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What changed in NETSTREIT Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NETSTREIT Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+292 added−278 removedSource: 10-K (2025-02-24) vs 10-K (2024-02-14)

Top changes in NETSTREIT Corp.'s 2024 10-K

292 paragraphs added · 278 removed · 228 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOn June 15, 2023, we amended and restated the agreement governing the 2024 Term Loan 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 our election (subject to certain conditions) (the “2027 Term Loan”).
Biggest changeThe Wells Fargo Credit Agreement was amended and restated to extend the maturity date of the existing $175.0 million senior unsecured term loan (the “2030 Term Loan A” or, prior to the extended maturity, referred to as the “2027 Term Loan”) thereunder from January 2027 to January 2029 with an option, at the Company’s election, to extend the maturity to January 2030.
We believe these characteristics make our tenants' businesses e-commerce resistant and resilient through all economic cycles.
We believe these characteristics make our tenants’ businesses e-commerce resistant and resilient through all economic cycles.
We then review the tenant's investment rating or establish a “shadow rating” using our proprietary credit modeling process for unrated tenants. and review investment rating or establish a “shadow rating” using our proprietary credit modeling process for unrated tenants. • Real Estate Valuation: We assess the underlying key real estate metrics of each property, including location and demographics that will support both tenant financial health, including market rents, and a market for alternative use, re-leasing or redevelopment, when necessary.
We then review the tenant’s investment rating or establish a “shadow rating” using our proprietary credit modeling process for unrated tenants. • Real Estate Valuation: We assess the underlying key real estate metrics of each property, including location and demographics that will support both tenant financial health, including market rents, and a market for alternative use, re-leasing or redevelopment, when necessary.
Regulation General Our properties are subject to various laws, ordinances and regulations, including those relating to fire and safety requirements, and affirmative and negative covenants and, in some instances, common area obligations. Our tenants have primary responsibility for compliance with these requirements pursuant to our leases. We believe that each of our properties has the necessary permits and approvals.
Regulation General Our properties are subject to various laws, ordinances and regulations, including those relating to fire and safety requirements, affirmative and negative covenants, and, in some instances, common area obligations. Our tenants have primary responsibility for compliance with these requirements pursuant to our leases. We believe that each of our properties has the necessary permits and approvals.
Insurance Our tenants are generally required to maintain liability and property insurance coverage for the properties they lease from us pursuant to triple or double-net leases.
Insurance Our tenants are generally required to maintain liability and property insurance coverage for the properties they lease from us pursuant to triple-net or double-net leases.
As we continue to grow our portfolio, we seek to acquire single-tenant, retail commercial real estate net leased on a long-term basis (at least ten years) to high credit quality 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, convenient stores, discount stores, and quick-service restaurants.
As we continue to grow our portfolio, we seek to acquire single-tenant, retail commercial real estate net leased on a long-term basis (generally at least ten years) to high credit quality 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, convenient stores, discount stores, and quick-service restaurants.
Such laws may impose fines or penalties for violations, and may require permits or other governmental approvals to be obtained for the operation of a business involving such activities. As a result of the foregoing, we could be materially and adversely affected.
Such laws may impose fines or penalties for violations and may require permits or other governmental approvals to be obtained for the operation of a business involving such activities. As a result, we could be materially and adversely affected.
Our growth and diversification strategy focuses 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, convenient stores, discount stores, and quick-service restaurants.
Our growth and diversification strategy focuses 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.
Our ability to efficiently deploy capital is a direct result of our management team's extensive network of industry relationships with retailers, brokers, intermediaries, private equity firms and others in the net lease industry, which we utilize to source a robust pipeline of attractive marketed and off-market investment opportunities through which we have deployed capital, acquiring 457 single-tenant retail net leased properties with an aggregate purchase price of $1.6 billion since our formation in December 2019 (excluding our property development acquisitions).
Our ability to efficiently deploy capital is a direct result of our management team’s extensive network of industry relationships with retailers, brokers, intermediaries, private equity firms and others in the net lease industry, which we utilize to source a robust pipeline of attractive marketed and off-market investment opportunities through which we have deployed capital, acquiring 572 single-tenant retail net leased properties with an aggregate purchase price of $2.1 billion since our formation in December 2019 (excluding our property development acquisitions).
We believe these characteristics make our tenants' businesses e-commerce resistant and resilient through all economic cycles. Our management team focuses primarily on securing long-term leases with investment grade credit rated tenants and creditworthy tenants without an investment grade rating. 6 Table of Contents The current market for retail net leased properties is fragmented and decentralized.
We believe these characteristics make our tenants’ businesses e-commerce resistant and resilient through all economic cycles. Our management team focuses primarily on securing long-term leases with investment grade credit rated tenants and creditworthy tenants without an investment grade rating. The current market for retail net leased properties is fragmented and decentralized.
Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy environmental noncompliance or investigate and cleanup contamination. If we or our tenants were to become subject to significant environmental liabilities, we could be materially and adversely affected.
Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy environmental noncompliance or investigate and clean up contamination. If we or our tenants were to become subject to significant environmental liabilities, we could be materially and adversely affected.
We also provide employees with standing desks, ergonomic desk chairs and fitness center memberships. 11 Table of Contents Available Information Our principal executive office is located at 2021 McKinney Avenue, Suite 1150, Dallas, Texas, 75201 and our telephone number is 972-200-7100. Our website address is www.NETSTREIT.com.
We also provide employees with standing desks, ergonomic desk chairs, and fitness center memberships. Available Information Our principal executive office is located at 2021 McKinney Avenue, Suite 1150, Dallas, Texas, 75201, and our telephone number is 972-200-7100. Our website address is www.NETSTREIT.com.
Human Capital Management As of December 31, 2023, we had 28 full-time employees. Our staff is mostly comprised of professional employees engaged in origination, underwriting, closing, accounting and financial reporting, portfolio management and capital markets activities essential to our business. We are committed to creating a strong internal culture that promotes inclusion and employee well-being.
Human Capital Management As of December 31, 2024, we had 22 full-time employees. Our staff mostly comprises professional employees engaged in origination, underwriting, closing, accounting and financial reporting, portfolio management, and capital markets activities essential to our business. We are committed to creating a strong internal culture that promotes inclusion and employee well-being.
We aim to develop our employees by providing internal training and reimbursement for certifications, tuition, courses and seminars for continuing professional education. We encourage regular informal feedback directly from the leadership team and complete formal evaluations of each employee annually. ◦ Diversity, equity, and inclusion.
We aim to develop our employees by providing internal training and reimbursement for certifications, tuition, courses, and seminars for continuing professional education. We encourage regular informal feedback directly from the leadership team and complete formal evaluations of each employee annually. ◦ Workplace culture and empowerment.
The information on, or otherwise accessible through, our website does not constitute a part of this report.
The information on, or otherwise accessible through, our website does not constitute a part of this report. 11 Table of Contents
Item 1. Business 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.
Item 1. Business Business Overview We are an internally managed real estate company that acquires, owns, 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.
Our past and continued success relies on our ability to attract, develop, engage, and retain a team of highly motivated and talented employees. In order to meet this objective, we are committed to the following: ◦ Talent acquisition and development. To ensure we attract and retain top talent, we provide competitive compensation and benefits, including equity compensation for all employees.
Our past and continued success relies on our ability to attract, develop, engage, and retain a team of highly motivated and talented employees. In order to meet this objective, we are committed to the following: ◦ Talent acquisition and development.
We expect 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 January 9, 2025.
As of December 31, 2024, 8,840,000 shares remain unsettled under the January 2024 forward sale agreements. We expect 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 December 31, 2025.
Our current strategy targets a portfolio that, over time, will: • derive no more than (i) 5% of its ABR from any single tenant or property, (ii) 15% of its ABR from any single retail sector, (iii) 15% of its ABR from any single state and (iv) 50% of its ABR from its top 10 tenants; • be primarily leased to tenants operating in businesses we believe to be e-commerce resistant and resilient through all economic cycles; • have at least 60% of its tenants with an investment grade rating; and • have a WALT that approximates 10 years.
Our current strategy targets a portfolio that, over time, will: • derive no more than (i) 5% of its ABR from any single tenant or property, (ii) 15% of its ABR from any single retail sector, (iii) 15% of its ABR from any single state and (iv) 50% of its ABR from its top 10 tenants; • be primarily leased to tenants operating in businesses we believe to be e-commerce resistant and resilient through all economic cycles; and • generate strong cash flows at the unit level.
As of December 31, 2023, our investments generated ABR 1 of $131.9 million. Approximately 71% of our ABR is from investment grade 2 credit rated tenants and an additional 14% of our ABR is derived from tenants with an investment grade profile 3 .
As of December 31, 2024, our investments generated ABR 1 of $165.1 million. Approximately 56% of our ABR is from investment grade 2 credit rated tenants and an additional 15% of our ABR is derived from tenants with an investment grade profile 3 .
For additional information regarding our debt facilities, see “Note 6 – Debt” in “Item 8 – Financial Statements and Supplementary Data.” 1 Annualized base rent (“ABR”) is annualized base rent as of December 31, 2023, for all leases that commenced, 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. 5 Table of Contents 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.
We may physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than December 31, 2025. 1 Annualized base rent (“ABR”) is annualized base rent as of December 31, 2024, for all leases that commenced, 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. 5 Table of Contents January 2024 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.
Exclusive of mortgage loans receivable, our portfolio was 100% occupied with a weighted average remaining lease term (“WALT”) of 9.5 years, which we believe provides us with a strong, stable source of recurring cash flow from our portfolio.
Our portfolio was 99.9% occupied and, excluding mortgage loans receivable, had a weighted average remaining lease term (“WALT”) of 9.8 years, which we believe provides a strong, stable source of recurring cash flow.
We also selectively review larger properties with a purchase price in excess of $10 million, which are typically leased to investment grade tenants like Walmart and Home Depot, when we believe the acquisition will be accretive to the quality of our portfolio.
We also selectively review larger properties with a purchase price in excess of $10 million when we believe the acquisition will be accretive to the quality of our portfolio.
The average purchase price of a property in our portfolio as of December 31, 2023 was $3.4 million, our ABR per property is approximately $232 thousand, and our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods.
The average purchase price of a property in our portfolio as of December 31, 2024 was $3.6 million, our ABR per property is approximately $251 thousand, and our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods. 6 Table of Contents We seek to invest in properties that have strong unit-level economics to reduce the risk of default on a particular property.
As we grow, we anticipate having access to the investment grade debt and equity capital markets to maintain a prudent balance between debt and equity financing. 8 Table of Contents In addition, we seek to make investments that generate strong current income as a result of the difference, or spread, between the rate we earn on our assets and the rate we pay on our liabilities (primarily our long-term debt).
In addition, we seek to make investments that generate strong current income as a result of the difference, or spread, between the rate we earn on our assets and the rate we pay on our liabilities (primarily our long-term debt).
Tax Status We are organized and have operated in a manner that has enabled us to qualify to be taxed as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate so as to satisfy the requirements for qualification as a REIT for U.S. federal income tax purposes.
Additionally, our WALT of 9.8 years as of December 31, 2024 and superior underwriting and portfolio monitoring capabilities, which reduce default losses, are intended to make our cash flows highly stable. 8 Table of Contents Tax Status We are organized and have operated in a manner that has enabled us to qualify to be taxed as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate so as to satisfy the requirements for qualification as a REIT for U.S. federal income tax purposes.
Underwriting and Portfolio Management The Company assesses its investments and actively manages its existing portfolio using a three-part underwriting and risk management strategy with an emphasis on credit and real estate that includes: • Tenant Credit Underwriting: We review corporate level financial information, assess business risks, including barriers to entry and technology risks.
We believe our developer partnerships on build-to-suit projects, which provide higher yields than acquisitions, will differentiate us from our competitors without development expertise. 7 Table of Contents Underwriting and Portfolio Management The Company assesses its investments and actively manages its existing portfolio using a three-part underwriting and risk management strategy with an emphasis on credit and real estate that includes: • Tenant Credit Underwriting: We review corporate level financial information and assess business risks, including barriers to entry.
During 2023, we disposed of 19 properties totaling $40.3 million in aggregate sales price and improved portfolio performance by diversifying tenant concentration and improving key metrics such as tenant credit quality, WALT and geographic diversity.
During 2024, we disposed of 56 properties for a total sales price, net of disposal costs, of $110.9 million and improved portfolio performance by diversifying tenant concentration and improving key metrics such as tenant credit quality, WALT, and geographic diversity.
As of December 31, 2023, we owned or had investments in 598 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 85 different tenants, across 26 retail sectors in 45 states.
As of December 31, 2024, we owned or had investments in 687 properties that were diversified by tenant, industry, and geography, including 98 different tenants, across 26 retail sectors in 45 states, excluding five property developments where rent has yet to commence.
As of December 31, 2023, we had $80.0 million of borrowings outstanding under our $400.0 million senior unsecured revolving credit facility (the “Revolver”) as well as $175.0 million outstanding under the 2027 Term Loan, $200.0 million outstanding under the $200 million senior unsecured term loan (the “2028 Term Loan”), and $150.0 million outstanding under the 2029 Term Loan.
As of December 31, 2024, we had $239.0 million of borrowings outstanding under our $400.0 million Revolver, as well as $175.0 million outstanding under the 2027 Term Loan, $200.0 million outstanding under the $200.0 million 2028 Term Loan, and $250.0 million outstanding under the 2029 Term Loan.
We provide equal employment opportunities to all individuals and seek to cultivate an inclusive culture that respects and appreciates diversity of experience, ideas and opinions. We have adopted a Diversity, Equity and Inclusion Policy to outline our diversity, equity and inclusion goals, commitment, initiatives and monitoring practices.
We provide equal employment opportunities to all individuals and seek to cultivate an inclusive culture that respects and appreciates diversity of experience, ideas, and opinions. To ensure we attract and retain top talent, we provide competitive compensation and benefits, including equity compensation for all employees.
We believe this multi-faceted investment strategy will provide us with greater flexibility to opportunistically build our portfolio and differentiate us from other public REITs pursuing a more limited investment strategy. 7 Table of Contents Investment Origination Process Our current investment pipeline has been, and our investments going forward will be, identified by our senior management team, led by our Chief Executive Officer, Mark Manheimer, supplemented by our entire acquisitions team.
Investment Origination Process Our current investment pipeline has been, and our investments going forward will be, identified by our senior management team, led by our Chief Executive Officer, Mark Manheimer, supplemented by our entire acquisitions team. Our acquisition team has developed a broad network of long-standing relationships.
In sale-leaseback transactions, we strive to set rents at sustainable levels and get long-term site commitments from tenants.
In sale-leaseback transactions, we strive to set rents at sustainable levels and get long-term site commitments from tenants. We believe this multi-faceted investment strategy will provide us with greater flexibility to opportunistically build our portfolio and differentiate us from other public REITs pursuing a more limited investment strategy.
As of December 31, 2023, we owned 99.3% of the limited partnership interests in our operating partnership.
As of December 31, 2024, we owned 99.5% of the limited partnership interests in our operating partnership. We have elected to be treated and qualify as a REIT for U.S. federal income tax purposes.
Removed
Beginning with our short taxable year ended December 31, 2019, we elected to be treated and qualify as a REIT for U.S. federal income tax purposes. 2023 Financing Activities Debt Transactions 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.
Added
Recent Financing Activities January 2025 Debt Transactions On January 15, 2025, the Company amended its existing credit agreements agented by PNC Bank, National Association (the “PNC Credit Agreement”), Wells Fargo Bank, National Association (the “Wells Fargo Credit Agreement”) and Truist Bank (the “Truist Credit Agreement”).
Removed
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 our option in whole or in part without premium or penalty.
Added
The PNC Credit Agreement was amended and restated and provides for: a new $175.0 million senior unsecured term loan (the “2030 Term Loan B”); an existing $200.0 million senior unsecured term loan, which was fully funded under the existing PNC Credit Agreement (the “2028 Term Loan”); and an upsized $500.0 million senior unsecured revolving credit facility (increased from $400 million under the existing PNC Credit Agreement) (the “Revolver”).
Removed
The 2029 Term Loan matures on July 3, 2026, subject to extension options at our election on two occasions, by one year and, on one occasion, by six months (subject to certain conditions).
Added
The 2030 Term Loan B and the upsized Revolver initially mature in January 2029 and include, at the Company’s election, a one-year option to extend the maturity to January 2030.
Removed
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%.
Added
The 2030 Term Loan B was fully funded on the closing date and the Company has hedged the entire $175.0 million 2030 Term Loan B at an all-in fixed interest rate of 5.12% through January 2030.
Removed
Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. 2027 Term Loan In December 2019, we 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”).
Added
The Truist Credit Agreement governs existing term loans thereunder (the “2029 Term Loan”). Among other changes, each of the PNC Credit Agreement, Wells Fargo Credit Agreement, and Truist Credit Agreement were also amended to remove certain financial covenants and provide for revised, improved pricing when the Company meets certain investment grade rating and leverage targets.
Removed
The 2027 Term Loan is repayable at our option in whole or in part without premium or penalty. The Company has fully hedged the 2027 Term Loan.
Added
ATM Program During 2024, we entered into forward sale agreements with respect to an aggregate 1,895,647 shares of common stock under our at-the-market (“ATM”) program at a weighted average price of $17.63 per share that remain unsettled.
Removed
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.
Added
On September 26, 2024, we physically settled 2,200,000 shares of common stock at a price of $17.22 per share in accordance with the forward sale agreements. We received net proceeds from the settlement of $37.8 million, net of underwriting discounts and offering costs of $1.8 million.
Removed
From October 25, 2023 through December 31, 2023, we sold 4,478,539 shares of our common stock at a weighted average price of $17.27 per share, from which we received net proceeds of approximately $76.5 million.
Added
This may include opportunistically acquiring properties that we believe will generate consistent cash flows but may initially result in higher tenant concentrations than we generally target, with the intent to reduce those concentrations over time.
Removed
As of December 31, 2023, we had $222.7 million in remaining gross proceeds available for future issuances of shares of our common stock under the 2023 ATM Program. Effective October 24, 2023, in connection with the establishment of the 2023 ATM Program, we terminated our prior $250.0 million at-the-market equity program (the “2021 ATM Program”).
Added
For tenants not required to provide unit-level reporting pursuant to their lease, we use technology tools that track cell phone use in stores to assess the performance of that store.
Removed
As a result of such termination, we will not offer or sell any additional shares of common stock under the 2021 ATM Program. We have entered into a forward confirmation with respect to 5,983,711 shares of common stock under the 2021 ATM Program that remains unsettled.
Added
As we grow, we anticipate having access to the investment grade debt and equity capital markets to maintain a prudent balance between debt and equity financing.
Removed
We 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 September 13, 2024.
Removed
We seek to invest in properties that have strong unit-level economics to reduce the risk of default on a particular property.
Removed
Our acquisition team has developed a broad network of long-standing relationships.
Removed
We believe our developer partnerships on build-to-suit projects, which provide higher yields than acquisitions, will differentiate us from our competitors without development expertise.
Removed
Additionally, our WALT of 9.5 years as of December 31, 2023 and superior underwriting and portfolio monitoring capabilities, which reduce default losses, are intended to make our cash flows highly stable.
Removed
As of December 31, 2023, our workforce was approximately 64% male and 36% female; females represented approximately 14% of our senior management team; and 29% of our workforce was ethnically diverse.
Removed
As part of our effort to attract a more diverse candidate base, we partner with local universities and organizations in our recruiting efforts with a focus on recruitment of candidates that are underserved in our industry. ◦ Workplace culture and empowerment.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Organizational Structure and Ownership of Our Common Stock Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders and provide that claims relating to causes of action under the Securities Act may only be brought in federal district courts, which could limit stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees and could discourage lawsuits against us and our directors, officers and employees.
Biggest changeWhile our tenants are obligated by law to comply with the ADA and typically obligated under our leases to cover costs associated with compliance with the ADA and other property regulations, if required changes involve greater expenditures than anticipated or if the changes must be made on a more accelerated basis than anticipated, the ability of our tenants to cover costs could be adversely affected, and we could be required to expend our own funds to comply with applicable law and regulation. 26 Table of Contents Risks Related to Our Organizational Structure and Ownership of Our Common Stock Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders and provide that claims relating to causes of action under the Securities Act may only be brought in federal district courts, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees and could discourage lawsuits against us and our directors, officers, and employees.
You should consider and read carefully all of the risks and uncertainties described below, together with all of the other information contained in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes as well as other information filed with the SEC from time to time.
You should consider and read carefully all of the risks and uncertainties described below, together with all the other information contained in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes as well as other information filed with the SEC from time to time.
If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates or to offer more substantial rent abatements, tenant improvements, early termination rights or below-market renewal options in order to retain tenants when our leases expire.
If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge, we may lose existing or potential tenants, and we may be pressured to reduce our rental rates or to offer more substantial rent abatements, tenant improvements, early termination rights, or below-market renewal options in order to retain tenants when our leases expire.
Moreover, the partnership agreement of our operating partnership provides that our operating partnership is required to indemnify the general partner and its members, managers, managing members, officers, employees, agents and designees from and against any and all claims that relate to the operations of our operating partnership, except (i) if the act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active or deliberate dishonesty, (ii) for any transaction for which the indemnified party received an improper personal benefit, in money, property or services or otherwise in violation or breach of any provision of the partnership agreement or (iii) in the case of a criminal proceeding, if the indemnified person had reasonable cause to believe that the act or omission was unlawful. 27 Table of Contents If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud.
Moreover, the partnership agreement of our operating partnership provides that our operating partnership is required to indemnify the general partner and its members, managers, managing members, officers, employees, agents, and designees from and against any and all claims that relate to the operations of our operating partnership, except (i) if the act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active or deliberate dishonesty, (ii) for any transaction for which the indemnified party received an improper personal benefit, in money, property, or services or otherwise in violation or breach of any provision of the partnership agreement or (iii) in the case of a criminal proceeding, if the indemnified person had reasonable cause to believe that the act or omission was unlawful. 28 Table of Contents If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud.
Accordingly, our performance is subject to risks incident to the ownership of commercial real estate, which include the inability to collect rents from tenants due to financial hardship, including bankruptcy; changes in local real estate conditions in the markets in which we operate, including the availability and demand for single-tenant, retail commercial real estate space; changes in consumer trends and preferences that affect the demand for products and services offered by our tenants; inability to lease or sell properties upon expiration or termination of existing leases; environmental risks, including the presence of hazardous or toxic substances or materials on our properties; the subjectivity of real estate valuations and changes in such valuations over time; the illiquid nature of real estate compared to most other financial assets; changes in laws and governmental regulations, including those governing real estate usage and zoning; changes in interest rates and the availability of financing; and changes in the general economic and business climate.
Accordingly, our performance is subject to risks incident to the ownership of commercial real estate, which include the inability to collect rents from tenants due to financial hardship, including bankruptcy; changes in local real estate conditions in the markets in which we operate, including the availability and demand for single-tenant, retail commercial real estate space; changes in consumer trends and preferences that affect the demand for products and services offered by our tenants; inability to lease or sell properties upon expiration or termination of existing leases; environmental risks, including the presence of hazardous or toxic substances or materials on our properties; the subjectivity of real estate valuations and changes in these valuations over time; the illiquid nature of real estate compared to most other financial assets; changes in laws and governmental regulations, including those governing real estate usage and zoning; changes in interest rates and the availability of financing; and changes in the general economic and business climate.
Our current debt agreements and other debt agreements we may enter into in the future contain or may contain financial and other covenants with which we are or will be required to comply and that limit or will limit our ability to operate our business.
Our current debt agreements and other debt agreements we may enter into in the future contain or may contain financial and other covenants with which we are or will be required to comply, and that limits or will limit our ability to operate our business.
Additionally, new development may involve risks related to construction delays or costs overruns that may increase anticipated project costs. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development activities once undertaken or provide a tenant the opportunity to reduce rent or terminate a lease.
Additionally, new development may involve risks related to construction delays or cost overruns that may increase anticipated project costs. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development activities once undertaken or provide a tenant with the opportunity to reduce rent or terminate a lease.
As a result, our investors could lose confidence in our reported financial information, which could harm our business and the value of our shares. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We may in the future discover areas of our internal controls that need improvement.
As a result, our investors could lose confidence in our reported financial information, which could harm our business and the value of our shares. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We have in the past and may in the future discover areas of our internal controls that need improvement.
These covenants, as well as any additional covenants to which we may be subject in the future because of additional borrowings, could cause us to have to forego investment opportunities, reduce or eliminate distributions to our common stockholders or obtain financing that is more expensive than financing we could obtain if we were not subject to the covenants.
These covenants, as well as any additional covenants to which we may be subject in the future because of additional borrowings, could cause us to have to forgo investment opportunities, reduce, or eliminate distributions to our common stockholders or obtain financing that is more expensive than financing we could obtain if we were not subject to the covenants.
Generally, franchise agreements have terms that end earlier than the respective expiration dates of the related leases. In addition, a tenant's rights as a franchisee or licensee typically may be terminated and the tenant may be precluded from competing with the franchiser or licensor upon termination.
Generally, franchise agreements have terms that end earlier than the respective expiration dates of the related leases. In addition, a tenants’ rights as a franchisee or licensee typically may be terminated, and the tenant may be precluded from competing with the franchiser or licensor upon termination.
We believe that our organization and current proposed method of operation has enabled us to meet the requirements for qualification and taxation as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate in such a manner.
We believe that our organization and current proposed method of operation have enabled us to meet the requirements for qualification and taxation as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate in such a manner.
Any of these situations may delay or eliminate proceeds or cash flows we expect from build-to-suit projects, which could have an adverse effect on our financial condition. Our business is dependent upon our tenants successfully operating their businesses and their failure to do so could materially and adversely affect us. Each of our properties is leased by a single tenant.
Any of these situations may delay or eliminate proceeds or cash flows we expect from development projects, which could have an adverse effect on our financial condition. Our business is dependent upon our tenants successfully operating their businesses and their failure to do so could materially and adversely affect us. Each of our properties is leased by a single tenant.
There can be no assurance that we will be able to comply with the 20% limitation discussed above or to avoid application of the 100% excise tax discussed above. New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify or remain qualified as a REIT.
There can be no assurance that we will be able to comply with the 20% limitation discussed above or to avoid application of the 100% excise tax discussed above. 24 Table of Contents New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify or remain qualified as a REIT.
Furthermore, foreclosures could create taxable income without accompanying cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code. Failure to hedge effectively against interest rate changes may materially and adversely affect us. We currently hedge a portion of our interest rate volatility through interest rate swaps.
Furthermore, foreclosures could create taxable income without accompanying cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code. 19 Table of Contents Failure to hedge effectively against interest rate changes may materially and adversely affect us. We currently hedge a portion of our interest rate volatility through interest rate swaps.
In the event there is damage to our properties that is not covered by insurance, we may be materially and adversely affected. 17 Table of Contents We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets.
In the event there is damage to our properties that is not covered by insurance, we may be materially and adversely affected. We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets.
Our portfolio includes properties leased to single tenants that operate in multiple locations, which means that, as of December 31, 2023, we owned numerous properties leased by the same entity (or related group of entities), including Dollar General, CVS, Walgreens, Dollar Tree / Family Dollar, Food Lion / Stop & Shop, Hobby Lobby, 7-Eleven, Festival Foods, Advance Auto Parts and Sam’s / Walmart.
Our portfolio includes properties leased to single tenants that operate in multiple locations, which means that, as of December 31, 2024, we owned numerous properties leased by the same entity (or related group of entities), including Dollar General, CVS, Walgreens, Dollar Tree / Family Dollar, Food Lion / Stop & Shop, Hobby Lobby, 7-Eleven, Advance Auto Parts, and Sam’s / Walmart.
In addition, our charter requires us to indemnify and advance expenses to our directors and officers for actions taken by them in those and certain other capacities to the maximum extent permitted by Maryland law. 26 Table of Contents We are a holding company with no direct operations and we rely on funds received from our operating partnership to pay liabilities.
In addition, our charter requires us to indemnify and advance expenses to our directors and officers for actions taken by them in those and certain other capacities to the maximum extent permitted by Maryland law. We are a holding company with no direct operations and we rely on funds received from our operating partnership to pay liabilities.
For example, the CCPA, which applies to business representative and other types of personal data of California residents, provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
For example, the CCPA, which applies to business representative and other types of personal data of California residents, provides for fines per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
We primarily invest in properties leased to 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 such as home improvement, auto parts, drug stores and pharmacies, general retail, grocers, convenient stores, discount stores and quick-service restaurants.
We primarily invest in properties leased to 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 such as home improvement, auto parts, general retail, grocers, convenience stores, discount stores and quick-service restaurants.
The occurrence of any of these may cause the value of our real estate to decline, which could materially and adversely affect us. 12 Table of Contents We may not be able to successfully execute our acquisition or development strategies.
The occurrence of any of these may cause the value of our real estate to decline, which could materially and adversely affect us. We may not be able to successfully execute our acquisition or development strategies.
For example, the current and continued macro-economic conditions of high inflation and high interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find attractive, which has reduced our ability to acquire properties at our historical rate with attractive terms.
For example, the current and continuing macro-economic conditions of fluctuating inflation and fluctuating interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find attractive, which has reduced our ability to acquire properties at our historical rate with attractive terms.
The bankruptcy or insolvency of any of our tenants could result in the termination of such tenant's lease and material losses to us.
The bankruptcy or insolvency of any of our tenants could result in the termination of such tenants’ lease and material losses to us.
Changes in global or national market and economic conditions, such as global economic and financial market volatility and global geopolitical conflict, may continue to cause, among other things, tightening in the credit markets, lower levels of liquidity, higher interest rates, increased inflation, increases in the rate of default and bankruptcy and lower consumer and business spending, which could materially and adversely affect us.
Changes in global or national market and economic conditions, such as global economic and financial market volatility and global geopolitical conflict, have caused, and may continue to cause, among other things, tightening in the credit markets, lower levels of liquidity, fluctuating interest rates and inflation, increases in the rate of default and bankruptcy, and lower consumer and business spending, which could materially and adversely affect us.
In the event that these relief provisions were not available, we could lose our REIT status under the Code. Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
In the event that these relief provisions were not available, we could lose our REIT status under the Code. 23 Table of Contents Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
Some of our tenants operate under franchise or license agreements, which, if terminated or not renewed prior to the expiration of their leases with us, would likely impair their ability to pay us rent. Of the ABR of our portfolio as of December 31, 2023, 4.6% is operated by tenants under franchise or license agreements.
Some of our tenants operate under franchise or license agreements, which, if terminated or not renewed prior to the expiration of their leases with us, would likely impair their ability to pay us rent. Of the ABR of our portfolio as of December 31, 2024, 8.8% is operated by tenants under franchise or license agreements.
We believe these characteristics make our tenants' businesses e-commerce resistant and resilient through all economic cycles. While we believe this to be the case, businesses previously thought to be internet resistant, such as the retail grocery industry, have proven to be susceptible to competition from e-commerce.
We believe these characteristics make our tenants’ businesses e-commerce resistant and resilient through all economic cycles. While we believe this to be the case, businesses previously thought to be internet resistant, such as the retail grocery and drug store and pharmacy industries, have proven to be susceptible to competition from e-commerce.
In particular, these risks could arise from weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions and changes in laws, regulations or fiscal policies of the jurisdiction in which the property is located.
In particular, these risks could arise from weakness in or lack of an established market for a property, changes in the financial condition, or prospects of prospective purchasers, changes in macroeconomic conditions, and changes in laws, regulations, or fiscal policies of the jurisdiction in which the property is located.
We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us. The top five tenants in our portfolio — Dollar General, CVS, Walgreens, Dollar Tree and Home Depot — contributed 10.9%, 7.8%, 6.9%, 5.0%, and 4.7%, respectively, of our ABR as of December 31, 2023.
We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us. The top five tenants in our portfolio — Dollar General, CVS, Dollar Tree, Home Depot, and Walgreens — contributed 9.0%, 6.2%, 5.2%, 5.0%, and 4.3%, respectively, of our ABR as of December 31, 2024.
Because you will not directly own units of our operating partnership, you will not have any voting rights with respect to any such issuances or other partnership level activities of our operating partnership.
Such issuances would reduce our ownership in our operating partnership. Because you will not directly own units of our operating partnership, you will not have any voting rights with respect to any such issuances or other partnership level activities of our operating partnership.
The failure of these systems to operate effectively, maintenance problems, failures or delays in upgrading or transitioning to new platforms, or a breach in security of these systems, such as in the event of cyber-attacks, malicious internet-based activity, online and offline fraud, and administrative or technical failures and other similar activities that threaten the confidentiality, integrity, and availability of our information technology systems, including those of the third parties upon which we rely, could result in the theft of intellectual property, personal information or personal property, damage to our reputation and third-party claims, as well as reduced efficiency in our operations and in the accuracy of our internal and external financial reporting.
The failure of these systems to operate effectively, maintenance problems, failures or delays in upgrading or transitioning to new platforms, or a breach in security of these systems or data (such as in the event of cyber-attacks, malicious internet-based activity, online and offline fraud, and administrative or technical failures and other similar activities that threaten the confidentiality, integrity, and availability of our information technology systems, including those of the third parties with whom we work, or data) has in the past, and may again in the future, result in the theft of intellectual property, personal information or personal property, damage to our reputation and third-party claims, as well as reduced efficiency in our operations and in the accuracy of our internal and external financial reporting.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences.
If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences.
In addition, a significant portion of our portfolio holdings (based on ABR as of December 31, 2023) were located in the South (43.4%) and Midwest (31.3%) regions of the United States (as defined by the U.S. Census Bureau).
In addition, a significant portion of our portfolio holdings (based on ABR as of December 31, 2024) were located in the South (46.4%) and Midwest (30.0%) regions of the United States (as defined by the U.S. Census Bureau).
There can be no assurance that our tenants will be successful in the face of any new competition, and a deterioration in our tenants' businesses could impair their ability to meet their lease obligations to us and materially and adversely affect us.
There can be no assurance that our tenants will be successful in the face of any new competition, and a deterioration in our tenants’ businesses could impair their ability to meet their lease obligations to us and materially and adversely affect us. The tools we use to determine the creditworthiness of our tenants may not be accurate.
Privacy-related claims or lawsuits initiated by governmental bodies, customers or other third parties, irrespective of the merits, could be time consuming, result in costly enforcement actions (including regulatory proceedings, investigations, fines,penalties, audits, and inspections), litigation (including class action claims) or mass arbitration demands, penalties and fines, require us to change our business practices or cause business interruptions and may lead to administrative, civil, or criminal liability.
Privacy-related claims or lawsuits initiated by governmental bodies, customers, or other third parties, irrespective of the merits, could be time consuming, result in costly enforcement actions (including regulatory proceedings, investigations, fines, penalties, audits, and inspections), litigation (including class action claims), or mass arbitration demands, penalties and fines, require us to change our business practices, or cause business interruptions, and may lead to administrative, civil, or criminal liability. 17 Table of Contents Insurance on our properties may not adequately cover losses, and uninsured losses could materially and adversely affect us.
Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT.
Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A TRS is subject to income tax as a regular C corporation.
As of December 31, 2023, we had a $200.0 million 2028 Term Loan, a $175.0 million 2027 Term Loan, a $150.0 million 2029 Term Loan and $80.0 million of borrowings outstanding under our $400.0 million Revolver.
As of December 31, 2024, we had a $200.0 million 2028 Term Loan, a $175.0 million 2027 Term Loan, a $250.0 million 2029 Term Loan, and $239.0 million of borrowings outstanding under our $400.0 million Revolver.
These restrictions on ownership and transfer of our stock may, among other things: discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests; or result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of one or more charitable beneficiaries and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares. 21 Table of Contents The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.
These restrictions on ownership and transfer of our stock may, among other things: discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests; or result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of one or more charitable beneficiaries and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.
However, a capital gain dividend will not be treated as effectively connected income if (i) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States and (ii) the non-U.S. stockholder does not own more than 10% of the class of our stock at any time during the one-year period ending on the date the distribution is received. 24 Table of Contents Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA.
However, a capital gain dividend will not be treated as effectively connected income if (i) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States and (ii) the non-U.S. stockholder does not own more than 10% of the class of our stock at any time during the one-year period ending on the date the distribution is received.
We typically obtain Phase I environmental site assessments on all properties we finance or acquire. However, the Phase I environmental site assessments are limited in scope and therefore may not reveal all environmental conditions affecting a property.
The properties we own or have owned in the past may subject us to known and unknown environmental liabilities. We typically obtain Phase I environmental site assessments on all properties we finance or acquire. However, the Phase I environmental site assessments are limited in scope and therefore may not reveal all environmental conditions affecting a property.
Any material failure, weakness, interruption or breach in security of our information systems or data, or those of our third party vendors, could prevent us from effectively operating our business.
Any material failure, weakness, interruption, or breach in security of our information systems or data, or those of the third parties with whom we work, could prevent us from effectively operating our business.
A failure or weakness in our information systems (or those of the third parties upon which we rely) could materially and adversely affect us, and the remediation of any such problems could result in significant unplanned expenditures. Our reliance on vendors could introduce new cybersecurity risks and vulnerabilities, and other threats to our business operations.
A failure or weakness in our information systems (or those of the third parties with whom we work) has in the past and could again in the future materially and adversely affect us, and the remediation of any such problems could result in significant unplanned expenditures. 16 Table of Contents Our reliance on third parties could introduce new cybersecurity risks and vulnerabilities and other threats to our business operations.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems. We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident.
We have not and may not in the future, however, detect and remediate all such vulnerabilities, including on a timely basis. Further, we have (and may in the future) experienced delays in developing and deploying remedial measures and patches designed to address any such identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident.
Any claims against such bankrupt tenant for unpaid future rent would be subject to statutory limitations that would likely result in our receipt of rental revenues that are substantially less than the contractually specified rent we are owed under the lease or leases.
Any claims against such a tenant for unpaid future rent would be subject to statutory limitations that would likely result in our receipt of rental revenues that are substantially less than the contractually specified rent we are owed under the lease(s). In addition, any claim we have for unpaid past rent, if any, may not be paid in full.
Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.
Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders (including affected individuals, customers, regulators, and investors) of security incidents, or to take other actions. Such disclosures and actions are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.
Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our operating partnership and its subsidiaries will be able to satisfy the claims of our stockholders only after all of our and our operating partnership's and its subsidiaries' liabilities and obligations have been paid in full.
Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our operating partnership and its subsidiaries will be able to satisfy the claims of our stockholders only after all of our and our operating partnership’s and its subsidiaries’ liabilities and obligations have been paid in full. 27 Table of Contents In connection with the acquisition of properties or otherwise, we may issue units of our operating partnership to third parties.
Income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts and estates is generally subject to tax at reduced rates. Currently, the maximum tax rate applicable to qualified dividend income payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, generally are not eligible for this reduced rate.
Currently, the maximum tax rate applicable to qualified dividend income payable to U.S. stockholders that are individuals, trusts, and estates is 20%. Dividends payable by REITs, however, generally are not eligible for this reduced rate. Distributions from REITs that are treated as dividends but are not designated as qualified dividends or capital gain dividends are treated as ordinary income.
Prospective investors should consult their tax advisors regarding the application and effect of state and local income and other tax laws on an investment in our stock. Liabilities arising under environmental laws may materially and adversely affect us. The properties we own or have owned in the past may subject us to known and unknown environmental liabilities.
Prospective investors should consult their tax advisors regarding the application and effect of state and local income and other tax laws on an investment in our stock. 25 Table of Contents Liabilities arising under environmental laws may materially and adversely affect us.
Insurance on our properties may not adequately cover all losses and uninsured losses could materially and adversely affect us. Our tenants generally are required to maintain liability and property insurance coverage for the properties they lease from us pursuant to triple or double-net leases.
Our tenants generally are required to maintain liability and property insurance coverage for the properties they lease from us pursuant to triple-net or double-net leases.
The form, timing and/or amount of dividend distributions will be authorized at the discretion of our board of directors and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements applicable to REITs under the Code, Maryland law and other factors as our board of directors may consider relevant.
The form, timing, and/or amount of dividend distributions will be authorized at the discretion of our board of directors and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements applicable to REITs under the Code, Maryland law, and other factors as our board of directors may consider relevant. 18 Table of Contents Risks Related to Financing our Business Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all.
In addition, if we are unable to obtain financing in order to make distributions required to maintain our qualification as a REIT, we may make taxable in-kind distributions of our own stock, which may cause our stockholders to be required to pay income taxes with respect to such distributions in excess of any cash they receive, or we may be required to withhold taxes with respect to such distributions in excess of any cash our stockholders receive. 18 Table of Contents Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.
In addition, if we are unable to obtain financing in order to make distributions required to maintain our qualification as a REIT, we may make taxable in-kind distributions of our own stock, which may cause our stockholders to be required to pay income taxes with respect to such distributions in excess of any cash they receive, or we may be required to withhold taxes with respect to such distributions in excess of any cash our stockholders receive.
If our operating partnership failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT. Our operating partnership intends to qualify as a partnership for U.S. federal income tax purposes, and intends to take that position for all income tax reporting purposes.
Our operating partnership intends to qualify as a partnership for U.S. federal income tax purposes and intends to take that position for all income tax reporting purposes.
Our properties are subject to the Americans with Disabilities Act, or ADA, fire and safety regulations, building codes and other regulations. Failure to comply with these laws and regulations could result in imposition of fines by the government or an award of damages to private litigants, or both.
Failure to comply with these laws and regulations could result in imposition of fines by the government or an award of damages to private litigants, or both.
If our vendors experience a security incident or other interruption, we could experience adverse consequences, including harm to our business, results of operations and financial condition. 16 Table of Contents We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
We and the third parties with whom we work are subject to a variety of evolving threats, including, but not limited to, social-engineering attacks (including through deep fakes, which are increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
In addition, exposure to mold by our tenants or others could subject us to liability if property damage or health concerns arise.
In addition, exposure to mold by our tenants or others could subject us to liability if property damage or health concerns arise. If we were to become subject to significant mold-related liabilities, we could be materially and adversely affected.
As a result, tenant bankruptcies may materially and adversely affect us. 15 Table of Contents Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition. Our real estate investments are relatively difficult to sell quickly.
We may also be unable to re-lease a terminated or rejected space on comparable terms, or at all. As a result, tenant bankruptcies may materially and adversely affect us. 15 Table of Contents Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition.
Additionally, these restrictions may adversely affect our operating and financial flexibility and may limit our ability to respond to changes in our business or competitive environment, all of which may materially and adversely affect us. 19 Table of Contents Risks Related to Government Regulation and Tax Matters Our failure to qualify or maintain our qualification as a REIT for U.S. federal income tax purposes would reduce the amount of funds we have available for distribution and limit our ability to make distributions to our stockholders.
Risks Related to Government Regulation and Tax Matters Our failure to qualify or maintain our qualification as a REIT for U.S. federal income tax purposes would reduce the amount of funds we have available for distribution and limit our ability to make distributions to our stockholders.
Our ability to expand our portfolio through property acquisitions requires us to identify and complete acquisitions or investment opportunities on attractive terms that are compatible with our growth strategy and to successfully integrate newly acquired properties into our portfolio.The current and continued macro-economic conditions of high inflation and high interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find acceptable, which has reduced our ability to acquire properties at our historical rate with attractive terms.
The current and continued macro-economic conditions of fluctuating inflation and fluctuating interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find acceptable, which has reduced our ability to acquire properties at our historical rate with attractive terms.
Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders of OP units, which may impede business decisions that could benefit our stockholders.
This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders of OP units, which may impede business decisions that could benefit our stockholders.
We cannot assure you that our portfolio of properties will expand at all, or if it will expand at any specified rate or to any specified size.
As a result, we may not be able to successfully implement our investment and acquisition strategies. We cannot assure you that our portfolio of properties will expand at all, or if it will expand at any specified rate or to any specified size.
For example, if circumstances make it not profitable or otherwise uneconomical for us to remain in certain states or geographical markets, the 100% tax could delay our ability to exit those states or markets by selling our assets in those states or markets other than through a TRS, which could harm our operating profits. 20 Table of Contents Furthermore, even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local income, property and excise taxes on our income or property.
For example, if circumstances make it not profitable or otherwise uneconomical for us to remain in certain states or geographical markets, the 100% tax could delay our ability to exit those states or markets by selling our assets in those states or markets other than through a TRS, which could harm our operating profits.
As a result, our ability to promptly sell one or more properties in our portfolio in response to changing economic, financial or investment conditions is limited. We may be unable to realize our investment objective by sale, other disposition or refinancing at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.
We may be unable to realize our investment objective by sale, other disposition, or refinancing at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.
If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at corporate rates and state and local taxes, which may have adverse consequences on our total return to our stockholders.
If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at corporate rates and state and local taxes, which may have adverse consequences on our total return to our stockholders. 22 Table of Contents If a transaction intended to qualify as a 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis.
We engage a variety of vendors to process and store data, some of which may be private or include personally identifiable information. We also depend on vendors to host certain of our systems and infrastructure. Our ability to monitor these vendors’ information security practices is limited, and these vendors may not have adequate information security measures in place.
We engage a variety of third parties to process and store data, some of which may be private or include personal information. We also depend on third parties to host certain of our systems and infrastructure.
In addition, our TRSs will be subject to U.S. federal income tax and applicable state and local taxes on their net income. Any of these taxes would reduce our cash available for distribution to stockholders. Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.
Any of these taxes would reduce our cash available for distribution to stockholders. 21 Table of Contents Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends. Income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts, and estates is generally subject to tax at reduced rates.
This strategy includes reviewing corporate level financial information, assessing business risks and reviewing investment ratings or establishing a “shadow rating” using our proprietary credit modeling process for unrated tenants.
As of December 31, 2024, 44.2% of our properties are leased to unrated or sub-investment grade tenants that we determine, through our disciplined underwriting and risk management strategy, to be creditworthy. This strategy includes reviewing corporate level financial information, assessing business risks, and reviewing investment ratings or establishing a “shadow rating” using our proprietary credit modeling process for unrated tenants.
As of December 31, 2023, our portfolio included substantial holdings in Illinois (8.6%), Texas (7.6%), Wisconsin (7.2%), New York (6.5%), North Carolina (5.9%), Georgia (5.4%), Alabama (5.1%), and Ohio (5.1%) based on ABR as of December 31, 2023.
Our portfolio has geographic market concentrations that make us especially susceptible to adverse developments in those geographic markets. As of December 31, 2024, our portfolio included substantial holdings in Texas (12.3%), Illinois (10.1%), New York (7.4%), Georgia (6.2%), Wisconsin (5.7%), and North Carolina (5.0%) based on ABR as of December 31, 2024.
Because we may invest in markets other than the ones in which our current properties are located or properties which may be leased to tenants other than those to which we have historically leased properties, we may also be subject to the risks associated with investment in new markets or with new tenants that may be relatively unfamiliar to our management team.
Because we may invest in markets other than the ones in which our current properties are located or properties which may be leased to tenants other than those to which we have historically leased properties, we may also be subject to the risks associated with investment in new markets or with new tenants that may be relatively unfamiliar to our management team. 12 Table of Contents Our property developments are subject to, without limitation, risks relating to the availability and timely receipt of zoning and other regulatory approvals and the cost and timely completion of construction (including risks from factors beyond our control, such as weather, labor conditions, or material shortages).
If we were to become subject to significant mold-related liabilities, we could be materially and adversely affected. 25 Table of Contents Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unanticipated expenditures that materially and adversely affect us.
Compliance with the Americans with Disabilities Act and fire, safety, and other regulations may require us to make unanticipated expenditures that materially and adversely affect us. Our properties are subject to the Americans with Disabilities Act (“ADA”), fire and safety regulations, building codes, and other regulations.
In addition, losses in any TRS in which we own an interest will generally not provide any tax benefit, except that such losses could theoretically be carried forward against future taxable income in such TRS. 22 Table of Contents The U.S. federal income tax treatment of the cash that we might receive from cash settlement of the forward sale agreement is unclear and could jeopardize our ability to meet the REIT qualification requirements.
The U.S. federal income tax treatment of the cash that we might receive from cash settlement of our forward sale agreements is unclear and could jeopardize our ability to meet the REIT qualification requirements.
Overall, no more than 20% of the value of a REIT's assets may consist of securities of one or more TRSs.
A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Overall, no more than 20% of the value of a REIT’s assets may consist of securities of one or more TRSs.
In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our common stock.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our common stock. 20 Table of Contents If our operating partnership failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT.
As a result, a tenant may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy.
As a result, a tenant may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon expiration, become insolvent, or declare bankruptcy. For example, in 2024, Big Lots filed for bankruptcy protection and Walgreens announced that it would close about 1,200 underperforming stores in the United States over three years.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. It may be difficult or costly to detect, investigate, mitigate, contain, and remediate a security incident. Our efforts to do so may not be successful.
If our measurement of credit quality proves to be inaccurate, we may be subject to defaults, and investors may view our cash flows as less stable. Our portfolio has geographic market concentrations that make us especially susceptible to adverse developments in those geographic markets.
If our measurement of credit quality proves to be inaccurate, we may be subject to defaults, and investors may view our cash flows as less stable. In addition, most investment grade tenants are not required to provide unit-level reporting information pursuant to their leases.
Our common stock will not constitute a USRPI so long as we are a “domestically-controlled” REIT.
Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA. Our common stock will not constitute a USRPI so long as we are a “domestically-controlled” REIT.
Removed
Additionally, our ability to successfully operate acquired properties may be constrained by risks associated with the ownership of real estate. As a result, we may not be able to implement our investment and acquisition strategies successfully.
Added
Our ability to expand our portfolio through property acquisitions requires us to identify and complete acquisitions or investment opportunities on attractive terms that are compatible with our growth strategy and to successfully integrate newly acquired properties into our portfolio.
Removed
Our development activities related to our build-to-suit projects are subject to, without limitation, risks relating to the availability and timely receipt of zoning and other regulatory approvals and the cost and timely completion of construction (including risks from factors beyond our control, such as weather or labor conditions or material shortages).
Added
In these cases, we utilize technology tools that track cell phone use in stores to assess the performance of a particular store. If the data provided by these tools is not accurate, we may be subject to defaults, and investors may view our cash flows as less stable.
Removed
A substantial number of our properties are leased to unrated tenants and the tools we use to determine the creditworthiness of our tenants may not be accurate. As of December 31, 2023, 29.5% of our properties are leased to unrated or sub-investment grade tenants that we determine, through our disciplined underwriting and risk management strategy, to be creditworthy.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+1 added−0 removed8 unchanged
Biggest changeDepending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity on the provider. 28 Table of Contents For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1.
Biggest changeDepending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity on the provider.
Our cybersecurity incident response policy is designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including senior management. The Company has identified and designated certain Company employees as members of a cybersecurity incident response team, including the Chief Accounting Officer and the IT Manager.
Our cybersecurity incident response policy is designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including senior management. The Company has identified and designated certain Company employees as members of a cybersecurity incident response team, including the Chief Accounting Officer, the Chief Financial Officer, and the IT Manager.
The audit committee of the board of directors receives quarterly reports concerning the Company’s significant cybersecurity threats and risk and the processes the Company has implemented to address them. These quarterly reports include summaries or presentations related to cybersecurity threats, risk, and mitigation. 29 Table of Contents
The audit committee of the board of directors receives quarterly reports concerning the Company’s significant cybersecurity threats and risk and the processes the Company has implemented to address them. These quarterly reports include summaries or presentations related to cybersecurity threats, risk, and mitigation. 30 Table of Contents
Our information security processes are overseen by our IT Manager and our Chief Accounting Officer, and supported by a cybersecurity monitoring service provider, who work to help identify, assess and manage the Company’s cybersecurity threats and risks.
Our information security processes are overseen by our IT Manager, Chief Accounting Officer, and Chief Financial Officer, and are supported by a cybersecurity monitoring service provider, who works to help identify, assess, and manage the Company’s cybersecurity threats and risks.
Third Party Risk Management The Company uses third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including for example a managed service security provider that monitors certain of the Company’s computer networks and third-party hosted services.
Third Party Risk Management The Company uses third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including, for example, a managed service security provider that monitors certain of the Company’s computer networks and third-party hosted services. 29 Table of Contents We use third-party service providers to perform a variety of functions throughout our business, including application providers and hosting companies.
We use third-party service providers to perform a variety of functions throughout our business, including application providers and hosting companies. The Company has implemented certain measures designed to help identify and mitigate cybersecurity threats associated with the use of third-party service providers, such as assessing the security protocols of certain service providers and obtaining security reports from certain vendors.
The Company has implemented certain measures designed to help identify and mitigate cybersecurity threats associated with the use of third-party service providers, such as assessing the security protocols of certain service providers and obtaining security reports from certain vendors.
The board of directors’ audit committee is responsible for overseeing the Company’s cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats.
Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function. The board of directors’ audit committee is responsible for overseeing the Company’s cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats.
Item 1A. Risk Factors in this Annual Report on Form 10-K. Any material failure, weakness, interruption or breach in security of our information systems or data, or those of our third party vendors, could prevent us from effectively operating our business. Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
Risk Factors in this Annual Report on Form 10-K, including Any material failure, weakness, interruption, or breach in security of our information systems or data, or those of the third parties with whom we work, could prevent us from effectively operating our business.
Added
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A.

Item 2. Properties

Properties — owned and leased real estate

12 edited+5 added−3 removed2 unchanged
Biggest changeThe breakdown of our necessity-based retail, service-oriented, discount-focused, and other, non-defensive retail industries by sector and by percentage of ABR as of December 31, 2023 is set forth below (dollars in thousands): ABR (1) Gross Leasable Area Tenant Industry and Sector Number of Leases Dollars % of Total Square Feet % of Total Necessity-Based Retail Grocery 31 $ 20,261 15.4 % 1,589,648 15.0 % Drug Stores & Pharmacies (2) 61 19,294 14.6 % 817,176 7.7 % Home Improvement 29 15,269 11.6 % 1,424,030 13.4 % Auto Parts 61 5,526 4.2 % 481,156 4.5 % General Retail 6 3,753 2.8 % 829,233 7.8 % Healthcare 12 2,366 1.8 % 87,126 0.8 % Farm Supplies 7 1,615 1.2 % 172,446 1.6 % Banking 3 467 0.4 % 9,668 0.1 % Wholesale Warehouse Club 1 417 0.3 % 110,858 1.0 % Total Necessity-Based Retail 211 68,968 52.3 % 5,521,341 52.0 % Service-Oriented Industry Convenience Stores 73 9,641 7.3 % 201,697 1.9 % Quick Service Restaurants 22 3,170 2.4 % 64,215 0.6 % Automotive Service 18 2,038 1.5 % 117,803 1.1 % Casual Dining 7 1,066 0.8 % 39,490 0.4 % Health and Fitness 1 985 0.7 % 33,616 0.3 % Equipment Rental and Leasing 5 687 0.5 % 49,275 0.5 % Total Service-Oriented Industry 126 17,587 13.3 % 506,096 4.8 % Discount-Focused Industry Dollar Stores 193 20,890 15.8 % 2,020,021 19.0 % Discount Retail 32 8,134 6.2 % 1,113,096 10.5 % Total Discount-Focused Industry 225 29,024 22.0 % 3,133,116 29.5 % Defensive Retail Industries 562 115,579 87.7 % 9,160,553 86.2 % Other, Non-Defensive Industries Arts & Crafts 14 5,475 4.2 % 767,816 7.2 % Sporting Goods 4 3,841 2.9 % 251,669 2.4 % Consumer Electronics 6 3,188 2.4 % 285,495 2.7 % Specialty 2 1,719 1.3 % 46,593 0.4 % Furniture Stores 2 932 0.7 % 47,101 0.4 % Apparel 4 481 0.4 % 39,126 0.4 % Telecommunications 2 314 0.2 % 13,635 0.1 % Gift, Novelty, and Souvenir Shops 1 200 0.2 % 8,081 0.1 % Home Furnishings 1 132 0.1 % 4,114 — % Total Other, Non-Defensive 36 16,282 12.3 % 1,463,629 13.8 % Total, All Industries 598 $ 131,861 100.0 % 10,624,183 100.0 % (1) Certain figures in this table may not foot due to rounding.
Biggest changeThe breakdown of our necessity-based retail, service-oriented, discount-focused, and other, non-defensive retail industries by sector and by percentage of ABR as of December 31, 2024 is set forth below: Tenant Industry and Sector Number of Leases (1) % of Total ABR (2) % of Total Gross Leasable Area (2) (3) Necessity-Based Retail Grocery 35 13.6 % 15.0 % Home Improvement 30 11.2 % 12.6 % Drug Stores & Pharmacies (4) 57 10.6 % 6.0 % Farm Supplies 19 3.6 % 4.1 % Auto Parts 59 3.2 % 3.7 % General Retail 7 3.0 % 8.2 % Healthcare 14 2.0 % 0.9 % Wholesale Warehouse Club 1 0.3 % 0.9 % Banking 3 0.3 % 0.1 % Total Necessity-Based Retail 225 47.6 % 51.5 % Service-Oriented Industry Convenience Stores 98 9.4 % 2.4 % Automotive Service 42 3.7 % 2.3 % Health and Fitness 4 3.7 % 2.1 % Quick-Service Restaurants 33 3.2 % 0.7 % Casual Dining 7 0.7 % 0.3 % Equipment Rental and Leasing 5 0.4 % 0.4 % Total Service-Oriented Industry 189 21.1 % 8.1 % Discount-Focused Industry Dollar Stores 200 14.3 % 16.9 % Discount Retail 30 4.5 % 8.4 % Total Discount-Focused Industry 230 18.8 % 25.3 % Defensive Retail Industries 644 87.5 % 85.0 % Other, Non-Defensive Industries Arts & Crafts 16 4.2 % 7.0 % Sporting Goods 6 3.2 % 3.1 % Consumer Electronics 7 2.4 % 2.7 % Specialty 2 1.0 % 0.4 % Apparel 5 0.7 % 1.3 % Furniture Stores 2 0.6 % 0.4 % Telecommunications 2 0.2 % 0.1 % Gift, Novelty, and Souvenir Shops 1 0.1 % 0.1 % Home Furnishings 1 0.1 % 0.0 % Total Other, Non-Defensive 42 12.5 % 15.0 % Total, All Industries 686 100.0 % 100.0 % (1) Excludes one vacant property.
As of December 31, 2023, the leases in our portfolio had a WALT of 9.5 years (exclusive of mortgage loans receivable).
As of December 31, 2024, the leases in our portfolio had a WALT of 9.8 years (exclusive of mortgage loans receivable).
As of December 31, 2023, our portfolio consisted of approximately 71% and 14% of investment grade tenants and investment grade profile tenants, respectively, by ABR, and had a WALT of 9.5 years (exclusive of mortgage loans receivable).
As of December 31, 2024, our portfolio consisted of approximately 56% and 15% of investment grade tenants and investment grade profile tenants, respectively, by ABR, and had a WALT of 9.8 years (exclusive of mortgage loans receivable).
Eight of our top 10 tenants are publicly traded companies, or are subsidiaries of publicly traded companies, that have investment grade credit ratings, in addition to Hobby Lobby and Festival Foods, investment grade profile tenants. 30 Table of Contents Tenant Diversification As of December 31, 2023, our 598 properties were operated by 85 different tenants, each representing a distinct brand or concept, with no one tenant representing more than 10.9% of our portfolio by ABR.
Nine of our top 10 tenants are publicly traded companies, or are subsidiaries of publicly traded companies, that have investment grade credit ratings, in addition to Hobby Lobby, an investment grade profile tenant. 31 Table of Contents Tenant Diversification As of December 31, 2024, our 687 investments were operated by 98 different tenants, each representing a distinct brand or concept, with no one tenant representing more than 9.0% of our portfolio by ABR.
As of December 31, 2023, none of our tenants represented more than 10.9% of our portfolio by ABR, and our top 10 largest tenants represented in aggregate 53.7% of our ABR.
As of December 31, 2024, none of our tenants represented more than 9.0% of our portfolio by ABR, and our top 10 largest tenants represented, in aggregate, 46.4% of our ABR.
As of December 31, 2023, our portfolio consisted of 10.6 million square feet and was 100% occupied. As of December 31, 2023, our portfolio generated ABR of $131.9 million.
As of December 31, 2024, our portfolio consisted of 12.6 million square feet and was 99.9% occupied. As of December 31, 2024, our portfolio generated ABR of $165.1 million.
Item 2. Properties During the year ended December 31, 2023, we acquired 103 single-tenant retail net lease properties with an aggregate purchase price of $345.1 million. As of December 31, 2023, our diversified portfolio consisted of 598 single-tenant retail net leased properties spanning 45 states, with 85 different tenants represented across 26 retail sectors.
Item 2. Properties During the year ended December 31, 2024, we acquired 115 single-tenant retail net lease properties with an aggregate purchase price of $479.0 million. As of December 31, 2024, we owned or had investments in 687 properties spanning 45 states, with 98 different tenants represented across 26 retail sectors.
As of December 31, 2023, we had 24 property developments with rent expected to commence at various dates throughout 2024. The following table illustrates actual and anticipated rent commencement of those developments.
(2) Certain figures in this table may not foot due to rounding. Developments During 2024, rent commenced on 23 completed property developments. As of December 31, 2024, we had five property developments with rent expected to commence at various dates throughout 2025. The following table illustrates actual and anticipated rent commencement of those developments.
Tenant Industry Location Lease Term (Years) Actual/ Anticipated Rent Commencement Arts & Craft D'Iberville 15 Commenced 1Q'23 Arts & Craft Winder, GA 15 Commenced 1Q'23 Arts & Craft Sheboygan, WI 10 Commenced 2Q'23 Home Improvement Bossier City, LA 12 Commenced 3Q'23 Discount Retail Alpena, MI 10 Commenced 3Q'23 Dollar Stores (multiple programs) Various (3 completed) 10 Commenced 3Q'23 Dollar Stores (multiple programs) Various (13 completed) 10 to 15 Commenced 4Q'23 Automotive Service (multiple programs) Various (1 completed) 15 Commenced 4Q'23 Dollar Stores (multiple programs) Various (15 in progress) 10 to 15 1Q'24 to 3Q'24 Automotive Service (multiple programs) Various (6 in progress) 15 1Q'24 to 3Q'24 Farm Supplies Malakoff, TX 20 years 1Q'24 Home Improvement Butte, MT 15 years 3Q'24 Pet Supplies Sumter, SC 10 years 4Q'24
Tenant Industry Location Lease Term (Years) Actual or Anticipated Rent Commencement Dollar Stores (multiple programs) Various (9 completed) 10 to 15 Commenced 1Q'24 Farm Supplies Malakoff, TX 20 Commenced 1Q'24 Dollar Stores (multiple programs) Various (5 completed) 15 Commenced 2Q'24 Automotive Service (multiple locations) Various (1 completed) 10 to 15 Commenced 2Q'24 Home Improvement Butte, MT 15 Commenced 3Q'24 Dollar Stores (multiple programs) Various (2 completed) 15 Commenced 3Q'24 Automotive Service (multiple locations) Various (1 completed) 15 Commenced 3Q'24 Dollar Stores (multiple programs) Various (2 completed) 10 to 15 Commenced 4Q'24 Automotive Service (multiple locations) Various (1 completed) 15 Commenced 4Q'24 Dollar Stores (multiple programs) Various (1 in progress) 10 1Q'25 to 2Q'25 Automotive Service (multiple locations) Various (3 in progress) 15 1Q'25 to 2Q'25 Pet Supplies Sumter, SC 10 1Q'25
The following table details information about our tenants as of December 31, 2023 (dollars in thousands): Tenant (1) Number of Properties Square Feet ABR % of ABR ABR per Square Foot Dollar General Corporation 134 1,386,713 $ 14,350 10.9 % $ 10.35 CVS Health Corporation 33 403,949 10,246 7.8 % 25.36 Walgreen Co. 28 413,227 9,047 6.9 % 21.89 Dollar Tree Stores, Inc. / Family Dollar Stores, Inc. 59 633,308 6,540 5.0 % 10.33 Home Depot U.S.A, Inc. 4 483,134 6,197 4.7 % 12.83 Koninklijke Ahold Delhaize N.V.
The following table details information about our tenants as of December 31, 2024: Tenant (1) Number of Properties (2) % of Annualized Base Rent (3) Dollar General Corporation 125 9.0 % CVS Health Corporation 33 6.2 % Dollar Tree Stores, Inc. / Family Dollar Stores, Inc. 75 5.2 % The Home Depot, Inc. 5 5.0 % Walgreen Co. 24 4.3 % Hobby Lobby Stores, Inc. 17 4.2 % Koninklijke Ahold Delhaize N.V.
(2) The Drug Stores & Pharmacies industry has one property that resides in NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), representing approximately 0.3% of ABR. 32 Table of Contents Geographic Diversification The following table presents ABR by state for our portfolio as of December 31, 2023 (dollars in thousands): ABR Gross Leasable Area Tenant State Number of Leases Dollars % of Total Square Feet % of Total Illinois 26 $ 11,391 8.6 % 752,941 7.1 % Texas 43 10,063 7.6 % 591,104 5.6 % Wisconsin 24 9,507 7.2 % 920,831 8.7 % New York 25 8,609 6.5 % 728,008 6.9 % North Carolina 70 7,721 5.9 % 531,814 5.0 % Georgia 36 7,056 5.4 % 815,324 7.7 % Alabama 45 6,698 5.1 % 536,199 5.0 % Ohio 42 6,685 5.1 % 690,087 6.5 % Virginia 11 5,892 4.5 % 281,363 2.6 % Pennsylvania 28 5,697 4.3 % 405,328 3.8 % Indiana 20 5,184 3.9 % 407,252 3.8 % Louisiana 13 4,447 3.4 % 347,985 3.3 % Mississippi 23 4,186 3.2 % 516,243 4.9 % California 13 4,174 3.2 % 190,390 1.8 % Florida 29 3,965 3.0 % 280,914 2.6 % Michigan 19 3,616 2.7 % 376,373 3.5 % Oregon 3 3,343 2.5 % 148,422 1.4 % New Mexico 8 1,658 1.3 % 97,292 0.9 % Iowa 12 1,488 1.1 % 239,596 2.3 % Kentucky 5 1,479 1.1 % 167,479 1.6 % Other (1) 103 19,002 14.4 % 1,599,238 15.1 % Total 598 $ 131,861 100.0 % 10,624,183 100.0 % (1) Includes 25 states. 33 Table of Contents Lease Terms and Expirations Our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods.
(4) The Drug Stores & Pharmacies industry has one property that resides in NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), representing approximately 0.3% of ABR. 33 Table of Contents Geographic Diversification The following table presents ABR by state for our portfolio as of December 31, 2024: Tenant State Number of Leases (1) % of Total ABR % of Total Gross Leasable Area (2) Texas 70 12.3 % 7.9 % Illinois 43 10.1 % 8.3 % New York 36 7.4 % 7.2 % Georgia 36 6.2 % 9.1 % Wisconsin 23 5.7 % 7.3 % North Carolina 72 5.0 % 4.5 % Alabama 50 4.6 % 4.4 % Ohio 42 4.0 % 5.5 % Pennsylvania 30 3.9 % 3.9 % Virginia 11 3.6 % 2.2 % Indiana 20 3.6 % 3.6 % Florida 30 3.4 % 2.6 % Louisiana 16 3.2 % 3.4 % Michigan 18 2.5 % 3.4 % Mississippi 21 2.4 % 4.0 % California 12 2.4 % 1.7 % Oregon 3 2.0 % 1.2 % South Carolina 11 1.3 % 1.7 % New Jersey 6 1.2 % 0.7 % Washington 5 1.1 % 1.1 % Other (3) 131 14.1 % 16.3 % Total 686 100.0 % 100.0 % (1) Excludes one vacant property.
(Big Lots) 8 302,587 2,011 1.5 % 6.65 Top 20 Subtotal 441 8,425,791 100,019 75.9 % 11.87 Other 157 2,198,392 31,842 24.1 % 14.48 Total / Weighted Average 598 10,624,183 $ 131,861 100.0 % $ 12.41 (1) Represents tenant or guarantor. 31 Table of Contents Tenant Industry Diversification The majority of our portfolio is comprised of properties leased to tenants operating in defensive retail industries, with 87.7% of our ABR as of December 31, 2023 coming from necessity, service-oriented, and/or discount industries.
(3) Certain figures in this table may not foot due to rounding. 32 Table of Contents Tenant Industry Diversification The majority of our portfolio is comprised of properties leased to tenants operating in defensive retail industries, with 87.5% of our ABR as of December 31, 2024 coming from necessity, service-oriented, and/or discount industries.
Removed
(Food Lion / Stop & Shop) 7 362,103 5,808 4.4 % 16.04 Hobby Lobby Stores, Inc. 15 825,816 5,531 4.2 % 6.70 7-Eleven, Inc. 20 69,968 4,611 3.5 % 65.90 Speedway, LLC 49 106,627 4,288 3.3 % 40.21 MDSFEST, Inc. (Festival Foods) 3 268,787 3,955 3.0 % 14.71 Advance Stores Company, Inc.
Added
(Food Lion / Stop & Shop) 8 3.9 % Walmart Inc. 7 3.0 % Tractor Supply Company 17 2.8 % Speedway, LLC 49 2.6 % 7-Eleven, Inc. 18 2.5 % Life Time Inc. 2 2.5 % Best Buy Co., Inc. 7 2.4 % Aldi Inc. 7 2.4 % MDSFEST, Inc. (Festival Foods) 3 2.3 % Advance Stores Company, Inc.
Removed
(Advance Auto Parts) 40 286,706 3,900 3.0 % 13.60 Wal-Mart Stores, Inc. 6 813,688 3,770 2.9 % 4.63 Lowe's Companies, Inc. 4 501,771 3,578 2.7 % 7.13 The Kroger Co. 7 396,089 3,407 2.6 % 8.60 Best Buy Stores, L.P. 6 285,495 3,188 2.4 % 11.17 Floor & Décor Outlets of America, Inc. 2 164,770 2,615 2.0 % 15.87 Ollie's Bargain Outlet, Inc. 10 373,976 2,435 1.8 % 6.51 Winn-Dixie Stores, Inc. 4 213,830 2,356 1.8 % 11.02 Dick's Sporting Goods, Inc. 2 133,247 2,186 1.7 % 16.41 Big Lots Stores, Inc. / PNS Stores, Inc.
Added
(Advance Auto Parts) 37 2.2 % Lowe's Companies, Inc. 4 2.2 % The Kroger Co. 7 2.1 % Subtotal of Tenants with ABR greater than 2.0% 445 65.0 % Other 241 35.0 % Total / Weighted Average 686 100.0 % (1) Represents tenant or guarantor. (2) Excludes one vacant property.
Removed
The following table illustrates contractual lease expirations within the Company's portfolio as of December 31, 2023, assuming no exercise of contractual extension options (dollars in thousands): ABR Gross Leasable Area Year Number of Leases Dollars % of Total Square Feet % of Total 2024 13 $ 4,056 3.1 % 329,292 3.1 % 2025 65 7,653 5.8 % 491,842 4.6 % 2026 10 2,563 1.9 % 282,727 2.7 % 2027 17 4,602 3.5 % 429,665 4.0 % 2028 26 10,128 7.7 % 817,615 7.7 % 2029 43 9,759 7.4 % 760,148 7.2 % 2030 39 9,896 7.5 % 1,052,878 9.9 % 2031 64 12,187 9.2 % 1,150,824 10.8 % 2032 34 9,085 6.9 % 1,236,792 11.6 % 2033 61 12,590 9.5 % 1,015,117 9.6 % 2034 39 11,095 8.4 % 441,606 4.2 % 2035 28 8,861 6.7 % 499,310 4.7 % 2036 21 4,977 3.8 % 269,010 2.5 % 2037 23 6,666 5.1 % 533,383 5.0 % 2038 91 11,441 8.7 % 1,048,698 9.9 % Thereafter 24 6,302 4.8 % 265,276 2.5 % Total 598 $ 131,861 100.0 % 10,624,183 100.0 % Developments During 2023, rent commenced on 22 completed property developments.
Added
(2) Certain figures in this table may not foot due to rounding. (3) Square feet.
Added
(2) Square feet. (3) Includes 25 states. 34 Table of Contents Lease Terms and Expirations Our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods.
Added
The following table illustrates contractual lease expirations within the Company’s portfolio as of December 31, 2024, assuming no exercise of contractual extension options (dollars in thousands): ABR Gross Leasable Area Year Number of Leases (1) Amount % of Total (2) Square Feet % of Total 2025 4 $ 1,215 0.8 % 238,918 2.0 % 2026 9 2,459 1.6 % 275,967 2.3 % 2027 12 4,077 2.7 % 364,935 3.0 % 2028 25 10,094 6.6 % 770,829 6.4 % 2029 41 9,602 6.3 % 833,668 6.9 % 2030 32 11,046 7.2 % 1,106,203 9.1 % 2031 53 12,260 8.0 % 1,177,377 9.7 % 2032 39 10,582 6.9 % 1,536,491 12.7 % 2033 52 11,520 7.5 % 883,568 7.3 % 2034 71 18,040 11.8 % 1,014,302 8.4 % 2035 36 9,681 6.3 % 562,621 4.7 % 2036 19 5,797 3.8 % 354,613 2.9 % 2037 21 7,265 4.7 % 577,962 4.8 % 2038 63 8,420 5.5 % 752,191 6.2 % 2039 47 9,916 6.5 % 762,249 6.3 % Thereafter 86 21,421 14.0 % 882,156 7.3 % Total 610 $ 153,395 100.0 % 12,094,050 100.0 % (1) Excludes one vacant property and 76 investments that secure mortgage loans receivable.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. 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. 34 Table of Contents Item 4. Mine Safety Disclosures Not applicable. PART II — OTHER INFORMATION
Biggest changeItem 3. 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 material lawsuits, claims, or other legal proceedings. 35 Table of Contents Item 4. Mine Safety Disclosures Not applicable. PART II — OTHER INFORMATION

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the years ended December 31, 2023 and 2022, we declared and paid the following common stock dividends (in thousands, except per share data): Year Ended December 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 April 25, 2023 0.200 June 1, 2023 12,173 June 15, 2023 July 24, 2023 0.205 September 1, 2023 13,768 September 15, 2023 October 24, 2023 0.205 December 1, 2023 14,084 December 15, 2023 $ 0.810 $ 51,675 Year Ended December 31, 2022 Declaration Date Dividend Per Share Record Date Total Amount Payment Date February 22, 2022 $ 0.200 March 15, 2022 $ 8,888 March 30, 2022 April 26, 2022 0.200 June 1, 2022 9,588 June 15, 2022 July 26, 2022 0.200 September 1, 2022 10,073 September 15, 2022 October 25, 2022 0.200 December 1, 2022 10,984 December 15, 2022 $ 0.800 $ 39,533 The holders of OP Units are entitled to an equal distribution per each OP Unit held as of each record date.
Biggest changeDuring the years ended December 31, 2024 and 2023, we declared and paid the following common stock dividends (in thousands, except per share data): Year Ended December 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 April 23, 2024 0.205 June 3, 2024 15,042 June 14, 2024 July 23, 2024 0.210 September 3, 2024 16,251 September 13, 2024 October 18, 2024 0.210 December 2, 2024 17,133 December 13, 2024 $ 0.830 $ 63,457 Year Ended December 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 April 25, 2023 0.200 June 1, 2023 12,173 June 15, 2023 July 24, 2023 0.205 September 1, 2023 13,768 September 15, 2023 October 24, 2023 0.205 December 1, 2023 14,084 December 15, 2023 $ 0.810 $ 51,675 The holders of OP Units are entitled to an equal distribution per each OP Unit held as of each record date.
Recent Sales of Unregistered Securities None. 35 Table of Contents Performance Graph The following graph compares our cumulative total stockholder return based on the market price of our common stock, assuming dividends are reinvested, with the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and the NAREIT US Equity REIT Index for the period beginning August 13, 2020 (the date our common stock began trading on the NYSE exchange) and ending December 31, 2023.
Recent Sales of Unregistered Securities None. 36 Table of Contents Performance Graph The following graph compares our cumulative total stockholder return based on the market price of our common stock, assuming dividends are reinvested, with the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and the NAREIT US Equity REIT Index for the period beginning August 13, 2020 (the date our common stock began trading on the NYSE exchange) and ending December 31, 2024.
Period Ending Index 8/13/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 NETSTREIT Corp. $ 100.00 $ 111.58 $ 136.05 $ 113.24 $ 115.61 S&P 500 $ 100.00 $ 112.05 $ 144.21 $ 118.08 $ 149.14 NAREIT US EQUITY REIT Index $ 100.00 $ 106.04 $ 149.84 $ 112.46 $ 125.23 The information above shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Period Ending Index 8/13/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 NETSTREIT Corp. $ 100.00 $ 111.58 $ 136.05 $ 113.24 $ 115.61 $ 96.30 S&P 500 $ 100.00 $ 112.05 $ 144.21 $ 118.08 $ 149.14 $ 186.45 NAREIT US EQUITY REIT Index $ 100.00 $ 106.04 $ 149.84 $ 112.46 $ 125.23 $ 131.39 The information above shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
In addition, there are no remaining Class B units of limited partnership of the operating partnership (“Class B OP Units”), which have all been converted into shares of our common stock prior to 2022.
In addition, there are no remaining Class B units of limited partnership of the operating partnership (“Class B OP Units”), which have all been converted into shares of our common stock.
In addition, as of February 12, 2024 there were 479,298 outstanding Class A units of limited partnership of the operating partnership (“Class A OP Units”) which are convertible into shares of our common stock on a one-for-one basis.
In addition, as of February 19, 2025, there were 424,956 outstanding Class A units of limited partnership of the operating partnership (“Class A OP Units”), which are convertible into shares of our common stock on a one-for-one basis.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock, Holders of Record, and Distribution Policy Our common stock is traded on the NYSE under the symbol “NTST.” As of February 12, 2024 there were 73,221,810 shares of our common stock issued and outstanding which were held by approximately 53 stockholders of record.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock, Holders of Record, and Distribution Policy Our common stock is traded on the NYSE under the symbol “NTST.” As of February 19, 2025, there were 81,663,128 shares of our common stock issued and outstanding, which were held by approximately 62 stockholders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table sets forth a reconciliation of Property-Level NOI and Property-Level Cash NOI for the periods presented (in thousands): Year Ended December 31, 2023 2022 Net income $ 6,890 $ 8,205 General and administrative 20,176 19,053 Depreciation and amortization 63,677 50,075 Provisions for impairment 7,083 1,114 Transaction costs 456 839 Interest expense, net 19,058 9,181 Gain on sales of real estate, net (1,175) (4,148) Income tax (benefit) expense (49) 396 Loss on debt extinguishment 128 — Interest income on mortgage loans receivable (7,388) (2,345) Lease termination fees (550) — Other income, net (752) (131) Property-Level NOI 107,554 82,239 Straight-line rent adjustments (1,163) (1,286) Amortization of lease-related intangibles (611) (889) Property-Level Cash NOI $ 105,780 $ 80,064 48 Table of Contents 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 December 31, 2023 Net income $ 1,962 General and administrative 4,876 Depreciation and amortization 17,078 Provisions for impairment 2,709 Transaction costs 189 Interest expense, net 5,646 Gain on sales of real estate, net (506) Gain on forfeited earnest money deposit — Income tax expense 10 Loss on debt extinguishment — Interest income on mortgage loans receivable (2,243) Lease termination fees — Other income, net (166) Property-Level NOI 29,555 Straight-line rent adjustments (456) Amortization of lease-related intangibles (93) Property-Level Cash NOI $ 29,006 Adjustment for intraquarter acquisitions, dispositions and completed development (1) 705 Property-Level Cash NOI Estimated Run Rate $ 29,711 Interest income on mortgage loans receivable 2,243 Adjustments for intraquarter mortgage loan activity (2) 115 Total Cash NOI - Estimated Run Rate $ 32,069 (1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the year ended December 31, 2023 had occurred on January 1, 2023.
Biggest changeThe 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 December 31, 2024 Net income $ (5,424) General and administrative 4,456 Depreciation and amortization 20,349 Provisions for impairment 12,633 Transaction costs 158 Interest expense, net 8,576 Gain on sales of real estate, net (1,002) Income tax expense 18 Amortization of loan origination costs and discounts (123) Interest income on mortgage loans receivable (3,103) Lease termination fees (400) Other expense, net 103 Property-Level NOI 36,241 Straight-line rent adjustments (1,120) Amortization of lease-related intangibles (95) Property-Level Cash NOI $ 35,026 Adjustment for intraquarter acquisitions, dispositions, and completed development (1) 1,817 Property-Level Cash NOI Estimated Run Rate $ 36,843 Interest income on mortgage loans receivable 3,103 Adjustments for intraquarter mortgage loan activity (2) 93 Total Cash NOI - Estimated Run Rate $ 40,039 (1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2024, had occurred on October 1, 2024.
Purchase Price Allocation of Acquired Properties We evaluate each acquisition transaction to determine whether the acquired asset meets the definition of a business and therefore accounted for as a business combination or if the acquisition transaction should be accounted for as an asset acquisition.
Purchase Price Allocation of Acquired Properties We evaluate each acquisition transaction to determine whether the acquired asset meets the definition of a business and should therefore be accounted for as a business combination, or if the transaction should be accounted for as an asset acquisition.
Examples of events or changed circumstances may include, but are not limited to, significant changes in real estate market conditions, estimated residual values, our ability or expectation to re-lease properties that are vacant or become vacant or a reduction in the expected holding period of a property.
Examples of events or changes in circumstances may include, but are not limited to, significant changes in real estate market conditions, estimated residual values, our ability or expectation to re-lease properties that are vacant or become vacant, or a reduction in the expected holding period of a property.
The lease has a remaining noncancellable term of 8.6 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.
The lease has a remaining noncancellable term of 7.6 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.
Additionally, in the normal course of business, we enter into various types of commitments to purchase real estate properties, fund development projects, or extend funds under mortgage notes receivable. These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before we are obligated to purchase or extend funding.
Additionally, in the normal course of business, we enter into various types of commitments to purchase real estate properties, fund development projects, or extend funds under mortgage loans receivable. These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before we are obligated to purchase or extend funding.
Contractual Obligations and Commitments As of December 31, 2023, our contractual debt obligations primarily include the maturity of our 2027 Term Loan with the scheduled principal payment due on 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 Revolver with a maturity of August 11, 2026.
Contractual Obligations and Commitments As of December 31, 2024, our contractual debt obligations primarily include the maturity of our 2027 Term Loan with the scheduled principal payment due on 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 the repayment of borrowings on our Revolver with a contractual maturity of August 11, 2026.
The Company expects the distributions made during 2023 are sufficient to receive a full dividends paid deduction. We maintain a taxable REIT subsidiary (“TRS”) which may be subject to U.S. federal, state, and local income taxes on its taxable income.
The Company expects the distributions made during 2024 are sufficient to receive a full dividends paid deduction. We maintain a taxable REIT subsidiary (“TRS”), which may be subject to U.S. federal, state, and local income taxes on its taxable income.
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).
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, amortization of loan origination costs and discounts, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees and other expense (income), net.
During the years ended 2023 and 2022, we recognized franchise and other state and local tax expenses in general and administrative and federal income tax in income tax benefit (expense) in the accompanying consolidated statements of operations and comprehensive income (loss).
During the years ended 2024 and 2023, we recognized franchise and other state and local tax expenses in general and administrative expenses and federal income tax in income tax (expense) benefit in the accompanying consolidated statements of operations and comprehensive (loss) income.
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 (“EBITDA re ”), Adjusted EBITDA re , Annualized Adjusted EBITDA re , Net Debt, Adjusted Net Debt, property-level net operating income (“Property-Level NOI”), 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 also disclose the following non-GAAP financial measures: Funds From Operations (“FFO”), Core FFO, Adjusted FFO (“AFFO”), earnings before interest expense, income tax expense, and depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) from the sales of depreciable property and real estate impairment losses (“EBITDAre”), Adjusted EBITDAre, Annualized Adjusted EBITDAre, Net Debt, Adjusted Net Debt, property-level net operating income (“Property-Level NOI”), property-level cash net operating income (“Property-Level Cash NOI”), 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.
Also refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023, for additional discussion of our financial condition and results of operations, including a comparison of our results of operations for the year ended December 31, 2022 and the year ended December 31, 2021, which is incorporated herein by reference. 36 Table of Contents 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.
Also refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 14, 2024, for additional discussion of our financial condition and results of operations, including a comparison of our results of operations for the year ended December 31, 2023 and the year ended December 31, 2022, which is incorporated herein by reference. 37 Table of Contents Business Overview We are an internally managed real estate company that acquires, owns, 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.
While our general and administrative expenses will continue to rise in some measure as our portfolio grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies and economies of scale. • Depreciation and Amortization.
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. 41 Table of Contents • Depreciation and amortization.
We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our Revolver, 2029 Term Loan and issuances of common stock.
We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our Revolver, and issuances of common stock.
(4) We entered into four interest rate hedges to fix the base interest rate (daily SOFR) on our 2029 Term Loan.
(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 2027 Term Loan are based on the hedged fixed rate of 1.87% through December 23, 2024, and 2.40% thereafter, compared to the variable 2027 Term Loan daily SOFR rate as of December 31, 2023 of 5.31%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $175.0 million 2027 Term Loan outstanding through the contractual maturity date of January 15, 2026.
Accordingly, the projected interest rate obligations for the variable rate 2027 Term Loan are based on the hedged fixed rate of 2.40% compared to the variable 2027 Term Loan daily SOFR rate of 4.31% as of December 31, 2024, plus a SOFR adjustment of 0.10%, and applicable margin of 1.15% based on the $175.0 million 2027 Term Loan outstanding through the contractual maturity date of January 15, 2026.
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 31, 2023 of 5.34%, 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.
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 31, 2024 of 4.55%, 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.
The funds provided under the loans, in addition to discount and loan origination costs of $0.1 million and $0.1 million, respectively, are included in mortgage loans receivable, net in the accompanying consolidated balance sheets as of December 31, 2023.
The funds provided under the loans, in addition to discount and loan origination costs, net of loan origination fees of $0.1 million, are included in mortgage loans receivable, net in the accompanying consolidated balance sheets as of December 31, 2024.
Debt See discussion of our debt and interest rate hedges included in “Note 6 - Debt” and “Note 7 - Derivative Financial Instruments” of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.
Debt See discussion of our debt and interest rate hedges included in “Note 6 – Debt,” “Note 7 – Derivative Financial Instruments” and “Note 13 – Subsequent Events” of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.
Annualized Adjusted EBITDA re is Adjusted EBITDA re multiplied by four. We present EBITDA, EBITDA re , Adjusted EBITDA re and Annualized Adjusted EBITDA re as they are measures commonly used in our industry.
Annualized Adjusted EBITDA re is Adjusted EBITDA re multiplied by four. 47 Table of Contents We present EBITDA, EBITDA re , Adjusted EBITDA re, and Annualized Adjusted EBITDA re as they are measures commonly used in our industry.
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.
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.
Accordingly, the projected interest rate obligations for the variable rate 2029 Term Loan are based on the hedged fixed rate of 3.64% compared to the variable 2029 Term Loan daily SOFR rate as of December 31, 2023 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.
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 December 31, 2024 of 4.46%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $250.0 million of the 2029 Term Loan outstanding through the contractual maturity date of July 3, 2026.
(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity completed during the year ended December 31, 2023 had occurred on January 1, 2023. (3) We calculate Annualized Adjusted EBITDA re by multiplying Adjusted EBITDA re by four.
(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2024, had occurred on October 1, 2024. (3) We calculate Annualized Adjusted EBITDA re by multiplying Adjusted EBITDA re by four.
Revenue for the year ended December 31, 2023 increased by $35.6 million to $131.9 million from $96.3 million for the year ended December 31, 2022, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.
Revenue for the year ended December 31, 2024 increased by $30.9 million to $162.8 million from $131.9 million for the year ended December 31, 2023, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.
We 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 September 13, 2024.
We may physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than December 31, 2025.
The purchase price, including acquisitions costs, and subsequent development are included in property under development in the accompanying consolidated balance sheets as of December 31, 2023. Dispositions During 2023, we sold 19 properties for a total sales price, net of disposal costs, of $40.3 million, recognizing a net gain of $1.2 million.
The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying consolidated balance sheets as of December 31, 2024. Dispositions During 2024, we sold 56 properties for a total sales price, net of disposal costs, of $110.9 million, recognizing a net gain of $1.9 million.
We believe that the availability of proceeds from future issuances of shares of our common stock under the 2023 ATM Program or subsequent at-the-market sale programs, coupled with our cash flows from operations and available borrowing capacity under the Revolver and 2029 Term Loan, 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 believe the availability of proceeds from the settlement of unsettled outstanding forward sale agreements, future issuances of shares of our common stock under the 2024 ATM Program, or subsequent at-the-market sale programs, as well as our cash flows from operations and available borrowing capacity under the Revolver, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital requirements for at least the next 12 months.
As of December 31, 2023, we had commitments to fund properties under development and extend funds under mortgage notes receivable totaling $35.7 million and $13.7 million, respectively, all of which is expected to be funded over the next 12 months.
As of December 31, 2024, we had commitments to fund properties under development and extend funds under mortgage loans receivable totaling $7.3 million and $9.5 million, respectively, which is expected to be funded over the next 12 months.
The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets.
Intangible assets include the value of in-place leases and above-market leases, and intangible liabilities include below-market leases. 45 Table of Contents The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets.
As of December 31, 2023, our investments generated ABR 1 of $131.9 million. Approximately 71% of our ABR is from investment grade 2 credit rated tenants and an additional 14% of our ABR is derived from tenants with an investment grade profile 3 .
As of December 31, 2024, our investments generated ABR 1 of $165.1 million. Approximately 56% of our ABR is from investment grade 2 credit rated tenants and an additional 15% of our ABR is derived from tenants with an investment grade profile 3 .
The table below summarizes the properties sold for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Number of properties sold 19 7 Sales price, net of disposal costs $ 40,259 $ 25,515 Gain on sales of real estate, net $ 1,175 $ 4,148 Other income, net.
The table below summarizes the properties sold for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Number of properties sold 56 19 Sales price, net of disposal costs $ 110,945 $ 40,259 Gain on sales of real estate, net $ 1,876 $ 1,175 Other (expense) income, net.
Net cash provided by operating activities increased by $29.6 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Net cash provided by operating activities increased by $10.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
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): Year Ended December 31, 2023 2022 Net income $ 6,890 $ 8,205 Depreciation and amortization of real estate 63,379 49,498 Provisions for impairment 7,083 1,114 Gain on sales of real estate, net (1,175) (4,148) FFO 76,177 54,669 Adjustments: Non-recurring executive transition costs, severance and related charges 362 848 Loss on debt extinguishment and other related costs 223 — Gain on insurance proceeds (78) (126) Core FFO 76,684 55,391 Adjustments: Straight-line rent adjustments (1,163) (1,286) Amortization of deferred financing costs 1,730 862 Amortization of above/below-market assumed debt 114 29 Amortization of loan origination costs 163 88 Amortization of lease-related intangibles (611) (889) Earned development interest 515 — Capitalized interest expense (1,060) (452) Non-cash interest expense (2,124) — Non-cash compensation expense 4,822 4,774 AFFO $ 79,070 $ 58,517 EBITDA, EBITDAre, Adjusted EBITDAre and Annualized Adjusted EBITDAre We compute EBITDA as earnings before interest expense, income tax expense, and depreciation and amortization.
The following table sets forth a reconciliation of FFO, Core FFO, and AFFO for the periods presented to net (loss) income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Year Ended December 31, 2024 2023 Net (loss) income $ (12,000) $ 6,890 Depreciation and amortization of real estate 76,560 63,379 Provisions for impairment 29,969 7,083 Gain on sales of real estate, net (1,876) (1,175) FFO 92,653 76,177 Adjustments: Non-recurring executive transition costs, severance and related charges 1,643 362 Loss on debt extinguishment and other related costs — 223 Other non-recurring loss (gain), net 2,934 (78) Core FFO 97,230 76,684 Adjustments: Straight-line rent adjustments (2,949) (1,163) Amortization of deferred financing costs 2,230 1,730 Amortization of above/below-market assumed debt 114 114 Amortization of loan origination costs and discounts (365) 163 Amortization of lease-related intangibles (458) (611) Earned development interest 1,072 515 Capitalized interest expense (806) (1,060) Non-cash interest expense (3,789) (2,124) Non-cash compensation expense 5,126 4,822 AFFO $ 97,405 $ 79,070 EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre We compute EBITDA as earnings before interest expense, income tax expense, and depreciation and amortization.
Net cash used in investing activities decreased by $16.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cash Flows Used In Investing Activities. Net cash used in investing activities decreased by $19.1 million for the year ended December 31, 2024 compared to the year ended December 31, 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 $7.7 million, in-place lease amortization expense of $3.3 million, building improvements depreciation expense of $2.6 million, and leasehold improvements depreciation expense of $0.3 million.
The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases primarily in building depreciation expense of $7.4 million, building improvements depreciation expense of $2.9 million, in-place lease amortization expense of $2.1 million, leasehold improvements depreciation expense of $0.4 million, and amortization of leasing commissions of $0.4 million. • Provisions for impairment.
This is offset primarily by increases in rental revenues due to the growth in the size of our real estate investment portfolio, including interest income associated with our mortgage loans receivable.
These decreases are partially offset by increases in additional rental revenues, primarily due to the growth in the size of our real estate investment portfolio, in addition to increased interest income associated with our mortgage loans receivable.
Exclusive of mortgage loans receivable, our portfolio was 100% occupied with a weighted average remaining lease term (“WALT”) of 9.5 years, which we believe provides us with a strong stable source of recurring cash flow from our portfolio.
Our portfolio was 99.9% occupied and, excluding mortgage loans receivable, had a weighted average remaining lease term (“WALT”) of 9.8 years, which we believe provides a strong, stable source of recurring cash flow.
The increase is primarily attributed to an increase in the number of operating properties, including combined net increases of reimbursable property expenses of $4.4 million, of which $2.8 million, $1.3 million, and $0.3 million were related to reimbursable property taxes, reimbursable common area maintenance costs, and reimbursable insurance costs, respectively.
The increase is primarily attributed to an increase in the number of operating properties, including combined net increases of reimbursable property expenses of $0.5 million, of which $0.9 million and $0.3 million were related to reimbursable property taxes and reimbursable insurance costs, respectively, partially offset by a decrease of $0.6 million of common area maintenance costs, and combined net increases of non-reimbursable property expenses of $0.5 million, of which $0.3 million, $0.1 million, and $0.1 million were related to common area maintenance costs, property insurance, and property taxes, respectively. • General and administrative expenses.
Net cash provided by financing activities decreased by $149.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cash Flows Provided By Financing Activities. Net cash provided by financing activities decreased by $4.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
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.
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 loss on debt extinguishments and other related costs.
This is offset by a decrease in assembled workforce amortization expense of $0.3 million. • Provisions for impairment. For the year ended December 31, 2023, we recorded provisions for impairment of $7.1 million on 22 properties, the majority of which were either previously classified as held-for-sale, newly classified as held-for-sale or disposed of during the year ended December 31, 2023.
For the year ended December 31, 2023, we recorded provisions for impairment of $7.1 million on 22 properties, the majority of which were either previously classified as held-for-sale, newly classified as held-for-sale, or disposed of during the year ended December 31, 2023.
Depreciation and amortization expense increased by $13.6 million to $63.7 million for the year ended December 31, 2023 from $50.1 million for the year ended December 31, 2022.
Depreciation and amortization expense increased by $13.2 million to $76.9 million for the year ended December 31, 2024 from $63.7 million for the year ended December 31, 2023.
NAREIT defines EBITDA re as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property. 45 Table of Contents Adjusted EBITDA re is a non-GAAP financial measure defined as EBITDA re further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities.
Adjusted EBITDA re is a non-GAAP financial measure defined as EBITDA re further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, other non-recurring loss (gain), net, other non-recurring expenses (income), transaction costs, lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities.
Historical Cash Flow Information Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Year Ended December 31, (in thousands) 2023 2022 Net cash provided by (used in): Operating activities $ 80,155 $ 50,647 Investing activities (451,953) (468,361) Financing activities 331,184 480,654 Cash Flows Provided By Operating Activities.
Historical Cash Flow Information Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023 Year Ended December 31, (in thousands) 2024 2023 Net cash provided by (used in): Operating activities $ 90,164 $ 80,155 Investing activities (432,875) (451,953) Financing activities 327,102 331,184 Cash Flows Provided By Operating Activities.
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.
ATM Programs On September 1, 2021, October 25, 2023, and August 12, 2024, we entered into a $250.0 million at-the-market equity program (the “2021 ATM Program”), a $300.0 million at-the-market equity program (the “2023 ATM Program”), and a $300.0 million at-the-market equity program (the “2024 ATM Program”), respectively (collectively, the “ATM Programs”) from which, from time to time, we may sell shares of our common stock in registered transactions.
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.
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.
(2) We are subject to a facility fee of 0.15% on our Revolver. (3) We entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan.
(2) We entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan.
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.
(4) We are subject to a facility fee of 0.15% on our Revolver. 43 Table of Contents 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.
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.
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.
As of December 31, 2023, we had $175.0 million outstanding principal amount under the senior unsecured term loan (the “2027 Term Loan”), $200.0 million outstanding principal amount under the 2028 Term Loan, $150.0 million outstanding principal amount under the 2029 Term Loan, and $80.0 million of borrowings outstanding under our Revolver.
As of December 31, 2024, we had $175.0 million outstanding principal amount under the 2027 Term Loan, $200.0 million outstanding principal amount under the 2028 Term Loan, $250.0 million outstanding principal amount under the 2029 Term Loan, and $239.0 million of borrowings outstanding under the Revolver.
The increase was largely attributed to the increase in the size of our real estate investment portfolio with an increase in rental receipts of $27.7 million and an increase in mortgage loan receivable interest of $5.0 million, offset primarily by increases in operating and general and administrative expenses paid associated with our larger portfolio. Cash Flows Used In Investing Activities.
The increase was largely attributed to the increase in the size of our real estate investment portfolio with an increase in rental receipts of $26.1 million, additional interest received under our mortgage loans receivable, partially offset by an increase in cash interest paid of $12.0 million, increases in operating and general and administrative expenses paid associated with our larger portfolio and changes in working capital accounts.
As of December 31, 2023, we owned or had investments in 598 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 85 different tenants, across 26 retail sectors in 45 states. This excludes 24 property developments where rent has yet to commence.
We also invest in property developments and mortgage loans secured by real estate. As of December 31, 2024, we owned or had investments in 687 properties that were diversified by tenant, industry, and geography, including 98 different tenants, across 26 retail sectors in 45 states. This excludes five property developments where rent has not yet commenced.
Interest expense increased by $9.9 million to $19.1 million for the year ended December 31, 2023 from $9.2 million for the year ended December 31, 2022.
Other (expense) income, net increased by $2.7 million to $1.9 million for the year ended December 31, 2024 from $0.8 million for the year ended December 31, 2023.
During the year ended December 31, 2023, we borrowed $361.0 million at a weighted average interest rate of 5.92% and also repaid $394.0 million on our revolving credit facilities.
During the year ended December 31, 2024, we borrowed $392.0 million at a weighted average interest rate of 6.24% and also repaid $233.0 million on our Revolver.
These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs. 44 Table of Contents 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.
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. 46 Table of Contents Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.
(2) Adjustment assumes all loan activity completed during the year ended December 31, 2023 had occurred on January 1, 2023.
(2) Adjustment assumes all loan activity completed during the three months ended December 31, 2024 had occurred on October 1, 2024. 50 Table of Contents
The increase is primarily attributed to an increase of $4.5 million of interest incurred under the 2028 Term Loan, an increase of $4.4 million of interest incurred under the 2029 Term Loan, a net increase of $2.1 million under the Revolver as a result of higher interest rates, offset by a decrease in average borrowings outstanding during the respective periods, and an increase of $0.3 million of interest incurred under the mortgage note payable.
The increase is primarily attributed to an increase of $8.0 million of interest incurred under our 2029 Term Loan, an increase of $3.1 million of interest incurred under our 2027 Term Loan, an increase of $1.4 million of interest incurred under our Revolver primarily due to an increase in average borrowings outstanding during the respective periods, and an increase of $0.5 million of loan fee amortization.
See further discussion of our debt, interest rate, and interest rate hedges included in “Note 6 - Debt.” Results of Operations Overall We continued to grow our assets held for investment during the year ended December 31, 2023 through the acquisition of properties, property developments, and investment in mortgage loans receivable.
Results of Operations Overall We continued to grow our assets held for investment during the year ended December 31, 2024 through the acquisition of properties, property developments, and investment in mortgage loans receivable, with an underwritten weighted-average capitalization rate of approximately 7.5%.
Property expenses increased $4.7 million to $16.4 million for the year ended December 31, 2023 from $11.7 million for the year ended December 31, 2022.
Total operating expenses include the following: • Property expenses. Property expenses increased $1.0 million to $17.4 million for the year ended December 31, 2024 from $16.4 million for the year ended December 31, 2023.
Additionally, as of December 31, 2023, we had $99.6 million and $300.0 million of remaining gross proceeds available for future issuances of shares of our common stock under the 2021 ATM Program and 2023 ATM Programs, respectively, inclusive of 5,983,711 shares remaining unsettled under the outstanding forward confirmation under the 2021 ATM Program.
As of December 31, 2024, $300.0 million of remaining gross proceeds were available for future issuances of shares of our common stock under the 2024 ATM Program, inclusive of unsettled shares under forward sale agreements.
The following table sets forth a reconciliation of EBITDA and EBITDA re for the periods presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Year Ended December 31, 2023 2022 Net income $ 6,890 $ 8,205 Depreciation and amortization of real estate 63,379 49,498 Amortization of lease-related intangibles (611) (889) Non-real estate depreciation and amortization 298 577 Interest expense, net 19,058 9,181 Income tax (benefit) expense (49) 396 Amortization of loan origination costs 163 88 EBITDA 89,128 67,056 Adjustments: Provisions for impairment 7,083 1,114 Gain on sales of real estate, net (1,175) (4,148) EBITDA re $ 95,036 $ 64,022 46 Table of Contents The following table sets forth a reconciliation of EBITDA, EBITDA re , Adjusted EBITDA re and Annualized Adjusted EBITDA re for the period presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Three Months Ended December 31, 2023 Net income $ 1,962 Depreciation and amortization of real estate 17,000 Amortization of lease-related intangibles (93) Non-real estate depreciation and amortization 78 Interest expense, net 5,646 Income tax expense 10 Amortization of loan origination costs 80 EBITDA 24,683 Adjustments: Provisions for impairment 2,709 Gain on sales of real estate, net (506) EBITDA re 26,886 Adjustments: Straight-line rent adjustments (456) Non-recurring executive transition costs, severance and related charges 86 Gain on insurance proceeds (31) Non-cash compensation expense 1,264 Adjustment for construction in process (1) 719 Adjustment for intraquarter investment activities (2) 820 Adjusted EBITDA re $ 29,288 Annualized Adjusted EBITDA re (3) $ 117,152 Adjusted Net Debt / Annualized Adjusted EBITDA re 4.1 (1) Adjustment reflects the estimated cash yield on developments in process as of December 31, 2023.
The following table sets forth a reconciliation of EBITDA and EBITDA re for the periods presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Year Ended December 31, 2024 2023 Net (loss) income $ (12,000) $ 6,890 Depreciation and amortization of real estate 76,560 63,379 Amortization of lease-related intangibles (458) (611) Non-real estate depreciation and amortization 311 298 Interest expense, net 30,324 19,058 Income tax expense (benefit) 49 (49) Amortization of loan origination costs and discounts (365) 163 EBITDA 94,421 89,128 Adjustments: Provisions for impairment 29,969 7,083 Gain on sales of real estate, net (1,876) (1,175) EBITDA re $ 122,514 $ 95,036 48 Table of Contents The following table sets forth a reconciliation of EBITDA, EBITDA re , Adjusted EBITDA re, and Annualized Adjusted EBITDA re for the period presented to net (loss) income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Three Months Ended December 31, 2024 Net (loss) income $ (5,424) Depreciation and amortization of real estate 20,275 Amortization of lease-related intangibles (95) Non-real estate depreciation and amortization 75 Interest expense, net 8,576 Income tax expense 18 Amortization of loan origination costs and discounts (123) EBITDA 23,302 Adjustments: Provisions for impairment 12,633 Gain on sales of real estate, net (1,002) EBITDA re 34,933 Adjustments: Straight-line rent adjustments (1,120) Non-recurring executive transition costs, severance and related charges 148 Other non-recurring gain, net (142) Other non-recurring expenses, net 438 Transaction costs 158 Non-cash compensation expense 999 Lease termination fees (400) Adjustment for construction in process (1) 152 Adjustment for intraquarter investment activities (2) 1,910 Adjusted EBITDA re $ 37,076 Annualized Adjusted EBITDA re (3) $ 148,304 Adjusted Net Debt / Annualized Adjusted EBITDA re 4.5 (1) Adjustment reflects the estimated cash yield on developments in process as of December 31, 2024.
Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 The following table sets forth our operating results for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Revenues Rental revenue (including reimbursable) $ 123,967 $ 93,934 Interest income on loans receivable 7,388 2,345 Other revenue 550 — Total revenues 131,905 96,279 Operating expenses Property 16,413 11,695 General and administrative 20,176 19,053 Depreciation and amortization 63,677 50,075 Provisions for impairment 7,083 1,114 Transaction costs 456 839 Total operating expenses 107,805 82,776 Other income (expense) Interest expense, net (19,058) (9,181) Gain on sales of real estate, net 1,175 4,148 Loss on debt extinguishment (128) — Other income, net 752 131 Total other income (expense), net (17,259) (4,902) Net income before income taxes 6,841 8,601 Income tax benefit (expense) 49 (396) Net income $ 6,890 $ 8,205 Revenue.
We continually monitor the commercial real estate and credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly. 40 Table of Contents Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023 The following table sets forth our operating results for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Revenues Rental revenue (including reimbursable) $ 150,823 $ 123,967 Interest income on loans receivable 11,561 7,388 Other revenue 400 550 Total revenues 162,784 131,905 Operating expenses Property 17,422 16,413 General and administrative 19,722 20,176 Depreciation and amortization 76,871 63,677 Provisions for impairment 29,969 7,083 Transaction costs 359 456 Total operating expenses 144,343 107,805 Other (expense) income Interest expense, net (30,324) (19,058) Gain on sales of real estate, net 1,876 1,175 Loss on debt extinguishment — (128) Other (expense) income, net (1,944) 752 Total other expense, net (30,392) (17,259) Net (loss) income before income taxes (11,951) 6,841 Income tax (expense) benefit (49) 49 Net (loss) income $ (12,000) $ 6,890 Revenue.
Development As of December 31, 2023, we had 18 property developments under construction. During 2023, we invested $81.0 million in our property developments, including the land acquisition of 40 new developments with a combined initial purchase price of $27.3 million.
These properties are located in 27 states with a WALT of approximately 13.5 years. 39 Table of Contents Development As of December 31, 2024, we had four property developments under construction. During 2024, we invested $29.8 million in our property developments, including the land acquisition of four new developments with a combined initial purchase price of $2.0 million.
Transaction costs related to acquisitions that qualify as asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred. 43 Table of Contents We allocate the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or liabilities based on their relative fair values.
Transaction costs related to acquisitions that qualify as asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred.
In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDA re . We compute EBITDA re in accordance with the definition adopted by NAREIT.
In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDA re . We compute EBITDA re in accordance with the definition adopted by NAREIT. NAREIT defines EBITDA re as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property.
Net income decreased $1.3 million to $6.9 million for the year ended December 31, 2023 from $8.2 million for the year ended December 31, 2022.
Net (loss) income. Net (loss) income decreased by $18.9 million to a net loss of $12.0 million for the year ended December 31, 2024 from net income of $6.9 million for the year ended December 31, 2023.
Net income decreased primarily due to increases in interest expense, depreciation and amortization expenses, provisions for impairment, bonus and payroll expense, as well as a decrease in net gains on sales of real estate, as set forth above.
Net (loss) income decreased primarily due to increases in interest expense, depreciation and amortization expense, provisions for impairment, and net expense associated with the transfer fraud loss, as set forth above.
See “Note 4 - Real Estate Investments” for further discussion on our mortgage loans receivable portfolio. 38 Table of Contents Economic and Financial Environment The annual inflation rate for the twelve months ended December 31, 2023 was 3.4% as compared to 6.5% for the prior year.
See discussion of our mortgage loans receivable portfolio included in “Note 4 - Real Estate Investments” of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K. Economic and Financial Environment The annual inflation rate for the twelve months ended December 31, 2024 and 2023 was 2.9% and 3.4%, respectively.
Net gain on sales of real estate decreased by $2.9 million to $1.2 million for the year ended December 31, 2023 from $4.1 million for the year ended December 31, 2022.
This is offset by a $1.7 million increase in amortization of deferred gains on interest rate swaps. Gain on sales of real estate, net. Net gain on sales of real estate increased by $0.7 million to $1.9 million for the year ended December 31, 2024 from $1.2 million for the year ended December 31, 2023.
The decrease was primarily due to a decrease in cash spent on acquisitions of real estate of $84.3 million, offset by increases in cash spent on real estate development and improvements of $56.4 million and cash spent on investments in mortgage loans receivable of $25.9 million.
The decrease was primarily due to a decrease in cash invested in mortgage loans receivable of $42.9 million, an increase of $52.4 million from proceeds from the sale of real estate, an increase of $23.4 million in principal collections on mortgage loans receivable, and a decrease of $38.5 million in real estate development and improvements, partially offset by an increase of $138.6 million in acquisitions of real estate.
The increase in revenue is offset by a $0.5 million decrease in straight-line rental revenue, $0.8 million decrease related to prior year recoveries, a $0.4 million increase in reserves for uncollectible amounts, and a $0.2 million decrease in lease incentive adjustments. Total Operating Expenses.
The increase includes additional cash rental receipts of $26.1 million, an increase of $4.2 million related to interest income on mortgage loans receivable, and an increase of $1.7 million in straight-line rental revenue. The increase is partially offset by a $0.8 million increase in reserves for uncollectible amounts. Total operating expenses.
The following table provides information with respect to our commitments as of December 31, 2023 (in thousands): Payment Due by Period Total 2024 2025 - 2026 2027 - 2028 Thereafter Contractual Obligations 2027 Term Loan – Principal $ 175,000 $ — $ 175,000 $ — $ — 2027 Term Loan – Variable interest (1) 12,135 5,492 6,643 — — Revolver – Borrowings 80,000 — 80,000 — — Revolver – Variable interest 13,556 5,192 8,364 — — Facility Fee (2) 1,567 600 967 — — 2028 Term Loan – Principal 200,000 — — 200,000 — 2028 Term Loan – Variable interest (3) 31,932 7,760 15,521 8,651 — 2029 Term Loan – Principal 150,000 — 150,000 — 2029 Term Loan – Variable interest (4) 18,358 7,331 11,027 — Mortgage Note – Principal 8,361 162 348 7,851 — Mortgage Note – Interest 1,423 375 726 322 — Property developments under contract 35,690 35,690 — — — Additional principal under mortgage notes receivable 13,737 13,737 — — — Tenant Improvement Allowances 4,089 4,089 — — — Corporate office lease obligations 5,888 617 1,289 1,359 2,623 Total $ 751,736 $ 81,045 $ 449,885 $ 218,183 $ 2,623 41 Table of Contents (1) We entered into five interest rate hedges to fix the base interest rate (daily SOFR) on our 2027 Term Loan.
The following table provides information with respect to our commitments as of December 31, 2024 (in thousands): Payment Due by Period Total 2025 2026 - 2027 2028 - 2029 Thereafter Contractual Obligations 2027 Term Loan – Principal $ 175,000 $ — $ 175,000 $ — $ — 2027 Term Loan – Variable interest (1) 6,643 6,381 262 — — 2028 Term Loan – Principal 200,000 — — 200,000 — 2028 Term Loan – Variable interest (2) 24,172 7,760 15,521 891 — 2029 Term Loan – Principal 250,000 — 250,000 — — 2029 Term Loan – Variable interest (3) 18,748 12,465 6,283 — — Revolver – Borrowings 239,000 — 239,000 — — Revolver – Variable interest 21,677 13,456 8,221 — — Facility Fee (4) 967 600 367 — — Mortgage Note – Principal 8,205 174 8,031 — — Mortgage Note – Interest 1,048 367 681 — — Property development under contract 7,299 7,299 — — — Additional principal under mortgage loans receivable 9,470 9,470 — — — Tenant improvement allowances 4,089 1,349 2,740 — — Corporate office lease obligations 5,270 636 1,323 1,396 1,915 Total $ 971,588 $ 59,957 $ 707,429 $ 202,287 $ 1,915 (1) We entered into five interest rate hedges to fix the base interest rate (daily SOFR) on our 2027 Term Loan.
Investment in Mortgage Loans Receivable During the year ended December 31, 2023, we invested $72.3 million, in fully collateralized mortgage loans receivable with stated interest rates ranging from 6.89% to 10.25%. The mortgage loans receivable are collateralized by real estate, primarily leased by investment grade credit rated tenants.
In addition, during the year ended December 31, 2024, we collected $24.9 million in principal on our mortgage loans receivable. The mortgage loans receivable are collateralized by real estate, primarily leased by investment grade credit rated tenants.
The increase is primarily attributed to an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, provisions for impairment, property-specific reimbursable expenses, and payroll costs. Total operating expenses include the following: 39 Table of Contents • Property Expenses.
Total expenses increased by $36.5 million to $144.3 million for the year ended December 31, 2024 as compared to $107.8 million for the year ended December 31, 2023. The increase is primarily attributed to an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense and provisions for impairment.
During the year, we completed development on 27 projects and reclassified approximately $68.6 million from property under development to land, building, and improvements in the accompanying consolidated balance sheets. The remaining 18 developments are expected to be substantially completed with rent commencing at various points throughout 2024.
During 2024, we completed development on 18 projects and reclassified approximately $52.9 million from property under development to land, buildings and improvements, and other assets (leasing commissions) in the accompanying consolidated balance sheets.
As a result of such termination, we will not offer or sell any additional shares of common stock under the 2021 ATM Program. We have entered into a forward confirmation with respect to 5,983,711 shares of common stock under the 2021 ATM Program that remains unsettled.
In connection with the establishment of the 2024 ATM Program, the 2023 ATM Program was terminated, and, in connection with the establishment of the 2023 ATM Program, the 2021 Program was terminated. As a result of such terminations, we will not offer or sell any additional shares of common stock under the 2023 ATM Program or the 2021 ATM Program.
The Company has fully hedged the 2027 Term Loan. 1 Annualized base rent (“ABR”) is annualized base rent as of December 31, 2023, for all leases that commenced, 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. 37 Table of Contents 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.
The following table details information related to activity under the ATM Programs for the year ended December 31, 2024 (in thousands, except share and per share data): Year Ended December 31, 2024 (1) Shares of common stock issued 5,983,711 Weighted average price per share $ 16.50 Gross proceeds $ 98,731 Sales commissions and offering costs $ 1,070 Net proceeds $ 97,661 (1) Represented shares of common stock physically settled under the forward sale agreement with respect to the 2021 ATM Program. 1 Annualized base rent (“ABR”) is annualized base rent as of December 31, 2024, for all leases that commenced, 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. 38 Table of Contents January 2024 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.
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.
This decrease is partially offset by an increase in net borrowings of $192.0 million under our revolving credit facilities and a decrease in deferred financing costs of $3.3 million. 44 Table of Contents 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.
These disposals relate to management’s continuous assessment of the Company’s portfolio in an effort to improve returns and manage risk exposure. • Transaction costs.
These disposals relate to management’s continuous assessment of our portfolio in an effort to improve returns and manage risk exposure. Interest expense. Interest expense increased by $11.2 million to $30.3 million for the year ended December 31, 2024 from $19.1 million for the year ended December 31, 2023.
This growth was financed through the settlement of shares of common stock through our forward sale agreements in an amount of $141.1 million, the issuance of common stock under the 2023 ATM Program and the 2021 ATM Program in an amount of $76.5 million and $53.7 million, respectively, the execution of the 2029 Term Loan Agreement and receipt of proceeds of $150.0 million under the 2029 Term Loan, net borrowings on our $400.0 million senior unsecured revolving credit facility (the “Revolver”), and cash flows from operations during the year ended December 31, 2023.
This growth was financed through a $100.0 million draw on our $250.0 million 2029 Term Loan, settlement of shares of common stock through our forward sale agreements in an amount of $135.4 million, the usage of cash balances as a result of borrowings on our Revolver, the usage of restricted cash balances as a result of tax-free exchanges under Section 1031 of the Internal Revenue Code of 1986, and cash flows from operations during the year ended December 31, 2024.
Non-reimbursable property expenses increased by approximately $0.2 million. • General and Administrative Expenses. General and administrative expenses increased $1.1 million to $20.2 million for the year ended December 31, 2023 from $19.1 million for the year ended December 31, 2022.
General and administrative expenses decreased $0.5 million to $19.7 million for the year ended December 31, 2024 from $20.2 million for the year ended December 31, 2023. The decrease is primarily related to a decrease of $1.0 million of payroll expense and $1.4 million of bonus expense, and a decrease of $0.3 million of corporate insurance premiums.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAdditionally, we will occasionally fund acquisitions through the use of our 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.
Biggest changeAdditionally, we will occasionally fund acquisitions through the use of our Revolver which, as of December 31, 2024, bore an interest rate determined by either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on our consolidated total leverage ratio, or (ii) a Base Rate (as defined in the PNC Credit Agreement), plus a margin ranging from 0.00% to 0.45%, based on our consolidated total leverage ratio.
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 consolidated financial statements).
The interest rate derivative contracts convert the variable rate debt on our term loans to a fixed interest rate (as further described in “Note 6 – Debt” in our consolidated financial statements).
Based on the results of our sensitivity analysis and daily outstanding borrowings on the Revolver during 2023, which assumes a 1% adverse change in the interest rate as of December 31, 2023, the estimated market risk exposure was approximately $0.8 million. 49 Table of Contents
Based on the results of our sensitivity analysis and daily outstanding borrowings on the Revolver during 2024, which assumes a 1% adverse change in the interest rate as of December 31, 2024, the estimated market risk exposure was approximately $1.0 million.
Effective through the maturity dates of January 15, 2027, February 11, 2028, and January 3, 2029, we entered into interest rate derivative contracts in order to hedge our market interest risk associated with the 2027 Term Loan, 2028 Term Loan, and 2029 Term Loan, respectively.
Effective through the fully extended maturity dates (as of December 31, 2024) of January 15, 2027, February 11, 2028, and January 3, 2029, we have entered into interest rate derivative contracts in order to hedge our market interest risk associated with the 2027 Term Loan, 2028 Term Loan, and 2029 Term Loan, respectively.
As of December 31, 2023, we had total indebtedness of approximately $175.0 million under the 2027 Term Loan, $200.0 million under the 2028 Term Loan, $150.0 million under the 2029 Term Loan, and $80.0 million of borrowings under the Revolver, all of which are floating rate debt with a variable interest rate.
As of December 31, 2024, we had total indebtedness of approximately $175.0 million under the 2027 Term Loan, $200.0 million under the 2028 Term Loan, $250.0 million under the 2029 Term Loan, and $239.0 million of borrowings under our Revolver, all of which is floating rate debt with a variable interest rate.
For the years ended December 31, 2023 and 2022, we had average daily outstanding borrowings on our revolving credit facilities of $82.5 million and $109.5 million, respectively.
For the years ended December 31, 2024 and 2023, we had average daily outstanding borrowings on our Revolver of $100.2 million and $82.5 million, respectively.

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