UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 10-Q

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

For the quarterly period ended March 31, ~~2023~~2024

☐ 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 001-39443



NETSTREIT Corp.

(Exact name of registrant as specified in its charter)

Maryland

84-3356606

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

2021 McKinney Avenue

Suite 1150

Dallas, Texas

75201

(Address of principal executive offices)

(Zip Code)

(972) 200-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, par value $0.01 per share

NTST

The New York Stock Exchange

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 (Section 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, 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 by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the issuer’s common stock, par value $0.01, outstanding as of April ~~24, 2023~~26, 2024 was ~~60,862,466.~~73,366,371.

NETSTREIT CORP. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023	4
	Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2426
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3538
Item 4.	Controls and Procedures	3538
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3640
Item 1A.	Risk Factors	3640
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3640
Item 3.	Defaults Upon Senior Securities	3640
Item 4.	Mine Safety Disclosures	3640
Item 5.	Other Information	3640
Item 6.	Exhibits	3741
	Signatures	3842

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

NETSTREIT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)


		March 31, 2023		December 31, 2022
	March 31, 2024						March 31, 2024	December 31, 2023
Assets	Assets
Real estate, at cost:	Real estate, at cost:
Real estate, at cost:
Real estate, at cost:
Land
Land
Land	Land	$	417,704	$	401,146
Buildings and improvements	Buildings and improvements	966,743		907,084
Total real estate, at cost	Total real estate, at cost	1,384,447		1,308,230
Less accumulated depreciation	Less accumulated depreciation	(72,682)		(62,526)
Property under development	Property under development	6,501		16,796
Real estate held for investment, net	Real estate held for investment, net	1,318,266		1,262,500
Assets held for sale	Assets held for sale	5,798		23,208
Mortgage loans receivable, net	Mortgage loans receivable, net	92,267		46,378
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	6,596		70,543
Lease intangible assets, net	Lease intangible assets, net	154,213		151,006
Other assets, net	Other assets, net	50,242		52,057
Total assets	Total assets	$	1,627,382	$	1,605,692
Liabilities and equity	Liabilities and equity
Liabilities:	Liabilities:
Liabilities:
Liabilities:
Term loans, net
Term loans, net
Term loans, net	Term loans, net	$	373,415	$	373,296
Revolving credit facility	Revolving credit facility	96,000		113,000
Mortgage note payable, net	Mortgage note payable, net	7,901		7,896
Lease intangible liabilities, net	Lease intangible liabilities, net	29,348		30,131
Liabilities related to assets held for sale	Liabilities related to assets held for sale	34		406
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	25,062		22,540
Total liabilities	Total liabilities	531,760		547,269
Commitments and contingencies
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)
Equity:	Equity:
Stockholders’ equity	Stockholders’ equity
Common stock, $0.01 par value, 400,000,000 shares authorized; 60,862,466 and 58,031,879 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		609		580
Stockholders’ equity
Stockholders’ equity
Common stock, $0.01 par value, 400,000,000 shares authorized; 73,328,411 and 73,207,080 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Common stock, $0.01 par value, 400,000,000 shares authorized; 73,328,411 and 73,207,080 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Common stock, $0.01 par value, 400,000,000 shares authorized; 73,328,411 and 73,207,080 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital	1,145,160		1,091,514
Distributions in excess of retained earnings	Distributions in excess of retained earnings	(77,237)		(66,937)
Accumulated other comprehensive income	Accumulated other comprehensive income	17,743		23,673
Total stockholders’ equity	Total stockholders’ equity	1,086,275		1,048,830
Noncontrolling interests	Noncontrolling interests	9,347		9,593
Total equity	Total equity	1,095,622		1,058,423
Total liabilities and equity	Total liabilities and equity	$	1,627,382	$	1,605,692

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

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NETSTREIT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share data)

(Unaudited)


		Three Months Ended March 31,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Revenues	Revenues
Rental revenue (including reimbursable)
Rental revenue (including reimbursable)
Rental revenue (including reimbursable)	Rental revenue (including reimbursable)	$	28,474	$	20,921
Interest income on loans receivable	Interest income on loans receivable	978		411
Total revenues	Total revenues	29,452		21,332
Operating expenses	Operating expenses
Property	Property	3,936		2,932
Property
Property
General and administrative	General and administrative	4,909		4,190
Depreciation and amortization	Depreciation and amortization	14,949		10,980
Provisions for impairment
Transaction costs	Transaction costs	109		165
Total operating expenses	Total operating expenses	23,903		18,267
Other income (expense)
Other (expense) income
Interest expense, net
Interest expense, net
Interest expense, net	Interest expense, net	(3,944)		(1,169)
Gain (loss) on sales of real estate, net	Gain (loss) on sales of real estate, net	(319)		161
Other income		152		—
Total other expense, net		(4,111)		(1,008)
Other (expense) income, net
Total other (expense) income, net
Net income before income taxes	Net income before income taxes	1,438		2,057
Income tax benefit (expense)		43		(91)
Income tax (expense) benefit
Net income	Net income	1,481		1,966
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	9		24
Net income attributable to common stockholders	Net income attributable to common stockholders	$	1,472	$	1,942
Amounts available to common stockholders per common share:	Amounts available to common stockholders per common share:
Basic	Basic	$	0.03	$	0.04
Basic
Basic
Diluted	Diluted	$	0.03	$	0.04
Weighted average common shares:	Weighted average common shares:
Basic	Basic	58,155,738		44,415,807
Basic
Basic
Diluted	Diluted	58,883,386		45,600,810
Other comprehensive income:	Other comprehensive income:
Net income
Net income
Net income	Net income	$	1,481	$	1,966
Change in value on derivatives, net	Change in value on derivatives, net	(5,979)		6,211
Total comprehensive income (loss)	Total comprehensive income (loss)	(4,498)		8,177
Comprehensive income (loss) attributable to noncontrolling interests	Comprehensive income (loss) attributable to noncontrolling interests	(40)		100
Comprehensive income (loss) attributable to common stockholders	Comprehensive income (loss) attributable to common stockholders	$	(4,458)	$	8,077

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

Table of Contents

NETSTREIT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)


		Common stock
			Shares
			Shares
			Shares															Par Value	Additional Paid-in Capital	Distributions in Excess of Retained Earnings	Accumulated Other Comprehensive Income	Total Stockholders’ Equity	Noncontrolling Interests	Total Equity
Balance at December 31, 2023
			Common stock
			Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2022			58,031,879	$	580	$	1,091,514	$	(66,937)	$	23,673	$	1,048,830	$	9,593	$	1,058,423
Issuance of common stock in public offerings, net of issuance costs			2,759,481	28		52,875		—		—		52,903		—		52,903
OP Units converted to common stock
OP Units converted to common stock
OP Units converted to common stock	OP Units converted to common stock		5,694	—		105		—		—		105		(105)		—
Dividends and distributions declared on common stock and OP units	Dividends and distributions declared on common stock and OP units		—	—		—		(11,650)		—		(11,650)		(101)		(11,751)
Dividends declared on restricted stock, net	Dividends declared on restricted stock, net		—	—		—		(122)		—		(122)		—		(122)
Vesting of restricted stock units	Vesting of restricted stock units		83,428	1		(1)		—		—		—		—		—
Repurchase of common stock for tax withholding obligations	Repurchase of common stock for tax withholding obligations		(18,016)	—		(360)		—		—		(360)		—		(360)
Stock-based compensation, net	Stock-based compensation, net		—	—		1,027		—				1,027		—		1,027
Other comprehensive loss			—	—		—		—		(5,930)		(5,930)		(49)		(5,979)
Other comprehensive income
Net income	Net income		—	—		—		1,472		—		1,472		9		1,481
Balance at March 31, 2023			60,862,466	$	609	$	1,145,160	$	(77,237)	$	17,743	$	1,086,275	$	9,347	$	1,095,622
Balance at March 31, 2024


			Common stock
			Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2021			44,223,050	$	442	$	809,724	$	(35,119)	$	4,123	$	779,170	$	10,645	$	789,815
		Common stock
			Shares
			Shares
			Shares															Par Value	Additional Paid-in Capital	Distributions in Excess of Retained Earnings	Accumulated Other Comprehensive Income	Total Stockholders’ Equity	Noncontrolling Interests	Total Equity
Balance at December 31, 2022
Issuance of common stock in public offerings, net of issuance costs	Issuance of common stock in public offerings, net of issuance costs		3,604,736	36		75,461		—		—		75,497		—		75,497
OP Units converted to common stock	OP Units converted to common stock		25,629	—		484		—		—		484		(484)		—
Dividends and distributions declared on common stock and OP units	Dividends and distributions declared on common stock and OP units		—	—		—		(8,888)		—		(8,888)		(109)		(8,997)
Dividends declared on restricted stock, net	Dividends declared on restricted stock, net		—	—		—		(128)		—		(128)		—		(128)
Vesting of restricted stock units	Vesting of restricted stock units		85,224	1		(1)		—		—		—		—		—
Repurchase of common stock for tax withholding obligations	Repurchase of common stock for tax withholding obligations		(16,651)	—		(362)		—		—		(362)		—		(362)
Stock-based compensation, net	Stock-based compensation, net		—	—		1,045		—				1,045		—		1,045
Other comprehensive income			—	—		—		—		6,135		6,135		76		6,211
Other comprehensive loss
Net income	Net income		—	—		—		1,942		—		1,942		24		1,966
Balance at March 31, 2022			47,921,988	$	479	$	886,351	$	(42,193)	$	10,258	$	854,895	$	10,152	$	865,047
Balance at March 31, 2023

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

Table of Contents

NETSTREIT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Three Months Ended March 31,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Cash flows from operating activities	Cash flows from operating activities
Net income	Net income	$	1,481	$	1,966
Net income
Net income
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	14,949		10,980
Amortization of deferred financing costs	Amortization of deferred financing costs	308		157
Amortization of above/below-market assumed debt	Amortization of above/below-market assumed debt	29		—
Noncash revenue adjustments	Noncash revenue adjustments	(509)		(807)
Amortization of deferred gains on interest rate swaps
Stock-based compensation expense	Stock-based compensation expense	1,027		1,045
(Gain) loss on sales of real estate, net	(Gain) loss on sales of real estate, net	319		(161)
Gain on involuntary conversion of buildings and improvements		(12)		—
Provisions for impairment
Loss (gain) on involuntary conversion of buildings and improvements
Changes in assets and liabilities, net of assets acquired and liabilities assumed:	Changes in assets and liabilities, net of assets acquired and liabilities assumed:
Other assets, net
Other assets, net
Other assets, net	Other assets, net	(1,845)		(1,484)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	(441)		(2,742)
Lease incentive payments	Lease incentive payments	(500)		—
Net cash provided by operating activities	Net cash provided by operating activities	14,806		8,954
Cash flows from investing activities	Cash flows from investing activities
Acquisitions of real estate	Acquisitions of real estate	(67,717)		(89,973)
Acquisitions of real estate
Acquisitions of real estate
Real estate development and improvements	Real estate development and improvements	(2,480)		(4,378)
Investment in mortgage loans receivable	Investment in mortgage loans receivable	(45,917)		(40,426)
Principal collections on mortgage loans receivable
Earnest money deposits	Earnest money deposits	(1,773)		(630)
Purchase of computer equipment and other corporate assets	Purchase of computer equipment and other corporate assets	—		(595)
Proceeds from sale of real estate	Proceeds from sale of real estate	15,463		2,294
Proceeds from the settlement of property-related insurance claims	Proceeds from the settlement of property-related insurance claims	12		—
Net cash used in investing activities	Net cash used in investing activities	(102,412)		(133,708)
Cash flows from financing activities	Cash flows from financing activities
Issuance of common stock in public offerings, net	Issuance of common stock in public offerings, net	52,903		75,497
Issuance of common stock in public offerings, net
Issuance of common stock in public offerings, net
Payment of common stock dividends	Payment of common stock dividends	(11,650)		(8,888)
Payment of OP unit distributions	Payment of OP unit distributions	(101)		(109)
Payment of restricted stock dividends	Payment of restricted stock dividends	(92)		(106)
Principal payments on mortgages payable	Principal payments on mortgages payable	(26)		—
Proceeds under property development incentives		—		375

Proceeds under revolving credit facilities
Proceeds under revolving credit facilities
Proceeds under revolving credit facilities	Proceeds under revolving credit facilities	99,000		128,000
Repayments under revolving credit facilities	Repayments under revolving credit facilities	(116,000)		(72,000)
Proceeds from term loans
Repurchase of common stock for tax withholding obligations	Repurchase of common stock for tax withholding obligations	(360)		(363)
Deferred offering costs	Deferred offering costs	(15)		(568)
Net cash provided by financing activities	Net cash provided by financing activities	23,659		121,838
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(63,947)		(2,916)
Cash, cash equivalents and restricted cash at beginning of the period	Cash, cash equivalents and restricted cash at beginning of the period	70,543		7,603
Cash, cash equivalents and restricted cash at end of the period	Cash, cash equivalents and restricted cash at end of the period	$	6,596	$	4,687

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:
Supplemental disclosures of cash flow information:
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid for interest
Cash paid for interest	Cash paid for interest	$	3,641	$	1,108
Supplemental disclosures of non-cash investing and financing activities:	Supplemental disclosures of non-cash investing and financing activities:
Dividends declared and unpaid on restricted stock		$	122	$	128
Dividends declared and unpaid on restricted stock, net
Dividends declared and unpaid on restricted stock, net
Dividends declared and unpaid on restricted stock, net
Deferred offering costs included in accounts payable, accrued expenses and other liabilities
Cash flow hedge change in fair value	Cash flow hedge change in fair value	$	(5,979)	$	6,211
Accrued capital expenditures and real estate development and improvement costs	Accrued capital expenditures and real estate development and improvement costs	$	2,516	$	1,418

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

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NETSTREIT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization and Description of Business

NETSTREIT Corp. (the “Company”) was incorporated on October 11, 2019 as a Maryland corporation and commenced operations on December 23, 2019. The Company conducts its operations through NETSTREIT, L.P., a Delaware limited partnership (the “Operating Partnership”). NETSTREIT GP, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, is the sole general partner of the Operating Partnership.

The Company elected to be treated and to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. Additionally, the Operating Partnership formed NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), which together with the Company jointly elected to be treated as a taxable REIT subsidiary under Section 856(a) of the Internal Revenue Code of 1986, as amended, (the “Code”) for U.S. federal income tax purposes.

The Company is structured as an umbrella partnership real estate investment trust (commonly referred to as an “UPREIT”) and is an internally managed real estate company that acquires, owns, invests in and manages a diversified portfolio of single-tenant, retail commercial real estate leased on a long-term basis to high credit quality tenants across the United States. ~~The Company also invests in property developments and mortgage loans secured by real estate.~~ As of March 31, ~~2023,~~2024, the Company owned or had investments in ~~488~~628 properties, located in 45 states, excluding ~~four~~16 property developments where rent has yet to commence.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements include the accounts of the Company and subsidiaries in which the Company has a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation and the Company’s net income is reduced by the portion of net income attributable to noncontrolling interests.

Interim Unaudited Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto on the Annual Report on Form 10-K as of and for the year ended December 31, ~~2022,~~2023, which provide a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The results of operations for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023 are not necessarily indicative of the results for the full year.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant assumptions and estimates relate to the useful lives of real estate assets, lease accounting, real estate impairment assessments, and allocation of fair value of purchase consideration. These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances. The Company evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known. Actual results could differ from those estimates.

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Impairment of Long-Lived Assets

Fair value measurement of an asset group occurs when events or changes in circumstances related to an asset indicate that the carrying amount of the asset is no longer recoverable. An example of an event or changed circumstance is a reduction in the expected holding period of a property. If indicators are present, the Company will prepare a projection of the undiscounted future cash flows of the property, excluding interest charges, and determine if the carrying amount of the asset group is recoverable. When a carrying amount is not recoverable, an impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair market value. The Company estimates fair value using data such as operating income, estimated capitalization rates or multiples, leasing prospects, local market information, and discount rates, and with regard to assets held for sale, based on the estimated or negotiated selling price, less estimated costs of disposal. Based on these unobservable inputs, the Company determined that its valuations of impaired real estate and intangible assets fall within Level 2 and Level 3 of the fair value hierarchy under ASC Topic 820.

The following table summarizes the provision for impairment during the periods indicated below (in thousands):


	Three Months Ended March 31,
	2024		2023
Total provision for impairment	$	3,662	$	—
Number of properties: (1)
Classified as held for sale	4		—
Disposed within the period	2		—

(1) Includes the number of properties that were either (i) impaired during the period on the held for sale classification date and remained as held for sale as of period-end or (ii) impaired and disposed of during the respective period. Excludes properties that did not have impairment recorded during the period. Of the total provision for impairment during the three months ended March 31, 2024, the Company recorded $0.3 million of additional impairment expense on two properties that were classified as held for sale in prior periods, and $2.2 million of impairment expense on four properties held for investment.

Cash, Cash Equivalents and Restricted Cash

The Company considers all cash balances, money market accounts and highly liquid investments with original maturities of three months or less to be cash and cash equivalents. Restricted cash includes cash restricted for property tenant improvements and cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code. Restricted cash is included in cash, cash equivalents, and restricted cash in the condensed consolidated balance sheets. The Company had no$0.7 million restricted cash as of March 31, ~~2023,~~2024, and ~~$4.7~~$11.5 million of restricted cash as of December 31, ~~2022.~~2023.

The Company’s bank balances as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 included certain amounts over the Federal Deposit Insurance Corporation limits.

Fair Value Measurement

~~Companies~~Fair value measurements are utilized in the accounting of the Company’s assets acquired and liabilities assumed in an asset acquisition and also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy described below prioritizes inputs to the valuation techniques used in measuring the fair value of assets and liabilities. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs to be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs.

The Company uses the following inputs in its fair value measurements:

– Level 2 and Level 3 inputs for its debt and derivative financial instrument fair value disclosures. See “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments,” respectively; and

– Level 2 and Level 3 inputs when assessing the fair value of assets and liabilities in connection with real estate acquisitions and impairment. See “Note 4 - Real Estate Investments.”

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Additionally, companies are required to disclose the estimated fair values of all financial instruments, even if they are not carried at their fair value. The fair values of financial instruments are estimates based on market conditions and perceived risks as of March 31, ~~2023~~2024 and December 31, ~~2022.~~2023. These estimates require management’s ~~judgement~~judgment and may not be indicative of the future fair values of the assets and liabilities.

The fair value of the Company’s cash, cash equivalents and restricted cash (including money market accounts), other assets and accounts payable, accrued expenses and other liabilities approximate their carrying value because of the short-term nature of these instruments. Additionally, the Company believes the following financial instruments have carrying values that approximate their fair values as of March 31, ~~2023:~~2024:

•Borrowings under the Company’s ~~New~~ Revolver (as defined in “Note 6 - Debt”) approximate fair value based on their nature, terms and variable interest rates.

•Carrying values of the Company’s ~~fixed rate~~ mortgage loans receivable approximate fair values based on a number of factors, including either their short-term nature, the availability of market quotes for comparable instruments, and a discounted cash flow analysis using estimates of the amount and timing of future cash flows, market rates, and credit spreads.

•Carrying value of the Company’s mortgage note payable approximates fair value based on a discounted cash flow analysis using estimates of the amount and timing of future cash flows, market rates, and credit spreads.

Provisions for impairment recognized during the three months ended March 31, 2024 partially related to assets held for sale where impairment was determined based on the estimated or negotiated selling price, less costs of disposal, compared to the carrying value of the property. Of the total provision for impairment during the three months ended March 31, 2024, the Company also recorded $2.2 million of impairment expense on four properties held for investment. These properties were accounted for at fair value on a nonrecurring basis using a cash flow model (Level 3 inputs) with adjusted carrying values ranging from $0.6 million to $1.6 million. The Company estimated the fair value using capitalization rates ranging from 9.0% to 12.1% which it believes is reasonable based on current market rates. As of December 31, 2023, there were two real estate assets held for investment accounted for at fair value. Of these properties, one was accounted for at fair value on a nonrecurring basis using a cash flow model (Level 3 inputs) with an adjusted carrying value of $1.5 million.

The following table discloses estimated fair value information for the Company’s ~~2024~~2027 Term Loan, 2028 Term Loan, and ~~2028~~2029 Term Loan (each as defined in “Note 6 - Debt”) which is derived based primarily on unobservable market inputs such as interest rates and discounted cash flow analysis using estimates of the amount and timing of future cash flows, market rates and credit spreads (in thousands):

March 31, 2023 December 31, 2022
Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value
2024 Term Loan (1)
$ 174,591 $ 175,471 $ 174,532 $ 175,382
2028 Term Loan (1)
198,824 201,324 198,764 201,108


	March 31, 2024				December 31, 2023
	Carrying Value (1)		Estimated Fair Value		Carrying Value (1)		Estimated Fair Value
2027 Term Loan	$	174,155	$	172,770	$	174,037	$	175,641
2028 Term Loan	199,066		198,101		199,006		201,396
2029 Term Loan	248,279		247,002		148,869		150,666

(1) The carrying value of the debt instruments are net of unamortized debt issuance and discount costs.

Concentrations of Credit Risk

Financial instruments that potentially subject usthe Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company is exposed to credit risk with respect to cash held at various financial institutions, access to its credit facilities, amounts due under mortgage loans receivable, and amounts due or payable under derivative contracts. The credit risk exposure with regard to the Company’s cash, credit facilities, and derivative instruments is spread among a diversified group of investment grade financial institutions.

During the three months ended March 31, 2024, one tenant, Dollar General, accounted for 10.43% of total revenues. During the three months ended March 31, 2023, ~~and 2022,~~ there were no tenants or borrowers with rental revenue or interest income on loans receivable ~~respectively,~~ that exceeded 10% of total ~~revenues.~~rental revenue.

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Segment Reporting

ASC Topic 280, Segment Reporting, establishes standards for the manner in which companies report information about operating segments. Substantially all of the Company’s investments, at acquisition, are comprised of real estate owned that is leased to tenants on a long-term basis or real estate that secures the Company's investment in mortgage loans receivable. The Company allocates resources and assesses operating performance based on individual investment and property needs. Therefore, the Company aggregates these investments for reporting purposes and operates in one reportable segment.

Recent Accounting Pronouncements Issued But Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosures by requiring disclosure of incremental segment information on an annual and interim basis such as, annual and interim disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, interim disclosure of a reportable segment’s profit or loss and assets, and the requirement that a public entity that has a single reportable segment provide all the disclosures required by ASU 2023-07 and all existing segment disclosures in Topic 280. The amendments in ASU 2023-07 do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The disclosures are applied retrospectively to all periods presented and early adoption is permitted. The Company has one reportable segment and continues to evaluate additional disclosures that may be required for entities with a single reportable segment.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires annual disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold within the rate reconciliation. In addition, the amendments require annual disclosure of income taxes paid disaggregated by federal, state and foreign jurisdictions as well as individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis, however early adoption and retrospective application is permitted. The Company continues to evaluate the potential impact of the guidance and potential additional disclosures required.

Note 3 – Leases

Tenant Leases

The Company acquires, owns and manages commercial single-tenant lease properties, with the majority being long-term triple-net leases where the tenant is generally responsible for all improvements and contractually obligated to pay all operating costs (such as real estate taxes, utilities and repairs and maintenance costs). As of March 31, ~~2023,~~2024, exclusive of mortgage loans receivable, the Company’s weighted average remaining lease term was ~~9.4~~9.2 years.

The Company’s property leases have been classified as operating leases and some have scheduled rent increases throughout the lease term. The Company’s leases typically provide the tenant one or more multi-year renewal options to extend their leases, subject to generally the same terms and conditions, including rent increases, consistent with the initial lease term.

All lease-related income is reported as a single line item, rental revenue (including reimbursable), in the condensed consolidated statements of operations and comprehensive income (loss) and is presented net of any reserves, write-offs, or recoveries for uncollectible amounts. ~~There were no material reserves for uncollectible amounts during the three months ended March 31, 2023 and 2022.~~

Fixed lease income includes stated amounts per the lease contract, which include base rent, fixed common area maintenance charges, and straight-line lease adjustments.

Variable lease income primarily includes recoveries from tenants, which represent amounts that tenants are contractually obligated to reimburse the Company for, specific to their portion of actual recoverable costs incurred. Variable lease income also includes percentage rent, which represents amounts billable to tenants based on their actual sales volume in excess of levels specified in the lease contract.

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The following table provides a disaggregation of lease income recognized under ASC 842 (in thousands):


		Three Months Ended March 31,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Rental revenue	Rental revenue
Fixed lease income (1)
Fixed lease income (1)
Fixed lease income (1)	Fixed lease income (1)	$	24,723	$	18,067
Variable lease income (2)	Variable lease income (2)	3,538		2,689
Other rental revenue:	Other rental revenue:
Above/below market lease amortization, net	Above/below market lease amortization, net	412		283
Above/below market lease amortization, net
Above/below market lease amortization, net
Lease incentives	Lease incentives	(199)		(118)
Rental revenue (including reimbursable)	Rental revenue (including reimbursable)	$	28,474	$	20,921

(1) Fixed lease income includes contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term.

(2) Variable lease income primarily includes tenant reimbursements for real estate taxes, insurance, common area maintenance, and lease termination fees, and the write-off of uncollectible amounts. There were ~~immaterial~~no material reserves, write-offs, or recoveries of uncollectible amounts during the three months ended March 31, ~~2023 with no write-offs during the three months ended~~2024 and March 31, ~~2022.~~2023.

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Scheduled future minimum base rental payments (excluding base rental payments from properties classified as held for sale and ~~straight line~~straight-line rent adjustments for all properties) due to be received under the remaining non-cancelable term of the operating leases in place as of March 31, ~~2023~~2024 are as follows (in thousands):


		Future Minimum Base Rental Receipts
Remainder of 2023		$	77,012
2024		101,804
	Future Minimum Base Rental Receipts			Future Minimum Base Rental Receipts
Remainder of 2024
2025	2025	101,209
2026	2026	98,383
2027	2027	94,112
2028
Thereafter	Thereafter	488,870
Total	Total	$	961,390

Future minimum rentals exclude amounts that may be received from tenants for reimbursements of operating costs and property taxes. In addition, the future minimum rents do not include any contingent rents based on a percentage of the lessees' gross sales or lease escalations based on future changes in the Consumer Price Index ~~(“CPI”)~~ or other stipulated reference rate.

~~Corporate Office Lease~~

In August 2021, the Company entered into a lease agreement on a new corporate office space, which commenced in October 2021 and is classified as an operating lease. The lease has a remaining noncancellable lease term of 9.3 years that expires on July 31, 2032, with a one-time option to terminate in 2029 exercisable by the Company.

~~The following table presents the lease expense components for the three months ended March 31, 2023 and 2022 (in thousands):~~

Three Months Ended March 31,
2023 2022
Operating lease cost $ 135 $ 135
Variable lease cost $ 67 $ 3

The Company recorded a right-of-use asset and operating lease liability of approximately $4.5 million at lease commencement. As of March 31, 2023, the right-of-use asset and operating lease liability was $4.1 million and $5.4 million, respectively. The right-of-use asset is included in other assets, net and the operating lease liability is included in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for the corporate office lease obligation as of March 31, 2023 (in thousands):

Future Minimum Lease Payments
Remainder of 2023 $ 412
2024 617
2025 636
2026 653
2027 670
Thereafter 3,311
Total lease payments 6,299
Less: amount representing interest (1)
(912)
Present value of operating lease liabilities $ 5,387

~~(1)~~Imputed interest was calculated using a discount rate of 3.25%. The discount rate is based on the estimated incremental borrowing rate, calculated as the treasury rate for the same period as the underlying lease term, plus a spread determined using factors including REIT industry performance.

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Note 4 – Real Estate Investments

As of March 31, ~~2023,~~2024, the Company owned or had investments in ~~488~~628 properties, excluding ~~four~~16 property developments where rent has yet to commence. The gross real estate investment portfolio, including properties under development, totaled approximately ~~$1.5~~$1.9 billion and consisted of the gross acquisition cost of land, buildings, improvements, ~~and~~ lease intangible assets and ~~liabilities.~~liabilities, and property development costs. The investment portfolio is geographically dispersed throughout 45 states with gross real estate investments in Illinois and Texas representing ~~8.6%~~9.4% and ~~8.0%~~8.8%, respectively, of the total gross real estate investment of the Company’s ~~entire~~investment portfolio.

Acquisitions

During the three months ended March 31, 2024, the Company acquired 28 properties for a total purchase price of $95.2 million, inclusive of $1.2 million of capitalized acquisition costs.

During the three months ended March 31, 2023, the Company acquired 20 properties for a total purchase price of $67.7 million, inclusive of $0.7 ~~million of capitalized acquisition costs.~~

~~During the three months ended March 31, 2022, the Company acquired 34 properties for a total purchase price of $90.0 million, inclusive of $1.2~~ million of capitalized acquisition costs.

The acquisitions were all accounted for as asset acquisitions. An allocation of the purchase price and acquisition costs paid for the completed acquisitions is as follows (in thousands):

Three Months Ended March 31,
2023 2022
Land $ 14,304 $ 14,654
Buildings 43,133 60,088
Site improvements 3,479 6,538
Tenant improvements 391 1,160
In-place lease intangible assets 6,410 8,872
Above-market lease intangible assets — 108
67,717 91,420
Liabilities assumed
Below-market lease intangible liabilities — (1,423)
Accounts payable, accrued expense and other liabilities — (24)
Purchase price (including acquisition costs) $ 67,717 $ 89,973

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	Three Months Ended March 31,
	2024		2023
Land	$	16,608	$	14,304
Buildings	59,379		43,133
Site improvements	6,428		3,479
Tenant improvements	1,445		391
In-place lease intangible assets	11,293		6,410





Purchase price (including acquisition costs)	$	95,153	$	67,717

Development

As of March 31, ~~2023,~~2024, the Company had ~~three~~13 property developments under ~~construction and one completed development where rent has yet to commence.~~construction. During the three months ended March 31, ~~2023,~~2024, the Company invested ~~$4.5~~$11.0 million in property ~~developments.~~developments, including the land acquisition of two new developments with a combined initial purchase price of $0.8 million. During ~~this period,~~the three months ended March 31, 2024, the Company completed development on ~~two~~seven projects and reclassified approximately ~~$14.8~~$18.4 million from property under development to land, ~~building,~~buildings and improvements, and other assets (leasing commissions) in the accompanying condensed consolidated balance sheets. Rent commenced for four of the seven completed developments in the first quarter of ~~2023.~~2024, while rent is expected to commence for the other three completed developments in the second quarter of 2024. The remaining ~~three~~13 developments ~~in progress~~ are expected to be substantially completed with rent commencing ~~in the third and fourth quarters of 2023 for two of the developments and the second quarter of 2024 for the remaining development.~~at various points throughout 2024. The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of March 31, ~~2023.~~2024.

During the three months ended March 31, ~~2022,~~2023, the Company invested ~~$5.0~~$4.5 million in property ~~developments, including the acquisition of one new build-to-suit project with an initial purchase price of $1.0 million.~~developments. During the three months ended March 31, ~~2022,~~2023, the Company completed development on ~~one project under development~~two projects and reclassified approximately ~~$4.7~~$14.8 million from property under development to land, ~~building,~~buildings and improvements in the accompanying condensed consolidated balance sheets. ~~Additionally, on January 1, 2022, rent~~Rent commenced ~~on a development that was previously~~for the completed developments in the ~~fourth~~first quarter of ~~2021.~~2023. The purchase price, including acquisitions costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of March 31, 2023.

Additionally, during ~~both~~ the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Company capitalized approximately $0.4 million and $0.1 million, respectively, of interest expense associated with properties under development.

Dispositions

~~Table~~During the three months ended March 31, 2024, the Company sold 12 properties for a total sales price, net of ~~Contents~~

~~Dispositions~~disposal costs, of $20.5 million, recognizing a net gain of $1.0 million.

During the three months ended March 31, 2023, the Company sold eight properties for a total sales price, net of disposal costs, of $15.5 million, recognizing a net loss of $0.3 million.

~~During the three months ended March 31, 2022, the Company sold one property for a total sales price, net~~

Table of ~~disposal costs, of $2.3 million, recognizing a gain of $0.2 million.~~Contents

Investment in Mortgage Loans Receivable

The Company’s mortgage loans receivable portfolio as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 is summarized below (in thousands):


Loan Type	Loan Type	Number of Secured Properties	Effective Interest Rate (3)	Stated Interest Rate	Maturity Date	March 31, 2023		December 31, 2022		Loan Type	Monthly Payment (1)	Number of Secured Properties	Effective Interest Rate (2)	Stated Interest Rate	Maturity Date	March 31, 2024	December 31, 2023
Mortgage (3) (4) (5)
Mortgage ~~(1)~~(4)	Mortgage ~~(1)~~(4)	1	5.69%	6.00%	7/26/2023	$	40,316	$	40,316
Mortgage (1)		2	5.83%	6.50%	6/30/2023	6,000		6,000
Mortgage		46	9.55%	9.55%	3/10/2026	41,940		—
Mortgage (4) (6)
Mortgage (3) (4) (6)
Mortgage ~~(2)~~	Mortgage ~~(2)~~	3	6.99%	6.89%	4/10/2026	4,132		—
Mortgage (3)
Mortgage (3) (4) (8)
Mortgage (3) (4)
Total	Total					92,388		46,316
Unamortized loan origination costs						34		62
Unamortized loan origination costs and fees, net
Unamortized discount	Unamortized discount					(155)		—
Total mortgage loans receivable, net	Total mortgage loans receivable, net					$	92,267	$	46,378

(1) I/O: Interest Only; P+I: Principal and Interest.

(2) Includes amortization of discount and loan origination costs, as applicable.

(3) The Company has the right, subject to certain terms and conditions, to ~~purchase~~acquire all or a portion of the underlying collateralized ~~property.~~properties.

~~(2)~~(4) ~~The stated interest rate is variable up to 15.0% and is calculated based on contractual rent for existing collateralized properties subject to the loan agreement.~~

~~(3)~~ ~~Includes amortization of discount and loan origination costs, as applicable.~~

~~All of the Company’s mortgage loans~~Loans require monthly payments of interest only with principal payments occurring as borrower disposes of underlying properties, limited to the Company’s allocated investment by property. Any remaining principal balance will be repaid at or before the maturity date.

(5) The $43.6 million mortgage note receivable was scheduled to mature on April 8, 2024, however, the Company executed an amendment in April 2024 that extended the maturity date to January 8, 2025.

(6) The stated interest rate is variable up to 15.0% and is calculated based on contractual rent for existing collateralized properties subject to the loan agreement.

(7) Payments of both interest and principal are due at maturity.

(8) The collateralized properties are in process developments with varying maturity dates dependent upon initial funding. Maturity dates range from December 5, 2024 to March 19, 2025.

Assets Held for Sale

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, there were ~~three and eleven~~23 properties ~~respectively,~~ classified as held for sale.

Provisions for Impairment

The Company ~~had no~~recorded provisions for impairment ~~during~~of $3.7 million on 12 properties for the three months ended March 31, ~~2023 and 2022.~~2024. The Company recorded no provisions for impairment for the three months ended March 31, 2023.

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Note 5 – Intangible Assets and Liabilities

Intangible assets and liabilities consisted of the following (in thousands):


		March 31, 2023						December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	March 31, 2024															March 31, 2024			December 31, 2023
	Gross Carrying Amount													Gross Carrying Amount	Accumulated Amortization		Net Carrying Amount	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Assets:	Assets:
In-place leases	In-place leases	$	162,784	$	(33,103)	$	129,681	$	154,876	$	(28,472)	$	126,404
In-place leases
In-place leases
Above-market leases	Above-market leases	20,091		(3,263)		16,828		20,091		(2,892)		17,199
Assembled workforce		873		(873)		—		873		(873)		—
Lease incentives	Lease incentives	8,521		(817)		7,704		8,021		(618)		7,403
Total intangible assets	Total intangible assets	$	192,269	$	(38,056)	$	154,213	$	183,861	$	(32,855)	$	151,006

Liabilities:	Liabilities:
Liabilities:
Liabilities:
Below-market leases	Below-market leases	$	35,596	$	(6,248)	$	29,348	$	35,596	$	(5,465)	$	30,131

The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of March 31, ~~2023~~2024 and as of December 31, ~~2022~~2023 by category were as follows:


		Years Remaining
		March 31, 2023	December 31, 2022
	Years Remaining							Years Remaining
	March 31, 2024					March 31, 2024			December 31, 2023
In-place leases	In-place leases	9.2	9.4	In-place leases	8.9		8.8
Above-market leases	Above-market leases	12.8	13.0	Above-market leases	12.0		12.2
Below-market leases	Below-market leases	11.4	11.6	Below-market leases	10.7		10.9
Lease incentives	Lease incentives	11.4	11.8	Lease incentives	10.8		11.1

The Company records amortization of in-place lease ~~assets and assembled workforce intangible~~ assets to amortization expense, and records net amortization of above-market and below-market lease intangibles as well as amortization of lease incentives to rental revenue. The following amounts in the accompanying condensed consolidated statements of operations and comprehensive income (loss) related to the amortization of intangible assets and liabilities for all property and ground leases (in thousands):


		Three Months Ended March 31,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Amortization:	Amortization:
Amortization of in-place leases	Amortization of in-place leases	$	4,670	$	3,555
Amortization of in-place leases
Amortization of in-place leases
Amortization of assembled workforce	Amortization of assembled workforce	—		73
		$	4,670	$	3,628
	$

Net adjustment to rental revenue:	Net adjustment to rental revenue:
Net adjustment to rental revenue:
Net adjustment to rental revenue:
Above-market lease assets
Above-market lease assets
Above-market lease assets	Above-market lease assets	(371)		(327)
Below-market lease liabilities	Below-market lease liabilities	783		610
Lease incentives	Lease incentives	(199)		(118)
		$	213	$	165
	$

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The following table provides the projected amortization of in-place lease assets to amortization expense and the net amortization of above-market, below-market, and lease incentive lease ~~intangibles~~intangible assets and liabilities to rental revenue as of March 31, ~~2023,~~2024, for the next five years and thereafter (in thousands):


		Remainder of 2023		2024		2025		2026		2027		Thereafter		Total
	Remainder of 2024															Remainder of 2024	2025	2026	2027	2028	Thereafter	Total
In-place leases	In-place leases	$	13,439	$	17,481	$	16,907	$	15,694	$	13,423	$	52,737	$	129,681

Above-market lease assets
Above-market lease assets
Above-market lease assets	Above-market lease assets	(1,113)		(1,480)		(1,479)		(1,478)		(1,450)		(9,828)		(16,828)
Below-market lease liabilities	Below-market lease liabilities	2,276		3,005		2,982		2,890		2,818		15,377		29,348
Lease incentives	Lease incentives	$	(556)	$	(741)	$	(741)	$	(741)	$	(691)	$	(4,234)	$	(7,704)
Net adjustment to rental revenue	Net adjustment to rental revenue	$	607	$	784	$	762	$	671	$	677	$	1,315	$	4,816

Note 6 – Debt

Debt consists of the following (in thousands):

Maturity Date

Interest Rate

March 31, 2023

December 31, 2022

Amounts Outstanding as of

Contractual Maturity Date

Fully Extended Maturity Date (1)

Interest Rate (2)

March 31, 2024

December 31, 2023

Debt:

2024 Term Loan (1)

December 23, 2024

1.37%

175,000

New Revolver (2)

August 11, 2026

5.94%

96,000

113,000

2028 Term Loan (3)

February 11, 2028

3.88%

200,000

2027 Term Loan (3)

2028 Term Loan (4)

2029 Term Loan (5)

Revolver (6)

Mortgage Note

November 1, 2027

4.53%

8,472

8,498

Total debt

479,472

496,498

Unamortized discount and debt issuance costs

(2,156)

(2,306)

Unamortized deferred financing costs, net (4)

(2,499)

(2,684)

Unamortized deferred financing costs, net (7)

Total debt, net

474,817

491,508

(1) Date represents the fully extended maturity date available to the Company, subject to certain conditions, under each related debt instrument.

~~(1)~~(2) Rate represents the effective interest rate as of March 31, 2024 and includes the effect of interest rate swap agreements, as described further in “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments.”

(3) Loan is a floating-rate loan which resets daily at daily SOFR plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.15% as of March 31, ~~2023.~~2024. The Company has entered into ~~four~~five interest rate swap agreements that effectively convert the floating rate to a fixed rate. The hedged fixed rate reset effective November 27, 2023 to 1.87% and will reset again effective December 23, 2024 to 2.40%.

~~(2)~~ The annual interest rate of the New Revolver assumes daily SOFR as of March 31, 2023 of 4.84% plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.00% as of March 31, 2023. The New Revolver may be extended up to one year.

~~(3)~~(4) Loan is a floating-rate loan which resets monthly at one-month term SOFR plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.15% as of March 31, ~~2023.~~2024. The Company has entered into three interest rate swap agreements that effectively convert the floating rate to a fixed rate.

~~(4)~~(5) Loan is a floating-rate loan which resets daily at daily SOFR plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.15% as of March 31, 2024. The Company has entered into four interest rate swap agreements that effectively convert the floating rate to a fixed rate.

(6) The annual interest rate of the Revolver assumes daily SOFR as of March 31, 2024 of 5.32% plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.00% as of March 31, 2024.

(7) The Company records deferred financing costs ~~for~~associated with the ~~New~~ Revolver in other assets, net on its condensed consolidated balance sheets. The Company reclassed the net amount of loan commitment fees associated with the 2029 Term Loan from other assets, net to debt issuance costs upon the $100.0 million draw under the 2029 Term Loan.

~~New~~ 2029 Term Loan

On July 3, 2023, the Company entered into an agreement (the “2029 Term Loan Agreement”) related to a $250.0 million sustainability-linked senior unsecured term loan (the “2029 Term Loan”) which may, subject to the terms of the 2029 Term Loan Agreement, be increased to an amount of up to $400.0 million at the Company’s request. The 2029 Term Loan contains a 12-month delayed draw feature and $150.0 million was drawn on July 3, 2023. The 2029 Term Loan is prepayable at the Company’s option in whole or in part without premium or penalty. The 2029 Term Loan matures on July 3, 2026, subject to extension options at the Company’s election on two occasions, by one year and, on one occasion, by six months (subject to certain conditions). Subject to the terms of the 2029 Term Loan Agreement, the Company drew an additional $100.0 million under the 2029 Term Loan on March 1, 2024.

The interest rate applicable to the 2029 Term Loan is determined by the Company’s Investment Grade Rating (as defined in the 2029 Term Loan Agreement). Prior to the date the Company obtains an Investment Grade Rating, interest shall accrue at either

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(i) SOFR, plus a margin ranging from 1.15% to 1.60% or (ii) Base Rate (as defined in the 2029 Term Loan Agreement), plus a margin ranging from 0.15% to 0.60%, in each case based on the Company’s consolidated total leverage ratio. After the date the Company obtains an Investment Grade Rating, interest shall accrue at either (i) SOFR, plus a margin ranging from 0.80% to 1.60% or (ii) Base Rate, plus a margin ranging from 0.00% to 0.60%, in each case based on the Company’s Investment Grade Rating.

The Company has hedged the entire $250.0 million of the 2029 Term Loan at an all-in fixed interest rate of 4.99%, through January 2029, which consists of a fixed SOFR rate of 3.74%, plus a credit spread adjustment of 0.10% and, at current leverage levels, a borrowing spread of 1.15%. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings.

The 2029 Term Loan also contains sustainability-linked pricing component pursuant to which the Company will receive interest rate reductions up to 0.025% based on its performance against a sustainability performance target focused on the portion of the Company’s annualized based rent attributable to tenants with commitments or quantifiable targets for reduced GHG emission in accordance with the standards of the Science Based Targets initiative (“SBTi”).

In connection with the 2029 Term Loan, the Company incurred $1.4 million of deferred financing costs. Additionally, the Company incurred $0.9 million of loan commitment fees associated with the 2029 Term Loan, which were capitalized to other assets, net on the condensed consolidated balance sheets and subsequently reclassed to debt issuance costs upon the $100.0 million draw under the 2029 Term Loan. Deferred financing costs are amortized over the term of the loan and are included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive income (loss).

Credit Facility

On August 11, 2022, the Company entered into a sustainability-linked senior unsecured credit facility consisting of (i) a $200.0 million senior unsecured term loan (the “2028 Term Loan”) and (ii) a $400.0 million senior unsecured revolving credit facility (the ~~“New Revolver”~~“Revolver”, and together with the 2028 Term Loan, the ~~“New Credit~~“Credit Facility”). The ~~New~~ Credit Facility may be increased by $400.0 million in the ~~aggregate.~~

~~The New Revolver refinanced and increased the available borrowing capacity under the Company��s $250.0 million senior unsecured revolving credit facility (the “Prior Revolver”) pursuant~~aggregate for total availability of up to ~~the credit agreement, dated as of December 23, 2019, governing such facility (the “Prior Credit Agreement”).~~

The Company used the proceeds from the borrowings made on the closing date to repay the Prior Revolver. Remaining and future borrowings under the New Revolver will be used by the Company for general corporate purposes of the Company and its subsidiaries, including acquisitions. The Company’s $175.0 million senior unsecured term loan (“2024 Term Loan”) under the Prior Credit Agreement, which matures in December 2024, remained outstanding upon the closing of the New Credit Facility.$800.0 million.

The 2028 Term Loan matures on February 11, ~~2028 and the New~~2028. The Revolver matures on August 11, 2026, subject to a one year extension ~~of up~~option at the Company’s election (subject to ~~one year.~~certain conditions) to August 11, 2027. Borrowings under the ~~New~~ Credit Facility are repayable at the Company’s option in whole or in part without premium or penalty. Borrowings under the ~~New~~ Revolver may be repaid and reborrowed from time to time prior to the maturity date.

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Prior to the date the Company obtains an ~~investment grade rating,~~Investment Grade Rating (as defined in the credit agreement governing the Credit Facility (the “Credit Agreement”)), interest rates are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.15% to 1.60%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the ~~credit agreement governing the New~~ Credit ~~Facility (the “New Credit Agreement”))~~Agreement), plus a margin ranging from 0.15% to 0.60%, based on the Company’s consolidated total leverage ratio and (B) in the case of the ~~New~~ Revolver either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the ~~New~~ Credit Agreement), plus a margin ranging from 0.00% to 0.45%, based on the Company’s consolidated total leverage ratio.

After the date the Company obtains an ~~investment grade rating,~~Investment Grade Rating, interest rates are based on the Company’s ~~investment grade rating,~~Investment Grade Rating, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 0.80% to 1.60%, based on the Company’s ~~investment grade rating,~~Investment Grade Rating, or (ii) a Base Rate (as defined in the ~~New~~ Credit Agreement), plus a margin ranging from 0.00% to 0.60%, based on the Company’s ~~investment grade rating~~Investment Grade Rating and (B) in the case of the ~~New~~ Revolver either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 0.725% to 1.40%, based on the Company’s ~~investment grade rating,~~Investment Grade Rating, or (ii) a Base Rate (as defined in the ~~New~~ Credit Agreement), plus a margin ranging from 0.00% to 0.40%, based on the Company’s ~~investment grade rating.~~Investment Grade Rating.

Additionally, the Company will incur a facility fee based on the total commitment amount of $400.0 million under the ~~New~~ Revolver. Prior to the date the Company obtains an ~~investment grade rating,~~Investment Grade Rating, the applicable facility fee will range from 0.15% to 0.30% based on the Company’s consolidated total leverage ratio. After the date the Company obtains an ~~investment grade rating,~~Investment Grade Rating, the applicable facility fee will range from 0.125% to 0.30% based on the Company’s ~~investment grade rating.~~Investment Grade Rating.

The ~~New~~ Credit Facility also contains a sustainability-linked pricing component pursuant to which the Company will receive interest rate reductions up to 0.025% based on its performance against a sustainability performance target focused on the portion of the

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Company’s annualized base rent attributable to tenants with commitments or quantifiable targets for reduced greenhouse gas emission in accordance with the standards of the ~~Science Based Targets initiative (“SBTi”).~~SBTi.

The Company has fully hedged the 2028 Term Loan with an all-in interest rate of 3.88%. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rate hedge is further described in “Note 7 – Derivative Financial Instruments.”

In connection with the ~~New~~ Credit Facility, the Company incurred approximately $3.8 million of deferred financing costs which were allocated between the ~~New~~ Revolver and 2028 Term Loan in the amounts of $2.4 million and $1.3 million, respectively. Additionally, $0.5 million of unamortized deferred financing costs associated with the ~~Prior Revolver~~Company’s previous revolving credit facility were reclassed to the ~~New~~ Revolver. Deferred financing costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net in the Company’s condensed consolidated statements of operations and comprehensive ~~income.~~income (loss).

~~Prior Credit Facility~~2027 Term Loan

In December 2019, the Company entered into an agreement governing a $175.0 million senior unsecured term loan that was scheduled to mature in December 2024 (the “2024 Term Loan”). On June 15, 2023, the ~~Prior Credit Agreement for a senior credit facility consisting of~~Company amended and restated the ~~Prior Revolver and~~agreement governing the 2024 Term Loan ~~(collectively,~~to provide for a $175.0 million senior unsecured term loan with a maturity date of January 15, 2026 that is subject to a one year extension option at the ~~“Prior Credit Facility”~~Company’s election (subject to certain conditions) (the “2027 Term Loan”). The 2027 Term Loan is repayable at the Company’s option in whole or in part without premium or penalty.

~~Effective September 28, 2020,~~The interest rate applicable to the 2027 Term Loan is determined by the Company’s Investment Grade Rating (as defined in the 2027 Term Loan). Prior to the date the Company ~~entered into~~obtains an Investment Grade Rating, interest ~~rate derivative contract~~shall accrue at either (i) SOFR, plus a margin ranging from 1.15% to ~~fix~~1.60% or (ii) Base Rate (as defined in the ~~base interest rate (one-month LIBOR)~~2027 Term Loan), plus a margin ranging from 0.15% to 0.60%, in each case based on the ~~2024~~Company’s consolidated total leverage ratio. After the date the Company obtains an Investment Grade Rating, interest shall accrue at either (i) SOFR, plus a margin ranging from 0.80% to 1.60% or (ii) Base Rate, plus a margin ranging from 0.00% to 0.60%, in each case based on the Company’s Investment Grade Rating.

Interest is payable monthly or at the end of the applicable interest period in arrears. The Company has fully hedged the 2027 Term Loan. The ~~total~~ interest rate ~~includes the fixed base interest rate of 0.21% plus a leverage-based margin of 1.15%. The interest rate hedge is further~~hedges are described in “Note 7 -– Derivative Financial Instruments.”

On January 27, 2023, the Company executed an amendment to the Prior Credit Agreement that replaced the interest rate benchmark from LIBOR to Secured Overnight Financing Rate (“SOFR”). Additionally, on January 30, 2023 and effective through the maturity date of December 31, 2024, the Company converted its four existing LIBOR swap agreements associated with 2024 Term Loan into four new SOFR swaps that convert the SOFR variable rate to a fixed rate of 0.12%. The Company has fully hedged the 2024 Term Loan with an all-in interest rate of 1.37%. The interest rate hedge is further described in “Note 7 - Derivative Financial Instruments.”

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Mortgage Note Payable

As of March 31, ~~2023,~~2024, the Company had total gross mortgage indebtedness of ~~$8.5~~$8.3 million, which was collateralized by related real estate and a tenant’s lease with an aggregate net book value of ~~$13.0~~$12.5 million. The Company incurred debt issuance costs of less than $0.1 million and recorded a debt discount of $0.6 million, both of which are recorded as a reduction of the principal balance in mortgage note payable, net in the Company’s condensed consolidated balance sheets. The mortgage note matures on November 1, 2027, but may be repaid in full beginning August 2027.

Debt Maturities

Payments on the ~~2024~~2027 Term Loan, 2028 Term Loan, and ~~2028~~2029 Term Loan are interest only through maturity. As of March 31, ~~2023,~~2024, scheduled debt maturities, including balloon payments, are as follows (in thousands):


			Scheduled Principal		Balloon Payment		Total
Remainder of 2023			$	117	$	—	$	117
2024			162		175,000		175,162
		Scheduled Principal							Scheduled Principal	Balloon Payment (1)	Total
Remainder of 2024
2025	2025		170		—		170
2026	2026		178		96,000		96,178
2027	2027		170		7,663		7,833
Thereafter			—		200,000		200,000
2028

Total	Total		$	797	$	478,663	$	479,460
Total
Total

(1)Does not assume the exercise of any extension options available to the Company.

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Interest Expense

The following table is a summary of the components of interest expense related to the Company’s borrowings (in thousands):


			Three Months Ended March 31,
			2023		2022
		Three Months Ended March 31,						Three Months Ended March 31,
		2024					2024		2023
Revolving credit facilities (1)	Revolving credit facilities (1)		$	1,150	$	478
Term loans (2)	Term loans (2)		2,499		590
Mortgage note payable	Mortgage note payable		93		—
Non-cash:	Non-cash:
Amortization of deferred financing costs	Amortization of deferred financing costs		185		101
Amortization of debt discount, net			151		56
Amortization of deferred financing costs
Amortization of deferred financing costs
Amortization of debt discount and debt issuance costs, net
Amortization of deferred gains on interest rate swaps
Capitalized interest	Capitalized interest		(134)		(56)
Total interest expense, net	Total interest expense, net		$	3,944	$	1,169

(1) Includes facility fees and non-utilization fees of approximately $0.2 million ~~and $0.1 million~~ for both the three months ended March 31, ~~2023~~2024 and ~~2022, respectively.~~2023.

(2) Includes the effects of interest rate ~~hedges.~~hedges in place as of such date.

Deferred financing, discount, and debt issuance costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net in the Company’s condensed consolidated statements of operations and comprehensive income (loss).

During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of ~~5.77%~~6.69% and ~~1.32%~~5.77%, respectively.

During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs and facility fees, of ~~5.86%~~6.54% and ~~1.39%~~5.86%, respectively.

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The estimated fair values of the Company’s term loans have been derived based on market observable inputs such as interest rates and discounted cash flow analysis using estimates of the amount and timing of future cash flows. These measurements are classified as Level 2 within the fair value hierarchy. Refer to “Note 2 - Summary of Significant Accounting Policies” for additional detail on fair value measurements.

The Company was in compliance with all of its debt covenants as of March 31, ~~2023~~2024 and expects to be in compliance for the twelve-month period ending December 31, ~~2023.~~2024.

Note 7 – Derivative Financial Instruments

The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the entire change in the fair value in Accumulated Other Comprehensive Income (“AOCI”) and the change is reflected as cash flow hedge changes in fair value in the supplemental disclosures of non-cash investing and financing activities in the condensed consolidated ~~statement~~statements of cash flows.

Effective ~~September 28, 2020~~July 3, 2023, such derivatives were initiated to hedge the variable cash flows associated with the 2029 Term Loan. The interest rate for the variable rate 2029 Term Loan is based on the hedged fixed rate of 3.74% compared to the variable 2029 Term Loan daily SOFR rate as of March 31, 2024 of 5.32%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15%. The maturity dates of the interest rate swaps coincide with the fully extended maturity date of the 2029 Term Loan.

Effective September 1, 2022, such derivatives were initiated to hedge the variable cash flows associated with the ~~2024 Term Loan and~~ 2028 Term Loan, respectively. Additionally, the Company converted its existing LIBOR swap agreements associated with the 2024 Term Loan into new SOFR swaps effective January 30, 2023. The interest rate for the variable rate 2024 Term Loan is based on the hedged fixed rate of 0.12% compared to the variable 2024 Term Loan SOFR rate as of March 31, 2023 of 4.80%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15%.Loan. The interest rate for the variable rate 2028 Term Loan is based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of March 31, ~~2023~~2024 of ~~4.67%~~5.33%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15%. The maturity dates of the interest rate swaps coincide with the ~~respective~~ maturity ~~dates~~date of the 2028 Term Loan.

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Effective January 27, 2023, the Company converted its four existing LIBOR swap agreements associated with the 2024 Term Loan into four new SOFR swaps that convert the SOFR variable rate to a fixed rate of 0.12% and on June 15, 2023, the Company amended and restated its 2024 Term Loan, providing for the 2027 Term Loan. In anticipation of the amendment and restatement of the 2024 Term Loan, additional derivatives, effective November 27, 2023 and ~~2028~~December 23, 2024 at hedged fixed rates of 1.87% and 2.40%, respectively, were initiated to hedge the variable cash flows associated with the 2027 Term ~~Loans.~~Loan through the fully extended maturity date. The interest rate on the variable 2027 Term Loan includes a daily SOFR rate as of March 31, 2024 of 5.31%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15%.

Amounts will subsequently be reclassified to earnings when the hedged item affects earnings. The Company does not enter into derivative contracts for speculative or trading purposes and does not have derivative netting arrangements.

The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company evaluates counterparty credit risk through monitoring the creditworthiness of counterparties, which includes review of debt ratings and financial performance. To mitigate credit risk, the Company enters into agreements with counterparties it considers credit-worthy, such as large financial institutions with favorable credit ratings.

The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments):

Number of Instruments

Notional

Number of Instruments

Notional

Interest Rate Derivatives

March 31, 2023

December 31, 2022

March 31, 2023

December 31, 2022

Interest Rate Derivatives

March 31, 2024

December 31, 2023

March 31, 2024

December 31, 2023

Interest rate swaps

375,000

The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 (in thousands):

Derivative Assets

Fair Value at

Derivative Assets

Fair Value as of March 31,

Derivatives Designated as Hedging Instruments:

Balance Sheet Location

March 31, 2023

December 31, 2022

Derivatives Designated as Hedging Instruments:

Balance Sheet Location

2024

2023

Interest rate swaps

Other assets, net

18,088

24,067


	Derivative Liabilities
		Fair Value as of March 31,
Derivatives Designated as Hedging Instruments:	Balance Sheet Location	2024		2023
Interest rate swaps	Accounts payable, accrued expenses and other liabilities	$	—	$	3,073

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The following table presents the effect of the Company's interest rate swaps on the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023 (in thousands):


			Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
		Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)														Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)					Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)

						Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)								Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives in Cash Flow Hedging Relationships	Derivatives in Cash Flow Hedging Relationships

Derivatives in Cash Flow Hedging Relationships

Derivatives in Cash Flow Hedging Relationships															2024				2023				2024	2023
Interest Rate Products	Interest Rate Products			$	(3,141)				$	6,188	Interest expense, net		$	2,837			$	(23)

The Company did not exclude any amounts from the assessment of hedge effectiveness for the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023. During the next twelve months, the Company estimates that an additional ~~$11.7~~$14.5 million will be reclassified as a decrease to interest expense.

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.

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To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, ~~2023,~~2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below presents the Company’s derivative assets measured at fair value on a recurring basis as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

Fair Value Hierarchy Level

Description

Level 1

Level 2

Level 3

Total Fair Value

March 31, 2023

Description

Level 1

Level 2

Level 3

Total Fair Value

March 31, 2024

Derivative assets

—

18,088

—

18,088

December 31, 2022

December 31, 2023

Derivative assets

—

24,067

—

24,067

Derivative assets

Derivative liabilities

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Note 8 – Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets

Other assets, net consist of the following (in thousands):


		March 31, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Accounts receivable, net	Accounts receivable, net	$	8,600	$	7,167
Deferred rent receivable	Deferred rent receivable	6,335		5,629
Prepaid assets	Prepaid assets	4,048		3,864
Earnest money deposits	Earnest money deposits	1,958		185
Fair value of interest rate swaps	Fair value of interest rate swaps	18,088		24,067
Deferred offering costs	Deferred offering costs	825		796
Deferred financing costs, net	Deferred financing costs, net	2,499		2,685
Right-of-use asset	Right-of-use asset	4,144		4,235
Leasehold improvements and other corporate assets, net	Leasehold improvements and other corporate assets, net	1,907		1,969
Interest receivable	Interest receivable	600		256
Other assets, net	Other assets, net	1,238		1,204
		$	50,242	$	52,057
	$

Accounts payable, accrued expenses and other liabilities consists of the following (in thousands):


		March 31, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Accrued expenses	Accrued expenses	$	6,815	$	5,745
Accrued bonus	Accrued bonus	352		1,305
Prepaid rent	Prepaid rent	4,038		2,937
Operating lease liability	Operating lease liability	5,387		5,464
Accrued interest	Accrued interest	2,020		1,782
Deferred rent	Deferred rent	2,134		1,756
Accounts payable	Accounts payable	2,050		1,394
Fair value of interest rate swaps
Other liabilities	Other liabilities	2,266		2,157
		$	25,062	$	22,540
	$

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Note 9 – Shareholders’ Equity, Partners’ Capital and Preferred Equity

ATM Program

On September 1, 2021, the Company entered into a $250.0 million at-the-market equity program (the ~~“ATM~~“2021 ATM Program”) through which, from time to time, it may sell shares of its common stock in registered transactions. The Company has issued shares of common stock in connection with the ATM Program for the periods presented as follows:

•. In March 2023, the Company issued 146,745 shares of common stock under the 2021 ATM Program at a weighted average price of $20.22 per share for net proceeds of approximately $2.9 million, net of sales commissions and offering costs of less than $0.1 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 146,745 Class A OP Units.

On October 25, 2023, the Company entered into a $300.0 million at-the-market equity program (the “2023 ATM Program”) through which, from time to time, it may sell shares of its common stock in registered transactions. Effective October 24, 2023, in connection with the establishment of the new at-the-market offering program, the 2021 ATM Program was terminated.

On March 28, 2024, the Company entered into a forward confirmation with respect to 107,500 shares of its common stock under the 2023 ATM Program, at a public offering price of $18.29 per share. 107,500 shares remain unsettled under the forward confirmation as of March 31, 2024. The Company may physically settle this forward confirmation (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than April 12, 2025.

The following table presents information about the 2023 ATM Program and the 2021 ATM Program (in thousands):


				Maximum Sales Authorization		Gross Sales through March 31, 2024
Program Name	Date Established	Date Terminated
2021 ATM Program (1)	September 2021	October 2023		$	250,000	$	150,391
2023 ATM Program (2)	October 2023	—	0	$	300,000	$	77,323

(1) Includes 1,516,289 shares of common stock partially physically settled at a price of $16.49 per share under the forward confirmation with respect to the 2021 ATM Program. 5,983,711 shares remain unsettled under the forward confirmation as of March 31, 2024 at the available net settlement price of $16.46.

(2) 107,500 shares remain unsettled under the forward confirmation as of March 31, 2024 at the available net settlement price of $18.12.

•In March 2022, the Company issued 163,774 shares of common stock at a weighted average price of $22.08 per share for net proceeds of approximately $3.5 million, net of sales commissions and offering costs of less than $0.1 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 163,774 Class A OP Units.

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~~August 2022~~January 2024 Follow-On Offering

~~On August 8, 2022,~~In January 2024, the Company completed a registered public offering of ~~9,000,000~~11,040,000 shares of its common stock at a public offering price of ~~$20.20~~$18.00 per ~~share, which excluded an over-allotment option to the underwriters to purchase up to an additional 1,350,000 shares, which was exercised in full on August 10, 2022.~~share. In connection with the offering, the Company entered into forward sale agreements for ~~10,350,000~~11,040,000 shares of its common stock. The Company did not initially receive any proceeds from the ~~sales~~sale of shares of common stock by the forward ~~purchasers upon registration of the offering.~~purchasers. The Company ~~may~~expects to physically settle the forward sale agreements (by ~~the~~ delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than ~~August 3, 2023.~~January 9, 2025. The Company may ~~at its election,~~also elect to cash settle or net share settle all or a portion of its obligations under a forward sale agreement if it concludes it is in its best interest to do ~~so over the prescribed offering period.~~so. If the Company elects to cash settle a forward sale agreement, it may not receive any proceeds and it may owe cash to the relevant forward counterparty in certain circumstances.

On March 30, 2023, the Company partially physically settled 2,612,736 shares of common stock at a price of $20.20 per share in accordance with the forward sale agreements. The Company received net proceeds from the settlement of $50.0 million, net of underwriting discounts and offering costs of $2.8 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 2,612,736 Class A OP Units. As of March 31, ~~2023, 4,763,320~~2024, 11,040,000 shares ~~remained~~remain unsettled under the ~~August 8, 2022~~January 2024 forward sale agreements.

~~January 2022 Follow-On Offering~~

On January 13, 2022, the Company completed a registered public offering of 10,350,000 shares of its common stock at a public offering price of $22.25 per share. In connection with the offering, the Company entered into forward sale agreements for 10,350,000 shares of its common stock. On March 30, 2022, the Company settled 3,440,962 shares of common stock at a price of $22.25 per share in accordance with the forward sale agreements. The Company received net proceeds from the settlement of $72.0 million, net of underwriting discounts and offering costs of $4.6 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 3,440,962 Class A OP Units. As of December 31, 2022, the Company fully physically settled the forward sale agreements (by the delivery of shares of common stock).

Surrendered Shares on Vested Stock Unit Awards

During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, portions of restricted stock unit awards (“RSUs”) granted to certain of the Company’s officers, directors, and employees vested. The vesting of these awards, granted pursuant to the NETSTREIT Corp. 2019 Omnibus Incentive Plan (the “Omnibus Incentive Plan”), resulted in federal and state income tax liabilities for the recipients. During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, as permitted by the terms of the Omnibus Incentive Plan and the award grants, certain executive officers and employees elected to surrender aan approximate total of 1862 thousand and 1718 thousand RSUs, respectively, ~~both~~ valued at approximately $1.1 million and $0.4 million, respectively, solely to pay the associated statutory tax withholding. The surrendered RSUs are included in the row entitled “repurchase of ~~shares of~~ common ~~stock” on~~stock for tax withholding obligations” in the condensed consolidated statements of cash flows.

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Dividends

During the three months ended March 31, 2024, the Company declared and paid the following common stock dividends (in thousands, except per share data):

Three Months Ended March 31, 2024

Declaration Date

Dividend Per Share

Record Date

Total Amount

Payment Date

February 13, 2024

0.205

March 15, 2024

15,031

March 28, 2024

During the three months ended March 31, 2023, the Company declared and paid the following common stock dividends (in thousands, except per share data):

Three Months Ended March 31, 2023
Declaration Date Dividend Per Share Record Date Total Amount Payment Date
February 21, 2023 $ 0.20 March 15, 2023 $ 11,650 March 30, 2023

Three Months Ended March 31, 2022
Declaration Date Dividend Per Share Record Date Total Amount Payment Date
February 22, 2022 $ 0.20 March 15, 2022 $ 8,888 March 30, 2022

Three Months Ended March 31, 2023

Declaration Date

Dividend Per Share

Record Date

Total Amount

Payment Date

February 21, 2023

0.200

March 15, 2023

11,650

March 30, 2023

The holders of OP Units are entitled to an equal distribution per each OP Unit held as of each record date. Accordingly, during each of the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Operating Partnership paid distributions of $0.1 million to holders of OP Units.

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Noncontrolling Interests

Noncontrolling interests represent noncontrolling holders of OP Units in the Operating Partnership. OP Units are convertible into common stock as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one-for-one basis. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, noncontrolling interests represented ~~0.8%~~0.6% and ~~0.9%~~0.7%, respectively, of OP Units. During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, OP Unit holders redeemed 7,119 and 5,694 and ~~25,629~~ OP units, respectively, into shares of common stock on a one-for-one basis.

Note 10 – Stock-Based Compensation

Under the Omnibus Incentive Plan, 2,094,976 shares of common stock are reserved for issuance. The Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted shares, RSUs, long-term incentive plan units, dividend equivalent rights, and other share-based, share-related or cash-based awards, including performance-based awards, to employees, directors and consultants, with each grant evidenced by an award agreement providing the terms of the award. The Omnibus Incentive Plan is administered by the Compensation Committee of the Board of Directors.

As of March 31, ~~2023,~~2024, the only stock-based compensation granted by the Company were ~~restricted stock units.~~RSUs. The total amount of stock-based compensation costs recognized in general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was $1.8 million and $1.0 ~~million~~ for ~~both~~ the three months ended March 31, 2024 and 2023, ~~and 2022.~~respectively. All awards of unvested restricted stock units are expected to fully vest over the next one to ~~four~~five years.

Performance-Based RSUs (effectiveness of Initial Public Offering)

Pursuant to the Omnibus Incentive Plan, the Company made performance-based RSUs to certain employees and non-employee directors. The performance condition required the Company to effectively file a ~~shelf~~resale registration statement. Up until the point of filing the registration statement, performance was not deemed probable and accordingly, no RSUs had the capability of vesting and no stock-based compensation expense was recorded. As a result of the Company's initial public offering in August 2020, the performance condition was satisfied and the Company recorded a stock-based compensation expense catch-up adjustment of $1.4 million. The vesting terms of these grants are specific to the individual grant and are expected to fully vest ~~in equal annual installments over~~during the ~~next two years.~~current year.

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The following table summarizes performance-based RSU activity for the period ended March 31, ~~2023:~~2024:


		Shares	Weighted Average Grant Date Fair Value per Share
Unvested RSU grants outstanding as of December 31, 2022		61,391	$	19.75
	Shares				Shares	Weighted Average Grant Date Fair Value per Share
Unvested RSU grants outstanding as of December 31, 2023
Granted during the period	Granted during the period	—	—
Forfeited during the period	Forfeited during the period	—	—
Vested during the period	Vested during the period	—	19.75
Unvested RSU grants outstanding as of March 31, 2023		61,391	$	19.75
Unvested RSU grants outstanding as of March 31, 2024

For the three months ended March 31, ~~2023,~~2024, the Company recognized less than $0.1 million in stock-based compensation expense associated with performance-based RSUs. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the remaining unamortized stock-based compensation expense totaled ~~$0.3~~$0.1 million and ~~$0.4~~$0.1 million, respectively, and as of March 31, ~~2023,~~2024, these awards are expected to be recognized over a remaining weighted average period of ~~1.4~~0.7 years. These units are subject to graded vesting and stock-based compensation expense is recognized ratably over the requisite service period for each vesting tranche in the award.

The grant date fair value of unvested RSUs is calculated as the per share price in the private offering that closed on December 23, 2019.

Service-Based RSUs

Pursuant to the Omnibus Incentive Plan, the Company has made service-based RSU grants to certain employees and non-employee directors. The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next one to ~~four~~five years.

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The following table summarizes service-based RSU activity for the period ended March 31, ~~2023:~~2024:


		Shares	Weighted Average Grant Date Fair Value per Share
Unvested RSU grants outstanding as of December 31, 2022		247,079	$	19.86
	Shares				Shares	Weighted Average Grant Date Fair Value per Share
Unvested RSU grants outstanding as of December 31, 2023
Granted during the period	Granted during the period	125,112	20.19
Forfeited during the period	Forfeited during the period	—	—
Vested during the period	Vested during the period	(83,428)	20.39
Unvested RSU grants outstanding as of March 31, 2023		288,763	$	19.85
Unvested RSU grants outstanding as of March 31, 2024

For the three months ended March 31, ~~2023,~~2024, the Company recognized ~~$0.6~~$1.0 million in stock-based compensation expense associated with service-based RSUs. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the remaining unamortized stock-based compensation expense totaled ~~$4.8~~$5.4 million and ~~$3.0~~$3.4 million, respectively, and as of March 31, ~~2023,~~2024, these awards are expected to be recognized over a remaining weighted average period of ~~2.3~~2.2 years. Stock-based compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award.

The grant date fair value of service-based unvested RSUs is calculated as the per share price determined in the initial public offering for awards granted in 2020, and as the per share price of the Company’s stock on the date of grant for those granted in years subsequent to 2020.

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Performance-Based RSUs (total shareholder return)

Pursuant to the Omnibus Incentive Plan, the Company has made market-based RSU grants to certain employees. These grants are subject to the participant’s continued service over a three year period with 40% of the award based on the Company’s total shareholder return (“TSR”) as compared to the TSR of identified peer companies and 60% of the award based on total absolute TSR over the cumulative ~~three-year~~three year period. The performance period of these grants runs through ~~March 8, 2024,~~ February 28, 2025, ~~and~~ February 28, 2026, and December 31, 2026. Grant date fair value of the market-based share awards was calculated using the Monte Carlo simulation model, which incorporated stock price volatility of the Company and each of the Company’s peers and other variables over the performance period. Significant inputs for the current period calculation were expected volatility of the Company of ~~29.0%~~24.9% and expected volatility of the Company's peers, ranging from ~~32.2%~~19.9% to ~~102.8%~~49.4%, with an average volatility of ~~46.7%~~27.1% and a risk-free interest rate of ~~4.46%~~4.41%. The fair value per share on the grant date specific to the target TSR relative to the Company’s peers was ~~$24.13~~$18.03 and the target absolute TSR was ~~$20.15~~$14.56 for a weighted average grant date fair value of ~~$21.57~~$15.77 per share. Stock-based compensation expense associated with unvested market-based share awards is recognized on a straight-line basis over the minimum required service period, which is three years.

The following table summarizes market-based RSU activity for the period ended March 31, ~~2023:~~2024:


		Shares	Weighted Average Grant Date Fair Value per Share
Unvested RSU grants outstanding as of December 31, 2022		177,350	$	19.83
	Shares				Shares	Weighted Average Grant Date Fair Value per Share
Unvested RSU grants outstanding as of December 31, 2023
Granted during the period	Granted during the period	81,751	21.57
Forfeited during the period	Forfeited during the period	—	—
Unvested RSU grants outstanding as of March 31, 2023		259,101	$	20.38
Vested during the period
Unvested RSU grants outstanding as of March 31, 2024

For the three months ended March 31, ~~2023,~~2024, the Company recognized ~~$0.3~~$0.6 million in stock-based compensation expense associated with market-based RSUs. As of March 31, ~~2023,~~2024, the remaining unamortized stock-based compensation expense totaled ~~$3.4~~$4.0 million and as of March 31, ~~2023,~~2024, these awards are expected to be recognized over a remaining weighted average period of ~~2.3~~2.4 years.

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Alignment of Interest Program

During March 2021, the Company adopted the Alignment of Interest Program (the “Program”), which allows employees to elect to receive a portion of their annual bonus in ~~unvested~~ RSUs in the first quarter of the following year, that ~~would then vest~~vests from one to four years based on the terms of the grant agreement. Stock-based compensation expense is recognized on a straight-line basis over ~~a four-year~~the total requisite service period ~~beginning~~for the entire award, which begins in the period ~~that~~ the bonus relates. The Program is deemed to be a liability-classified award (accounted for as an equity-classified award as the service date precedes the grant date and the award would otherwise be classified as equity on grant date), which will be fair-valued and accrued over the applicable service period. The total estimated fair value of the elections made for ~~2023~~2024 under the Program was approximately ~~$0.4~~$1.7 million. The award will be remeasured to fair value each reporting period until the unvested RSUs are granted. For the three months ended March 31, ~~2023,~~2024, the Company recognized approximately $0.1 million in stock-based compensation expense associated with these awards. Previous awards under the Program that have been granted are included within ~~service based~~service-based RSUs above.

Note 11 – Earnings Per Share

Net income per common share has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is similarly calculated except that the denominator is increased by using the treasury stock method to determine the potential dilutive effect of the Company’s outstanding unvested RSUs and unsettled shares under open forward equity contracts and using the if-converted method to determine the potential dilutive effect of the OP Units. The Company has noncontrolling interests in the form of OP Units which are convertible into common stock and represent potentially dilutive securities, as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one-for-one basis.

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The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net income per common share for the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023.


		Three Months Ended March 31,
	Three Months Ended March 31,								Three Months Ended March 31,
(In thousands, except share and per share data)	(In thousands, except share and per share data)	2023		2022		(In thousands, except share and per share data)	2024	2023
Numerator:	Numerator:
Net income
Net income
Net income	Net income	$	1,481	$	1,966
Net (income) attributable to noncontrolling interest	Net (income) attributable to noncontrolling interest	(9)		(24)
Net income attributable to common shares, basic	Net income attributable to common shares, basic	1,472		1,942
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	9		24
Net income attributable to common shares, diluted	Net income attributable to common shares, diluted	$	1,481	$	1,966

Denominator:	Denominator:
Denominator:
Denominator:
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, basic	Weighted average common shares outstanding, basic	58,155,738		44,415,807
Effect of dilutive shares for diluted net income per common share:	Effect of dilutive shares for diluted net income per common share:
OP Units
OP Units
OP Units	OP Units	511,402		550,673
Unvested RSUs	Unvested RSUs	175,859		294,272
Unsettled shares under open forward equity contracts	Unsettled shares under open forward equity contracts	40,387		340,058
Weighted average common shares outstanding, diluted	Weighted average common shares outstanding, diluted	58,883,386		45,600,810

Net income available to common stockholders per common share, basic	Net income available to common stockholders per common share, basic	$	0.03	$	0.04
Net income available to common stockholders per common share, basic
Net income available to common stockholders per common share, basic
Net income available to common stockholders per common share, diluted	Net income available to common stockholders per common share, diluted	$	0.03	$	0.04

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, there were ~~507,773~~472,179 and ~~513,467~~479,298 of OP Units outstanding, respectively.

Note 12 – Commitments and Contingencies

Litigation and Regulatory Matters

In the ordinary course of business, from time to time, the Company may be subject to litigation, claims and regulatory matters, none of which are currently outstanding, which the Company believes could have, individually or in the aggregate, a material adverse effect on its business, financial condition or results of operations, liquidity or cash flows.

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Environmental Matters

The Company is subject to environmental regulations related to the ownership of real estate. The cost of complying with the environmental regulations was not material to the Company’s results of operations for any of the periods presented. The Company is not aware of any environmental condition on any of its properties that is likely to have a material adverse effect on the condensed consolidated financial statements when the fair value of such liability can be reasonably estimated and is required to be recognized.

Commitments

In the normal course of business, the Company enters into various types of commitments to purchase real estate properties, or fund development ~~projects.~~projects, or extend funds under mortgage notes receivable. These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated ~~or receives an option~~ to purchase ~~the properties.~~or extend funding. As of March 31, ~~2023,~~2024, the Company had tenant improvement allowance commitments totaling approximately $4.1 million, ~~all of~~ which is expected to be funded over the next two years. Additionally, as of March 31, ~~2023,~~2024, the Company had commitments to fund ~~three~~13 properties under development totaling ~~$6.0~~$25.0 million, all of which is expected to be funded ~~over~~throughout the ~~next two years.~~remainder of 2024. The Company also had commitments to extend funds under mortgage notes receivable of $12.4 million as of March 31, 2024, which is expected to occur throughout 2024.

In August 2021, the Company entered into a lease agreement on a new corporate office space, which is classified as an operating lease. The Company began operating out of the new office in February 2022. The lease has ana remaining noncancellable term of ~~9.3~~8.3 years that expires on July 31, 2032 and is renewable at the Company’s option for two additional periods of 5five years. ~~Future minimum base rental payments under the lease are outlined in “Note - 3 - Leases.”~~ Annual rent expense, excluding operating expenses, is approximately $0.5 million during the initial term.

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As of March 31, ~~2023,~~2024, the Company did not have any other material commitments for re-leasing costs, recurring capital expenditures, non-recurring building improvements, or similar types of costs.

Note 13 – Subsequent Events

The Company has evaluated all events that occurred subsequent to March 31, ~~2023~~2024 through the date on which these condensed consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements.

Common Stock Dividend

On April ~~25, 2023,~~23, 2024, the Company's Board of Directors declared a cash dividend of ~~$0.20~~$0.205 per share for the second quarter of ~~2023.~~2024. The dividend will be paid on June ~~15, 2023~~14, 2024 to stockholders of record on June ~~1, 2023.~~3, 2024.

Revolver Activity

In April ~~2023,~~2024, the Company ~~borrowed $72.0~~paid $12.0 million, net of borrowings, on the 2026 ~~Revolver~~Revolver.

2023 ATM Program

In April 2024, the Company entered into forward sale agreements with respect to an aggregate 1,635,600 shares of its common stock under the 2023 ATM Program at a weighted average price of $17.63 per share. The Company did not initially receive any proceeds from the sale of shares of common stock by the forward purchaser. The Company expects to physically settle the forward sale agreements (by delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which ~~will be used for general corporate purposes, including~~shall occur no later than April 12, 2025. The Company may also elect to cash settle or net share settle all or a portion of its obligations under a forward sale agreement if it concludes it is in its best interest to do so. If the ~~acquisition of properties~~Company elects to cash settle a forward sale agreement, it may not receive any proceeds and it may owe cash to the relevant forward counterparty in certain circumstances. No physical settlement has occurred through the ~~Company’s pipeline.~~date on which these consolidated financial statements were issued.

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

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Quarterly Report on Form 10-Q may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” Part I, Item 1A. in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, filed with the Securities and Exchange Commission (the “SEC”) on February ~~23, 2023,~~14, 2024, and other reports filed with the Securities and Exchange Commission from time to time.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report on Form 10-Q. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified have been and will continue to be heightened as a result of the ongoing numerous adverse effects arising from the novel coronavirus and instability in macroeconomic conditions. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

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Business Overview

We are an internally managed real estate company that acquires, owns, invests in and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States. ~~We also invest in property developments and mortgage loans secured by real estate.~~ As of March 31, ~~2023,~~2024, we owned or had investments in ~~488~~628 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 8388 different tenants, across 2526 retail sectors in 45 states. This excludes ~~four~~16 property developments where rent has yet to commence. We focus on tenants in industries where a physical location is critical to the generation of sales and profits, with a focus on necessity goods and essential services in the retail sector, including home improvement, auto parts, drug stores and pharmacies, general retail, grocers, convenience stores, discount stores, and quick-service restaurants, all of which we refer to as defensive retail industries. As of March 31, ~~2023,~~2024, our investments generated ABR1 of ~~$108.9~~$140.3 million. Approximately ~~67%~~71% of our ABR is from investment grade2 credit rated tenants and an additional ~~15%~~13% of our ABR is derived from tenants with an investment grade profile3. Exclusive of mortgage loans receivable, our portfolio was 100% occupied with a weighted average remaining lease term (“WALT”) of ~~9.4~~9.2 years, which we believe provides us with a strong stable source of recurring cash flow from our portfolio.

January Follow-On Offering

In January 2024, we completed a registered public offering of 11,040,000 shares of our common stock at a public offering price of $18.00 per share. In connection with the offering, we entered into forward sale agreements for 11,040,000 shares of our common stock. We did not initially receive any proceeds from the sale of shares of common stock by the forward purchasers. We expect to physically settle the forward sale agreements (by delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than January 9, 2025. We may also elect to cash settle or net share settle all or a portion of our obligations under a forward sale agreement if we conclude it is in our best interest to do so. If we elect to cash settle a forward sale agreement, we may not receive any proceeds and we may owe cash to the relevant counterparty in certain circumstances. No physical settlement has occurred under the January 2024 forward sale agreements through March 31, 2024.

2023 ATM Program

On October 25, 2023, we entered into a $300.0 million at-the-market equity program (the “2023 ATM Program”) through which, from time to time, we may sell shares of our common stock in registered transactions. On March 28, 2024, we entered into a forward sale agreement for 107,500 shares of our common stock under the 2023 ATM Program at a public offering price of $18.29 per share. As of March 31, 2024, we had $222.7 million in remaining gross proceeds available for future issuances of shares of our common stock under the 2023 ATM Program, inclusive of unsettled shares under forward confirmation.

2029 Term Loan

On July 3, 2023, we entered into an agreement (the “2029 Term Loan Agreement”) related to a $250.0 million sustainability-linked senior unsecured term loan (the “2029 Term Loan”) which may, subject to the terms of the 2029 Term Loan Agreement, be increased to an amount of up to $400.0 million at our request. We drew an additional $100.0 million under the 2029 Term Loan on March 1, 2024.

We have hedged the entire $250.0 million of the 2029 Term Loan at an all-in fixed interest rate of 4.99%, through January 2029, which consists of the fixed rate SOFR swap of 3.74%, plus a credit spread adjustment of 0.10% and, at current leverage levels, a borrowing spread of 1.15%. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. See further discussion of our debt, interest rate, and interest rate hedges included in “Note 6 - Debt” in “Item 1 - Financial Statements (unaudited).”

(1) Annualized base rent (“ABR”) is annualized ~~contractual~~ base rent ~~in place~~ as of ~~the most recent quarter end~~March 31, 2024, for all leases that commenced, ~~as of that date,~~ and annualized cash interest on mortgage loans receivable in place as of that date.

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

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

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~~August 2022 Follow-On Offering~~

On August 8, 2022, we completed a registered public offering of 9,000,000 shares of our common stock at a public offering price of $20.20 per share, which excluded an over-allotment option to the underwriters to purchase up to an additional 1,350,000 shares, which was exercised in full on August 10, 2022. In connection with the offering, we entered into forward sale agreements for 10,350,000 shares of its common stock. We did not initially receive any proceeds from the sales of shares of common stock by the forward purchasers upon registration of the offering. We may physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than August 3, 2023. We may, at our election, cash settle or net share settle all or a portion of our obligations under a forward sale agreement if we concludes it is in its best interest to do so over the prescribed offering period. If we elect to cash settle a forward sale agreement, we may not receive any proceeds and may owe cash to the relevant forward counterparty in certain circumstances.

On March 30, 2023, we partially physically settled 2,612,736 shares of common stock at a price of $20.20 per share in accordance with the forward sale agreements. We received net proceeds from the settlement of $50.0 million, net of underwriting discounts and offering costs of $2.8 million. As of March 31, 2023, 4,763,320 shares remained unsettled under the August 8, 2022 forward sale agreements.

~~ATM Program~~

On September 1, 2021, we entered into a $250.0 million at-the-market equity program (the “ATM Program”) through which, from time to time, we may sell shares of our common stock in registered transactions. In March 2023, we issued 146,745 shares of common stock at a weighted average price of $20.22 per share for net proceeds of approximately $2.9 million, net of sales commissions and offering costs of less than $0.1 million. We have $151.2 million remaining gross proceeds available for future issuances of shares of our common stock under the ATM Program.

Results of Operations

Overall

We continued to grow our assets during the first quarter of ~~2023~~2024 through the acquisition of properties, property developments, and investment in mortgage loans receivable. This growth was financed through ~~the settlement of shares of common stock through~~a $100.0 million draw on our ~~forward sale agreements in an amount of $50.0 million, the issuance of common stock under the ATM Program in an amount of $2.9 million,~~2029 Term Loan, the usage of existing cash balances as a result of borrowings on our Revolver, the usage of existing restricted cash balances as a result of tax-free exchanges under Section 1031 of the Internal Revenue Code of 1986, and cash flows from operations during the three months ended March 31, ~~2023.~~2024.

Acquisitions

During the three months ended March 31, ~~2023,~~2024, we acquired 2028 properties for a total purchase price of ~~$67.7~~$95.2 million, inclusive of ~~$0.7~~$1.2 million of capitalized acquisition costs.

The acquisitions were all accounted for as asset acquisitions. These properties are located in 1216 states with a WALT of approximately ~~9.4~~10.6 years. The underwritten weighted-average capitalization rate on our year to date acquisitions was approximately ~~6.9%~~7.3%.

Development

As of March 31, ~~2023,~~2024, we had ~~three~~13 property developments under ~~construction and one completed development where rent has yet to commence.~~construction. During the three months ended March 31, ~~2023,~~2024, we invested ~~$4.5~~$11.0 million in property ~~developments.~~developments, including the land acquisition of two new developments with a combined initial purchase price of $0.8 million. During ~~this period,~~the three months ended March 31, 2024, we completed development on ~~two~~seven projects and reclassified approximately ~~$14.8~~$18.4 million from property under development to land, ~~building,~~buildings and improvements, and other assets (leasing commissions) in the accompanying condensed consolidated balance sheets. Rent commenced for four of the seven completed developments in the first quarter of ~~2023.~~2024, while rent is expected to commence for the other three completed developments in the second quarter of 2024. The remaining ~~three~~13 developments ~~in progress~~ are expected to be substantially completed with rent commencing ~~in the third and fourth quarters of 2023 for two of the developments and the second quarter of 2024 for the remaining development.~~at various points throughout 2024. The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of March 31, ~~2023.~~2024.

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Dispositions

During the three months ended March 31, ~~2023,~~2024, we sold ~~eight~~12 properties for a total sales price, net of disposal costs, of ~~$15.5~~$20.5 million, recognizing a net loss of ~~$0.3~~$1.0 million.

Investment in Mortgage Loans Receivable

OnDuring the three months ended March ~~3, 2023,~~31, 2024, we ~~executed a~~invested an additional $10.2 million in fully collateralized ~~$41.9 million loan~~mortgage loans receivable with a stated interest ~~rate~~rates of ~~9.55% and scheduled maturity date of March 10, 2026.~~10.25%. The ~~loan~~mortgage loans receivable isare collateralized by ~~46 properties~~real estate, primarily leased by ~~one~~ investment grade ~~tenant.~~credit rated tenants. The funds provided under the loans, in addition to loan origination costs, net of loan origination fees of less than $0.1 million, are included in mortgage loans receivable, net in the accompanying ~~condensed~~ consolidated balance sheets as of March 31, ~~2023.~~

On March 24, 2023, we executed a fully collateralized $4.1 million loan receivable with a stated interest rate of 6.89% and scheduled maturity date of April 10, 2026. The loan receivable is collateralized by three properties leased by one investment grade tenant. The funds provided under the loan are included2024. See “Note 4 - Real Estate Investments” in “Item 1 - Financial Statements (unaudited)” for further discussion on our mortgage loans receivable ~~net in the accompanying condensed consolidated balance sheets as of March 31, 2023.~~portfolio.

Economic and Financial Environment

The average inflation rate for the three months ended March 31, ~~2023~~2024 was 3.5% as compared to 5.0%. for the prior year period. While the Federal Reserve ~~has~~had been ~~continuing to raise~~raising interest rates in an effort to lower inflation throughout 2022 and the ~~pace at which it may continue~~first half of 2023, there continues to ~~do so is unclear~~be uncertainty entering into 2024 as to whether rates will be maintained or potentially cut, and the timing of potential cuts, leading to uncertainties in the financing market and a volatile economy.

In the commercial real estate market, property prices generally continue to fluctuate which may impact our investment capitalization rates and operating costs. Likewise, during certain periods, including the current market, the credit markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of capital. We continually monitor the commercial real estate and credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly.

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Three Months Ended March 31, ~~2023~~2024 Compared with Three Months Ended March 31, ~~2022~~2023

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


		Three Months Ended March 31,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Revenues	Revenues
Rental revenue (including reimbursable)
Rental revenue (including reimbursable)
Rental revenue (including reimbursable)	Rental revenue (including reimbursable)	$	28,474	$	20,921
Interest income on loans receivable	Interest income on loans receivable	978		411
Total revenues	Total revenues	29,452		21,332
Operating expenses	Operating expenses
Property	Property	3,936		2,932
Property
Property
General and administrative	General and administrative	4,909		4,190
Depreciation and amortization	Depreciation and amortization	14,949		10,980
Provisions for impairment
Transaction costs	Transaction costs	109		165
Total operating expenses	Total operating expenses	23,903		18,267
Other income (expense)
Other (expense) income
Interest expense, net
Interest expense, net
Interest expense, net	Interest expense, net	(3,944)		(1,169)
Gain (loss) on sales of real estate, net	Gain (loss) on sales of real estate, net	(319)		161
Other income		152		—
Total other expense, net		(4,111)		(1,008)
Other (expense) income, net
Total other (expense) income, net
Net income before income taxes	Net income before income taxes	1,438		2,057
Income tax benefit (expense)		43		(91)
Income tax (expense) benefit
Net income	Net income	$	1,481	$	1,966

Revenue. Revenue for the three months ended March 31, ~~2023~~2024 increased by $8.2 million to ~~$29.5~~$37.7 million from ~~$21.3~~$29.5 million for the three months ended March 31, ~~2022~~2023 which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans. The increase includes ~~an increase in~~additional cash rental receipts of $6.9 million, combined with net increases of property expense reimbursements of ~~$0.9~~$0.1 million, ~~and~~ an increase of ~~$0.6~~$1.5 million related to interest income on mortgage loans receivable, and an increase in straight-line rental revenue of $0.2 million. The increase in revenue is offset by a $0.2 million decrease in ~~straight-line rental revenue.~~above/below market lease adjustments and a $0.3 million decrease related to prior year recoveries.

Total Operating Expenses. Total expenses increased by ~~$5.6~~$7.2 million to $31.1 million for the three months ended March 31, 2024 as compared to $23.9 million for the three months ended March 31, ~~2023 as compared to $18.3 million for the three months ended March 31, 2022.~~2023. The increase ~~in operating expenses~~ is primarily attributed to ~~the~~an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, provisions for impairment, property-specific reimbursable expenses, and payroll and severance costs. Total operating expenses include the following:

•Property Expenses. Property expenses increased ~~$1.0~~$0.2 million to $4.1 million for the three months ended March 31, 2024 from $3.9 million for the three months ended March 31, ~~2023 from $2.9 million for the three months ended March 31, 2022.~~2023. The increase is primarily attributed to the increase in the number of operating properties, including combined net increases of reimbursable property expenses, ~~of $1.0~~including $0.3 million of ~~which $0.4 million,~~reimbursable property taxes, offset by a decrease of $0.3 million ~~and $0.3 million was related to~~of reimbursable common area maintenance ~~costs, reimbursable insurance costs, and reimbursable property taxes, respectively.~~costs. Additionally, non-reimbursable expenses increased by $0.1 million, primarily consisting of roof repairs.

•General and Administrative Expenses. General and administrative expenses increased ~~$0.7~~$0.8 million to $5.7 million for the three months ended March 31, 2024 from $4.9 million for the three months ended March 31, ~~2023 from $4.2 million for the three months ended March 31, 2022.~~2023. The increase is primarily due to an increase in employee severance of $0.8 million, including cash severance of $0.5 million and the expense associated with the accelerated vesting of stock-based compensation of $0.3 million, an increase of $0.4 million of stock-based compensation, offset by a decrease of $0.2 million of payroll expenses, ~~$0.4 million in addition to smaller~~and other combined net ~~increases in corporate office rent and franchise tax expense.~~decreases of $0.2 million. While our general and administrative expenses will continue to rise in some measure as our portfolio grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies and economies of scale.

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•Depreciation and Amortization. Depreciation and amortization expense increased ~~$3.9~~$2.6 million to $17.5 million for the three months ended March 31, 2024 from $14.9 million for the three months ended March 31, ~~2023 from $11.0 million for the three months ended March 31, 2022.~~2023. The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of ~~$2.1~~$1.7 million, building improvements depreciation expense of $0.5 million, in-place lease amortization expense of ~~$1.1~~$0.2 million, and ~~building improvements depreciation~~leasing commissions amortization expense of ~~$0.8~~$0.2 million.

28•Provisions for impairment. For the three months ended March 31, 2024, we recorded provisions for impairment of $3.7 million on 12 properties, the majority of which were either previously classified as held-for-sale, newly classified as held-for-sale or disposed of during three months ended March 31, 2024. Four of the properties are held for investment as of the three months ended March 31, 2024. For the three months ended March 31, 2023, we recorded no provisions for impairment. For the three months ended March 31, 2024, we sold two properties that were impaired. These disposals relate to management’s continuous assessment of the Company’s portfolio in an effort to improve returns and manage risk exposure.

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Interest Expense. Interest expense increased by ~~$2.7~~$2.3 million to $6.2 million for the three months ended March 31, 2024 from $3.9 million for the three months ended March 31, ~~2023 from $1.2 million for the three months ended March 31, 2022.~~2023. The increase is primarily attributed to an increase of ~~$1.9~~$2.3 million of interest incurred under ~~our $200.0 million senior unsecured term loan (the “2028~~the 2029 Term ~~Loan”), a net increase of $0.6 million under our $400.0 million senior unsecured revolving credit facility (the “New Revolver”) as a result of higher interest rates driving~~Loan executed on July 3, 2023, an increase of $0.8 million of interest incurred under the 2027 Term Loan (amendment and restatement of the 2024 Term Loan on June 15, 2023), offset by a net decrease of less than $0.1 million under the Revolver as a result of a decrease in average borrowings outstanding ~~during the respective periods. Additional increases~~which was offset by higher interest rates. An additional increase of ~~$0.1~~$0.3 million ~~and $0.1 million are attributed~~was attributable to increased ~~facility fees and interest incurred under the mortgage note payable, respectively.~~loan fee amortization. This is offset by ~~$0.1~~$1.0 million in amortization of deferred gains on interest rate swaps and $0.2 million of increased capitalized interest on our property developments.

Gain (loss) on sales of real estate, net. Net ~~loss~~gain on sales of real estate increased by ~~$0.5~~$1.3 million to ~~$0.3~~$1.0 million for the three months ended March 31, ~~2023~~2024 from a ~~$0.2~~$0.3 million net ~~gain~~loss for the three months ended March 31, ~~2022.~~2023. The table below summarizes the properties sold for the periods indicated (in thousands):


		Three Months Ended March 31,
		2023		2022
	Three Months Ended March 31,									Three Months Ended March 31,
	2024							2024			2023
Number of properties sold	Number of properties sold	8		1		Number of properties sold	12		8
Sales price, net of disposal costs	Sales price, net of disposal costs	$	15,463	$	2,294
Gain (loss) on sales of real estate, net	Gain (loss) on sales of real estate, net	$	(319)	$	161

Other ~~income.~~(expense) income, net. ~~The change in other~~Other (expense) income, ~~is primarily related to $0.1 million of interest income earned on the Company’s cash, cash equivalents and restricted cash balances as presented in the condensed consolidated balance sheets.~~

~~Income tax benefit (expense).~~ ~~Income tax expense~~net decreased by ~~$0.1~~$0.4 million for the three months ended March 31, ~~2023. The decrease relates~~2024 primarily due to ~~income tax benefits regarding current period losses~~a $0.4 million loss recorded on ~~disposals offset by provisions for federal and state income taxes on the financial results~~one property as a result of ~~NETSTREIT Management TRS, LLC.~~foundation issues in 2024.

Net income. Net income decreased ~~$0.5~~$0.4 million to $1.1 million for the three months ended March 31, 2024 from $1.5 million for the three months ended March 31, ~~2023 from $2.0 million for the three months ended March 31, 2022.~~2023. Net income decreased primarily due to increases in provisions for impairment, interest expense, and depreciation and amortization expense, ~~and payroll expense~~ offset by increases in gains on sales of real estate and additional rental revenues primarily due to the growth in the size of our real estate investment portfolio, including interest income associated with our mortgage loans receivable.

Liquidity and Capital Resources

Our primary capital requirements are to fund property acquisitions and developments, fund investments in mortgage loans receivable and required interest payments, ~~as well as~~and fund working capital needs, operating expenses, and capital expenditures. Our capital resources primarily consist of cash from operations, sales of equity securities and ~~borrowings under the $175.0 million senior unsecured term loan (the “2024 Term Loan”), 2028 Term Loan and New Revolver.~~available borrowing facilities. As of March 31, ~~2023,~~2024, we had $175.0 million outstanding principal amount ofunder the ~~2024~~senior unsecured term loan (the “2027 Term ~~Loan,~~Loan”), $200.0 million outstanding principal amount ofunder the ~~2028~~senior unsecured term loan (the “2028 Term Loan”), $250.0 million outstanding principal amount under the 2029 Term Loan, and ~~$96.0~~$75.0 million of borrowings outstanding under our ~~New Revolver.~~$400.0 million senior unsecured revolving credit facility (the “Revolver”). Additionally, as of March 31, ~~2023,~~2024, we had ~~4,763,320 shares that were~~$98.5 million and $1.9 million of unsettled ~~under open~~ forward equity ~~contracts. We believe that~~under the ~~availability~~2021 ATM Program and 2023 ATM Program, respectively. As of March 31, 2024, $222.7 million of remaining gross proceeds ~~from~~were available for future issuances of shares of our common stock under the 2023 ATM Program, ~~and~~inclusive of unsettled shares under forward confirmation. Lastly, we had $190.5 million of unsettled forward equity under the ~~physical~~January 2024 forward sale agreements as of March 31, 2024.

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We believe the availability of proceeds from the settlement of unsettled outstanding forward ~~sales~~confirmations, future issuances of shares of our common stock ~~coupled with~~under the 2023 ATM Program or subsequent at-the-market sale programs, as well as our cash flows from operations and available borrowing capacity under the ~~New~~ Revolver, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital requirements for at least the next 12 months. We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our ~~New~~ Revolver, and issuances of common ~~stock, including settlement of existing forward sales agreements.~~stock.

Contractual Obligations and Commitments

As of March 31, ~~2023,~~2024, our contractual debt obligations primarily include the maturity of our ~~2024~~2027 Term Loan with the scheduled principal payment due on ~~December 23, 2024,~~January 15, 2026, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, the maturity of our 2029 Term Loan with the scheduled principal payment due on July 3, 2026, and repayment of borrowings on our ~~New~~ Revolver with a maturity of August 11, 2026. During the three months ended March 31, ~~2023,~~2024, we borrowed ~~$99.0~~$82.0 million at a weighted average interest rate of ~~5.86%~~6.54% and also repaid ~~$116.0~~$87.0 million on our revolving credit facilities.

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The following table provides information with respect to our ~~debt obligations and other~~ commitments as of March 31, ~~2023~~2024 (in thousands):

Payment Due by Period
Total From April 1, 2023 to December 31, 2023 1 – 3 Years 3 – 5 Years Thereafter
Contractual Obligations
2024 Term Loan – Principal $ 175,000 $ — $ 175,000 $ — $ —
2024 Term Loan – Variable interest (1)
4,154 1,803 2,351 — —
New Revolver – Borrowings 96,000 — — 96,000 —
New Revolver – Variable interest 19,166 4,277 11,405 3,484 —
Facility Fee (2)
2,017 450 1,200 367 —
2028 Term Loan – Principal 200,000 — — — 200,000
2028 Term Loan – Variable Interest (3)
37,756 5,821 15,522 15,522 891
Mortgage Note – Principal 8,460 117 332 8,011 —
Mortgage Note – Interest 1,709 286 742 681 —
Property development under contract 5,953 5,953 — — —
Tenant Improvement Allowances 4,089 — 4,089 — —
Corporate office lease obligations 6,299 412 1,253 1,323 3,311
Total $ 560,603 $ 19,119 $ 211,894 $ 125,388 $ 204,202


	Payment Due by Period
	Total		From April 1, 2024 to December 31, 2024		2025 - 2026		2027 - 2028		Thereafter
Contractual Obligations
2027 Term Loan – Principal	$	175,000	$	—	$	175,000	$	—	$	—
2027 Term Loan – Variable interest (1)	10,775		4,132		6,643		—		—
2028 Term Loan – Principal	200,000		—		—		200,000		—
2028 Term Loan – Variable Interest (2)	29,992		5,820		15,521		8,651		—
2029 Term Loan – Principal	250,000		—		250,000		—		—
2029 Term Loan – Variable interest (3)	28,096		9,348		18,748		—		—
Revolver – Borrowings	75,000		—		75,000		—		—
Revolver – Variable interest	11,368		3,611		7,757		—		—
Facility Fee (4)	1,417		450		967		—		—
Mortgage Note – Principal	8,322		123		348		7,851		—
Mortgage Note – Interest	1,328		280		726		322		—
Property development under contract	24,961		24,961		—		—		—
Additional principal under mortgage notes receivable	12,371		12,371		—		—		—
Tenant improvement allowances	4,089		4,089		—		—		—
Corporate office lease obligations	5,736		466		1,289		1,359		2,622
Total	$	838,455	$	65,651	$	551,999	$	218,183	$	2,622

(1) ~~Effective September 28, 2020, we~~We entered into ~~four~~five interest rate hedges to fix the base interest rate ~~(one-month LIBOR)~~(daily SOFR) on our 2027 Term Loan. The hedged fixed rate reset effective November 27, 2023 to 1.87% and will reset December 23, 2024 ~~Term Loan which were converted~~ to ~~daily SOFR effective January 30, 2023.~~2.40%. Accordingly, the projected interest rate obligations for the variable rate ~~2024~~2027 Term Loan are based on the hedged fixed rate of ~~0.12%~~1.87% through December 23, 2024, and 2.40% thereafter, compared to the variable ~~2024~~2027 Term Loan daily SOFR rate as of March 31, ~~2023~~2024 of ~~4.80%~~5.31%, plus a SOFR adjustment of 0.10%~~, plus a~~ and applicable margin of 1.15% based on the $175.0 million 2027 Term Loan outstanding through the contractual maturity date of ~~December 23, 2024.~~January 15, 2026.

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

~~(3)~~ ~~Effective August 11, 2022, we~~ entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan. Accordingly, the projected interest rate obligations for the variable rate 2028 Term Loan are based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of ~~December~~March 31, ~~2022~~2024 of ~~4.67%~~5.33%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $200.0 million 2028 Term Loan outstanding through the maturity date of February 11, 2028.

(3) We entered into four interest rate hedges to fix the base interest rate (daily SOFR) on our 2029 Term Loan. Accordingly, the projected interest rate obligations for the variable rate 2029 Term Loan are based on the hedged fixed rate of 3.74% compared to the variable 2029 Term Loan daily SOFR rate as of March 31, 2024 of 5.32%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $150.0 million of the 2029 Term Loan outstanding through the contractual maturity date of July 3, 2026.

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

In August 2021, we entered into a lease agreement on a new corporate office space, which is classified as an operating lease. We began operating out of the new office in February 2022. The lease has a remaining noncancellable term of ~~9.3~~8.3 years that expires on July 31, 2032 and is renewable at our option for two additional periods of five years. ~~Future minimum base rental payments under the lease are outlined in “Note - 3 - Leases.”~~ Annual rent expense, excluding operating expenses, is approximately $0.5 million during the initial term.

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Additionally, in the normal course of business, we enter into various types of commitments to purchase real estate properties, or fund development ~~projects.~~projects, or extend funds under mortgage notes receivable. These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before ~~the Company is~~we are obligated ~~or receives an option~~ to purchase ~~the properties.~~or extend funding. As of March 31, ~~2023,~~2024, we had commitments to fund properties under development and extend funds under mortgage notes receivable totaling ~~$6.0~~$25.0 million and $12.4 million, respectively, all of which is expected to be funded ~~over the next two years.~~throughout 2024.

~~Credit Facilities~~Debt

On January 27, 2023, we executed an amendment to the Prior Credit Agreement that replaced the interest rate benchmark from LIBOR to Secured Overnight Financing Rate (“SOFR”). Additionally, on January 30, 2023 and effective through the maturity date of December 31, 2024, we converted its four existing LIBOR swap agreements associated with the 2024 Term Loan into four new SOFR swaps that convert the SOFR variable rate to a fixed rate of 0.12%. We have fully hedged the 2024 Term Loan with an all-in interest rate of 1.37%. The interest rate hedge is further described in “Note 7 - Derivative Financial Instruments.”

~~Further~~See discussion of our debt isand interest rate hedges included in “Note 6 - Debt” ~~of our condensed consolidated financial statements, included~~and “Note 7 - Derivative Financial Instruments” in ~~Part I, Item~~“Item 1 ~~of this Quarterly Report on Form 10-Q.~~

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As of March 31, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.– Financial Statements (unaudited).”

Historical Cash Flow Information

Three Months Ended March 31, ~~2023~~2024 Compared with Three Months Ended March 31, ~~2022~~2023


		Three Months Ended March 31,
		2023		2022
	Three Months Ended March 31,								Three Months Ended March 31,
	2024							2024		2023
(In thousands)	(In thousands)	(Unaudited)				(In thousands)	(Unaudited)
Net cash provided by (used in):	Net cash provided by (used in):
Operating activities	Operating activities	$	14,806	$	8,954
Operating activities
Operating activities
Investing activities	Investing activities	(102,412)		(133,708)
Financing activities	Financing activities	23,659		121,838

Cash Flows Provided By Operating Activities. Net cash provided by operating activities ~~increased~~decreased by ~~$5.8~~$3.1 million for the three months ended March 31, ~~2023~~2024 compared to the three months ended March 31, ~~2022.~~2023. The ~~increase~~decrease was largely attributed to the ~~increase~~timing of corporate and property related vendor payments and changes to other working capital accounts, including the payment of our annual insurance policies, payments of employee severance and bonus, and increased interest payments along with other net increases in ~~the size of the Company’s real estate investment portfolio~~operating and general and administrative expenses associated with our larger portfolio. This was offset by an increase in rental receipts of $6.9 million ~~offset primarily by increases~~and an increase in ~~operating and general and administrative expenses paid associated with our larger portfolio.~~mortgage loan receivable interest of $1.5 million.

Cash Flows Used In Investing Activities. Net cash used in investing activities decreased by ~~$31.3~~$5.2 million for the three months ended March 31, ~~2023~~2024 compared to the three months ended March 31, ~~2022.~~2023. The decrease was primarily due to decreases in cash spent on ~~acquisitions of real estate of $22.3 million and cash spent on real estate development and improvements of $1.9 million, offset by an increase in our investment~~investments in mortgage loans receivable of ~~$5.5 million. Additionally, an increase~~$35.7 million and $1.8 million less in earnest money deposits made, offset by increases in cash spent on acquisitions of ~~$13.2~~real estate and real estate developments and improvements of $27.5 million ofand $9.8 million, respectively. The remaining decrease is primarily related to proceeds ~~were received in connection with~~from the sale of real ~~estate.~~estate, which increased $5.0 million compared to the prior period.

Cash Flows Provided By Financing Activities. Net cash provided by financing activities ~~decreased~~increased by ~~$98.1~~$54.3 million for the three months ended March 31, ~~2023~~2024 compared to the three months ended March 31, ~~2022.~~2023. The ~~decrease~~increase was primarily attributed to a ~~reduction in net borrowings of $73.0~~$100.0 million ~~under~~draw on our revolving credit facilities. Further, issuances of common stock in connection with our ATM Program and physical settlement of our common stock under the forward sale agreements provided $22.6 million fewer proceeds. Additionally, we paid $2.8 million more in common stock dividends2029 Term Loan during the three months ended March 31, ~~2023.~~2024 and an increase in net borrowings of $12.0 million under our Revolver. The increase was offset by a decrease of $52.9 million from the issuance of our common stock, further offset by an increase in payments of common stock dividends of $3.3 million and increases in the repurchase of common stock for tax withholding obligations of $0.7 million.

Income Taxes

The Company elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its stockholders and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution and share ownership tests. The Company intends to make sufficient distributions during ~~2023~~2024 to receive a full dividends paid deduction.

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

Recent Accounting Pronouncements

31A discussion of recent accounting pronouncements and their possible effects on our condensed consolidated financial statements is included in “Note 2 – Summary of Significant Accounting Policies” in “Item 1 – Financial Statements (unaudited).”

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Critical Accounting Policies and Estimates

Our accounting policies have been established to conform with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. A summary of our critical accounting policies is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, which is accessible on the SEC’s website at www.sec.gov. There have been no material changes to these policies during the periods covered by this quarterly report.

Non-GAAP Financial Measures

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

FFO, Core FFO and AFFO

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

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

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

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

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

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

~~Table of Contents~~

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


		Three Months Ended March 31,
		2023		2022
		(Unaudited)
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
	(Unaudited)						(Unaudited)
Net income	Net income	$	1,481	$	1,966
Depreciation and amortization of real estate	Depreciation and amortization of real estate	14,884		10,862
Loss (gain) on sales of real estate, net		319		(161)
Provisions for impairment
(Gain) loss on sales of real estate, net
FFO	FFO	16,684		12,667
Adjustments:	Adjustments:
Non-recurring severance and related charges		13		—
Other non-recurring expenses (income)		(12)		—
Non-recurring executive transition costs, severance and related charges
Non-recurring executive transition costs, severance and related charges
Non-recurring executive transition costs, severance and related charges
Non-recurring other loss (gain), net
Core FFO	Core FFO	16,685		12,667
Adjustments:	Adjustments:
Straight-line rent adjustments	Straight-line rent adjustments	(311)		(526)
Straight-line rent adjustments
Straight-line rent adjustments
Amortization of deferred financing costs	Amortization of deferred financing costs	308		157
Amortization of above/below-market assumed debt	Amortization of above/below-market assumed debt	29		—
Amortization of loan origination costs		28		13
Amortization of loan origination costs and discounts
Amortization of lease-related intangibles	Amortization of lease-related intangibles	(213)		(165)
Earned development interest
Capitalized interest expense	Capitalized interest expense	(134)		(56)
Non-cash interest expense
Non-cash compensation expense	Non-cash compensation expense	1,027		1,045
AFFO	AFFO	$	17,419	$	13,135

EBITDA, EBITDAre, Adjusted EBITDAre and Annualized Adjusted EBITDAre

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

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

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

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

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


	Three Months Ended March 31,
	2024		2023
	(Unaudited)
Net income	$	1,052	$	1,481
Depreciation and amortization of real estate	17,462		14,884
Amortization of lease-related intangibles	(95)		(213)
Non-real estate depreciation and amortization	79		65
Interest expense, net	6,180		3,944
Income tax expense (benefit)	17		(43)
Amortization of loan origination costs	39		28
EBITDA	24,734		20,146
Adjustments:
Provisions for impairments	3,662		—
(Gain) loss on sales of real estate, net	(997)		319
EBITDAre	27,399		20,465

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Three Months Ended March 31,
2023 2022
(Unaudited)
Net income $ 1,481 $ 1,966
Depreciation and amortization of real estate 14,884 10,862
Amortization of lease-related intangibles (213) (165)
Non-real estate depreciation and amortization 65 117
Interest expense, net 3,944 1,169
Income tax (benefit) expense (43) 91
Amortization of loan origination costs 28 13
EBITDA 20,146 14,053
Adjustments:
Loss (gain) on sales of real estate, net 319 (161)
EBITDAre
20,465 13,892
Adjustments:
Straight-line rent adjustments (311) (526)
Non-recurring severance and related charges 13 —
Other non-recurring expenses (income) (12) —
Non-cash compensation expense 1,027 1,045
Adjusted EBITDAre
$ 21,182 $ 14,411
The following table sets forth a reconciliation of EBITDA, EBITDAre, Adjusted EBITDAre and Annualized Adjusted EBITDAre for the period presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

~~NOI~~


	Three Months Ended March 31, 2024
Net income	$	1,052
Depreciation and amortization of real estate	17,462
Amortization of lease-related intangibles	(95)
Non-real estate depreciation and amortization	79
Interest expense, net	6,180
Income tax expense (benefit)	17
Amortization of loan origination costs	39
EBITDA	24,734
Adjustments:
Provisions for impairments	3,662
(Gain) loss on sales of real estate, net	(997)
EBITDAre	27,399
Adjustments:
Straight-line rent adjustments	(542)
Non-recurring executive transition costs, severance and related charges	857
Non-recurring other loss (gain), net	414
Other non-recurring expenses, net	158
Non-cash compensation expense	1,424
Adjustment for construction in process (1)	497
Adjustment for intraquarter investment activities (2)	1,469
Adjusted EBITDAre	$	31,676

Annualized Adjusted EBITDAre(3)	$	126,704
Adjusted Net Debt / Annualized Adjusted EBITDAre	3.1

(1) Adjustment reflects the estimated cash yield on developments in process as of March 31, 2024.

(2) Adjustment assumes all re-leasing activity, investments in and ~~Cash NOI~~dispositions of real estate, including developments and interest earning loan activity completed during the three months ended March 31, 2024 had occurred on January 1, 2024.

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

Net Debt and Adjusted Net Debt

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

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

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


	As of
	March 31, 2024
Principal amount of total debt	$	708,322
Less: Cash, cash equivalents and restricted cash	(22,334)
Net Debt	685,988
Less: Value of unsettled forward equity (1)	(290,908)
Adjusted Net Debt	$	395,080

(1) There were 17,131,211 unsettled shares under forward equity contracts as of March 31, 2024 at the available weighted-average net settlement price of $16.98.

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

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

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

The following table sets forth a reconciliation of Property-Level NOI and Property-Level Cash NOI for the periods presented (in thousands):


		Three Months Ended March 31,
		2023		2022
		(Unaudited)
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
	(Unaudited)						(Unaudited)
Net income	Net income	$	1,481	$	1,966
General and administrative	General and administrative	4,909		4,190
Depreciation and amortization	Depreciation and amortization	14,949		10,980
Provisions for impairment
Transaction costs	Transaction costs	109		165
Interest expense, net	Interest expense, net	3,944		1,169
Loss (gain) on sales of real estate, net		319		(161)
Income tax (benefit) expense		(43)		91
(Gain) loss on sales of real estate, net
Income tax expense (benefit)
Interest income on mortgage loans receivable	Interest income on mortgage loans receivable	(978)		(411)
Other income		(152)		—
NOI		24,538		17,989
Other expense (income), net
Property-Level NOI
Straight-line rent adjustments	Straight-line rent adjustments	(311)		(526)
Amortization of lease-related intangibles	Amortization of lease-related intangibles	(213)		(165)
Cash NOI		$	24,014	$	17,298
Property-Level Cash NOI

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


	Three Months Ended March 31, 2024
Net income	$	1,052
General and administrative	5,707
Depreciation and amortization	17,541
Provisions for impairment	3,662
Transaction costs	129
Interest expense, net	6,180
(Gain) loss on sales of real estate, net	(997)
Gain on forfeited earnest money deposit	—
Income tax expense (benefit)	17
Interest income on mortgage loans receivable	(2,484)
Other expense (income), net	280
Property-Level NOI	31,087
Straight-line rent adjustments	(542)
Amortization of lease-related intangibles	(95)
Property-Level Cash NOI	$	30,450
Adjustment for intraquarter acquisitions, dispositions and interest earning development (1)	1,358
Property-Level Cash NOI Estimated Run Rate	31,808
Interest income on mortgage loans receivable	2,484
Adjustments for intraquarter mortgage loan activity (2)	111
Total Cash NOI - Estimated Run Rate	$	34,403

(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended March 31, 2024 had occurred on January 1, 2024.

(2) Adjustment assumes all loan activity completed during the three months ended March 31, 2024 had occurred on January 1, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair value relevant to our financial instruments depend upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Based upon the nature of our operations, the principal market risk to which we are exposed is the risk related to interest rate fluctuations. As of March 31, ~~2023,~~2024, we had total indebtedness of approximately $175.0 million under the ~~2024~~2027 Term Loan, $200.0 million under the 2028 Term Loan, $250.0 million under the 2029 Term Loan, and ~~$96.0~~$75.0 million of borrowings under the ~~New~~ Revolver, all of which are floating rate debt with a variable interest rate. For the three months ended March 31, ~~2023,~~2024, we had average daily outstanding borrowings on our ~~New~~ Revolver of ~~$69.2~~$59.6 million.

~~On September 28, 2020 and September 1, 2022, and effective~~Effective through the maturity dates of ~~December 23, 2024 and~~January 15, 2027, February 11, 2028, ~~respectively,~~and January 3, 2029, we entered into interest rate derivative contracts in order to hedge our market interest risk associated with the ~~2024~~2027 Term Loan, 2028 Term Loan, and ~~the 2028~~2029 Term Loan, respectively. On January 27, 2023, we executed an amendment to the Prior Credit Agreement that replaced the interest rate benchmark from LIBOR to Secured Overnight Financing Rate (“SOFR”). Additionally, on January 30, 2023 and effective through the maturity date of December 31, 2024, we converted our four existing LIBOR swap agreements associated with the 2024 Term Loan into four new SOFR swaps that convert the SOFR variable rate to a fixed rate of 0.12%. The interest rate derivative contracts convert the variable rate debt on the term loans to a fixed interest rate (as further described in “Note 6 - Debt” in our condensed consolidated financial statements).

Additionally, we will occasionally fund acquisitions through the use of our ~~New~~ Revolver which bears an interest rate determined by either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on our consolidated total leverage ratio, or (ii) a Base Rate (as defined in the New Credit Facility), plus a margin ranging from 0.00% to 0.45%, based on our consolidated total leverage ratio. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to our interest rate risk. Based on the results of our sensitivity analysis and daily outstanding borrowings on the ~~New~~ Revolver during ~~2023,~~2024, which assumes a 1% adverse change in the interest rate as of March 31, ~~2023,~~2024, the estimated market risk exposure was approximately ~~$0.7~~$0.6 million.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures.

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

Changes in Internal Control over Financial Reporting.

During the period covered by this report, there have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation described above 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

From time to time, we may be party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently subject to any lawsuits, claims, or other legal proceedings.

Item 1A. Risk Factors

For a discussion of the most significant factors that may adversely affect us, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, which is accessible on the SEC’s website at www.sec.gov. There have been no material changes to the risk factors disclosed in the Annual Report. These risk factors may not describe every risk facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and results of operations.

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

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Company Stock Repurchases

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits


Exhibit No.						Description
3.1						Conformed Articles of Amendment and Restatement of NETSTREIT Corp. (incorporated by reference to Exhibit 3.1 to the Registrant’s ~~Registration Statement~~Annual Report on Form ~~S-11 (File No. 333-239911) filed on July 17, 2020)~~10-K for the year ended December 31, 2022).

3.2						~~Articles of Amendment of NETSTREIT Corp. (incorporated by reference to Exhibit 3.3 to the Registrant's Registration Statement on Form S-11 (File No. 333-239911) filed on July 17, 2020).~~

~~3.3~~						Amended and Restated Bylaws of NETSTREIT Corp. (incorporated by reference to Exhibit 3.2 to the Registrant’s ~~Current~~Annual Report on Form ~~8-K filed on August 21, 2020)~~10 -K for the year ended December 3 1, 2022 ).

~~10.3†~~						Employment Agreement, dated March 24, 2023, between NETSTREIT Management, LLC and Daniel Donlan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 3, 2023).

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 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**						XBRL Instance Document.

101.SCH***						XBRL Taxonomy Extension Schema Document.

101.CAL***						XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB***						XBRL Taxonomy Extension Label Linkbase Document.

101.PRE***						XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF***						XBRL Taxonomy Extension Definition Linkbase Document.

104**						Cover Page Interactive Data File.


*						Filed herewith.
**						The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File because their XBRL tags are embedded within the Inline XBRL document.
***						Submitted electronically with the report.
†						~~Management contract or compensatory plan or arrangement.~~

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SIGNATURES

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

NETSTREIT Corp.

April ~~26, 2023~~29, 2024

/s/ MARK MANHEIMER

Date

Mark Manheimer

President, Chief Executive Officer, Secretary and Director

(Principal Executive Officer)

April ~~26, 2023~~29, 2024

/s/ DANIEL DONLAN

Date

Daniel Donlan

Chief Financial Officer and Treasurer

(Principal Financial Officer)

April ~~26, 2023~~29, 2024

/s/ PATRICIA GIBBS

Date

Patricia Gibbs

Senior Vice President and Chief Accounting Officer

(Principal Accounting Officer)

3842


	March 31, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
2024 Term Loan (1)	$	174,591	$	175,471	$	174,532	$	175,382
2028 Term Loan (1)	198,824		201,324		198,764		201,108


	Future Minimum Lease Payments
Remainder of 2023	$	412
2024	617
2025	636
2026	653
2027	670
Thereafter	3,311
Total lease payments	6,299
Less: amount representing interest (1)	(912)
Present value of operating lease liabilities	$	5,387


	Payment Due by Period
	Total		From April 1, 2023 to December 31, 2023		1 – 3 Years		3 – 5 Years		Thereafter
Contractual Obligations
2024 Term Loan – Principal	$	175,000	$	—	$	175,000	$	—	$	—
2024 Term Loan – Variable interest (1)	4,154		1,803		2,351		—		—
New Revolver – Borrowings	96,000		—		—		96,000		—
New Revolver – Variable interest	19,166		4,277		11,405		3,484		—
Facility Fee (2)	2,017		450		1,200		367		—
2028 Term Loan – Principal	200,000		—		—		—		200,000
2028 Term Loan – Variable Interest (3)	37,756		5,821		15,522		15,522		891
Mortgage Note – Principal	8,460		117		332		8,011		—
Mortgage Note – Interest	1,709		286		742		681		—
Property development under contract	5,953		5,953		—		—		—
Tenant Improvement Allowances	4,089		—		4,089		—		—
Corporate office lease obligations	6,299		412		1,253		1,323		3,311
Total	$	560,603	$	19,119	$	211,894	$	125,388	$	204,202