668
Issuance of common stock under the distribution reinvestment plan 767,755 8 6,296 — — 6,304
Vesting of restricted stock 50,689 — — — — —
Stock-based compensation — — 860 — — 860
Repurchase of common stock (225,136) (2) (1,844) — — (1,846)
Distributions to common stockholders — — — (22,882) — (22,882)
Other comprehensive income — — — — 16,345 16,345
Net income — — — 13,392 — 13,392
Balance, September 30, 2022 225,833,531 $ 2,258 $ 2,019,564 $ (441,591) $ 29,610 $ 1,609,841

Common Stock
No. of
Shares Par
Value Additional
Paid-in
Capital Distributions in Excess of Accumulated Earnings Accumulated Other Comprehensive (Loss) Income Total
Stockholders’
Equity
Balance, December 31, 2021 224,179,939 $ 2,242 $ 2,004,404 $ (400,669) $ (4,847) $ 1,601,130
Issuance of common stock under the distribution reinvestment plan 2,265,628 23 18,571 — — 18,594
Vesting of restricted stock 174,825 — — — — —
Stock-based compensation — 1 3,033 — — 3,034
Repurchase of common stock (786,861) (8) (6,444) — — (6,452)
Distributions to common stockholders — — — (67,706) — (67,706)
Other comprehensive income — — — — 34,457 34,457
Net income — — — 26,784 — 26,784
Balance, September 30, 2022 225,833,531 $ 2,258 $ 2,019,564 $ (441,591) $ 29,610 $ 1,609,841


	Common Stock
	No. of Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
Balance, March 31, 2023	226,680,140	$	2,267	$	2,028,079	$	(507,661)	$	19,726	$	1,542,411
Issuance of common stock under the distribution reinvestment plan	766,124	8		6,269		—		—		6,277

Stock-based compensation	—	—		1,251		—		—		1,251


Repurchase of common stock	(303,122)	(3)		(2,489)		—		—		(2,492)
Distributions to common stockholders	—	—		—		(22,821)		—		(22,821)
Other comprehensive income	—	—		—		—		7,382		7,382
Net income	—	—		—		3,855		—		3,855
Balance, June 30, 2023	227,143,142	$	2,272	$	2,033,110	$	(526,627)	$	27,108	$	1,535,863


	Common Stock
	No. of Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
Balance, December 31, 2022	226,255,969	$	2,263	$	2,024,176	$	(499,334)	$	27,990	$	1,555,095
Issuance of common stock under the distribution reinvestment plan	1,516,914	15		12,435		—		—		12,450
Vesting of restricted stock	99,451	—		—		—		—		—
Stock-based compensation	—	1		2,492		—		—		2,493

Other offering costs	—	—		(6)		—		—		(6)
Repurchase of common stock	(729,192)	(7)		(5,987)		—		—		(5,994)
Distributions to common stockholders	—	—		—		(45,348)		—		(45,348)
Other comprehensive loss	—	—		—		—		(882)		(882)
Net income	—	—		—		18,055		—		18,055
Balance, June 30, 2023	227,143,142	$	2,272	$	2,033,110	$	(526,627)	$	27,108	$	1,535,863

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SILA REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share data)

(Unaudited)


		Common Stock												Common Stock
		No. of Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity			No. of Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
Balance, June 30, 2021		223,285,587	2,233		1,995,298		(345,941)		(12,877)		1,638,713
Balance, March 31, 2022													Balance, March 31, 2022	224,616,042	$	2,246	$	2,008,481	$	(421,561)	$	8,008	$	1,597,174
Issuance of common stock under the distribution reinvestment plan	Issuance of common stock under the distribution reinvestment plan	826,280	8		6,909		—		—		6,917		Issuance of common stock under the distribution reinvestment plan	765,065	8		6,270		—		—		6,278
Vesting of restricted stock	Vesting of restricted stock	18,075	—		—		—		—		—		Vesting of restricted stock	76,150	—		—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		637		—		—		637		Stock-based compensation	—	1		1,277		—		—		1,278
Distribution and servicing fees		—	—		573		—		—		573

Repurchase of common stock	Repurchase of common stock	(303,247)	(3)		(2,483)		—		—		(2,486)		Repurchase of common stock	(217,034)	(3)		(1,776)		—		—		(1,779)
Distributions to common stockholders	Distributions to common stockholders	—	—		—		(416,636)		—		(416,636)		Distributions to common stockholders	—	—		—		(22,561)		—		(22,561)
Other comprehensive income	Other comprehensive income	—	—		—		—		2,241		2,241		Other comprehensive income	—	—		—		—		5,257		5,257
Net income	Net income	—	—		—		371,645		—		371,645		Net income	—	—		—		12,021		—		12,021
Balance, September 30, 2021		223,826,695	$	2,238	$	2,000,934	$	(390,932)	$	(10,636)	$	1,601,604
Balance, June 30, 2022													Balance, June 30, 2022	225,240,223	$	2,252	$	2,014,252	$	(432,101)	$	13,265	$	1,597,668


		Common Stock												Common Stock
		No. of Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity			No. of Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity
Balance, December 31, 2020		222,045,522	$	2,220	$	1,983,361	$	(311,264)	$	(20,444)	$	1,653,873
Balance, December 31, 2021													Balance, December 31, 2021	224,179,939	2,242		2,004,404		(400,669)		(4,847)		1,601,130
Issuance of common stock under the distribution reinvestment plan	Issuance of common stock under the distribution reinvestment plan	2,532,368	25		21,725		—		—		21,750		Issuance of common stock under the distribution reinvestment plan	1,497,873	15		12,275		—		—		12,290
Vesting of restricted stock	Vesting of restricted stock	21,386	—		—		—		—		—		Vesting of restricted stock	124,136	—		—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		1,756		—		—		1,756		Stock-based compensation	—	1		2,173		—		—		2,174
Distribution and servicing fees		—	—		649		—		—		649

Repurchase of common stock	Repurchase of common stock	(772,581)	(7)		(6,557)		—		—		(6,564)		Repurchase of common stock	(561,725)	(6)		(4,600)		—		—		(4,606)
Distributions to common stockholders	Distributions to common stockholders	—	—		—		(470,251)		—		(470,251)		Distributions to common stockholders	—	—		—		(44,824)		—		(44,824)
Other comprehensive income	Other comprehensive income	—	—		—		—		9,808		9,808		Other comprehensive income	—	—		—		—		18,112		18,112
Net income	Net income	—	—		—		390,583		—		390,583		Net income	—	—		—		13,392		—		13,392
Balance, September 30, 2021		223,826,695	$	2,238	$	2,000,934	$	(390,932)	$	(10,636)	$	1,601,604
Balance, June 30, 2022													Balance, June 30, 2022	225,240,223	$	2,252	$	2,014,252	$	(432,101)	$	13,265	$	1,597,668

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SILA REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


		Nine Months Ended September 30,				Six Months Ended June 30,
		2022		2021				2023		2022
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income attributable to common stockholders	Net income attributable to common stockholders	$	26,784	$	390,583		Net income attributable to common stockholders	$	18,055	$	13,392
Adjustments to reconcile net income attributable to common stockholders to net cash provided by operating activities:	Adjustments to reconcile net income attributable to common stockholders to net cash provided by operating activities:						Adjustments to reconcile net income attributable to common stockholders to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	54,443		64,857			Depreciation and amortization	37,355		35,802
Amortization of deferred financing costs	Amortization of deferred financing costs	1,267		2,761			Amortization of deferred financing costs	825		854
Amortization of above- and below-market leases	Amortization of above- and below-market leases	362		(1,239)			Amortization of above- and below-market leases	504		240
Other amortization expenses	Other amortization expenses	1,989		2,159			Other amortization expenses	399		1,511
Gain on real estate disposition from continuing operations		(460)		—
Gain on real estate dispositions of discontinued operations		—		(395,801)
Gain on real estate disposition							Gain on real estate disposition	(21)		(460)

Loss on extinguishment of debt	Loss on extinguishment of debt	3,367		28,751			Loss on extinguishment of debt	—		3,367
Impairment losses	Impairment losses	7,387		27,837			Impairment losses	6,708		7,387
Straight-line rent adjustments		(7,530)		(12,492)
Straight-line rent adjustments, net of write-offs							Straight-line rent adjustments, net of write-offs	(1,273)		(5,023)
Stock-based compensation	Stock-based compensation	3,034		1,756			Stock-based compensation	2,493		2,174
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Accounts payable and other liabilities	Accounts payable and other liabilities	(2,770)		(7,172)			Accounts payable and other liabilities	(1,670)		(4,042)
Other assets	Other assets	1,158		2,816			Other assets	831		1,551
Net cash provided by operating activities	Net cash provided by operating activities	89,031		104,816			Net cash provided by operating activities	64,206		56,753
Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:
Investment in real estate		(157,194)		(25,048)
Consideration paid for the internalization transaction		—		(15,000)
Investments in real estate							Investments in real estate	(9,920)		(42,428)

Proceeds from real estate disposition	Proceeds from real estate disposition	22,822		1,295,367			Proceeds from real estate disposition	12,241		22,822
Capital expenditures	Capital expenditures	(7,577)		(20,323)			Capital expenditures	(962)		(6,477)

Change in deposits and other costs for investments in real estate		—		(400)
Collection of notes receivable		—		28,500
Net cash (used in) provided by investing activities		(141,949)		1,263,096
Payments of deposits and other costs for investments in real estate							Payments of deposits and other costs for investments in real estate	—		(1,166)

Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	1,359		(27,249)
Cash flows from financing activities:	Cash flows from financing activities:						Cash flows from financing activities:
Payments on notes payable		—		(453,422)

Proceeds from credit facility	Proceeds from credit facility	845,000		15,000			Proceeds from credit facility	—		740,000
Payments on credit facility	Payments on credit facility	(745,000)		(433,000)			Payments on credit facility	(18,000)		(735,000)
Payments for extinguishment of debt		(4)		(29,244)

Payments of deferred financing costs	Payments of deferred financing costs	(6,936)		(436)			Payments of deferred financing costs	(12)		(6,940)
Repurchase of common stock	Repurchase of common stock	(6,452)		(6,564)			Repurchase of common stock	(5,994)		(4,606)
Offering costs on issuance of common stock	Offering costs on issuance of common stock	(193)		(1,807)			Offering costs on issuance of common stock	(10)		(193)
Distributions to common stockholders	Distributions to common stockholders	(48,920)		(450,143)			Distributions to common stockholders	(32,969)		(32,401)
Net cash provided by (used in) financing activities		37,495		(1,359,616)

Net cash used in financing activities							Net cash used in financing activities	(56,985)		(39,140)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(15,423)		8,296			Net change in cash, cash equivalents and restricted cash	8,580		(9,636)
Cash, cash equivalents and restricted cash - Beginning of period	Cash, cash equivalents and restricted cash - Beginning of period	32,880		67,909			Cash, cash equivalents and restricted cash - Beginning of period	13,083		32,880
Cash, cash equivalents and restricted cash - End of period	Cash, cash equivalents and restricted cash - End of period	$	17,457	$	76,205		Cash, cash equivalents and restricted cash - End of period	$	21,663	$	23,244
Supplemental cash flow disclosure:	Supplemental cash flow disclosure:						Supplemental cash flow disclosure:
Interest paid, net of interest capitalized of $48 and $296, respectively		$	12,451	$	34,142
Interest paid, net of interest capitalized							Interest paid, net of interest capitalized	$	10,779	$	7,918
Supplemental disclosure of non-cash transactions:	Supplemental disclosure of non-cash transactions:						Supplemental disclosure of non-cash transactions:
Common stock issued through distribution reinvestment plan	Common stock issued through distribution reinvestment plan	$	18,594	$	21,750		Common stock issued through distribution reinvestment plan	$	12,450	$	12,290
Change in accrued distributions to common stockholders	Change in accrued distributions to common stockholders	$	192	$	(1,642)		Change in accrued distributions to common stockholders	$	(71)	$	133
Change in accounts payable and other liabilities related to capital expenditures		$	(3,295)	$	605
Right-of-use assets obtained in exchange for new operating lease liabilities		$	15,305	$	625
Change in accounts payable and other liabilities related to capital expenditures and investments in real estate							Change in accounts payable and other liabilities related to capital expenditures and investments in real estate	$	87	$	(2,470)

Right-of-use assets obtained in exchange for new lease liabilities							Right-of-use assets obtained in exchange for new lease liabilities	$	—	$	3,749

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SILA REALTY TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~September~~June 30, ~~2022~~2023

Note 1—Organization and Business Operations

Sila Realty Trust, Inc., or the Company, is a Maryland corporation, headquartered in Tampa, Florida, that has elected, and currently qualifies, to be taxed as a real estate investment trust, or a REIT, under the Internal Revenue Code of 1986, as amended, or the Code, for federal income tax purposes. The Company invests in high-quality ~~healthcare~~ properties leased to long-term tenants. The Company is primarily focused on investing in ~~and managing strategic~~ healthcare assets across the continuum of care, with emphasis on lower cost patient settings, which the Company believes typically generate predictable, durable and growing income streams. The Company may also make other real estate-related investments, ~~in healthcare properties,~~ which may include equity or debt interests in other real estate entities.

Substantially all of the Company’s business is conducted through Sila Realty Operating Partnership, LP, a Delaware limited partnership, or the Operating Partnership. The Company is the sole general partner of the Operating Partnership and directly and ~~through its wholly-owned subsidiaries,~~indirectly owns 100% of the Operating Partnership.

The Company formerly invested in data center properties and during the second quarter of 2021, the Company's board of directors, or the Board, made a determination to sell the Company's data center properties. On May 19, 2021, the Company and certain of its wholly-owned subsidiaries entered into a purchase and sale agreement, or the PSA, for the sale of up to 29 data center properties owned by the Company, which constituted the entirety of the Company's data center segment. The decision of the Board to sell the data center properties, as well as the execution of the PSA, represented a strategic shift that had a major effect on the Company's results and operations for the periods presented. As of December 31, 2021, the Company had no assets or liabilities related to the data center segment. The operations of the data center segment have been classified as income from discontinued operations on the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2021.

On July 22, 2021, the Company completed the sale of its data center segment, or the Data Center Sale, for an aggregate sale price of $1,320,000,000, and generated net proceeds of approximately $1,295,367,000. Concurrently, the Board declared a special cash distribution of $1.75 per share of Class A, Class I, Class T and Class T2 shares of common stock. The special cash distribution was funded with the proceeds from the Data Center Sale. The special cash distribution was paid on July 30, 2021 to stockholders of record at the close of business on July 26, 2021, in an aggregate amount of approximately $392,685,000.

Except as the context otherwise requires, the “Company” refers to Sila Realty Trust, Inc., the Operating Partnership and their wholly-owned subsidiaries.

Note 2—Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, ~~2021,~~2022, and related notes thereto set forth in the Company’s Annual Report on Form 10-K, filed with the SEC on March ~~29, 2022.~~16, 2023. In the opinion of management, all adjustments, consisting of a normal and recurring nature considered for a fair presentation, have been included. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023.

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, and their wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements and accompanying notes in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates are made and evaluated on an ongoing basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates.

~~Table of~~ ~~Contents~~

Restricted Cash

Restricted cash consists of cash held in escrow accounts ~~for tenant and capital improvements~~ in accordance with ~~the respective tenants'~~a certain tenant's lease agreement. Restricted cash is reported in other assets ~~net,~~ in the accompanying condensed consolidated balance sheets.

Table of Contents

The following table presents a reconciliation of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals shown in the condensed consolidated statements of cash flows (amounts in thousands):


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Beginning of period:	Beginning of period:					Beginning of period:
Cash and cash equivalents	Cash and cash equivalents	$	32,359	$	53,174	Cash and cash equivalents	$	12,917	$	32,359
Restricted cash	Restricted cash	521		14,735		Restricted cash	166		521
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	32,880	$	67,909	Cash, cash equivalents and restricted cash	$	13,083	$	32,880

End of period:	End of period:					End of period:
Cash and cash equivalents	Cash and cash equivalents	$	17,291	$	75,363	Cash and cash equivalents	$	21,497	$	23,077
Restricted cash	Restricted cash	166		842		Restricted cash	166		167
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	17,457	$	76,205	Cash, cash equivalents and restricted cash	$	21,663	$	23,244

Reclassifications

~~Certain~~The Company determined that certain expenses, previously presented within general and administrative expenses, are more closely related to the operations of its properties. As a result, these amounts ~~in the condensed consolidated financial statements for prior periods~~ have been reclassified to rental expenses for the prior period to conform to the current period presentation.

Note 3—Real Estate Investments

~~2022~~ Real Estate Property ~~Acquisitions~~Acquisition

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company purchased ~~seven~~one real estate ~~properties in five separate transactions, or the 2022 Acquisitions,~~property which ~~were each~~was determined to be an asset ~~acquisitions.~~acquisition. The Company allocated the purchase price ~~of the 2022 Acquisitions~~ to tangible assets, consisting of land, building and improvements, tenant improvements, and ~~acquired~~ intangible assets, ~~and liabilities,~~ consisting of in-place ~~and above and below market~~ leases, based on the relative fair value method of allocating all accumulated costs.

The following table summarizes the consideration transferred, ~~for the 2022 Acquisitions during the nine months ended September 30, 2022:~~

Property Description Date Acquired Ownership Percentage Purchase Price
(amount in thousands)
Yukon Healthcare Facility 03/10/2022 100% $ 19,554
Pleasant Hills Healthcare Facility 05/12/2022 100% 14,303
Prosser Healthcare Facilities (1)
05/20/2022 100% 8,593
Tampa Healthcare Facility II 07/20/2022 100% 51,259
Escondido Healthcare Facility 07/21/2022 100% 63,485
Total $ 157,194

~~(1) The Prosser Healthcare Facilities consist~~and allocation of ~~three healthcare properties.~~

~~Table of~~ ~~Contents~~

~~The following table summarizes the Company's~~ purchase price, ~~allocation of the 2022 Acquisitions during the nine months ended September 30, 2022~~for this acquisition (amounts in thousands):

Property Description

Date Acquired

Ownership Percentage

Consideration Transferred
(amount in thousands)

West Palm Beach Healthcare Facility

06/15/2023

100%

9,920


	Total
Land	$	~~2,646~~2,065
Building and improvements	~~136,938~~6,728
Tenant improvements	~~4,840~~282
In-place leases	~~12,779~~845
~~Above-market leases~~	~~454~~
Total assets acquired	~~157,657~~$	9,920
~~Below-market leases~~	~~(463)~~
~~Net assets acquired~~	$	~~157,194~~

~~Acquisition costs associated with transactions determined to be asset acquisitions are capitalized.~~ The Company capitalized acquisition costs of approximately ~~$617,000 related to the 2022 Acquisitions,~~$71,000, which are included in the ~~Company's~~ allocation of the real estate ~~acquisitions~~acquisition presented above.

~~2022~~ Real Estate Property Disposition

On ~~February 10, 2022,~~March 31, 2023, the Company sold one ~~land parcel that formerly contained~~property for a ~~healthcare property, or the 2022 Disposition, for an aggregate sale~~sales price of ~~$24,000,000~~$12,500,000, consisting of $5,000,000 in cash and $7,500,000 that was structured as a note receivable, which was collected in full on June 30, 2023. The Company generated net proceeds on the sale of ~~$22,701,000. For~~$12,241,000 and recognized a gain of $21,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023. Interest income on the ~~Company recognized an aggregate gain~~note receivable was $105,000 for the three and six months ended June 30, 2023, and is recorded in interest and other expenses, net, on ~~sale of $460,000, which is presented in gain on real estate disposition in~~ the accompanying condensed consolidated ~~statements~~statement of comprehensive income.

~~Concentration of Credit~~Investment Risk ~~and Significant Leases~~Concentrations

As of ~~September~~June 30, ~~2022,~~2023, the Company had one exposure to geographic concentration that accounted for ~~greater than~~at least 10.0% of rental revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. Real estate ~~investments~~properties located in the Houston-The Woodlands-Sugar Land, Texas metropolitan statistical area accounted for ~~10.9%~~10.5% of rental revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

Table of Contents

As of ~~September~~June 30, ~~2022,~~2023, the Company had one exposure to tenant concentration that accounted for ~~greater than~~at least 10.0% of rental revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. The leases with tenants at ~~healthcare~~ properties under the common control of Post Acute Medical, LLC and its affiliates accounted for ~~14.2%~~14.5% of rental revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

~~Impairments~~Impairment Losses

The Company recorded impairment losses on real estate of ~~Real Estate, Goodwill, Acquired Intangible Assets~~$6,364,000 and ~~Acquired Intangible Liabilities~~

~~During~~$6,708,000 (including goodwill impairments of $1,238,000 and $1,582,000), for the ~~nine~~three and six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as a result of tenant related triggering events that occurred at certain properties. In addition, during the three months ended June 30, 2023, the Company recorded an impairment ~~loss on real estate, including goodwill, in the aggregate amount~~ of ~~$7,387,000 related to a healthcare property.~~in-place lease and above-market lease intangible assets of $592,000 and $260,000, respectively. The fair ~~value~~values of ~~this property was~~these properties were determined based on the guidance in ASC 820, Fair Value Measurement. These impairments were allocated to the asset groups, for each respective property, on a ~~market approach model using a signed purchase~~pro-rata basis, which included land, buildings and ~~sale agreement to estimate the fair value~~improvements, and ~~classified within Level 2 of the fair value hierarchy. In addition, during the nine months ended September 30, 2022, the Company recognized an impairment of one in-place lease~~their related intangible asset in the amount of approximately $380,000 related to a tenant in this property. During the three months ended September 30, 2022, the Company did not have impairment of real estate, goodwill, acquired intangible assets or acquired intangible liabilities.assets.

During the ~~three~~six months ended ~~September~~June 30, ~~2021, the Company recorded an impairment loss on real estate in the amount of $10,241,000 related to one healthcare property for which the carrying value exceeded the estimated fair value.~~

~~During the three months ended September 30, 2021, the Company did not have impairment of goodwill, acquired intangible assets or acquired intangible liabilities.~~

~~During the nine months ended September 30, 2021,~~2022, the Company recorded impairment losses on real estate ~~including~~of $7,387,000 (including goodwill ~~in the aggregate amount~~impairments of $27,837,000 related to one healthcare property held for use, one healthcare property classified as held for sale and one land parcel that formerly contained a healthcare property classified as held for sale, for which the carrying values exceeded the estimated fair values less costs to sell. The fair value of the properties with impairment charges$278,000). In addition, during the three and nine months September 30, 2021, were determined based on a market approach model using comparable properties adjusted for differences in characteristics to estimate the fair value and classified within Level 2 of the fair value hierarchy. During the ninesix months ended ~~September~~June 30, ~~2021,~~2022, the Company ~~recognized~~recorded an impairment of ~~one~~an in-place lease intangible asset ~~in the amount~~ of ~~approximately $1,120,000~~$380,000. The property related to ~~one healthcare tenant. The impaired properties for~~ the ~~three and nine months ended September 30, 2021 have all been subsequently sold.~~2022 impairments was sold on March 31, 2023.

~~Table of~~ ~~Contents~~

~~During the nine months ended September 30, 2021, the Company did not have impairment of acquired intangible liabilities.~~

~~Impairment charges on real estate and goodwill~~Impairments are recorded as impairment losses in the accompanying condensed consolidated statements of comprehensive income. ~~Impairment~~Impairments of ~~the~~ in-place leases isare included in depreciation and amortization in the accompanying condensed consolidated statements of comprehensive income.

~~Note 4—Held for Sale and Discontinued Operations~~

~~On August 30, 2021, the Company entered into~~ Impairments of above-market leases are recorded as a purchase and sale agreement for the sale of one land parcel that formerly contained a healthcare property. The purchase and sale agreement required that the structures on the healthcare property be demolished priorreduction to ~~the sale. The structures on the property were demolished and the property consisted solely of land as of December 31, 2021. The Company classified the land as held for sale as of December 31, 2021.The Company sold the land held for sale on February 10, 2022.~~

~~The following table presents the major classes of the assets and liabilities held for sale as presented separately~~rental revenue in the ~~condensed consolidated balance sheet as of December 31, 2021 (amounts in thousands):~~


	~~December 31, 2021~~
~~Assets:~~
~~Real estate:~~
~~Land~~	$	~~22,241~~
~~Buildings and improvements, net~~	—
~~Total real estate, net~~	~~22,241~~




~~Other assets, net~~	~~329~~
~~Assets held for sale~~	$	~~22,570~~
~~Liabilities:~~

~~Accounts payable and other liabilities~~	~~698~~


~~Liabilities held for sale~~	$	~~698~~

~~The operations reflected in income from discontinued operations (which consisted solely of the Company's former data center segment) on the~~accompanying condensed consolidated statements of comprehensive ~~income for the three and nine months ended September 30, 2021, were as follows (amounts in thousands):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2021
Revenue:
Rental revenue $ 6,180 $ 57,903
Lease termination revenue 75 7,075
Total revenue 6,255 64,978
Expenses:
Rental expenses 2,504 15,737
Depreciation and amortization 35 11,759
Total expenses 2,539 27,496
Interest and other expense, net (1)
25,085 31,839
Income from discontinued operations (21,369) 5,643
Gain on real estate dispositions(2)
398,560 395,801
Net income from discontinued operations attributable to common stockholders $ 377,191 $ 401,444

(1) Interest expense attributable to discontinued operations for the three and nine months ended September 30, 2021 was $25,085,000 and $31,856,000, respectively, which related to notes payable on certain data center properties. On July 22, 2021, in connection with the Data Center Sale, the Company paid off all data center and healthcare related notes payable, with an outstanding principal balance of $450,806,000 at the time of repayment.

~~Table of~~ ~~Contents~~

(2) Represents gain on real estate dispositions related to the Data Center Sale that occurred on July 22, 2021. The Company recognized $2,759,000 in transaction costs during the second quarter of 2021, resulting in the total gain being higher during the three months ended September 30, 2021.

~~Capital expenditures on a cash basis for the nine months ended September 30, 2021, were $2,215,000, related to properties classified within discontinued operations.~~

~~There were no significant non-cash operating or investing activities for the properties classified within discontinued operations for the nine months ended September 30, 2021.~~income.

Note ~~5—Acquired~~ 4—Intangible Assets, Net

~~Acquired intangible~~Intangible assets, net, consisted of the following as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (amounts in thousands, except weighted average remaining life amounts):

September 30, 2022 December 31, 2021
In-place leases, net of accumulated amortization of $79,932 and $66,579, respectively (with a weighted average remaining life of 9.1 years and 9.5 years, respectively) $ 164,702 $ 168,012
Above-market leases, net of accumulated amortization of $5,956 and $4,488, respectively (with a weighted average remaining life of 8.1 years and 8.8 years, respectively) 12,613 13,627
$ 177,315 $ 181,639


	June 30, 2023		December 31, 2022
In-place leases, net of accumulated amortization of $93,258 and $83,788, respectively (with a weighted average remaining life of 8.6 years and 8.9 years, respectively)	$	144,813	$	155,365
Above-market leases, net of accumulated amortization of $6,188 and $6,451, respectively (with a weighted average remaining life of 7.2 years and 7.9 years, respectively)	10,866		12,118
	$	155,679	$	167,483

The aggregate weighted average remaining life of the ~~acquired~~ intangible assets was ~~9.1~~8.5 years and ~~9.5~~8.8 years as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Amortization of ~~acquired~~ intangible assets was ~~$5,839,000~~$6,466,000 and ~~$5,507,000~~$5,676,000 for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$17,557,000~~$12,206,000 and ~~$17,624,000~~$11,718,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Amortization of in-place leases is included in depreciation and amortization, and amortization of above-market leases is recorded as an adjustment to rental revenue in the accompanying condensed consolidated statements of comprehensive income.

Note ~~6—Acquired~~ 5—Intangible Liabilities, Net

~~Acquired intangible~~Intangible liabilities, net, consisted of the following as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (amounts in thousands, except weighted average remaining life amounts):

September 30, 2022 December 31, 2021
Below-market leases, net of accumulated amortization of $5,550 and $4,444, respectively (with a weighted average remaining life of 8.6 years and 9.3 years, respectively) $ 12,319 $ 12,962


	June 30, 2023		December 31, 2022
Below-market leases, net of accumulated amortization of $6,670 and $5,923, respectively (with a weighted average remaining life of 7.9 years and 8.4 years, respectively)	$	11,199	$	11,946

Amortization of below-market leases was $373,000 and ~~$338,000~~$369,000 for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$1,106,000~~$747,000 and ~~$979,000~~$733,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Amortization of below-market leases is recorded as an adjustment to rental revenue in the accompanying condensed consolidated statements of comprehensive income.

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Table of Contents

Note 7—6—Leases

Lessor

Rental Revenue

The Company’s real estate properties are leased to tenants under operating leases with varying terms. Typically, the leases have provisions to extend the terms of the lease agreements. The Company retains substantially all of the risks and benefits of ownership of the real estate properties leased to tenants.

Future rent to be received from the Company's investments in real estate assets under the terms of non-cancellable operating leases in effect as of ~~September~~June 30, ~~2022,~~2023, for the ~~three months~~period ending December 31, ~~2022,~~2023, and for each of the next four years ending December 31, and thereafter, are as follows (amounts in thousands):


Year		Amount
Three months ending December 31, 2022		$	42,292
2023		172,586
					June 30, 2023
Period ending December 31, 2023				Period ending December 31, 2023	$	86,535
2024	2024	173,961		2024	174,804
2025	2025	170,002		2025	170,910
2026	2026	163,163		2026	165,193
2027				2027	161,415
Thereafter	Thereafter	1,096,932		Thereafter	978,154
Total	Total	$	1,818,936	Total	$	1,737,011

Lessee

The Company is subject to various non-cancellable operating ~~ground~~ lease agreements ~~and a finance ground lease agreement~~ on which certain of its properties ~~reside. In addition, the Company has non-cancellable corporate-related operating leases.~~reside and for its corporate offices.

The Company's operating leases ~~and the finance lease~~ do not provide an implicit interest ~~rate.~~rates. In order to calculate the present value of the remaining operating ~~and finance~~ lease payments, the Company used incremental borrowing rates, or IBRs, adjusted for a number of factors. The determination of an appropriate IBR involves multiple inputs and judgments. The Company determined its IBRs considering the general economic environment, term of the underlying leases, and various financing and asset specific adjustments to ensure the IBRs are appropriate for the intended use of the underlying operating ~~or finance~~ leases.

The effects of the Company's ~~right-of-use assets classified as operating~~ leases ~~and finance lease~~ are recorded in right-of-use assets and lease liabilities on the condensed consolidated balance sheets.

As of ~~September~~June 30, ~~2022,~~2023, the Company's ~~IBRs for its operating leases were between 2.5% and 6.4%, with a~~ weighted average IBR offor its leases was 5.5%. The weighted average remaining lease term for the Company's ~~operating~~ leases was ~~37.4 years and 36.1~~37.0 years as of ~~September~~June 30, ~~2022 and December 31, 2021, respectively.~~

As of September 30, 2022, the Company's IBR for its finance lease was 5.3%. The remaining lease term for the Company's finance lease was 41.7 years and 42.4 years as of September 30, 2022 and December 31, 2021, respectively.2023.

The future rent payments, discounted by the Company's IBRs, under non-cancellable operating leases in effect as of ~~September~~June 30, ~~2022,~~2023, for the ~~three months~~period ending December 31, ~~2022,~~2023, and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):


Year		Operating		Finance
Three months ending December 31, 2022		$	622	$	34
2023		2,539		136
							June 30, 2023
Period ending December 31, 2023						Period ending December 31, 2023	$	1,340
2024	2024	2,606		141		2024	2,746
2025	2025	2,625		143		2025	2,768
2026	2026	2,572		143		2026	2,715
2027						2027	2,681
Thereafter	Thereafter	103,696		6,441		Thereafter	107,456
Total undiscounted rental payments	Total undiscounted rental payments	114,660		7,038		Total undiscounted rental payments	119,706
Less imputed interest	Less imputed interest	(75,671)		(4,387)		Less imputed interest	(78,346)
Total lease liabilities	Total lease liabilities	$	38,989	$	2,651	Total lease liabilities	$	41,360

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Table of Contents

The following table provides details of the Company's total lease costs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
Location in Condensed Consolidated Statements of Comprehensive Income 2022 2021 2022 2021
Operating lease costs:
Ground lease costs Rental expenses $ 575 $ 422 $ 1,442 $ 1,266
Ground lease costs (1)
Income from discontinued operations — 25 — 414
Corporate operating lease costs General and administrative expenses 182 297 559 825
Finance lease costs:
Amortization of right-of-use asset Depreciation and amortization $ 5 $ 5 $ 15 $ 14
Interest on lease liability Interest and other expense, net 35 35 105 102


		Three Months Ended June 30,				Six Months Ended June 30,
	Location in Condensed Consolidated Statements of Comprehensive Income	2023		2022		2023		2022
Operating lease costs:
Ground lease costs (1)	Rental expenses	$	681	$	475	$	1,363	$	947

Corporate operating lease costs	General and administrative expenses	189		172		376		377
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	165	$	71	$	398	$	219

(1)~~Amount relates to lease costs attributable to~~The Company receives reimbursements from tenants for certain operating ground leases, ~~related to data center properties disposed of~~which are recorded as rental revenue in the ~~Data Center Sale on July 22, 2021.~~accompanying condensed consolidated statements of comprehensive income.

Note 8—7—Other Assets ~~Net~~

Other assets ~~net,~~ consisted of the following as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (amounts in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Deferred financing costs, related to the revolver portion of the credit facility, net of accumulated amortization of $635 and $8,332, respectively		$	3,432	$	482
Leasing commissions, net of accumulated amortization of $151 and $121, respectively		792		780
Deferred financing costs, related to the revolver portion of the credit facility, net of accumulated amortization of $1,398 and $889, respectively						Deferred financing costs, related to the revolver portion of the credit facility, net of accumulated amortization of $1,398 and $889, respectively	$	2,669	$	3,178
Leasing commissions, net of accumulated amortization of $157 and $167, respectively						Leasing commissions, net of accumulated amortization of $157 and $167, respectively	627		775

Restricted cash	Restricted cash	166		521		Restricted cash	166		166
Tenant receivables	Tenant receivables	1,637		1,851		Tenant receivables	1,062		1,736
Straight-line rent receivable	Straight-line rent receivable	63,255		55,725		Straight-line rent receivable	63,634		62,457

Prepaid and other assets	Prepaid and other assets	3,739		4,835		Prepaid and other assets	3,638		3,865
Derivative assets	Derivative assets	29,724		2,171		Derivative assets	27,108		27,990
		$	102,745	$	66,365		$	98,904	$	100,167

Note 9—8—Accounts Payable and Other Liabilities

Accounts payable and other liabilities consisted of the following as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (amounts in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	5,482	$	9,409	Accounts payable and accrued expenses	$	3,805	$	5,387
Accrued interest expense	Accrued interest expense	1,563		1,626		Accrued interest expense	1,653		1,941
Accrued property taxes	Accrued property taxes	2,794		2,913		Accrued property taxes	2,801		2,421
Accrued personnel costs	Accrued personnel costs	3,138		4,198		Accrued personnel costs	2,027		3,940
Distribution and servicing fees		—		182

Distributions payable to stockholders	Distributions payable to stockholders	7,456		7,355		Distributions payable to stockholders	7,505		7,719
Performance DSUs distributions payable	Performance DSUs distributions payable	485		394		Performance DSUs distributions payable	716		573
Tenant deposits	Tenant deposits	877		802		Tenant deposits	877		877
Deferred rental income	Deferred rental income	6,784		7,100		Deferred rental income	9,552		7,761
Derivative liabilities		—		5,618
		$	28,579	$	39,597

							$	28,936	$	30,619

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Note ~~10—~~9—Credit Facility

The Company's outstanding credit facility as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following (amounts in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022

Variable rate revolving line of credit	Variable rate revolving line of credit	25,000		—		Variable rate revolving line of credit	$	—	$	8,000
Variable rate term loans fixed through interest rate swaps	Variable rate term loans fixed through interest rate swaps	485,000		400,000		Variable rate term loans fixed through interest rate swaps	525,000		485,000
Variable rate term loans	Variable rate term loans	90,000		100,000		Variable rate term loans	40,000		90,000
Total credit facility, principal amount outstanding	Total credit facility, principal amount outstanding	600,000		500,000		Total credit facility, principal amount outstanding	565,000		583,000
Unamortized deferred financing costs related to the term loan credit facility		(2,570)		(3,226)
Unamortized deferred financing costs related to credit facility term loans						Unamortized deferred financing costs related to credit facility term loans	(2,107)		(2,412)
Total credit facility, net of deferred financing costs	Total credit facility, net of deferred financing costs	$	597,430	$	496,774	Total credit facility, net of deferred financing costs	$	562,893	$	580,588

Significant activities regarding the credit facility during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 and subsequent, include:

•On February ~~15, 2022,~~17, 2023, the Company ~~the Operating Partnership and certain of the Company's subsidiaries,~~ entered into ~~a senior unsecured revolving credit~~an interest rate swap agreement ~~or the Revolving Credit Agreement, with Truist Bank, as Administrative Agent for the lenders, for aggregate commitments available~~to hedge $40,000,000 of ~~up to $500,000,000, which may be increased, subject to lender approval, through incremental~~its variable rate term loans ~~and/or revolving loan commitments in~~with an ~~aggregate amount not to exceed $1,000,000,000. The maturity~~effective date ~~for~~of March 1, 2023.

•On March 8, 2023, the ~~Revolving Credit Agreement is February 15, 2026, which, at the Company's election, may be extended for a period of six-months~~Company repaid $8,000,000 on ~~no more than two occasions, subject to certain conditions, including the payment of an extension fee. The Revolving Credit Agreement was entered into to replace the Company's prior $500,000,000~~its revolving line of credit ~~which had~~with cash flows from operations.

•On April 13, 2023, the Company repaid $10,000,000 on its 2024 term loan with proceeds from a ~~maturity date~~disposition and cash flows from operations.

•On July 13, 2023, the Company repaid $10,000,000 on its 2024 term loan with proceeds from the collection of ~~April 27, 2022, with~~a note receivable related to a disposition and cash flows from operations. See Note 16—"Subsequent Events."

The principal payments due on the ~~option to extend~~credit facility as of June 30, 2023, for ~~one twelve-month period. The Company did not exercise~~ the ~~option to extend. Upon closing~~period ending December 31, 2023, and for each of the Revolving Credit Agreement, the Company extinguished all commitments associated with the prior revolving line of credit. Simultaneously with the Revolving Credit Agreement’s execution, on February 15, 2022, the Company, the Operating Partnership,next four years ending December 31 and ~~certain of the Company's subsidiaries, entered into the senior unsecured term loan agreement, or the 2024 Term Loan Agreement, with Truist Bank,~~thereafter, are as ~~Administrative Agent for the lenders.~~ follows (amounts in thousands):


	June 30, 2023
Period ending December 31, 2023	$	—
2024 (1)	290,000
2025	—
2026	—
2027	—
Thereafter	275,000
	$	565,000

(1)The 2024 Term Loan Agreement was fully funded at closing, and is made up of aggregate commitments of $300,000,000, which may be increased, subject to lender approval, to an aggregate amount not to exceed $600,000,000. The 2024 Term Loan Agreement has a maturity date of December 31, 2024, and,term loan, at the Company's election, may be extended for a period of six-months on no more than two occasions, subject to the satisfaction of certain conditions, including the payment of an extension fee. The 2024 Term Loan Agreement was entered into to replace the Company's prior term loan, which was paid off in its entirety upon closing of the Revolving Credit Agreement and the 2024 Term Loan Agreement.

•In connection with the repayment of our prior credit facility, the Company recognized a loss on extinguishment of debt of $3,367,000 during the nine months ended September 30, 2022, which included loan costs in the amount of $4,000 and accelerated unamortized debt issuance costs of $3,363,000. The loss on extinguishment of debt was recognized in interest and other expense, net, in the accompanying condensed consolidated statements of comprehensive income.

•On April 8, 2022, the Company entered into five interest rate swap agreements, two of which have an effective date of May 2, 2022 and an aggregate notional amount of $85,000,000, and three of which have an effective date of May 1, 2023 and an aggregate notional amount of $150,000,000.

•On May 17, 2022, the Company, the Operating Partnership and certain of the Company’s subsidiaries, entered into a new senior unsecured term loan agreement, or the 2028 Term Loan Agreement, with Truist Bank, as Administrative Agent for the lenders, for aggregate commitments of up to $275,000,000, of which $205,000,000 was drawn at closing to pay down the Company’s Revolving Credit Agreement in its entirety. The remainder of the commitments were available for three months following the closing date, or the Availability Period, and were available in no more than three subsequent draws with a minimum of $20,000,000 per draw, or the remaining commitments available. After the Availability Period, the undrawn portion was no longer available. If the committed amount was not fully drawn within 60 days of closing, the Company was required to pay a fee to the lenders, calculated as 0.25% per annum on the average daily amount of the undrawn portion, payable quarterly in arrears, until the earlier of (i) the date when the commitments have been funded in full, or (ii) August 17, 2022. The 2028 Term Loan Agreement may be increased, subject to lender approval, to an aggregate amount not to exceed $500,000,000 and has a maturity date of January 31, 2028. The 2028 Term Loan Agreement is pari passu with the Company’s Revolving Credit Agreement and 2024 Term Loan Agreement. The Company refers to the 2028 Term Loan Agreement, the Revolving Credit Agreement and the 2024 Term Loan Agreement, collectively, as the “Unsecured Credit Facility,” which has aggregate commitments available of $1,075,000,000. At the Company’s election, loans under the Unsecured Credit Facility may be made as Base Rate Loans or Secured Overnight Financing Rate, or SOFR, Loans. The applicable margin for loans that are Base Rate Loans is

~~Table of~~ ~~Contents~~

adjustable based on a total leverage ratio, ranging from 0.25% to 0.90%. The applicable margin for loans that are SOFR Loans is adjustable based on a total leverage ratio, ranging from 1.25% to 1.90%. In addition to interest, the Company is required to pay a fee on the unused portion of the lenders’ commitments under the Revolving Credit Agreement at a rate per annum equal to 0.20% if the average daily amount outstanding under the Revolving Credit Agreement is less than 50% of the aggregate commitments, or 0.15% if the average daily amount outstanding under the Revolving Credit Agreement is equal to or greater than 50% of the aggregate commitments. The unused fee is payable quarterly in arrears.

•On July 12, 2022 and July 20, 2022, the Company drew $50,000,000 and $20,000,000, respectively, on the 2028 Term Loan Agreement, to fund acquisitions. As of July 20, 2022, the 2028 Term Loan Agreement commitments were fully funded.

•During the nine months ended September 30, 2022, the Company drew $70,000,000 on the Revolving Credit Agreement to fund acquisitions and repaid $40,000,000 on the Revolving Credit Agreement, with proceeds from dispositions and cash flows from operations.

The principal payments due on the Unsecured Credit Facility as of September 30, 2022, for the three months ending December 31, 2022, and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):

Year Amount
Three months ending December 31, 2022 $ —
2023 —
2024 300,000
2025 —
2026 25,000
Thereafter 275,000
$ 600,000

Note ~~11—~~10—Fair Value

Cash and cash equivalents, restricted cash, tenant receivables, prepaid and other assets, accounts payable and other liabilities—The Company considers the carrying values of these financial instruments, assets and liabilities, to approximate fair value because of the short period of time between origination of the instruments and their expected realization.

Credit facility—The outstanding principal of the credit facility was ~~$600,000,000~~$565,000,000 and ~~$500,000,000,~~$583,000,000, which approximated its fair value due to the variable nature of the terms as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

The fair value of the Company's credit facility is estimated based on the interest rates currently offered to the Company by its financial institutions.

Derivative instruments—~~Considerable judgment~~The Company’s derivative instruments consist of interest rate swaps. These swaps are carried at fair value to comply with the provisions of ASC 820. The fair value of these instruments is ~~necessary~~determined using interest rate market pricing models. The Company incorporated credit valuation adjustments to ~~develop estimated~~appropriately reflect the Company’s nonperformance risk and the respective counterparty’s nonperformance risk in the fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amount the Company could realize, or be liable for, on disposition of the financial instruments.value measurements. The Company determined that the majority of the inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy. The credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and the respective counterparty. However, as of ~~September~~June 30, ~~2022,~~2023, the

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Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy. ~~See Note 12—"Derivative Instruments~~

Considerable judgment is necessary to develop estimated fair values of financial assets and ~~Hedging Activities" for further discussion~~liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the ~~Company's derivative instruments.~~

~~Table~~amounts the Company could realize or be liable for on disposition of ~~Contents~~

the financial assets and liabilities.

The following tables show the fair value of the Company’s financial assets ~~and liabilities~~ that are required to be measured at fair value on a recurring basis as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (amounts in thousands):


		September 30, 2022									June 30, 2023
		Fair Value Hierarchy									Fair Value Hierarchy
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:	Assets:									Assets:
Derivative assets	Derivative assets	$	—	$	29,724	$	—	$	29,724	Derivative assets	$	—	$	27,108	$	—	$	27,108
Total assets at fair value	Total assets at fair value	$	—	$	29,724	$	—	$	29,724	Total assets at fair value	$	—	$	27,108	$	—	$	27,108


		December 31, 2021									December 31, 2022
		Fair Value Hierarchy									Fair Value Hierarchy
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:	Assets:									Assets:
Derivative assets	Derivative assets	$	—	$	2,171	$	—	$	2,171	Derivative assets	$	—	$	27,990	$	—	$	27,990
Total assets at fair value	Total assets at fair value	$	—	$	2,171	$	—	$	2,171	Total assets at fair value	$	—	$	27,990	$	—	$	27,990
Liabilities:
Derivative liabilities		$	—	$	5,618	$	—	$	5,618
Total liabilities at fair value		$	—	$	5,618	$	—	$	5,618

Derivative assets ~~and liabilities~~ are reported in the condensed consolidated balance sheets as other assets.

Real Estate Assets—Certain real estate assets ~~net,~~(which include land, buildings and ~~accounts payable~~improvements and ~~other liabilities,~~intangible assets) were adjusted to fair value as a result of impairments which occurred during the six months ended June 30, 2023. The fair values of real estate assets were determined by using either third-party purchase offers or comparable sales information. The fair values of real estate assets based on third-party purchase offers are reflected in the Level 2 fair value hierarchy. The comparable sales technique uses estimates of properties similar to the subject property by comparing prices per square foot considering recent transaction activity. The estimates of comparable sales and prices per square foot have been adjusted, and are considered significant inputs and thus are classified within Level 3 of the fair value hierarchy.

The following table shows the fair value of the Company's real estate assets, including intangible assets, measured at fair value on a non-recurring basis as of June 30, 2023 (amounts in thousands):


	June 30, 2023
	Fair Value Hierarchy
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Total Losses (1)
Real estate assets	$	—	$	20,726	$	1,552	$	22,278	$	5,978

(1)Amount includes impairment of in-place lease and above-market lease intangible assets of $592,000 and $260,000, respectively.

The following table sets forth quantitative information about the significant unobservable inputs of the Company’s Level 3 real estate recorded as of June 30, 2023:

Significant Unobservable Inputs

June 30, 2023

Comparable sale price per square foot

$98.04

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Note ~~12—~~11—Derivative Instruments and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. ~~Interest rate swaps~~

For derivatives designated and qualifying as cash flow hedges ~~involve~~of interest rate risk, the ~~receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreements without exchange of the underlying notional amount.~~

~~Accounting for changes in the fair value of a derivative instrument depends~~gain or loss on the ~~intended use and designation of the~~ derivative instrument. The Company designated the interest rate swaps as cash flow hedges to hedge the variability of the anticipated cash flows on its variable rate credit facility. Changes in the fair value of derivatives designated, and that qualify, as cash flow hedges areis recorded in accumulated other comprehensive income ~~(loss) in the accompanying condensed consolidated statements of stockholders' equity~~ and ~~are~~ subsequently reclassified into ~~earnings~~interest expense in the ~~period that~~same period(s) during which the hedged ~~forecasted~~ transaction affects earnings.

In connection with the Data Center Sale on July 22, 2021, the Company terminated eight interest rate swap agreements related to mortgage notes fixed through interest rate swaps. Prior to the termination of the eight interest rate swaps, the Company de-designated and then formally re-designated these hedged transactions. During the three and nine months ended September 30, 2022, as the hedged forecasted transactions affected earnings, the Company reclassified approximately $291,000 and $1,274,000, respectively, from accumulated other comprehensive income (loss) to interest and other expense, net, related to the swap terminations, in the accompanying condensed consolidated statements of comprehensive income.

Amounts reported in accumulated other comprehensive income ~~(loss)~~ related to current and terminated derivatives will be reclassified to interest and other ~~expense,~~expenses, net, as interest is incurred on the Company’s variable rate debt. During the next twelve months, the Company estimates that an additional ~~$15,406,000~~$17,087,000 will be reclassified from accumulated other comprehensive income ~~(loss)~~ as ~~an increase~~a reduction to ~~earnings.~~

~~Table of~~ ~~Contents~~

interest expense.

The following table summarizes the notional amount and fair value of the Company’s derivative instruments (amounts in thousands):

Derivatives
Designated as
Hedging
Instruments

Balance
Sheet
Location

Effective

Dates (2), (3)

Maturity

Dates (2)

September 30, 2022

December 31, 2021

Derivatives
Designated as
Hedging
Instruments

Balance
Sheet
Location

Effective
Dates

Maturity
Dates

June 30, 2023

December 31, 2022

Outstanding

Notional

Amount ~~(2)~~

Fair Value of

Outstanding
Notional
Amount

Fair Value of

Outstanding

Notional

Amount ~~(2)~~

Fair Value of

Outstanding
Notional
Amount

Fair Value of

Assets

(Liabilities)

Assets

(Liabilities)

Assets

Interest rate swaps

(1)

05/01/2022 to
05/01/2023

04/27/2023 to
01/31/2028

485,000

29,724

—

400,000

2,171

(5,618)

Interest rate swaps

(1)

05/01/2022 to
05/01/2023

12/31/2024 to
01/31/2028

525,000

27,108

27,990

(1) Derivative assets ~~and liabilities~~ are reported in the condensed consolidated balance sheets as other ~~assets, net, and accounts payable and other liabilities, respectively.~~

(2) During the three months ended June 30, 2022, the Company entered into three interest rate swap agreements with an aggregate notional amount of $150,000,000, that have an effective date of May 1, 2023, to replace two interest rate swaps with an aggregate notional amount of $150,000,000 that have a maturity date of April 27, 2023.

(3) In May 2022, the Company entered into bilateral agreements with its swap counterparties to transition all of its interest rate swap agreements to SOFR. As of June 30, 2022, all of the Company's interest rate swap agreements were indexed to SOFR.assets.

The notional amount under the agreements is an indication of the extent of the Company’s involvement in each instrument at the time, but does not represent exposure to credit, interest rate or market risks.

The table below summarizes the amount of income and losses recognized on the interest rate derivatives designated as cash flow hedges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands):

Derivatives in Cash Flow
Hedging Relationships Amount of Income (Loss) Recognized
in Other Comprehensive Income on Derivatives Location of Income (Loss)
Reclassified From
Accumulated Other
Comprehensive Income (Loss) to
Net Income Amount of Income (Loss)
Reclassified From
Accumulated Other
Comprehensive Income (Loss) to
Net Income Total Amount of Line Item in Condensed Consolidated Statements of Comprehensive Income
Three Months Ended September 30, 2022
Interest rate swaps - continuing operations $ 16,724 Interest and other expense, net $ 379 $ 5,498
Three Months Ended September 30, 2021
Interest rate swaps - continuing operations $ (253) Interest and other expense, net $ (1,952) $ 11,737
Interest rate swaps - discontinued operations — Income from discontinued operations (542) 377,191
Total $ (253) $ (2,494)
Nine Months Ended September 30, 2022
Interest rate swaps - continuing operations $ 31,545 Interest and other expense, net $ (2,912) $ 17,942
Nine Months Ended September 30, 2021
Interest rate swaps - continuing operations $ 2,555 Interest and other expense, net $ (5,643) $ 30,035
Interest rate swaps - discontinued operations (37) Income from discontinued operations (1,647) 401,444
Total $ 2,518 $ (7,290)


Derivatives in Cash Flow Hedging Relationships	Amount of Income Recognized in Other Comprehensive Income (Loss) on Derivatives		Location of Income (Loss) Reclassified From Accumulated Other Comprehensive Income to Net Income	Amount of Income (Loss) Reclassified From Accumulated Other Comprehensive Income to Net Income		Total Amount of Line Item in Condensed Consolidated Statements of Comprehensive Income
Three Months Ended June 30, 2023
Interest rate swaps	$	11,464	Interest and other expenses, net	$	4,082	$	5,523

Three Months Ended June 30, 2022
Interest rate swaps	$	3,973	Interest and other expenses, net	$	(1,284)	$	4,329


Six Months Ended June 30, 2023
Interest rate swaps	$	6,770	Interest and other expenses, net	$	7,652	$	11,139


Six Months Ended June 30, 2022
Interest rate swaps	$	14,821	Interest and other expenses, net	$	(3,291)	$	12,444

Credit Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. The Company records credit risk valuation adjustments on its interest rate swaps based on the respective credit quality of the Company and the counterparty. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. As of ~~September~~June 30, ~~2022,~~2023, the Company had no derivatives with fair value in a net liability position, inclusive of accrued interest but excluding any adjustment for nonperformance risk related to the agreement. As of ~~September~~June 30, ~~2022,~~2023, there were no termination events or events of default related to the interest rate swaps.

1815

Table of Contents

Tabular Disclosure Offsetting Derivatives

The Company has elected not to offset derivative positions in its condensed consolidated financial statements. The following tables present the effect on the Company’s financial position had the Company made the election to offset its derivative positions as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (amounts in thousands):

Offsetting of Derivative Assets
Gross Amounts Not Offset in the Balance Sheet
Gross
Amounts of
Recognized
Assets Gross Amounts
Offset in the
Balance Sheet Net Amounts of
Assets Presented in
the Balance Sheet Financial Instruments
Collateral Cash Collateral Net
Amount
September 30, 2022 $ 29,724 $ — $ 29,724 $ — $ — $ 29,724
December 31, 2021 $ 2,171 $ — $ 2,171 $ (1,023) $ — $ 1,148

Offsetting of Derivative Liabilities
Gross Amounts Not Offset in the Balance Sheet
Gross
Amounts of
Recognized
Liabilities Gross Amounts
Offset in the
Balance Sheet Net Amounts of
Liabilities
Presented in the
Balance Sheet Financial Instruments
Collateral Cash Collateral Net
Amount
September 30, 2022 $ — $ — $ — $ — $ — $ —
December 31, 2021 $ 5,618 $ — $ 5,618 $ (1,023) $ — $ 4,595


Offsetting of Derivative Assets
							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet		Net Amounts of Assets Presented in the Balance Sheet		Financial Instruments Collateral		Cash Collateral		Net Amount
June 30, 2023	$	27,108	$	—	$	27,108	$	—	$	—	$	27,108
December 31, 2022	$	27,990	$	—	$	27,990	$	—	$	—	$	27,990

Note ~~13—~~12—Stockholders' Equity

Distributions Payable

As of June 30, 2023, the Company had distributions payable of approximately $7,505,000. Of these distributions payable, approximately $5,470,000 was paid in cash on July 7, 2023, and approximately $2,035,000 was reinvested in shares of common stock pursuant to our distribution reinvestment plan, or the DRIP, effective July 1, 2023.

Share Repurchase Program

The Company’s Amended and Restated Share Repurchase Program ~~or SRP,~~ allows for repurchases of shares of the Company’s common stock upon meeting certain criteria. The SRP provides that all repurchases during any calendar year, including those redeemable upon death or a "Qualifying Disability" (as defined in the Company's SRP) of a stockholder, be limited to those that can be funded with equivalent proceeds raised from the DRIP during the prior calendar year and other operating funds, if any, as the Board, in its sole discretion, may reserve for this purpose.

Repurchases of shares of the Company’s common stock are at the sole discretion of the Board, provided, however, that the Company limits the number of shares repurchased during any calendar year to 5.0% of the total number of shares of common stock outstanding as of December 31st of the previous calendar year. The SRP is subject to terms and limitations, including, but not limited to, quarterly share limitations, an annual 5.0% share limitation and DRIP funding limitations and any amendments to the plan, as more fully described below. In addition, the Board, in its sole discretion, may suspend (in whole or in part) the SRP at any time, and may amend, reduce, terminate or otherwise change the SRP upon 30 days' prior notice to the Company’s stockholders for any reason it deems appropriate.

The Company will currently only repurchase shares due to death and involuntary exigent circumstances in accordance with the SRP, subject in each case to the terms and limitations of the SRP. Under the SRP, the Company may waive certain of the terms and requirements of the SRP in the event of the death of a stockholder who is a natural person, including shares held through an Individual Retirement Account or other retirement or profit-sharing plan, and certain trusts meeting the requirements of the SRP. The Company may also waive certain of the terms and requirements of the SRP in the event of an involuntary exigent circumstance, as determined by the Company or any of the executive officers thereof, in its or their sole discretion. See Part II, Item 2. "Unregistered Sales of Equity Securities" for more information on the Company's SRP.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company repurchased ~~786,861~~729,192 Class A shares, Class I shares and Class T shares of common stock ~~(690,494~~(560,083 Class A shares, ~~20,905~~43,945 Class I shares and ~~75,462~~125,164 Class T shares), for an aggregate purchase price of approximately ~~$6,452,000~~$5,994,000 (an average of ~~$8.20~~$8.22 per share). During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company repurchased ~~772,581~~561,725 Class A shares, Class I shares and Class T shares of common stock ~~(715,406~~(476,551 Class A shares, ~~8,322~~20,611 Class I shares and ~~48,853~~64,563 Class T shares), for an aggregate purchase price of approximately ~~$6,564,000~~$4,606,000 (an average of ~~$8.50~~$8.20 per share).

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Accumulated Other Comprehensive Income ~~(Loss)~~

The following table presents a rollforward of amounts recognized in accumulated other comprehensive income ~~(loss)~~ by component for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands):


	Unrealized Loss on Derivative Instruments
Balance as of December 31, 2022	$	27,990
Other comprehensive income before reclassification	6,770
Amount of income reclassified from accumulated other comprehensive income to net income	(7,652)
Other comprehensive loss	(882)
Balance as of June 30, 2023	$	27,108


	Unrealized Income on Derivative Instruments




Balance as of December 31, 2021	$	(4,847)
Other comprehensive income before reclassification	~~31,545~~
~~Amount of loss reclassified from accumulated other comprehensive income (loss) to net income~~	~~2,912~~
~~Other comprehensive income~~	~~34,457~~
~~Balance as of September 30, 2022~~	$	~~29,610~~


	Unrealized Income on Derivative Instruments






~~Balance as of December 31, 2020~~	$	~~(20,444)~~
~~Other comprehensive income before reclassification~~	~~2,518~~14,821
Amount of loss reclassified from accumulated other comprehensive loss to net income	~~7,290~~3,291
Other comprehensive income	~~9,808~~18,112
Balance as of ~~September~~June 30, ~~2021~~2022	$	~~(10,636)~~13,265

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The following table presents reclassifications out of accumulated other comprehensive income ~~(loss)~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands):

Details about Accumulated Other
Comprehensive Income (Loss) Components Loss Amounts Reclassified from
Accumulated Other Comprehensive Income (Loss) to Net Income Affected Line Items in the Condensed Consolidated Statements of Comprehensive Income
Nine Months Ended
September 30,
2022 2021
Interest rate swap contracts - continuing operations $ 2,912 $ 5,643 Interest and other expense, net
Interest rate swap contracts - discontinued operations — 1,647 Income from discontinued operations
Interest rate swap contracts $ 2,912

$ 7,290


Details about Accumulated Other Comprehensive Income Components	(Income) Loss Amounts Reclassified from Accumulated Other Comprehensive Income to Net Income				Affected Line Items in the Condensed Consolidated Statements of Comprehensive Income
	Six Months Ended June 30,
	2023		2022
Interest rate swap contracts	$	(7,652)	$	3,291		Interest and other expense, net

Note ~~14—~~13—Earnings Per Share

The Company calculates basic earnings per share by dividing net income attributable to common stockholders for the period by the weighted average shares of its common stock outstanding for that period. Diluted earnings per share is computed based on the weighted average number of shares outstanding and all potentially dilutive securities. Shares of non-vested restricted common stock and performance-based deferred stock unit awards, or Performance DSUs, give rise to potentially dilutive shares of common stock. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, diluted earnings per share reflected the effect of approximately ~~1,319,000~~1,858,000 and ~~1,346,000,~~1,850,000, respectively, of non-vested shares of restricted common stock and Performance DSUs that were outstanding. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, diluted earnings per share ~~was computed~~reflected the ~~same as basic earnings per share, because the Company recorded a loss from continuing operations, which would make potentially dilutive shares~~effect of ~~990,000~~approximately 1,355,000 and ~~965,000,~~1,360,000, respectively, ~~related to~~of non-vested shares of restricted common stock and Performance DSUs ~~anti-dilutive.~~that were outstanding.

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Note ~~15—~~14—Stock-based Compensation

On March 6, 2020, the Board approved the Amended and Restated 2014 Restricted Share Plan, or the A&R Incentive Plan, pursuant to which the Company has the authority and power to grant awards of restricted shares of its Class A common stock to its directors, officers and employees. ~~The Company accounts for its stock awards in accordance with ASC 718-10,~~ ~~Compensation—Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be calculated and amortized over~~

During the service period (generally equal to the vesting period). For performance-based awards, compensation costs are recognized over the service period if it is probable that the performance condition will be satisfied, with changes of the assessment at each reporting period and recording the effect of the change in the compensation cost as a cumulative catch-up adjustment. The compensation costs for restricted stock are recognized based on the fair value of the restricted stock awards at grant date less forfeitures (if applicable). Forfeitures are accounted for as they occur.

~~On January 3, 2022,~~six months ended June 30, 2023, the Company granted time-based awards to its executive officers and certain employees, consisting of ~~217,988~~284,063 restricted shares of Class A common stock, or the Time-Based ~~2022~~2023 Awards. The Time-Based ~~2022~~2023 Awards will vest ratably over four years following the grant date, subject to each executive's and employee's employment through the applicable vesting dates, with certain exceptions.

In addition, ~~on January 3, 2022,~~during the six months ended June 30, 2023, the Company's compensation committee approved ~~performance-based deferred stock unit awards, or~~ Performance DSUs to be granted to its executive officers for performance-based awards, or the Performance-Based ~~2022~~2023 Awards. The Performance-Based ~~2022~~2023 Awards will be measured based on Company performance over a three-year performance period ending on December 31, ~~2024. The Performance-Based 2022 Awards vest after the last day of the performance period and are subject~~2025. Subject to ~~continued~~each executive's continuous employment through the applicable vesting dates, with certain exceptions, the Performance-Based DSUs, if any, will be issued following the performance period end date. The actual value realized by each executive will depend on the market value of shares of stock or units on the date that the awards vest and the actual number of shares of stock or units that vest.

The Time-Based ~~2022~~2023 Awards and the Performance-Based ~~2022~~2023 Awards, or collectively, the ~~2022~~2023 Awards, were granted under and are subject to the terms of the A&R Incentive Plan and award agreements.

Stock-based compensation expense for the ~~2022~~2023 Awards for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, was approximately ~~$260,000~~$317,000 and ~~$864,000,~~$622,000, respectively. The Company recognized total stock-based compensation expense of $1,251,000 and $1,278,000, respectively, ~~which~~for the three months ended June 30, 2023 and 2022, and $2,493,000 and $2,174,000, respectively, for the six months ended June 30, 2023, and 2022. Stock-based compensation expense is reported in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income. The Company recognized accelerated stock-based compensation expense of $326,000 during the nine months ended September 30, 2022. The Company recognized total stock-based compensation expense of approximately $860,000income, and $637,000, respectively, for the three months ended September 30, 2022 and 2021, and $3,034,000 and $1,756,000, respectively, for the nine months ended September 30, 2022 and 2021, which is reported in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income.forfeitures are recorded as they occur.

Note ~~16—~~15—Commitments and Contingencies

Legal Proceedings

In the ordinary course of business, the Company may become subject to litigation or claims. As of ~~September~~June 30, ~~2022,~~2023, there were, and currently there are, no material pending legal proceedings to which the Company is a party. While the resolution of a lawsuit or proceeding may have an impact to the Company's financial results for the period in which it is resolved, the Company believes that the final resolution of the lawsuits or proceedings in which it is currently involved, either individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations or liquidity.

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Note ~~17—~~16—Subsequent Events

Distributions Paid to Stockholders

The following table summarizes the Company's distributions paid to stockholders on ~~October 6, 2022,~~July 7, 2023, for the period from ~~September~~June 1, ~~2022~~2023 through ~~September~~June 30, ~~2022~~2023 (amounts in thousands):

Payment Date Common Stock Cash DRIP Total Distribution
October 6, 2022 Class A $ 4,358 $ 1,206 $ 5,564
October 6, 2022 Class I 324 224 548
October 6, 2022 Class T 716 628 1,344
$ 5,398 $ 2,058 $ 7,456


Payment Date	Common Stock	Cash		DRIP		Total Distribution
July 7, 2023	Class A	$	4,398	$	1,191	$	5,589
July 7, 2023	Class I	333		221		554
July 7, 2023	Class T	739		623		1,362

		$	5,470	$	2,035	$	7,505

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~~The following table summarizes the Company's distributions paid to stockholders on November 4, 2022, for the period from October 1, 2022 through October 31, 2022 (amounts in thousands):~~

Payment Date Common Stock Cash DRIP Total Distribution
November 4, 2022 Class A $ 4,506 $ 1,249 $ 5,755
November 4, 2022 Class I 338 229 567
November 4, 2022 Class T 743 648 1,391
$ 5,587 $ 2,126 $ 7,713

Distributions Authorized

The following tables summarize the daily distributions approved and authorized by the Board subsequent to ~~September~~June 30, ~~2022:~~2023:

Authorization Date (1)
Common Stock
Daily Distribution Rate (1)
Annualized Distribution Per Share
October 20, 2022 Class A $ 0.00109589 $ 0.40
October 20, 2022 Class I $ 0.00109589 $ 0.40
October 20, 2022 Class T $ 0.00109589 $ 0.40


Authorization Date (1)	Common Stock	Daily Distribution Rate (1)		Annualized Distribution Per Share
July 17, 2023	Class A	$	0.00109589	$	0.40
July 17, 2023	Class I	$	0.00109589	$	0.40
July 17, 2023	Class T	$	0.00109589	$	0.40

Authorization Date (2)
Common Stock
Daily Distribution Rate (2)
Annualized Distribution Per Share
November 8, 2022 Class A $ 0.00109589 $ 0.40
November 8, 2022 Class I $ 0.00109589 $ 0.40
November 8, 2022 Class T $ 0.00109589 $ 0.40


Authorization Date (2)	Common Stock	Daily Distribution Rate (2)		Annualized Distribution Per Share
August 2, 2023	Class A	$	0.00109589	$	0.40
August 2, 2023	Class I	$	0.00109589	$	0.40
August 2, 2023	Class T	$	0.00109589	$	0.40

(1)Distributions approved and authorized to stockholders of record as of the close of business on each day of the period commencing on ~~November~~August 1, ~~2022~~2023 and ending on ~~November 30, 2022.~~August 31, 2023. The distributions are calculated based on 365 days in the calendar year. The distributions declared for each record date in ~~November 2022~~August 2023 will be paid in ~~December 2022.~~September 2023. The distributions are payable to stockholders from legally available funds therefor.

(2)Distributions approved and authorized to stockholders of record as of the close of business on each day of the period commencing on ~~December~~September 1, ~~2022~~2023 and ending on ~~December 31, 2022.~~September 30, 2023. The distributions will be calculated based on 365 days in the calendar year. The distributions declared for each record date in ~~December 2022~~September 2023 will be paid in ~~January~~October 2023. The distributions will be payable to stockholders from legally available funds therefor.

Repayment on Credit Facility

On July 13, 2023, the Company repaid $10,000,000 on its 2024 term loan with proceeds from the collection of a note receivable related to a disposition and cash flows from operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this Quarterly Report on Form 10-Q.

The following discussion should also be read in conjunction with our audited consolidated financial statements, and the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March ~~29, 2022,~~16, 2023, or the ~~2021~~2022 Annual Report on Form 10-K.

The terms “we,” “our,” "us," and the “Company” refer to Sila Realty Trust, Inc., Sila Realty Operating Partnership, LP, or our Operating Partnership, and all wholly-owned subsidiaries.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, other than historical facts, include forward-looking statements that reflect our expectations and projections about our future results, performance, prospects and opportunities. Such statements include, in particular, our liquidity and capital resources, capital expenditures, material cash requirements, debt service requirements, term loan requirements, plans, leases, dividends, distributions, strategies, and prospects and are subject to certain risks and uncertainties, ~~as well as~~including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Forward-looking statements are subject to various risks and uncertainties, and factors that could cause actual results to differ materially from our expectations, and investors should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect our results of operations, financial condition, cash flows, performance or future achievements or events.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We make no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Quarterly Report on Form 10-Q, and we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. See Part I, Item 1A. “Risk Factors” of our ~~2021~~2022 Annual Report on Form 10-K, for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.

Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and ~~expenses, and related disclosure of contingent assets and liabilities.~~expenses. We evaluate these estimates on a regular basis. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Overview

We invest in high-quality ~~healthcare~~ properties leased to tenants capitalizing on critical and structural economic growth drivers. We are primarily focused on investing in ~~and managing strategic~~ healthcare assets across the continuum of care, with emphasis on lower cost patient settings, which we believe typically generate predictable, durable and growing income streams. We may also make other real estate-related investments, ~~in healthcare properties,~~ which may include equity or debt interests in other real estate entities.

~~On July 28, 2020, we and our Operating Partnership entered into a Membership Interest Purchase Agreement to provide for the internalization~~As of the external management functions previously performed for us and our Operating Partnership by our former advisor and its affiliates, or the Internalization Transaction. On September 30, 2020, we closed the Internalization Transaction.

~~We formerly invested in data center properties. During the three months ended~~ June 30, ~~2021, our board of directors, or the Board, made a determination to sell our data center properties. On May 19, 2021,~~2023, we owned 132 real estate properties and certain of our wholly-owned subsidiaries entered into a Purchase and Sale Agreement, or the PSA for the sale of up to 29 data center properties owned by us. The Board's determination to sell the data center properties, as well as the execution of the PSA, represented a strategic shift that had a major effect on our results and operations for the periods presented. On July 22, 2021, we completed the sale of our data centers, or the Data Center Sale, comprised of approximately 3,298,000 rentable square feet, for an aggregate sale price oftwo undeveloped land parcels.

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$1,320,000,000, and generated net proceeds of approximately $1,295,367,000. As of December 31, 2021, we had no assets or liabilities related to the data center segment. The operations of the data center segment have been classified as income from discontinued operations on the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2021.

~~As of September 30, 2022, we owned 132 real estate healthcare properties and two undeveloped land parcels in two µSAs and 56 MSAs.~~

On August 25, 2022, the Board, at the recommendation of our audit committee, approved the estimated per share net asset value, or Estimated Per Share NAV, calculated as of June 30, 2022, of $8.22. We intend to publish an updated Estimated Per Share NAV on an annual basis.

The Estimated Per Share NAV was calculated for purposes of assisting broker-dealers participating in public offerings in meeting their customer account statement reporting obligations under the National Association of Securities Dealers Conduct Rule 2340. The Estimated Per Share NAV was declared by the Board after consultation with management and an independent third-party valuation firm. The Estimated Per Share NAV is not subject to audit by our independent registered public accounting firm.

We raised the equity capital for our real estate investments through two public offerings, or our Offerings, from May 2014 through November 2018, and we have offered shares pursuant to our distribution reinvestment plan, or the DRIP, pursuant to two Registration Statements on Form S-3, or each, a DRIP Offering and together the DRIP Offerings, since November 2017. As of September 30, 2022, we had accepted investors’ subscriptions for and issued approximately 156,747,000 shares of Class A, Class I, Class T and Class T2 common stock in our Offerings, resulting in receipt of gross proceeds of approximately $1,513,846,000, before share repurchases of approximately $132,936,000, selling commissions and dealer manager fees of approximately $96,734,000 and other offering costs of approximately $27,627,000.

Critical Accounting Estimates

Our critical accounting estimates were disclosed in our ~~2021~~2022 Annual Report on Form 10-K. There have been no material changes to our critical accounting estimates as disclosed therein.

Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments, which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such full year results may be less favorable. Our accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our ~~2021~~2022 Annual Report on Form 10-K.

Qualification as a REIT

We elected, and qualify, to be taxed as a REIT for federal income tax purposes, and we intend to continue to be taxed as a REIT. To maintain our qualification as a REIT, we must continue to meet certain organizational and operational requirements, including a requirement to distribute at least 90.0% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gain, to our stockholders. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.

If we fail to maintain our qualification as a REIT in any taxable year, we would then be subject to federal income taxes on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our net income and net cash available for distribution to our stockholders.

Factors That May Influence Results of Operations

We are not aware at this time of any material trends or uncertainties, other than national economic conditions and those discussed below, affecting our real estate properties, that may reasonably be expected to have a material impact, favorable or

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unfavorable, on revenues or income, ~~from the acquisition,~~ management and operation of our properties other than those set forth in our ~~2021~~2022 Annual Report on Form 10-K.

Rental Revenue

The amount of rental revenue generated by our ~~healthcare~~ properties depends principally on our ability to maintain the occupancy rates of leased space and to lease available space at ~~the then~~ existing rental rates. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods. We continually monitor our tenants' ability to meet their lease obligations to pay us rent to determine if any adjustments should be reflected currently. ~~Our current financial results~~During the six months ended June 30, 2023, GenesisCare (as defined below) filed for bankruptcy and we determined the collectability of amounts owed under the contractual terms of GenesisCare's lease were no longer reasonably assured. As a result, we ceased recognizing rent on a straight-line basis and have ~~not been adjusted due~~only recorded rent for GenesisCare to ~~any tenants difficulties.~~the extent we have received cash. In addition, during the three and six months ended June 30, 2023, we wrote off $1,630,000 of straight line rent receivable, related to GenesisCare, as a reduction in rental revenue, because the amounts were determined to be uncollectible. As of ~~September~~June 30, ~~2022,~~2023, our ~~operating healthcare~~ real estate properties were ~~99.5%~~99.6% leased.

GenesisCare Bankruptcy Filing

As disclosed in the Current Report on Form 8-K that the Company filed with the SEC on June 5, 2023, GenesisCare USA, Inc. and its affiliates, or GenesisCare, sponsor and owner of the tenant in 17 of our real estate properties, announced that it filed for Chapter 11 bankruptcy protection under the United States Bankruptcy Code. GenesisCare is seeking U.S. bankruptcy court approval to reject certain unexpired real property leases. GenesisCare's lease obligations with us have not been included in any motions to date. GenesisCare continues to make its lease payments due to us in accordance with their contractual terms. Bankruptcy proceedings are subject to uncertainty and there can be no assurance how the bankruptcy court's or other parties' actions or decisions may impact GenesisCare.

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Results of Operations

~~The results of operations discussed below reflect the data centers segment presented as discontinued operations.~~

Our results of operations are influenced by the timing of acquisitions and the performance of our ~~operating healthcare~~ real estate properties. The following table shows the property statistics of our ~~operating healthcare~~ real estate properties as of ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		September 30,					June 30,
		2022		2021			2023		2022
Number of operating real estate properties (1)		132		124
Number of real estate properties (1)						Number of real estate properties (1)	132		130
Leased square feet	Leased square feet	5,508,000		5,086,000		Leased square feet	5,400,000		5,359,000
Weighted average percentage of rentable square feet leased	Weighted average percentage of rentable square feet leased	99.5	%	96.0	%	Weighted average percentage of rentable square feet leased	99.6	%	99.4	%

(1)As of ~~September~~June 30, ~~2022,~~2023, we owned 132 ~~operating healthcare~~ real estate properties and two undeveloped land parcels. As of ~~September~~June 30, ~~2021,~~2022, we owned ~~125 healthcare~~130 real estate properties ~~one of which was under construction. As of September 30, 2021, we had three vacant real estate properties that were being marketed for sale or re-tenanting~~ and ~~subsequently sold.~~two undeveloped land parcels.

The following table summarizes our ~~healthcare~~ real estate activity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Operating real estate properties acquired 2 — 7 1
Operating real estate properties placed into service — — 1 1
Aggregate purchase price of operating real estate properties acquired (1)
$ 114,744,000 $ — $ 157,194,000 $ 25,048,000
Aggregate cost of operating real estate properties placed into service $ — $ — $ 15,713,000 $ 22,140,000
Leased square feet of operating real estate property additions 144,449 — 284,449 115,000


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Real estate properties acquired	1		4		1		5
Real estate properties disposed	—		—		1		—		(1)

Aggregate purchase price of real estate properties acquired (2)	$	9,920,000	$	22,896,000	$	9,920,000	$	42,450,000

Net book value of real estate properties disposed	$	—	$	—	$	12,127,000	$	—	(1)
Leased square feet of real estate property additions	25,000		54,000		25,000		140,000
Leased square feet of real estate property dispositions	—		—		139,000		—

(1)During the three months ended March 31, 2022, we disposed of one land parcel that formerly contained a property.

(2)Includes capitalized acquisition costs associated with transactions determined to be asset acquisitions.

~~Same Store Properties~~

This section describes and compares our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. We generate substantially all of our revenue from property operations. In order to evaluate our overall portfolio, management analyzes the ~~net operating income~~results of our same store properties. We define "same store properties" as ~~operating~~ properties that were owned and operated for the entirety of both calendar periods being compared and exclude properties under development, ~~and properties~~re-development, or ~~land~~ classified as held for sale.

By evaluating the ~~revenue and expenses~~results of our same store properties, management is able to monitor the operations of our existing properties for comparable periods to measure the performance of our current portfolio and readily observe the expected effects of our new acquisitions and dispositions on net income.

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Three Months Ended ~~September~~June 30, ~~2022~~2023 Compared to Three Months Ended ~~September~~June 30, ~~2021~~2022

The following table ~~represents the breakdown of~~allocates total rental revenue for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the comparable period in ~~2021~~2022 (amounts in thousands).


	Three Months Ended June 30,
	2023		2022		$ Change		% Change
Same store rental revenue	$	39,844	$	41,611	$	(1,767)	(4.2)	%
Same store tenant reimbursements	2,748		2,597		151		5.8	%
Non-same store rental revenue	2,141		672		1,469		218.6	%
Non-same store tenant reimbursements	231		37		194		524.3	%


Other operating income	1		1		—		—	%
Total rental revenue	$	44,965	$	44,918	$	47	0.1	%

Three Months Ended
September 30,
2022 2021 $ Change % Change
Same store rental revenue $ 40,844 $ 40,759 $ 85 0.2 %
Same store tenant reimbursements 2,498 2,124 374 17.6 %
Non-same store rental revenue 3,169 60 3,109 5181.7 %
Non-same store tenant reimbursements 370 24 346 1441.7 %
Other operating income — 96 (96) (100.0) %
Total rental revenue $ 46,881 $ 43,063 $ 3,818 8.9 %
•Same store rental revenue decreased primarily related to a $1,630,000 write-off of straight-line rent due to tenant uncertainty, impairment of above-market lease intangible assets of $260,000 and $293,000 related to tenants who ceased paying all or a portion of their rent, partially offset by a $311,000 increase in base rent for leases indexed to CPI and a $105,000 increase from new leasing and lease amendments at existing properties.

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•Non-same store rental ~~and tenant reimbursement~~ revenue increased primarily due to ~~the acquisition of ten operating~~a $1,961,000 increase resulting from properties ~~and the placement of one development property in service~~acquired since ~~July~~April 1, ~~2021,~~2022, partially offset by a $492,000 decrease ~~in non-same store rental and tenant reimbursement revenue~~ due to the ~~sale~~disposition of ~~three~~a property.

•Non-same store tenant reimbursements increased $194,000 primarily due to properties acquired since April 1, 2022.

•There were no significant changes in same store tenant reimbursements and other operating ~~properties since July 1, 2021.~~income.

Changes in our expenses are summarized in the following table (amounts in thousands):


		Three Months Ended September 30,									Three Months Ended June 30,
		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change
Same store rental expenses	Same store rental expenses	$	2,719	$	2,565	$	154	6.0	%	Same store rental expenses	$	4,468	$	4,237	$	231	5.5	%
Non-same store rental expenses	Non-same store rental expenses	513		459		54		11.8	%	Non-same store rental expenses	405		73		332		454.8	%

General and administrative expenses	General and administrative expenses	6,118		6,348		(230)		(3.6)	%	General and administrative expenses	5,547		6,444		(897)		(13.9)	%

Depreciation and amortization	Depreciation and amortization	18,641		17,259		1,382		8.0	%	Depreciation and amortization	18,803		17,814		989		5.6	%

Impairment losses	Impairment losses	—		10,241		(10,241)		(100.0)	%	Impairment losses	6,364		—		6,364		100.0	%
Total expenses	Total expenses	$	27,991	$	36,872	$	(8,881)	(24.1)	%	Total expenses	$	35,587	$	28,568	$	7,019	24.6	%

•There were no significant changes in same store rental expenses.

•Non-same store rental expenses increased primarily due to ~~the acquisition of ten operating~~a $374,000 increase resulting from properties ~~and the placement of one development property in service~~acquired since ~~July~~April 1, ~~2021, partially offset by a decrease due to the sale of three operating properties since July 1, 2021.~~2022.

•General and administrative expenses decreased primarily due to severance of $793,000 recorded in 2022, a $99,000 decrease in ~~corporate~~ legal fees and ~~transfer agent expenses of approximately $462,000, partially offset by an increase~~a $27,000 decrease in stock-based ~~compensation of $223,000.~~compensation.

•Depreciation and amortization increased primarily due to ~~the acquisition~~a $962,000 increase from properties acquired since April 1, 2022, and a $592,000 impairment of ~~ten operating properties and the placement of one development property in service since July 1, 2021,~~in-place lease intangible assets, partially offset by a $337,000 decrease ~~due~~related to ~~the sale of three operating~~ properties impaired in 2022 and a $169,000 decrease related to properties sold since ~~July~~April 1, ~~2021.~~2022.

•Impairment ~~loss relates to one healthcare property which occurred~~losses were recorded in the aggregate amount of $6,364,000 and $0 during the three months ended ~~September~~June 30, ~~2021. There were no impairments recorded during the three months ended September 30, 2022.~~2023 and 2022, respectively.

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Changes in interest and other ~~expense,~~expenses, net, are summarized in the following table (amounts in thousands):

Three Months Ended
September 30,
2022 2021 $ Change % Change
Interest and other expense, net:
Interest on notes payable $ — $ 975 $ (975) (100.0) %
Interest on credit facility 5,135 5,477 (342) (6.2) %
Other expense 363 5,285 (4,922) (93.1) %
Total interest and other expense, net $ 5,498 $ 11,737 $ (6,239) (53.2) %
Income from discontinued operations $ — $ 377,191 $ (377,191) (100.0) %

•~~Interest on notes payable decreased due to the repayment of all our notes payable related to healthcare properties on July 22, 2021, with proceeds from the Data Center Sale.~~


	Three Months Ended June 30,
	2023		2022		$ Change		% Change
Interest and other expenses, net:

Interest on credit facility	$	5,664	$	4,477	$	1,187	26.5	%
Other income	(141)		(148)		7		(4.7)	%
Total interest and other expenses, net	$	5,523	$	4,329	$	1,194	27.6	%

•Interest on credit facility ~~decreased~~increased primarily due to a ~~reduction in the~~$770,000 increase related to higher weighted average outstanding principal ~~balance~~balances on our credit facility of ~~$28 million, which was paid with~~$70,330,000 and an increase of $760,000 related to the ~~proceeds from the Data Center Sale. In addition, we achieved comparably lower~~weighted average interest ~~rates versus the third quarter of 2021, as a result of entering into the Unsecured Credit Facility (as defined below).~~rate on our credit facility that is subject to variable rates.

•~~There was no~~2022, partially offset by an increase of $30,000 in cash deposits interest income ~~from discontinued operations~~ during the three months ended ~~September~~June 30, ~~2022, due to the Data Center Sale in July 2021.~~2023.

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Six Months Ended ~~September~~June 30, ~~2022~~2023 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022

The following table ~~represents the breakdown of~~allocates total rental revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the comparable ~~periods~~period in ~~2021~~2022 (amounts in thousands).


		Nine Months Ended September 30,									Six Months Ended June 30,
		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change
Same store rental revenue	Same store rental revenue	$	119,020	$	118,932	$	88	0.1	%	Same store rental revenue	$	79,012	$	81,942	$	(2,930)	(3.6)	%
Same store tenant reimbursements	Same store tenant reimbursements	7,066		6,609		457		6.9	%	Same store tenant reimbursements	5,263		4,984		279		5.6	%
Non-same store rental revenue	Non-same store rental revenue	9,024		3,082		5,942		192.8	%	Non-same store rental revenue	9,665		2,088		7,577		362.9	%
Non-same store tenant reimbursements	Non-same store tenant reimbursements	969		511		458		89.6	%	Non-same store tenant reimbursements	666		184		482		262.0	%

Other operating income	Other operating income	2		98		(96)		(98.0)	%	Other operating income	3		2		1		50.0	%
Total rental revenue	Total rental revenue	$	136,081	$	129,232	$	6,849	5.3	%	Total rental revenue	$	94,609	$	89,200	$	5,409	6.1	%

•Same store rental revenue decreased primarily due to a $1,703,000 decrease related to tenants who ceased paying all or a portion of their rent, a $1,770,000 write-off of straight-line rent due to tenant uncertainty and an impairment of above-market lease intangible assets of $260,000, partially offset by a $632,000 increase in base rent for leases indexed to CPI and a $171,000 increase from new leasing and lease amendments at existing properties.

•Non-same store rental revenue increased due to ~~the acquisition~~$3,681,000 of ~~eleven operating~~lease termination income and $4,487,000 in increases due to properties acquired and ~~the placement of two development~~ properties placed in service since January 1, ~~2021, partially~~2022, offset by a $493,000 decrease ~~in non-same store rental revenue~~ due to the ~~sale~~disposition of ~~three operating~~a property.

•Non-same store tenant reimbursements increased $482,000 primarily due to properties acquired since January 1, ~~2021.~~2022.

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There were no significant changes in same store tenant reimbursements and other operating income.

Changes in our expenses are summarized in the following table (amounts in thousands):


		Nine Months Ended September 30,									Six Months Ended June 30,
		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change
Same store rental expenses	Same store rental expenses	$	7,915	$	7,811	$	104	1.3	%	Same store rental expenses	$	8,685	$	8,247	$	438	5.3	%
Non-same store rental expenses	Non-same store rental expenses	1,352		1,702		(350)		(20.6)	%	Non-same store rental expenses	1,038		382		656		171.7	%

General and administrative expenses	General and administrative expenses	20,718		19,610		1,108		5.7	%	General and administrative expenses	11,650		12,006		(356)		(3.0)	%

Depreciation and amortization	Depreciation and amortization	54,443		53,098		1,345		2.5	%	Depreciation and amortization	37,355		35,802		1,553		4.3	%

Impairment losses	Impairment losses	7,387		27,837		(20,450)		(73.5)	%	Impairment losses	6,708		7,387		(679)		(9.2)	%
Total expenses	Total expenses	$	91,815	$	110,058	$	(18,243)	(16.6)	%	Total expenses	$	65,436	$	63,824	$	1,612	2.5	%
Gain on real estate dispositions	Gain on real estate dispositions	$	460	$	—	$	460	100.0	%	Gain on real estate dispositions	$	21	$	460	$	(439)	(95.4)	%

•There were no significant changes in same store rental expenses.

•Non-same store rental expenses ~~decreased~~increased primarily due to ~~the sale of three operating~~a $751,000 increase from properties acquired and properties placed in service since ~~January~~April 1, ~~2021, which were vacant prior to sale, thus requiring us to incur incrementally more expenses.~~2022.

•General and administrative expenses ~~increased~~decreased primarily due to a severance ~~payment to our former chief accounting officer and an increase~~of $826,000 recorded in ~~stock-based compensation,~~2022, partially offset by a ~~decrease~~$319,000 increase in ~~corporate legal and transfer agent expenses.~~stock-based compensation.

•Depreciation and amortization increased primarily due to ~~the acquisition of eleven operating~~a $2,258,000 increase from properties acquired and ~~the placement of two development~~ properties placed in service since January 1, ~~2021, coupled with~~2022, and a $592,000 impairment of in-place lease intangible assets, partially offset by a $674,000 decrease related to properties impaired in 2022 and a $315,000 decrease related to properties sold. In addition, the six months ended June 30, 2022, included an impairment of ~~one~~an in-place lease intangible asset ~~in the amount~~ of approximately $380,000 during the nine months ended September 30, 2022, related to a healthcare tenant. The increase was partially offset by an impairment of one in-place lease intangible asset during the nine months ended September 30, 2021, in the amount of approximately $1,120,000 related to one of our healthcare tenants and the sale of three operating properties since January 1, 2021.$380,000.

•Impairment losses were recorded in the aggregate amount of $6,708,000 and $7,387,000 during the six months ended June 30, 2023 and 2022, respectively. The property related to ~~one healthcare property during~~ the ~~nine months ended September 30, 2022. Impairment losses were recorded in the aggregate amount~~2022 impairments was sold on March 31, 2023.

Table of ~~$27,837,000 related to one healthcare property and one land parcel that formerly contained a healthcare property during the nine months ended September 30, 2021.~~Contents

Changes in interest and other ~~expense,~~expenses, net, are summarized in the following table (amounts in thousands):

Nine Months Ended
September 30,
2022 2021 $ Change % Change
Interest and other expense, net:
Interest on notes payable $ — $ 4,630 $ (4,630) (100.0) %
Interest on credit facility 13,553 19,931 (6,378) (32.0) %
Other expense 4,389 5,474 (1,085) (19.8) %
Total interest and other expense, net $ 17,942 $ 30,035 $ (12,093) (40.3) %
Income from discontinued operations $ — $ 401,444 $ (401,444) (100.0) %

•~~Interest on notes payable decreased due to the repayment of all our notes payable related to healthcare properties on July 22, 2021, with proceeds from the Data Center Sale.~~


	Six Months Ended June 30,
	2023		2022		$ Change		% Change
Interest and other expenses, net:

Interest on credit facility	$	11,286	$	12,665	$	(1,379)	(10.9)	%
Other income	(147)		(221)		74		(33.5)	%
Total interest and other expenses, net	$	11,139	$	12,444	$	(1,305)	(10.5)	%

•Interest on credit facility decreased primarily due to ~~a reduction~~$3,367,000 in loss on extinguishment of debt and $996,000 in amortization of interest rate swaps recognized during the six months ended June 30, 2022, partially offset by an increase of $1,470,000 related to higher weighted average outstanding principal balance on our credit facility of ~~$307 million, which was paid with~~$79,050,000 and an increase of $1,569,000 related to changes in the ~~proceeds from the Data Center Sale. In addition, we achieved comparably lower~~weighted average interest ~~rates versus the nine months ended September 30, 2021, as a result of entering into the Unsecured Credit Facility (as defined below).~~rate on our credit facility that is subject to variable rates.

•Other ~~expense~~income decreased primarily due to $105,000 in interest income on a ~~loss on debt extinguishment related to the repayment of all our healthcare notes payable and a term loan of the prior credit facility with proceeds from the Data Center Sale~~note receivable during the ~~nine~~six months ended ~~September~~June 30, ~~2021, consisting of loan costs of $3,187,000 and accelerated unamortized debt issuance costs of $1,826,000,~~2023, compared to $217,000 in settlement income from disposed properties during the six months ended June 30, 2022, partially offset by ~~loss on debt extinguishment recorded~~an increase of $30,000 in cash deposits interest income during the ~~nine~~six months ended ~~September~~June 30, ~~2022, related to the repayment of our prior credit facility consisting primarily of accelerated unamortized debt issuance costs of $3,363,000.~~2023.

•~~There was no income from discontinued operations during the nine months ended September 30, 2022, due to the Data Center Sale in July 2021.~~

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Liquidity and Capital Resources

Our principal uses of funds are for acquisitions of real estate and real estate-related investments, capital expenditures, operating expenses, distributions to, and share repurchases from, stockholders and principal and interest payments on ~~any~~ current and future indebtedness. While interest rates on variable rate debt have increased and ~~we expect will~~are expected to continue to increase, ~~globally,~~ we believe our exposure is limited at this time due to our hedging strategy, which has effectively fixed ~~81%~~93% of our outstanding debt as of ~~September~~June 30, ~~2022,~~2023, allowing us to reasonably project our ~~cash~~liquidity needs. Generally, cash for these items is generated from operations of our current and future investments. Our sources of funds are primarily operating cash flows, funds equal to amounts reinvested in the DRIP, our credit facility and other potential borrowings.

When we acquire a property, we prepare a capital plan that contemplates the estimated capital needs of that investment. In addition to operating expenses, capital needs may also include, for example, costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include a line of credit, operating cash generated by the investment, additional equity investments from us, and when necessary, capital reserves. The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or, as necessary, to respond to unanticipated additional capital needs.

Short-term Liquidity and Capital Resources

For at least the next twelve months, we expect our principal demands for funds will be for operating expenses, including our general and administrative expenses, as well as the acquisition of real estate and real estate-related investments and funding of capital improvements and tenant improvements, distributions to and stock repurchases from stockholders, and interest payments on our credit facility. We expect to meet our short-term liquidity requirements through net cash flows provided by operations, funds equal to amounts reinvested in the DRIP and borrowings on our credit facility and potential other borrowings.

We believe we will have sufficient liquidity available to meet our obligations in a timely manner, under both normal and stressed conditions, for the next twelve months.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, we expect our principal demands for funds will be for costs to acquire additional real estate properties, interest and principal payments on our credit facility, long-term capital investment demands for our real estate properties and our distributions necessary to maintain our REIT status.

We currently expect to meet our long-term liquidity requirements through proceeds from cash flows from operations and borrowings on our credit facility and potential other borrowings.

We expect to pay distributions to our stockholders from cash flows from operations; however, we have used, and may continue to use, other sources to fund distributions, as necessary, such as funds equal to amounts reinvested in the ~~DRIP and borrowings on our credit facility.~~DRIP. To the extent cash flows from operations are lower due to ~~less-than-expected~~lower-than-expected returns on the properties held or the disposition of properties, distributions paid to stockholders may be lower. We currently expect that substantially all net cash flows from our

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operations will be used to fund acquisitions, certain capital expenditures identified at acquisition, ongoing capital expenditures, interest and principal payments on outstanding debt and distributions to our stockholders.

Material Cash Requirements

In addition to the cash we need to conduct our normal business operations, we expect to require approximately ~~$21,733,000~~$22,512,000 in cash over the next twelve months, of which ~~$19,073,000~~$19,802,000 will be required for the payment of estimated interest on our outstanding debt (calculated based on our effective hedged interest rates as of ~~September~~June 30, ~~2022)~~2023) and ~~$2,660,000~~$2,710,000 related to our various obligations as lessee. We cannot provide assurances, however, that actual expenditures will not exceed these estimates.

As of ~~September~~June 30, ~~2022,~~2023, we had approximately ~~$17,291,000~~$21,497,000 in cash and cash equivalents. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we paid capital expenditures of ~~$7,577,000 that primarily~~$962,000 related to ~~the completion of one development property, which was placed into service during the period, and re-developing another operating real estate property.~~tenant improvements.

As of ~~September~~June 30, ~~2022,~~2023, we had material obligations beyond 12 months in the amount of approximately ~~$778,396,000,~~$727,341,000, inclusive of ~~$659,358,000~~$610,345,000 related to principal and estimated interest payments on our outstanding debt (calculated based on our effective interest rates as of ~~September~~June 30, ~~2022)~~2023) and ~~$119,038,000~~$116,996,000 related to our various obligations as lessee.

One of our principal liquidity needs is the payment of principal and interest on outstanding indebtedness. As of ~~September~~June 30, ~~2022,~~2023, we had ~~$600,000,000~~$565,000,000 of principal outstanding under our Unsecured Credit ~~Facility (as defined below).~~Facility. We are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements.

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As of ~~September~~June 30, ~~2022,~~2023, we were in compliance with all such covenants and requirements on our Unsecured Credit Facility (as defined below).

As of ~~September~~June 30, ~~2022,~~2023, the aggregate notional amount under our derivative instruments was ~~$485,000,000.~~$525,000,000. We have agreements with each derivative counterparty that contain cross-default provisions; if we default on our indebtedness, then we could also be declared in default on our derivative obligations, resulting in an acceleration of payment of any net amounts due under our derivative contracts. As of ~~September~~June 30, ~~2022,~~2023, we were in compliance with all such cross-default provisions.

Debt Service Requirements

Credit Facility

As of ~~September~~June 30, ~~2022,~~2023, the maximum commitments available under our senior unsecured revolving line of credit with Truist Bank, as Administrative Agent for the lenders, or the Revolving Credit Agreement, were $500,000,000, which may be increased, subject to lender approval, through incremental term loans and/or revolving loan commitments in an aggregate amount not to exceed $1,000,000,000. The maturity date for the Revolving Credit Agreement is February 15, 2026, which, at our election, may be extended for a period of six-months on no more than two occasions, subject to certain conditions, including the payment of an extension fee. ~~The Revolving Credit Agreement was entered into on February 15, 2022, to replace our prior $500,000,000 revolving line~~As of ~~credit, which had a maturity date of April 27, 2022, with the option to extend for one twelve-month period. We did not exercise the option to extend. Upon closing of~~June 30, 2023, the Revolving Credit Agreement ~~we extinguished all commitments associated with the prior revolving line of credit.~~did not have an outstanding principal balance.

As of ~~September~~June 30, ~~2022,~~2023, the maximum commitments available under our senior unsecured term loan with Truist Bank, as Administrative Agent for the lenders, or the 2024 Term Loan Agreement, were ~~$300,000,000,~~$290,000,000, which may be increased, subject to lender approval, to an aggregate amount not to exceed ~~$600,000,000.~~$590,000,000. The 2024 Term Loan Agreement has a maturity date of December 31, 2024, and, at our election, may be extended for a period of six-months on no more than two occasions, subject to the satisfaction of certain conditions, including the payment of an extension fee. ~~The~~As of June 30, 2023, the 2024 Term Loan Agreement ~~was entered into simultaneously with the Revolving Credit Agreement’s execution, on February 15, 2022, to replace our prior term loan, which was paid off in its entirety upon closing~~had an aggregate outstanding principal balance of ~~the Revolving Credit Agreement and the 2024 Term Loan Agreement.~~$290,000,000.

As of ~~September~~June 30, ~~2022,~~2023, the maximum commitments available under our senior unsecured term loan with Truist Bank, as Administrative Agent for the lenders, or the 2028 Term Loan Agreement, were $275,000,000, of which $205,000,000 was drawn at closing to pay down our Revolving Credit Agreement in its entirety. The remainder of the commitments were available for three months following the closing date, or the Availability Period, and were available in no more than three subsequent draws with a minimum of $20,000,000 per draw, or the remaining commitments available. After the Availability Period, the undrawn portion was no longer available. If the committed amount was not fully drawn within 60 days of closing, we were required to pay a fee to the lenders, calculated as 0.25% per annum on the average daily amount of the undrawn portion, payable quarterly in arrears, until the earlier of (i) the date when the commitments have been funded in full, or (ii) August 17, 2022. The 2028 Term Loan Agreement may be increased, subject to lender approval, to an aggregate amount not to exceed $500,000,000 and has a maturity date of January 31, 2028. The 2028 Term Loan Agreement is pari passu with our Revolving Credit Agreement and 2024 Term Loan Agreement. ~~On July 12, 2022 and July 20, 2022, we drew $50,000,000 and $20,000,000, respectively, on the 2028 Term Loan Agreement.~~ As of ~~July 20, 2022,~~June 30, 2023, the 2028 Term Loan Agreement ~~commitments were fully funded.~~had an aggregate outstanding principal balance of $275,000,000.

We refer to the ~~2028~~Revolving Credit Agreement, the 2024 Term Loan Agreement ~~the Revolving Credit Agreement~~ and the ~~2024~~2028 Term Loan Agreement, collectively, as the “Unsecured Credit Facility,” which has aggregate commitments available of ~~$1,075,000,000,~~$1,065,000,000, as of ~~September~~June 30, ~~2022.~~2023. Generally, the proceeds of loans made under our Unsecured Credit Facility may be used for ~~the~~ acquisition of real estate investments, funding of tenant improvements and leasing commissions with respect to real estate, repayment of indebtedness, funding of capital expenditures with respect to real estate, and general corporate and working capital purposes.

During the nine months ended September 30, 2022, we drew $70,000,000 on the Revolving Credit Agreement related to seven property acquisitions and we repaid $40,000,000 on the Revolving Credit Agreement, with proceeds from one property disposition and cash flows from operations.

As of ~~September~~June 30, ~~2022,~~2023, we had a total pool availability under our Unsecured Credit Facility of ~~$1,075,000,000~~$1,065,000,000 and an aggregate outstanding principal balance of ~~$600,000,000;~~$565,000,000; therefore, ~~$475,000,000~~$500,000,000 was available to be drawn under our Unsecured Credit Facility. We were in compliance with all the financial covenant requirements as of ~~September~~June 30, ~~2022.~~2023.

On July 13, 2023, we repaid $10,000,000 on the 2024 Term Loan Agreement with proceeds from the collection of a note receivable related to a disposition and cash flows from operations. As of July 13, 2023, as a result of the repayment, we had a

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total pool availability under our Unsecured Credit Facility of $1,055,000,000 and an aggregate outstanding principal balance of $555,000,000; therefore, $500,000,000 was available to be drawn under our Unsecured Credit Facility.

Cash Flows

~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022

Nine Months Ended
September 30,
(in thousands) 2022 2021 Change % Change
Net cash provided by operating activities $ 89,031 $ 104,816 $ (15,785) (15.1) %
Net cash (used in) provided by investing activities $ (141,949) $ 1,263,096 $ (1,405,045) (111.2) %
Net cash provided by (used in) financing activities $ 37,495 $ (1,359,616) $ 1,397,111 (102.8) %

~~Cash flows from discontinued operations are not separately disclosed on the condensed consolidated statement of cash flows for the nine months ended September 30, 2021.~~


	Six Months Ended June 30,
(in thousands)	2023		2022		Change
Net cash provided by operating activities	$	64,206	$	56,753	$	7,453
Net cash provided by (used in) investing activities	$	1,359	$	(27,249)	$	28,608
Net cash used in financing activities	$	(56,985)	$	(39,140)	$	(17,845)

Operating Activities

•Net cash provided by operating activities ~~decreased~~increased primarily due to ~~the Company owning fewer properties subsequent to the Data Center Sale on July 22, 2021, partially offset by~~ an increase in ~~rental revenues~~cash collected for rent resulting from ~~the acquisition of eleven operating properties~~acquiring and ~~placement of two development~~placing properties in service, ~~since January 1, 2021~~annual rent increases, new leasing and ~~a decrease in interest paid as a result of entering into the Unsecured Credit Facility~~renewal activity and the ~~pay-off~~receipt of ~~all our notes payable on July 22, 2021, in connection with the Data Center Sale.~~lease termination income.

Investing Activities

Significant investing activities included:

•~~Net cash used in investing activities for~~Investment of $9,920,000 to purchase one property during the ~~nine~~six months ended ~~September~~June 30, ~~2022, was due~~2023, compared to ~~the~~an investment of $42,428,000 to purchase ~~of operating real estate~~five properties ~~and payment of capital expenditures primarily related to the completion of one development property, which was placed into service~~ during the ~~period, and re-developing another operating real estate~~six months ended June 30, 2022.

•Sale of property ~~partially offset by~~for net proceeds of $12,241,000 during the six months ended June 30, 2023, compared to receiving $22,822,000 from the sale of ~~one property. Net cash provided by investing activities for~~a land parcel that formerly contained a property during the ~~nine~~six months ended ~~September~~June 30, ~~2021, was primarily due to the Data Center Sale and the collection of a note receivable, partially offset by the purchase of one real estate property, payment of~~2022.

•Incurred capital expenditures, ~~related~~primarily for tenant improvements and developments, of $962,000 during the six months ended June 30, 2023, compared to ~~one data center property and three healthcare properties and consideration paid for~~incurring $6,477,000 during the ~~Internalization Transaction.~~six months ended June 30, 2022.

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Financing Activities

Significant financing activities included:

•~~Net cash provided by financing activities for~~Payment of $32,969,000 in distributions to common stockholders during the ~~nine~~six months ended ~~September~~June 30, ~~2022, was due~~2023, compared to $32,401,000 during the six months ended June 30, 2022.

•Repurchase of $5,994,000 of common stock under our share repurchase program during the six months ended June 30, 2023, compared to $4,606,000 during the six months ended June 30, 2022.

•The following Unsecured Credit Facility related activity during the six months ended June 30, 2023:

◦Repayment of $8,000,000 on the Revolving Credit Agreement with cash flows from operations; and

◦Repayment of $10,000,000 on the 2024 Term Loan Agreement with proceeds from a disposition and cash flows from operations.

•The following Unsecured Credit Facility related activity during the six months ended June 30, 2022:

◦Draw of $35,000,000 on the Revolving Credit Agreement for acquisitions;

◦Repayment of $30,000,000 on the Revolving Credit Agreement with proceeds from a disposition;

◦Replacement of $500,000,000 from our prior unsecured credit facility ~~partially offset by payments~~with borrowings from our new Revolving Credit Agreement and 2024 Term Loan Agreement; and

◦Draw of $205,000,000 on ~~our credit facility, payments~~the 2028 Term Loan Agreement at closing to pay down the $205,000,000 outstanding balance on the Revolving Credit Agreement.

◦Payment of $6,940,000 in deferred financing costs as a result of entering into the Revolving Credit Agreement, 2024 Term Loan Agreement and ~~Revolving Credit Agreement on February 15, 2022 and the~~ 2028 Term Loan Agreement on May 17, 2022, repurchases of our common stock under our share repurchase program, distributions to our common stockholders and payment of offering costs on issuance of common stock. Net cash used in financing activities forduring the ~~nine~~six months ended ~~September~~June 30, 2021, was due to payments on notes payable and debt extinguishment as a result of the Data Center Sale, payments on our credit facility primarily with proceeds from the Data Center Sale, payments of deferred financing costs, repurchases of our common stock under our share repurchase program, distributions to our common stockholders, including a special cash distribution, and payment of offering costs on issuance of common stock, partially offset by proceeds from our credit facility.2022.

Distributions to Stockholders

The amount of distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including our funds available for distribution, financial condition, lenders' restrictions and limitations, capital expenditure requirements, corporate law restrictions and the annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended. The Board must authorize each distribution and may, in the future, authorize lower amounts of distributions or not authorize additional distributions and, therefore, distribution payments are not guaranteed. Additionally, our organizational documents permit us to pay distributions from unlimited amounts of any source, and we may use sources other than operating cash flows to fund distributions, including funds equal to amounts reinvested in the DRIP, which may reduce the amount of capital we ultimately invest in properties or other permitted investments. We have funded distributions with operating cash flows from our properties and funds equal to amounts reinvested in the DRIP. To the extent that we do not have taxable income, distributions paid will be considered a return of capital to stockholders.

~~Table of~~ ~~Contents~~

The following table shows the sources of distributions paid during the ~~nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands):

Nine Months Ended September 30,
2022 2021
Distributions paid in cash - common stockholders $ 48,920 $ 450,143 (1)
Distributions reinvested (shares issued) 18,594 21,750
Total distributions $ 67,514 $ 471,893
Source of distributions:
Cash flows provided by operations $ 48,920 72 % (2) $ 57,458 12 % (2)
Offering proceeds from issuance of common stock pursuant to the DRIP 18,594 28 % (2) 21,750 5 % (2)
Proceeds from real estate disposals — — % (2) 392,685 83 % (2)
Total sources $ 67,514 100 % $ 471,893 100 %


	Six Months Ended June 30,
	2023					2022
Distributions paid in cash - common stockholders	$	32,969				$	32,401
Distributions reinvested (shares issued)	12,450					12,290
Total distributions	$	45,419				$	44,691
Source of distributions:
Cash flows provided by operations	$	32,969	73	%	(1)	$	32,401	73	%	(1)
Offering proceeds from issuance of common stock pursuant to the DRIP	12,450		27	%	(1)	12,290		27	%	(1)

Total sources	$	45,419	100	%		$	44,691	100	%

(1)Includes a special cash distribution declared by the Board of $1.75 per share of Class A, Class I, Class T and Class T2 common stock. The special cash distribution was funded with the proceeds from the Data Center Sale on July 22, 2021. The special cash distribution was paid on July 30, 2021, to stockholders of record at the close of business on July 26, 2021, in the aggregate amount of approximately $392,685,000.

~~(2)~~Percentages were calculated by dividing the respective source amount by the total sources of distributions.

Total distributions declared but not paid on Class A shares, Class I shares and Class T shares as of ~~September~~June 30, ~~2022,~~2023, were approximately ~~$7,456,000~~$7,505,000 for common stockholders. These distributions were paid on ~~October 6, 2022.~~July 7, 2023.

~~For the nine months ended September 30, 2022, we declared and paid distributions~~

Table of approximately $67,514,000 to Class A stockholders, Class I stockholders, Class T stockholders and Class T2 stockholders, collectively, including shares issued pursuant to the DRIP, as compared to FFO and AFFO (which are Non-GAAP measures defined and reconciled below under "Non-GAAP Financial Measures") for the nine months ended September 30, 2022, of approximately $88,080,000 and $90,096,000, respectively.Contents

Non-GAAP Financial Measures

In the real estate industry, analysts and investors employ certain non-GAAP supplemental financial measures in order to facilitate meaningful comparisons between periods and among peer companies. Additionally, in the formulation of our goals and in the evaluation of the effectiveness of our strategies, we use funds from operations, or FFO, and adjusted funds from operations, or AFFO, which are non-GAAP metrics. We believe that these measures are useful to investors to consider because they may assist them to better understand and measure the performance of our business over time and against similar companies. We use the following non-GAAP financial measures: Funds From Operations, or FFO, Core Funds From Operations, or Core FFO, and Adjusted Funds From Operations, or AFFO.

Net Income and FFO, Core FFO and AFFO

A description of FFO, Core FFO, and AFFO and reconciliations of these non-GAAP measures to net income, the most directly comparable GAAP ~~measures,~~measure, are provided below.

~~Funds from Operations and Adjusted Funds from Operations~~

~~One of our objectives is to provide cash distributions to our stockholders from cash flows generated by our operations.~~ The purchase of real estate assets and real estate-related investments, and the corresponding expenses associated with that process, is a key operational function of our business plan in order to generate cash flows from operations. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated athe FFO measure, ~~known as FFO,~~ which we believe is an appropriate ~~supplemental~~additional measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income as determined under GAAP.

We define FFO, consistent with NAREIT’s definition, as net income ~~(loss)~~ (calculated in accordance with GAAP), excluding gains (or losses) from sales of real estate assets and impairments of real estate assets, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. To date, we ~~have~~do not ~~had~~have any investments in unconsolidated partnerships or joint ventures.

We, along with many of our peers in the real estate industry, consider FFO to be an appropriate supplemental measure of a REIT’s operating performance, because it is based on a net income ~~(loss)~~ analysis of real estate portfolio performance that excludes non-cash items such as real estate depreciation and amortization and real estate ~~impairments, which we~~impairments. We believe FFO provides a ~~more~~

~~Table of~~ ~~Contents~~

~~complete~~useful understanding of our performance to the investors and to our management, and when compared to year over year, FFO reflects the impact on our operations from trends in occupancy.

We calculate ~~AFFO, a non-GAAP measure,~~Core FFO by ~~further~~ adjusting FFO ~~for~~to remove the ~~following~~effect of items ~~included in the determination~~that are not expected to impact our operating performance on an ongoing basis and consider it to be a useful supplemental measure because it provides investors with additional information to understand our sustainable performance. These include severance arrangements, write-off of ~~GAAP net income:~~straight-line rent receivables related to prior periods, amortization of above- and below-market leases ~~amortization of operating leases~~(including ground leases) and ~~the finance lease, straight-line rent adjustments, deferred rent, discount amortization related to the deferred liability in connection with the Internalization Transaction, (gain)~~ loss on extinguishment of ~~debt,~~debt.

We calculate AFFO by further adjusting Core FFO for the following items: deferred rent, current period straight-line rent adjustments, amortization of deferred financing costs and stock-based compensation. ~~By excluding such charges that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information.~~

AFFO is a metric used by management to evaluate our dividend policy. Additionally, we consider AFFO to be an appropriate supplemental measure of our operating performance because it provides to investors a more complete understanding of our sustainable performance.

Presentation of this information is intended to assist management and investors in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO, Core FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO, Core FFO and AFFO are not necessarily indicative of cash flows available to fund cash needs and should not be considered as an alternative to net income as an indication of our performance, as an indication of our liquidity, or indicative of funds available for our cash needs, including our ability to make distributions to our stockholders. FFO, ~~and AFFO should be reviewed in conjunction with other measurements as an indication of our performance. FFO and AFFO have limitations as performance measures. However,~~Core FFO and AFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods. ~~FFO and AFFO are not useful~~All of our non-GAAP financial measures should be reviewed in ~~evaluating net asset value since impairments are taken into account in determining net asset value but not in determining FFO and AFFO.~~

~~FFO and AFFO,~~conjunction with other measurements as ~~described above, should not be considered to be more relevant or accurate than the GAAP methodology in calculating net income or in its applicability in evaluating~~an indication of our ~~operational~~ performance. The method used to evaluate the value and performance of real estate under GAAP should be considered as a more relevant measure of operating performance and considered more prominent than the non-GAAP ~~FFO and AFFO~~financial measures ~~and the adjustments to GAAP in calculating FFO and AFFO.~~presented here.

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Reconciliation of Net Income to FFO, Core FFO and AFFO

The following istable presents a reconciliation of net income attributable to common stockholders, which is the most directly comparable GAAP financial measure, to FFO, Core FFO and AFFO for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Net income attributable to common stockholders $ 13,392 $ 371,645 $ 26,784 $ 390,583
Adjustments:
Depreciation and amortization 18,615 17,289 54,369 64,843
Gain on real estate disposition from continuing operations — — (460) —
Gain on real estate dispositions from discontinued operations — (398,560) — (395,801)
Impairment losses — 10,241 7,387 27,837
FFO attributable to common stockholders $ 32,007 $ 615 $ 88,080 $ 87,462
Adjustments:
Amortization of above- and below-market leases 122 13 362 (1,239)
Amortization of operating leases and finance lease 193 189 719 674
Straight-line rent adjustments (2,589) (3,414) (7,530) (12,492)
Deferred rent 299 — 797 —
Amortization of discount of deferred liability — 163 — 272
Loss on extinguishment of debt — 28,751 3,367 28,751
Amortization of deferred financing costs 413 754 1,267 2,761
Stock-based compensation 860 637 3,034 1,756
AFFO attributable to common stockholders $ 31,305 $ 27,708 $ 90,096 $ 107,945


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income attributable to common stockholders	$	3,855	$	12,021	$	18,055	$	13,392
Adjustments:
Depreciation and amortization	18,780		17,788		37,311		35,754
Gain on real estate disposition	—		—		(21)		(460)

Impairment losses	6,364		—		6,708		7,387
FFO	$	28,999	$	29,809	$	62,053	$	56,073
Adjustments:
Severance arrangements	8		801		40		866
Write-off of straight-line rent receivables related to prior periods	1,479		—		1,618		—
Amortization of above (below) market lease intangibles, including ground leases	546		247		831		491
Loss on extinguishment of debt	—		—		—		3,367
Core FFO	$	31,032	$	30,857	$	64,542	$	60,797
Adjustments:
Deferred rent	344		299		863		498


Straight-line rent adjustments	(1,454)		(2,472)		(2,891)		(5,023)

Amortization of deferred financing costs	412		364		825		854
Stock-based compensation	1,251		1,278		2,493		2,174
AFFO	$	31,585	$	30,326	$	65,832	$	59,300

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk.

We have obtained variable rate debt financing ~~to fund certain property acquisitions~~ and we are exposed to such changes in the one-month Term SOFR. Loans under the Unsecured Credit Facility may be made as Base Rate Loans or SOFR ~~(as defined below).~~Loans, at our election, and all of our interest rate swap agreements are indexed to SOFR. Our objectives in managing interest rate risk are ~~to seek~~ to limit the impact of interest rate fluctuations on operations and cash flows, and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at interest rates with the lowest margins available and, in some cases, with the ability to convert variable interest rates to fixed rates.

~~In July 2017, the Financial Conduct Authority, or FCA, which regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation~~As of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate, or SOFR, as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. Subsequently, on March 5, 2021, the FCA announced that USD-LIBOR will no longer be published after June 30, 2023. Effective February 15, 2022, we have no LIBOR-rate debt. Loans under the Unsecured Credit Facility may be made as Base Rate Loans or SOFR Loans, at our election. On May 2, 2022, we entered into bilateral agreements with our swap counterparties to transition all of our swap agreements to SOFR.

~~As of September 30, 2022,~~2023, we had 1211 interest rate swap agreements outstanding, which mature on various dates from ~~April 2023~~December 2024 to January 2028, with an aggregate notional amount under the swap agreements of $485,000,000. Of the 12 interest rate swap agreements outstanding, three interest rate swap agreements with an aggregate notional amount of $150,000,000 have an effective date of May 1, 2023, and will replace two interest rate swaps with an aggregate notional amount of $150,000,000 that have a maturity date of April 27, 2023.$525,000,000. As of ~~September~~June 30, ~~2022,~~2023, the aggregate settlement asset value was ~~$30,378,000.~~$28,653,000. The settlement value of these interest rate swap agreements is dependent upon existing market interest rates and swap spreads. As of ~~September~~June 30, ~~2022,~~2023, an increase of 50 basis points in the market rates of interest would have resulted in an increase to the settlement asset value of these interest rate swaps to a value of ~~$38,023,000.~~$35,546,000. These interest rate swap agreements were designated as cash flow hedging instruments.

~~On April 8, 2022, we entered into two interest rate swap agreements, which have an effective date of May 2, 2022 and an aggregate notional amount of $85,000,000.~~

As of ~~September~~June 30, ~~2022,~~2023, of the ~~$600,000,000~~$565,000,000 total principal debt outstanding, ~~$115,000,000~~$40,000,000 was subject to variable interest rates, indexed to Term SOFR, with an interest rate of ~~3.9%~~6.5% per annum. As of ~~September~~June 30, ~~2022,~~2023, an increase of 50 basis points in the market rates of interest would have resulted in an increase in interest expense of approximately ~~$575,000~~$200,000 per year.

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The following table summarizes our principal debt outstanding related to our credit facility as of June 30, 2023 (amounts in thousands):


	June 30, 2023


Variable rate term loans fixed through interest rate swaps	$	525,000
Variable rate term loans	40,000
Total principal debt outstanding (1)	$	565,000

(1)As of June 30, 2023, the weighted average interest rate on our total debt outstanding was 3.5%.

We have entered, and may continue to enter, into additional derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a given variable rate financial instrument. To the extent we do, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not possess credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We 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. We have not entered, and do not intend to enter, into derivative or interest rate swap transactions for speculative purposes. We may also enter into rate-lock arrangements to lock interest rates on future borrowings.

In addition to changes in interest rates, the value of our future investments will be subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt, if necessary.

We do not have any foreign operations and thus we are not exposed to foreign currency ~~fluctuations.~~

~~Table of~~ ~~Contents~~

~~The following table summarizes our principal debt outstanding related to our credit facility as of September 30, 2022 (amounts in thousands):~~


	~~September 30, 2022~~

~~Variable rate revolving line of credit~~	$	~~25,000~~
~~Variable rate term loans fixed through interest rate swaps~~	~~485,000~~
~~Variable rate term loans~~	~~90,000~~
~~Total principal debt outstanding~~ ~~(1)~~	$	~~600,000~~

~~(1)As of September 30, 2022, the weighted average interest rate on our total debt outstanding was 3.1%.~~fluctuation risks.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we conducted an evaluation as of ~~September~~June 30, ~~2022,~~2023, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of ~~September~~June 30, ~~2022,~~2023, were effective at a reasonable assurance level.

(b) Changes in internal control over financial reporting. There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three months ended ~~September~~June 30, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any material pending legal proceedings to which we are a party or to which our properties are the subject.

Item 1A. Risk Factors

There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, as filed with the SEC on March ~~29, 2022.~~16, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

~~On July 1, 2022,~~During the three months ended June 30, 2023, we ~~granted an aggregate of 54,878.05 shares of restricted Class A common stock to our five independent directors. Each independent director received 10,975.61 shares of restricted Class A common stock~~did not sell any equity securities that ~~vest on July 1, 2023. The awards~~ were ~~granted~~not registered or otherwise exempt under ~~and subject to~~ the ~~terms of our Amended and Restated 2014 Restricted Share Plan and an award agreement.~~

On August 3, 2022, we granted our new chief accounting officer an award of 42,682.927 shares of restricted Class A common stock, which, subject to the chief accounting officer's continuous employment through the applicable vesting date, with certain exceptions, will vest on January 1, 2027. The award was granted under and subject to the terms of the Amended and Restated 2014 Restricted Share Plan and an award agreement.Securities Act.

During the three months ended ~~September~~June 30, ~~2022,~~2023, we fulfilled the following repurchase requests pursuant to our Share Repurchase Program:
Period Total Number of
Shares Repurchased Average
Price Paid per
Share Total Number
of Shares Purchased
as Part of Publicly
Announced Plans
and Programs Approximate Dollar Value
of Shares Available
that may yet
be Repurchased under the
Program
July 1, 2022 - July 31, 2022 225,136 $ 8.20 — $ —
August 1, 2022 - August 31, 2022 — $ — — $ —
September 1, 2022 - September 30, 2022 — $ — — $ —
Total 225,136 —


Period	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans and Programs	Approximate Dollar Value of Shares Available that may yet be Repurchased under the Program
April 1, 2023 - April 30, 2023	303,122	$	8.22	—	$	—
May 1, 2023 - May 31, 2023	—	$	—	—	$	—
June 1, 2023 - June 30, 2023	—	$	—	—	$	—
Total	303,122			—

During the three months ended ~~September~~June 30, ~~2022,~~2023, we repurchased approximately ~~$1,846,000~~$2,492,000 of Class A shares, Class I shares and Class T shares of common stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~(c) Insider trading arrangements and policies. During the three months ended June 30, 2023, none of the Company’s officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(c) of Regulation S-K.

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Item 6. Exhibits.

Effective September 30, 2020, Carter Validus Mission Critical REIT II, Inc., Carter Validus Operating Partnership II, LP, CVMC REIT II, LLC, CVOP Partner, LLC, Carter/Validus Operating Partnership, LP and CV Manager, LLC changed their names to Sila Realty Trust, Inc., Sila Realty Operating Partnership, LP, Sila REIT, LLC, Sila Partner, LLC, Sila Operating Partnership, LP and Sila Realty Management Company, LLC, respectively. With respect to documents executed prior to the name change, the following Exhibit List refers to the entity names used prior to the name changes in order to accurately reflect the names of the entities that appear on such documents.


Exhibit No:
3.1						~~Second~~Third Articles of Amendment and Restatement ~~of Carter Validus Mission Critical REIT II, Inc.~~ (included as Exhibit 3.1 to ~~Post-Effective Amendment No. 1 to~~ the ~~Registrant’s Registration Statement~~Registrant's Current Report on Form ~~S-11~~8-K (File No. ~~333-191706)~~000-55435) filed ~~June 12, 2014,~~on August 15, 2022, and incorporated herein by reference).

3.2						Second Amended and Restated Bylaws of ~~Carter Validus Mission Critical REIT II,~~Sila Realty Trust, Inc. ~~(included as Exhibit 3.2 to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form S-11 (File No. 333-191706) filed May 9, 2014, and incorporated herein by reference).~~

~~3.3~~						Articles Supplementary of Carter Validus Mission Critical REIT II, Inc., filed on January 13, 2017 (included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on January 18, 2017, and incorporated herein by reference).

~~3.4~~						~~Articles Supplementary of Carter Validus Mission Critical REIT II, Inc., filed on June 2, 2017~~ (included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on June ~~6, 2017,~~20, 2023, and incorporated ~~herein by reference.~~

~~3.5~~						Articles of Amendment of Carter Validus Mission Critical REIT II, Inc., filed on August 18, 2017 (included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on August 22, 2017, and incorporated hereinhere by reference).

~~3.6~~						Certificate of Correction to the Articles Supplementary of Carter Validus Mission Critical REIT II, Inc. (included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on July 2, 2018, and incorporated herein by reference).

~~3.7~~						Articles of Amendment of Carter Validus Mission Critical REIT II, Inc., dated December 12, 2019 (included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on December 12, 2019, and incorporated herein by reference).

~~3.8~~						~~Articles of Amendment (included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on September 30, 2020, and incorporated herein by reference).~~

~~3.9~~						~~Third~~ ~~Articles of Amendment~~ ~~and Restatement~~ ~~(included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on~~ ~~August 15, 2022, and incorporated herein by reference).~~

~~4.1~~						Subscription Agreement and Subscription Agreement Signature Page (included as Appendix B to the prospectus, incorporated by reference to the Registrant's final prospectus filed pursuant to Rule 424(b)(3), filed on November 27, 2017 (File No. 333-217579)).

~~4.2~~						Additional Subscription Agreement and Subscription Agreement Signature Page (included as Appendix C to the prospectus. incorporated by reference to the Registrant's final prospectus filed pursuant to Rule 424(b)(3), filed on November 27. 2017 (File No. 333-217579)).

~~4.3~~						Automatic Purchase Program Enrollment Form (included as Appendix D to the prospectus, incorporated by reference to the Registrant's final prospectus filed pursuant to Rule 424(b)(3), filed on November 27, 2017, and incorporated herein by reference).

~~4.4~~						Third Amended and Restated Distribution Reinvestment Plan (included as Appendix E to the prospectus attached to Post-Effective Amendment No. 11 to the Registrant’s Registration Statement on Form S-11 (File No. 333-191706) filed on January 20, 2017, and incorporated herein by reference).

~~4.5~~						Fourth Amended and Restated Distribution Reinvestment Plan (included as Appendix A in the prospectus that is part of the Registrant's Registration Statement on Form S-3 (File No. 333-220940), filed on December 6, 2017, and incorporated herein by reference).

~~4.6~~						Form of Multi-Product Subscription Agreement (included as Appendix F to the prospectus, incorporated by reference to the Registrant's final prospectus filed pursuant to Rule 424(b)(3), filed on February 10, 2017 (File No. 333-191706)).

~~4.7~~						Description of Capital Stock Registered Under Section 12 of the Securities Exchange Act of 1934, as amended (included as Exhibit 4.7 to the Registrant's Annual Report on Form 10-K (File No. 000-55435) filed on March 27, 2020, and incorporated herein by reference).

~~Table of~~ ~~Contents~~




31.1*						Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*						Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**						Certification of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**						Certification of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*						XBRL Instance Document

101.SCH*						Inline XBRL Taxonomy Extension Schema Document

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*						Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).



*			Filed herewith.
**			Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		SILA REALTY TRUST, INC.
		(Registrant)

Date: ~~November 10, 2022~~August 7, 2023	By:	/s/ MICHAEL A. SETON
		Michael A. Seton
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November 10, 2022~~August 7, 2023	By:	/s/ KAY C. NEELY
		Kay C. Neely
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)


Derivatives in Cash Flow Hedging Relationships	Amount of Income (Loss) Recognized in Other Comprehensive Income on Derivatives		Location of Income (Loss) Reclassified From Accumulated Other Comprehensive Income (Loss) to Net Income	Amount of Income (Loss) Reclassified From Accumulated Other Comprehensive Income (Loss) to Net Income		Total Amount of Line Item in Condensed Consolidated Statements of Comprehensive Income
Three Months Ended September 30, 2022
Interest rate swaps - continuing operations	$	16,724	Interest and other expense, net	$	379	$	5,498

Three Months Ended September 30, 2021
Interest rate swaps - continuing operations	$	(253)	Interest and other expense, net	$	(1,952)	$	11,737
Interest rate swaps - discontinued operations	—		Income from discontinued operations	(542)		377,191
Total	$	(253)		$	(2,494)
Nine Months Ended September 30, 2022
Interest rate swaps - continuing operations	$	31,545	Interest and other expense, net	$	(2,912)	$	17,942


Nine Months Ended September 30, 2021
Interest rate swaps - continuing operations	$	2,555	Interest and other expense, net	$	(5,643)	$	30,035
Interest rate swaps - discontinued operations	(37)		Income from discontinued operations	(1,647)		401,444
Total	$	2,518		$	(7,290)


Offsetting of Derivative Liabilities
							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet		Net Amounts of Liabilities Presented in the Balance Sheet		Financial Instruments Collateral		Cash Collateral		Net Amount
September 30, 2022	$	—	$	—	$	—	$	—	$	—	$	—
December 31, 2021	$	5,618	$	—	$	5,618	$	(1,023)	$	—	$	4,595


Details about Accumulated Other Comprehensive Income (Loss) Components	Loss Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Net Income				Affected Line Items in the Condensed Consolidated Statements of Comprehensive Income
	Nine Months Ended September 30,
	2022		2021
Interest rate swap contracts - continuing operations	$	2,912	$	5,643		Interest and other expense, net
Interest rate swap contracts - discontinued operations	—		1,647			Income from discontinued operations
Interest rate swap contracts	$	2,912	$	7,290


	Nine Months Ended September 30,
	2022					2021
Distributions paid in cash - common stockholders	$	48,920				$	450,143	(1)
Distributions reinvested (shares issued)	18,594					21,750
Total distributions	$	67,514				$	471,893
Source of distributions:
Cash flows provided by operations	$	48,920	72	%	(2)	$	57,458		12	%	(2)
Offering proceeds from issuance of common stock pursuant to the DRIP	18,594		28	%	(2)	21,750			5	%	(2)
Proceeds from real estate disposals	—		—	%	(2)	392,685			83	%	(2)
Total sources	$	67,514	100	%		$	471,893		100	%