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What changed in Peakstone Realty Trust's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Peakstone Realty Trust'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.

+418 added−391 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in Peakstone Realty Trust's 2024 10-K

418 paragraphs added · 391 removed · 267 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

19 edited+7 added−6 removed16 unchanged
Biggest changeIn addition, as of December 31, 2023, the majority of our five-member Board of Trustees (the “Board”) was composed of women and/or minorities. Our cultural values extend beyond the individuals within our organization and encourages our employees to have a positive impact on the community around us.
Biggest changeWe draw from the largest pools of talent to help find the best people for our company. As of December 31, 2024, approximately 53% of our employees were people of color/minorities and approximately 47% were women. In addition, as of December 31, 2024, the majority of our five-member Board of Trustees (the “Board”) was composed of women and/or minorities.
ITEM 1. BUSINESS The use herein of the words “PKST,” “the Company,” “we,” “us,” and “our” refer to Peakstone Realty Trust, a Maryland real estate investment trust, and its subsidiaries, including PKST OP L.P., our operating partnership (our “Operating Partnership”), except where the context otherwise requires.
ITEM 1. BUSINESS The use herein of the words “PKST,” “the Company,” “Peakstone,” “we,” “us,” and “our” refer to Peakstone Realty Trust, a Maryland real estate investment trust, and its subsidiaries, including PKST OP L.P., our operating partnership (our “Operating Partnership”), except where the context otherwise requires.
The tax treatment of us, our Operating Partnership, any of our operating subsidiaries we may form and the holders of our shares in local jurisdictions may differ from our U.S. federal income tax treatment. 7 Table of Contents Tax We have elected to be taxed as a REIT under the Internal Revenue Code (the “Code”), commencing with our tax year ended December 31, 2015.
The tax treatment of us, our Operating Partnership, any of our operating subsidiaries we may form and the holders of our shares in local jurisdictions may differ from our U.S. federal income tax treatment. 7 Table of Contents Tax We have elected to be taxed as a REIT under the “Code”, commencing with our tax year ended December 31, 2015.
Such an event could materially adversely affect net income and net cash available for the payment of dividends to shareholders. As of December 31, 2023, the Company satisfied the REIT requirements and distributed all of its taxable income. Pursuant to the Code, the Company has elected to treat its corporate subsidiary as a taxable REIT subsidiary (“TRS”).
Such an event could materially adversely affect net income and net cash available for the payment of dividends to shareholders. As of December 31, 2024, the Company believes it has satisfied the REIT requirements and distributed all of its taxable income. Pursuant to the Code, the Company has elected to treat its corporate subsidiary as a taxable REIT subsidiary (“TRS”).
Through our due diligence process and protections in our leases, we aim to own and operate properties that are in material compliance with all such regulatory requirements.
Through our due diligence process, and protections in our leases, we aim to own and operate properties that are in material compliance with all such regulatory requirements, including all zoning, occupancy and land use requirements.
For example, in October 2023, California passed two bills that require certain companies that do business in California to disclose their green house emissions and climate-related financial risks starting in 2026.
For example, since October 2023, California passed several bills that require certain companies that do business in California to disclose their GHG emissions and climate-related financial risks starting in 2026.
Americans with Disabilities Act Under the Americans with Disabilities Act of 1990 (the “ADA”), all public accommodations and commercial facilities are required to meet certain federal requirements related to access and use by disabled persons. Failing to comply could result in the imposition of fines by the federal government or an award of damages to private litigants.
Under the ADA, all public accommodations and commercial facilities are required to meet certain federal requirements related to access and use by disabled persons. Failing to comply with the ADA, including any requirements for public accommodations and commercial facilities could result in the imposition of fines by the federal government or an award of damages to private litigants.
PKST OP, L.P., our operating partnership (the “Operating Partnership”), owns, directly and indirectly all of the Company’s assets. As of December 31, 2023, the Company owned approximately 91.8% of the outstanding common units of limited partnership interest in the Operating Partnership (“OP Units”).
PKST OP, L.P., our operating partnership (the “Operating Partnership”), owns, directly and indirectly all of the Company’s assets. As of December 31, 2024, the Company owned, directly and indirectly through a wholly-owned subsidiary, approximately 93.0% of the outstanding common units of limited partnership interest in the Operating Partnership (“OP Units”).
If we or our subsidiaries fail to maintain an exception or exemption from the 1940 Act, we may be required to, among other things, substantially change the manner in which we conduct our operations to avoid being required to register as an investment company under the 1940 Act or register as an investment company under the 1940 Act.
If we or our subsidiaries fail to maintain an exception or exemption from the 1940 Act, we may be required to, among other things, substantially change the manner in which we conduct our operations to avoid being required to register as an investment company under the 1940 Act or register as an investment company under the 1940 Act. 8 Table of Contents Americans with Disabilities Act We are subject to the Americans with Disabilities Act of 1990 (the “ADA”).
We maintain liability insurance (including pollution coverage) for all of our properties to insure against the potential liability of remediation and exposure risk. Also, numerous states and municipalities have adopted laws and policies on climate change and emission reduction targets.
We maintain pollution liability insurance for all of our properties to insure against the potential liability of remediation and exposure risk; however, in certain cases, pre-existing conditions may be excluded coverage. Also, numerous states and municipalities have adopted laws and policies on climate change and emission reduction targets.
To accomplish our objectives, we will leverage our experienced, operationally-minded and cycle-tested management team. Competition The commercial real estate markets in which we operate are highly competitive. We compete against owners and managers of competing properties in leasing space to prospective tenants and in re-leasing space to existing tenants.
Competition The commercial real estate markets in which we operate are highly competitive. We compete against owners and managers of competing properties in leasing space to prospective tenants and in re-leasing space to existing tenants.
We use our website (www.pkst.com) as a routine channel of distribution of company information, including press releases, presentations, and supplemental information, and as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website in addition to following press releases, SEC filings, and public conference calls and webcasts.
We use our website (www.pkst.com) as a routine channel of distribution of company information, including announcements of dividend declarations, press releases, presentations, and supplemental information, and as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.
Accordingly, investors should monitor our website in addition to following press releases, SEC filings, and public conference calls and webcasts. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.
Human Capital Management We are internally managed by an experienced team that specializes in industrial and office properties. As of December 31, 2023, we employed 35 people. We believe our employees are our greatest asset. Because of this perspective, we have implemented several programs to foster their professional growth and their growth as global citizens.
As of December 31, 2024, we employed 38 people. We believe our employees are our greatest asset. Because of this perspective, we have implemented several programs to foster their professional growth and their growth as global citizens.
Throughout our organization, we have a shared passion and dedication to giving back to the communities in which we live and work.
Our cultural values extend beyond the individuals within our organization and encourages our employees to have a positive impact on the community around us. Throughout our organization, we have a shared passion and dedication to giving back to the communities in which we live and work.
Other Regulations The properties we own and operate generally are subject to various federal, state and local regulatory requirements, such as zoning and state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants.
Other Regulations The properties we own and operate generally are subject to various federal, state and local regulatory requirements, such as zoning, occupancy and land use regulations and state and local fire and life safety requirements.
Although we perform diligence compliance with laws, including the ADA, when we acquire properties, we may incur additional costs to comply with the ADA or other regulations related to access by disabled persons.
Through our due diligence process and protections in our leases, we aim to ensure compliance with laws, including the ADA. However we cannot assure our shareholders that this will always be the case when we acquire properties, and we may incur additional costs to comply with the ADA or other regulations related to access by disabled persons.
However, we cannot assure our shareholders that these requirements will not be changed or that new requirements will not be imposed which would require significant unanticipated expenditures by us and could have an adverse effect on our financial condition and results of operations. 8 Table of Contents We conduct our operations so that we and our subsidiaries are not required to register as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and monitor the structure and nature of our assets so that we do not come within the definition of an “investment company” under the 1940 Act.
We conduct our operations so that we and our subsidiaries are not required to register as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and monitor the structure and nature of our assets so that we do not come within the definition of an “investment company” under the 1940 Act.
Although we believe that these costs will not have a material adverse effect on us, if required changes involve a greater amount of expenditures than we currently anticipate, our ability to pay expected dividends could be adversely affected.
Although we believe that these costs will not have a material adverse effect on us, if required changes or litigation involve a greater amount of expenditures than we currently anticipate, it could have a material adverse effect on us. Human Capital Management We are internally managed by an experienced team that specializes in industrial and office properties.
Removed
Overview Peakstone Realty Trust is an internally managed, publicly traded real estate investment trust (“REIT”) that owns and operates a high-quality, newer-vintage portfolio of predominantly single-tenant industrial and office properties located in diverse, strategic growth markets. These assets are generally leased to creditworthy tenants under long-term net lease agreements with contractual rent escalations.
Added
Overview Peakstone Realty Trust (NYSE: PKST) is an internally managed real estate investment trust currently shifting its portfolio composition towards industrial properties. PKST’s objective is to grow its portfolio through investments in the industrial outdoor storage (“IOS”) subsector. The Company’s existing portfolio includes high-quality, predominantly single-tenant industrial and office properties located in strategic markets.
Removed
As of December 31, 2023, the Company’s wholly-owned portfolio (i) consisted of 71 properties located in 24 states, (ii) was 96.4% leased with a weighted average remaining lease term (“WALT”) of approximately 6.5 years, and (iii) generated approximately $196.7 million Annualized Base Rent (“ABR”).
Added
As of December 31, 2024, our portfolio is comprised of 103 properties, consisting of 97 operating properties and six redevelopment properties (those designated for redevelopment or repositioning) reported in two segments - Industrial and Office. Our Business Strategy Our strategic focus is to reposition the portfolio towards industrial assets.
Removed
The Company reports the results of its wholly-owned portfolio in three segments which had the following characteristics as of December 31, 2023: • Industrial: This segment (i) comprised 19 industrial properties and (ii) was 100% leased with a WALT of approximately 6.7 years. • Office: This segment (i) comprised 35 office properties and (ii) was 98.8% leased with a WALT of approximately 7.6 years. • Other: This segment (i) comprised 17 properties and (ii) was 82.4% leased with a WALT of approximately 2.6 years.
Added
This will be accomplished through the continued divestment of non-core assets and investment in industrial outdoor storage (“IOS”) opportunities. We will maintain a balanced approach to capital allocation, prioritizing investments in the IOS subsector while also optimizing our leverage to support long-term growth. Our goal is to enhance portfolio performance, maximize shareholder value, and ensure financial flexibility for future opportunities.
Removed
Our Business Strategy The Company’s long-term objective is to maximize shareholder value through the ownership and operation of industrial and select office assets located in strategic growth markets. We are focused on maintaining a strong balance sheet that enables us to execute multi-channel investments across the risk and capital spectrum as they arise.
Added
In addition, regulations and other expectations related to environmental matters and climate change are not uniform, and may be inconsistently interpreted or applied, which can increase the complexity and costs of compliance as well as any associated litigation or enforcement risks.
Removed
It is our intention to continue to maximize our balance sheet flexibility through free cash flow generation and the execution of our strategic disposition plan. We seek to generate internal and external growth by increasing the cash flow from our properties and expanding our portfolio by making industrial-focused investments.
Added
Failure to comply with these requirements could result in, among other things, the imposition of fines by governmental authorities or awards of damages to private litigants.
Removed
We believe that a wide range of opinions and experiences are key to our continued success, and we therefore value racial, gender, and generational diversity throughout our organization. As of December 31, 2023, approximately 56% of our employees were people of color/minorities and approximately 47% were women.
Added
Local regulations, including municipal or local ordinances and zoning restrictions, may restrict our use of our properties and may require us to obtain approval from local officials of community standards organizations at any time with respect to our properties, including prior to acquiring a property, when undertaking renovations to any of our existing properties or upon a change of tenant.
Added
However, we cannot assure our shareholders that this will always be the case, or that these requirements will not be changed or that new requirements will not be imposed which would require significant unanticipated expenditures by us, all of which could have a material adverse effect on us.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

168 edited+60 added−39 removed136 unchanged
Biggest changeThe development or redevelopment of such properties is subject to various risks, including the following, among others: • we may be unable to obtain zoning, occupancy or other governmental approvals; • rents may not meet our projections and the project may not be accretive; • we may need the consent of third parties such as mortgage lenders and joint venture partners, and those consents may be withheld; and • development, redevelopment or expansions may fail to appeal to the demographics of the market in which they are located.
Biggest changeThe development or redevelopment of such properties is subject to various risks, including the following, among others: • time required to complete the development or redevelopment of a property or to lease up the completed project may be greater than originally anticipated, which may result in increased debt service expense and additional downtime and expense carry costs; • rents may not meet our projections and the project may perform below anticipated levels, thereby adversely impacting our cash flows; • we may have delays in obtaining construction materials and may be subject to increases in costs of materials, particularly as a result of the imposition of tariffs; • we may face delays or difficulties with respect to complying with applicable zoning regulations and obtaining and maintaining necessary occupancy, land use and other governmental permissions and permits; • contractor and subcontractor disputes, strikes, lack of available labor, labor disputes or supply chain disruptions may occur; • we may need the consent of third parties such as mortgage lenders and joint venture partners, and those consents may be withheld; 13 Table of Contents • newly acquired properties may be subject to ongoing legal proceedings; and • speculative development, redevelopment or expansions may fail to appeal to the prospective users in the market in which they are located.
We may be required to pay dividends to our shareholders at times it would be more advantageous to reinvest cash in our business or when we do not have cash readily available for distribution, and we may be forced to sell assets on terms and at times unfavorable to us, which could have a material adverse effect on us.
We may be required to pay dividends to our shareholders at times when it would be more advantageous to reinvest cash in our business or when we do not have cash readily available for distribution, and we may be forced to sell assets on terms and at times unfavorable to us, which could have a material adverse effect on us.
In addition, if any of the entities through which our Operating Partnership owns its properties, in whole or in part, loses its characterization as an entity disregarded from its parent, a REIT or a partnership for federal income tax purposes, the underlying entity could become subject to taxation as a corporation, thereby reducing distributions to our Operating Partnership and jeopardizing our ability to maintain REIT status.
In addition, if any of the entities through which our Operating Partnership owns its properties, in whole or in part, loses its characterization as an entity disregarded from its parent or a partnership for federal income tax purposes, the underlying entity could become subject to taxation as a corporation, thereby reducing distributions to our Operating Partnership and jeopardizing our ability to maintain REIT status.
We may also be subject to state and local taxes on our income or property, either directly or at the level of our Operating Partnership or at the level of the other companies through which we indirectly own our assets.
We may also be subject to state and local taxes on our income or property, either directly, at the level of our Operating Partnership, or at the level of the other companies through which we indirectly own our assets.
In addition, we may be obligated to fund the defense costs incurred by our trustees, officers, employees and agents in some cases which would decrease the cash otherwise available to pay dividends to shareholders or otherwise operate our business. We are uncertain of our sources of funding our future capital needs.
In addition, we may be obligated to fund the defense costs incurred by our trustees, officers, employees and agents in some cases which would decrease the cash otherwise available to pay dividends to shareholders or otherwise operate our business. We are uncertain of our sources of funding for our future capital needs.
If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, it could have a material adverse effect on us. Costs of complying with governmental laws and regulations, including those relating to environmental matters and the ADA, may have a material adverse effect on us.
If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, it could have a material adverse effect on us. Costs of complying with governmental laws and regulations, including those relating to environmental matters, zoning and the ADA, may have a material adverse effect on us.
We may pursue acquisitions of and/or other investments in properties for which we are unable to secure traditional financing on terms and conditional acceptable to us. Accordingly, we may be required to seek alternative sources of financing. Such non-traditional financing may not be available on terms and conditions that are as favorable as traditional lending sources.
We may pursue acquisitions of and/or other investments in properties for which we are unable to secure traditional financing on terms and conditions acceptable to us. Accordingly, we may be required to seek alternative sources of financing. Such non-traditional financing may not be available on terms and conditions that are as favorable as traditional lending sources.
Any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for U.S. federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to U.S. federal and possibly state corporate income tax.
Further, any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for U.S. federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to U.S. federal and possibly state corporate income tax.
Lenders have imposed and could impose restrictions on us that affect our dividend and operating policies and our ability to incur additional debt, including customary restrictive covenants, that, among other things, restrict our ability to engage in material asset sales, mergers, consolidations, acquisitions or investments, to make capital expenditures, to pay special dividends, and more generally on how and when we can spend operating funds and capital event proceeds.
Lenders have imposed and could impose restrictions on us that affect our dividend and operating policies and our ability to incur additional debt, including customary restrictive covenants, that, among other things, restrict our ability to engage in material asset sales, mergers, consolidations, acquisitions or investments, to make capital expenditures, to pay special dividends, to repurchase our securities, and more generally on how and when we can spend operating funds and capital event proceeds.
This ownership limit and the other restrictions on ownership and transfer of our shares contained in our charter may: • discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our shares or that our shareholders might otherwise believe to be in their best interest; or • result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.
This ownership limit and the other restrictions on ownership and transfer of our shares contained in our declaration of trust may: • discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our shares or that our shareholders might otherwise believe to be in their best interest; or • result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.
The market price of our common shares could be subject to wide fluctuations in response to: • our financial performance, cash flows, financial condition, results of operations and prospects, • actual or anticipated differences in our quarterly or annual operating results from those expected; • our dependence on key personnel whose continued services are not guaranteed; • whether we will be successful in renewing leases as they expire; • failure to qualify as a REIT; • failure to comply with the rules of the NYSE, the requirements of the Sarbanes-Oxley Act or other applicable laws; • the annual yield from dividends on our common shares as compared to yields on other financial instruments; • actual or anticipated changes in our and our tenants’ business or prospects; • the current state of the credit and capital markets, and our ability and the ability of our tenants to obtain financing on favorable terms; • whether work-from-home trends or other factors will impact the attractiveness of industrial and/or office assets; • changes in market valuations of similar companies; • strategic decisions by us or our competitors, such as acquisitions or investments, divestments, spin offs, joint ventures, strategic investments or changes in business strategy; • further increases in (or prolonged periods of high) market interest rates, which could result in increased interest expense on our debt; 24 Table of Contents • equity issuances by us (including the issuance of OP Units or other securities convertible into, or exchangeable for, our common shares) or the conversion of a large number of OP Units into common shares as opposed to cash; • future sales of substantial amounts of our common shares by our existing or future shareholders, or the perception that such issuances or future sales may occur; • adverse market reaction to any indebtedness we incur in the future, inability to refinance our existing indebtedness, the inclusion of restrictive covenants in our future indebtedness, or our failure to establish debt levels that investors believe are appropriate; • changes in expectations of future financial performance or changes in estimates of securities analysts; • publication of research reports about us or our industry by securities analysts; • government regulatory action or inaction and legislative changes that could adversely affect our industry; • changes in tax laws; • adverse speculation in the press or investment community; • changes in the underlying value of real estate; • climate change and natural disasters, such as earthquakes, wildfires, rising sea levels, flooding, and extreme weather; • impacts of the outbreak of a highly infectious or contagious disease or declaration of a pandemic, epidemic or other health crises; • terrorist acts, natural or man-made disasters or threatened or actual armed conflicts; and • general market conditions.
The market price of our common shares could be subject to wide fluctuations in response to: • our financial performance, cash flows, financial condition, results of operations and prospects, • actual or anticipated differences in our quarterly or annual operating results from those expected; • our dependence on key personnel whose continued services are not guaranteed; • whether we will be successful in renewing leases as they expire; • failure to qualify as a REIT; • failure to comply with the rules of the NYSE, the requirements of the Sarbanes-Oxley Act or other applicable laws; • the annual yield from dividends on our common shares as compared to yields on other financial instruments; • actual or anticipated changes in our and our tenants’ business or prospects; • the current state of the credit and capital markets, and our ability and the ability of our tenants to obtain financing on favorable terms; • whether work-from-home trends or other factors will impact the attractiveness of industrial and/or office assets; • our entry into new business lines; • our ability to execute on the sale of properties; • changes in market valuations of similar companies; • strategic decisions by us or our competitors, such as acquisitions or investments, divestments, spin offs, joint ventures, strategic investments or changes in business strategy; • increases in (or prolonged periods of high) market interest rates, which could result in increased interest expense on our debt; • equity issuances by us (including the issuance of OP Units or other securities convertible into, or exchangeable for, our common shares) or the conversion of a large number of OP Units into common shares as opposed to cash; • future sales of substantial amounts of our common shares by our existing or future shareholders, or the perception that such issuances or future sales may occur; • adverse market reaction to any indebtedness we incur in the future, inability to refinance our existing indebtedness, the inclusion of restrictive covenants in our future indebtedness, or our failure to establish debt levels that investors believe are appropriate; • changes in expectations of future financial performance or changes in estimates of securities analysts; • publication of research reports about us or our industry by securities analysts; • government regulatory action or inaction and legislative changes that could adversely affect our industry; • changes in tax laws; • adverse speculation in the press or investment community; • changes in the underlying value of real estate; • climate change and natural disasters, such as earthquakes, wildfires, rising sea levels, flooding, and extreme weather; • impacts of the outbreak of a highly infectious or contagious disease or declaration of a pandemic, epidemic or other health crises; • terrorist acts, natural or man-made disasters or threatened or actual armed conflicts; and • general market conditions.
If we continue to grant awards of restricted stock units (“RSUs”) to our trustees and employees as has been our historical practice, and our shareholders do not approve an increase in the number of common shares authorized for issuance under our long-term incentive plan, we may need to settle future awards in cash.
If we continue to grant awards of restricted stock and restricted stock units to our trustees and employees, respectively, as has been our historical practice, and our shareholders do not approve an increase in the number of common shares authorized for issuance under our long-term incentive plan, we may need to settle future awards in cash.
Furthermore, at the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties. The occurrence of any of the foregoing could have a material adverse effect on us. The commercial real estate markets in which we operate are highly competitive.
Furthermore, at the time we elect to sell our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties. The occurrence of any of the foregoing could have a material adverse effect on us. The commercial real estate markets in which we operate are highly competitive.
The revenues generated by the properties leased and/or guaranteed by these companies are substantially reliant upon the financial condition of such companies, either because they are the tenant at 10 Table of Contents such properties or the parent-guarantor, and, accordingly, any event of bankruptcy, insolvency, or a general downturn in the business of any of these tenants or the relevant parent-guarantor, a default by a tenant, the failure of a guarantor to fulfill its obligations, a premature termination of a lease, or a tenant’s election not to extend a lease upon its expiration, which could have a material adverse effect on us.
The revenues generated by the properties leased and/or guaranteed by these companies are substantially reliant upon the financial condition of such companies, either because they are the tenant at such properties or the parent-guarantor, and, accordingly, any event of bankruptcy, insolvency, or a general downturn in the business of any of these tenants or the relevant parent-guarantor, a default by a tenant, the failure of a guarantor to fulfill its obligations, a premature termination of a lease, or a tenant’s election not to extend a lease upon its expiration, which could have a material adverse effect on us.
Competition for companies that may lease or guarantee our properties could decrease or prevent increases of the occupancy and rental rates of our properties. Furthermore, at the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties.
Competition for companies that may lease or guarantee our properties could decrease or prevent increases of the occupancy and rental rates of our properties. Furthermore, at the time we elect to sell our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties.
Our future success also depends upon the service of our executive management team, who we believe have extensive market knowledge and business relationships and will exercise substantial influence over the Company’s operating, financing, acquisition, disposition and investment activity.
Our future success also depends upon the service of our executive leadership team, who we believe have extensive market knowledge and business relationships and will exercise substantial influence over the Company’s operating, financing, acquisition, disposition and investment activity.
Although we diligence compliance with laws, including the ADA, when we acquire properties, we may incur additional costs to comply with the ADA or other regulations related to access by disabled persons. If required changes involve a greater amount of expenditures than we currently anticipate, it could have a material adverse effect on us.
Although we diligence compliance with laws, including the ADA, when we acquire properties, we may incur additional costs to comply with 18 Table of Contents the ADA or other regulations related to access by disabled persons. If required changes involve a greater amount of expenditures than we currently anticipate, it could have a material adverse effect on us.
Separately, we obtain, to the extent available, liability insurance (includes pollution coverage) and property insurance (includes earthquake coverage, wind coverage, flood coverage and rent loss coverage for at least one year of rental loss) for all of our properties.
Separately, we obtain, to the extent available, liability insurance (including pollution coverage) and property insurance (including earthquake coverage, wind coverage, flood coverage and rent loss coverage for at least one year of rental loss) for all of our properties.
We may also be required to have and maintain certain specified financial ratios and to reserve or otherwise set aside funds for specific expenses, such as anticipated leasing and capital expenditures. These or other limitations may adversely affect our flexibility and limit our ability to pay dividends to shareholders at our current level.
We may also be required to have and maintain certain specified financial ratios and to reserve or otherwise set aside funds for specific expenses, such as anticipated leasing and capital expenditures. These or other limitations may adversely affect our flexibility and limit our ability to pay dividends to shareholders.
If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available to pay indebtedness, to pay dividends to shareholders or otherwise run our business; • it may be difficult to sell real estate quickly, or potential buyers of our properties may experience difficulty in obtaining financing, which may limit our ability to dispose of properties promptly in response to changes in economic or other conditions.
If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available to pay indebtedness, to pay dividends to shareholders or otherwise run our business; • it may be difficult to sell real estate quickly, or potential buyers of our properties may experience difficulty in obtaining financing, which may limit our ability to sell properties in accordance with our business plan promptly in response to changes in economic or other conditions.
In addition, in the event we determine it is best to sell the property, we may have difficulty selling it to a party other than the company that has leased the property, such company’s parent and/or the company that has guaranteed the lease of the property due to the special purpose for which the property may have been designed.
In addition, in the event we determine it is best to sell the property, we may have difficulty selling it to a party other than the company that has leased the property, such company’s 10 Table of Contents parent and/or the company that has guaranteed the lease of the property due to the special purpose for which the property may have been designed.
The presence of these substances may adversely affect our ability to lease or sell the property or to borrow using the property as collateral and may expose us to 17 Table of Contents liability resulting from any release of or exposure to these substances, any of which could result in expenditures and could have a material adverse effect on us.
The presence of these substances may adversely affect our ability to lease or sell the property or to borrow using the property as collateral and may expose us to liability resulting from any release of or exposure to these substances, any of which could result in expenditures and could have a material adverse effect on us.
In addition, dividends paid to our shareholders would no longer qualify for the dividends paid deduction, and we would no longer be required to pay dividends. Qualification as a REIT is subject to the 21 Table of Contents satisfaction of tax requirements and various factual matters and circumstances that are not entirely within our control.
In addition, dividends paid to our shareholders would no longer qualify for the dividends paid deduction, and we would no longer be required to pay dividends. Qualification as a REIT is subject to the satisfaction of tax requirements and various factual matters and circumstances that are not entirely within our control.
For these purposes, our charter includes a “group” as that term is used for purposes of Section 13(d)(3) of the Exchange Act in the definition of “Person.” Our Board may exempt a person, prospectively or retroactively, from these ownership limits if certain conditions are satisfied.
For these purposes, our declaration of trust includes a “group” as that term is used for purposes of Section 13(d)(3) of the Exchange Act in the definition of “Person.” Our Board may exempt a person, prospectively or retroactively, from these ownership limits if certain conditions are satisfied.
The Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. Our charter authorizes our Board to take such actions as it determines are necessary or appropriate to preserve our qualification as a REIT.
The Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. Our declaration of trust authorizes our Board to take such actions as it determines are necessary or appropriate to preserve our qualification as a REIT.
Participants in the GCC Incentive Plan, including Messrs. Escalante and Bitar, are entitled to receive distributions from the GCC Incentive Plan in the form of cash, common shares, or other property, or a combination thereof, as elected by the plan administrator.
Participants in the GCC 26 Table of Contents Incentive Plan, including Messrs. Escalante and Bitar, are entitled to receive distributions from the GCC Incentive Plan in the form of cash, common shares, or other property, or a combination thereof, as elected by the plan administrator.
Our executive officers’ interest in the GCC Incentive Plan may create the appearance of a conflict of interest between the interest of the Company and the interest of these executive officers. Risks Related to Our Corporate Structure Our charter contains certain ownership limits with respect to our shares.
Our executive officers’ interest in the GCC Incentive Plan may create the appearance of a conflict of interest between the interest of the Company and the interest of these executive officers. Risks Related to Our Corporate Structure Our declaration of trust contains certain ownership limits with respect to our shares.
Our charter prohibits the ownership by any Person (as defined in our charter) of more than 9.8% (in value or in number, whichever is more restrictive, as determined in good faith by our Board) of the aggregate of our common shares or more than 9.8% of the value (as determined in good faith by our Board) of the aggregate of our outstanding Shares (as defined in our charter), unless waived by our Board.
Our declaration of trust prohibits the ownership by any Person (as defined in our declaration of trust) of more than 9.8% (in value or in number, whichever is more restrictive, as determined in good faith by our Board) of the aggregate of our common shares or more than 9.8% of the value (as determined in good faith by our Board) of the aggregate of our outstanding Shares (as defined in our declaration of trust), unless waived by our Board.
Furthermore, our properties may be subject to various federal, state and local regulatory requirements, such as zoning and state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or an award of damages to private litigants.
Furthermore, our properties may be subject to various federal, state and local regulatory requirements, such as zoning, occupancy and land use regulations and state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or an award of damages to private litigants.
Among the reasons that they are important to our success is that we believe that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist us in negotiations with lenders, companies that may lease or guarantee our properties and other industry personnel.
Among the reasons that they are important to our success is that we believe that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist us in negotiations with lenders, sellers, buyers, companies that may lease or guarantee our properties and other industry participants.
The loss of services of one or more members of our executive management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business and weaken our business relationships with lenders, business partners, companies that may lease or guarantee our properties and other industry participants, any of which could have a material adverse effect on us.
The loss of services of one or more members of our executive leadership team, or our inability to attract and retain highly qualified personnel, could adversely affect our business and weaken our business relationships with lenders, sellers, buyers, companies that may lease or guarantee our properties and other industry participants, any of which could have a material adverse effect on us.
These include risks described elsewhere in this “Risk Factors” section and other risks, including the following: 16 Table of Contents • the value of real estate fluctuates depending on conditions in the general economy and the real estate business.
These include risks described elsewhere in this “Risk Factors” section and other risks, including the following: • the value of real estate fluctuates depending on conditions in the general economy and the real estate business.
These current conditions, or similar conditions existing in the future, may adversely affect our business, financial condition, results of operations and ability to pay dividends to our shareholders as a result of one or more of the following, among other potential consequences: • significant job losses may occur, which may decrease demand for our office and industrial space, causing market rental rates and property values to be negatively impacted, and create increased challenges in disposing of properties in accordance with our business plan; • reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of secured or unsecured loans; • inflation may adversely affect tenant leases with stated rent increases tied to the consumer price index, which could be lower than the increase in inflation at any given time; • the financial condition of our tenants may be adversely affected, which may result in tenant defaults under leases due to inflationary pressure, bankruptcy, lack of liquidity, the stability of tenants’ banking institutions, lack of funding, operational failures or for other reasons; • our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to refinance existing debt and increase our future interest expense; • the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, a dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors; and • to the extent we enter into derivative financial instruments, one or more counterparties to our derivative financial instruments could default on their obligations to us, or could fail, increasing the risk that we may not realize the benefits of these instruments. 15 Table of Contents The outbreak of a highly infectious or contagious disease or declaration of a pandemic, epidemic or other health crises could have a material adverse effect on us.
These current conditions, or similar conditions existing in the future, may adversely affect our business, financial condition, results of operations and ability to pay dividends to our shareholders as a result of one or more of the following, among other potential consequences: • significant job losses may occur, which may decrease demand for our office and industrial space, causing market rental rates and property values to be negatively impacted, and create increased challenges in disposing of properties in accordance with our business plan; • reduced values of our properties may limit our ability to sell assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of secured or unsecured loans; • inflation may adversely affect tenant leases with stated rent increases tied to the consumer price index, which could be lower than the increase in inflation at any given time; • the financial condition of our tenants may be adversely affected, which may result in tenant defaults under leases due to inflationary pressure, bankruptcy, lack of liquidity, the stability of tenants’ banking institutions, lack of funding, operational failures or for other reasons; • our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to refinance existing debt and increase our future interest expense; • the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, a dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors; • unanticipated increases in costs; and • to the extent we enter into derivative financial instruments, one or more counterparties to our derivative financial instruments could default on their obligations to us, or could fail, increasing the risk that we may not realize the benefits of these instruments.
We are subject to risks from climate change and natural disasters such as earthquakes and severe weather conditions. Our properties are located in areas that may be subject to climate change and natural disasters, such as earthquakes and wildfires, and severe weather conditions.
Our properties are located in areas that may be subject to climate change and natural disasters, such as earthquakes and wildfires, and severe weather conditions.
Unfavorable resolution of such litigation may result in our having to pay significant fines, judgments, or settlements, which, if uninsured—or if the fines, judgments and settlements exceed insured levels—would adversely impact our cash flows, thereby negatively impacting our ability to service debt and pay dividends to our shareholders, which may have a material adverse effect on our business, financial condition and results of operations.
Unfavorable resolution of such litigation may result in our having to pay significant fines, judgments, or settlements, which, if uninsured (or if the fines, judgments and settlements exceed insured levels), would adversely impact our cash flows, thereby negatively impacting our ability to service debt and pay dividends to our shareholders, which may have a material adverse effect on us.
Additionally, we may not be able to successfully implement appropriate operational, financial and management systems and controls to achieve the benefits expected to result from the acquisitions of and/or other investments in properties.
Additionally, we may not be able to successfully implement appropriate operational, financial and management systems and controls to achieve the benefits expected to result from the acquisitions of and/or other investments in properties in new markets and new business lines.
Further, our charter permits the Company, with the approval of our Board, to provide such indemnification and advancement of expenses to any of our employees or agents.
Further, our declaration of trust permits the Company, with the approval of our Board, to provide such indemnification and advancement of expenses to any of our employees or agents.
Additionally, in the event of a default, a termination of, or failure to renew a lease, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting the property or experience a decrease in value of a property if the Company determines to sell such property while it is vacant.
In the event of a tenant default, a termination of, or failure to renew a lease, as applicable, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting the property and/or experience a decrease in value of a property if we determine to sell such property while it is vacant.
In connection with the aforesaid future installments, if GC LLC elects to redeem additional OP Units, we currently intend to satisfy such redemption request with our common shares. GCC Incentive Plan participants may receive additional payment, which payments could be substantial.
Escalante and 2,000 common shares to Mr. Bitar. In connection with the aforesaid future installments, if GC LLC elects to redeem additional OP Units, we currently intend to satisfy such redemption request with our common shares. GCC Incentive Plan participants may receive additional payment, which payments could be substantial.
Also, vacancies increase our exposure to downturns in the real estate market during the time that we are trying to sell or re-lease such space, and could increase our capital expenditure requirements during the liquidation or re-leasing period, as applicable, any of which could have a material adverse effect on us.
Also, vacancies increase our exposure to downturns in the real estate market during the time that we are trying to sell or re-lease such space, could increase our capital expenditure requirements during the sale or re-leasing period, as applicable, and result in unfavorable terms in connection with the sale or re-leasing, as applicable, any of which could have a material adverse effect on us.
Certain litigation, or the resolution of certain litigation, may affect the availability or cost of some of our insurance coverage, expose us to increased risks that would be uninsured, or adversely impact our ability to attract officers and trustees, each of which may have a material adverse effect on our business, financial condition and results of operations, as well as divert the attention of management.
Certain litigation, or the resolution of certain litigation, may affect the availability or cost of some of our insurance coverage, expose us to increased risks that would be uninsured, or adversely impact our ability to attract officers and trustees, each of which may have a material adverse effect on us, as well as divert the attention of management. ITEM 1B.
It is possible that the Bipartisan Budget Act of 2015 rules could result in partnerships in which we directly or indirectly invest (including our Operating Partnership) being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though we may have not been a partner in the partnership during the year to which the audit relates and we, as a REIT, may not otherwise have been required to pay additional corporate- 23 Table of Contents level taxes as a result of the related audit adjustment.
It is possible that the application of the current partnership tax audit rules could result in partnerships in which we directly or indirectly invest (including our Operating Partnership) being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though we may have not been a partner in the partnership during the year to which the audit relates and we, as a REIT, may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment.
Additionally, our tenants may determine to lease less space as a result of the aftereffects of the outbreak of a highly infectious or contagious disease, or a declaration of a pandemic, epidemic or other health crises, resulting more vacancies at our properties, which could have a material adverse effect on our business, financial condition and results of operations.
Additionally, our tenants may determine to lease less space as a result of the aftereffects of the outbreak of a highly infectious or contagious disease, or a declaration of a pandemic, epidemic or other health crises, resulting more vacancies at our properties, which could have a material adverse effect on us.
Any inability to take advantage of increases in market rental rates could adversely impact the value of our properties and the market price of our common shares and could have a material adverse effect on us. Our ability to fully control the maintenance of our net-leased properties may be limited.
Any inability to take advantage of increases in market rental rates, whether in connection with existing or new leases, could adversely impact the value of our properties and the market price of our common shares and could have a material adverse effect on us. Our ability to fully control the maintenance of our net-leased properties may be limited.
As further described below, of December 31, 2023, GC LLC owned 2,486,516 OP Units, which, upon a request for redemption by GC LLC, are exchangeable into common shares or cash, at the Company’s election.
As further described below, as of December 31, 2024, GC LLC 2,273,473 OP Units owned, which, upon a request for redemption by GC LLC, are exchangeable into common shares or cash, at the Company’s election.
As required by our listing on the NYSE, certain awards under the GCC Incentive Plan were settled during the fourth quarter 2023 and will be settled in four annual installments thereafter, unless waived or modified.
As required by our listing on the NYSE, certain awards under the GCC Incentive Plan were settled during each of the fourth quarter 2023 and fourth quarter 2024 and will be settled in three additional annual installments thereafter, unless waived or modified.
Failure to hedge effectively against interest rate changes may adversely affect our business, financial condition, results of operations and ability to pay dividends to our shareholders. The REIT provisions of the Code impose certain restrictions on our ability to utilize hedges, swaps and other types of derivatives to hedge our liabilities.
Failure to hedge effectively against interest rate changes may adversely affect our business, financial condition, results of operations, ability to pay dividends to our shareholders or otherwise have a material adverse effect on us. The REIT provisions of the Code impose certain restrictions on our ability to utilize hedges, swaps and other types of derivatives to hedge our liabilities.
In addition, interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates and a failure to hedge effectively against interest rate changes could materially adversely affect our business, financial condition, results of operations and ability to pay dividends to our shareholders.
In addition, interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates and a failure to hedge effectively against interest rate changes could materially adversely affect our business, financial condition, results of operations and ability to pay dividends to our shareholders or otherwise have a material adverse effect on us.
If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to that tenant.
If a tenant becomes insolvent or bankrupt, that could diminish the income we receive from that tenant’s lease and we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to that tenant.
Our charter requires us to indemnify our trustees and officers to the maximum extent permitted under Maryland law. Additionally, our charter limits the liability of our trustees and officers for monetary damages to the maximum extent permitted under Maryland law.
Our declaration of trust requires us to indemnify our trustees and officers to the maximum extent permitted under Maryland law. Additionally, our declaration of trust limits the liability of our present and former trustees and officers for monetary damages to the maximum extent permitted under Maryland law.
This could create risks in addition to those we face in more familiar regions, such as our not sufficiently anticipating conditions or trends in a new market and, therefore a property not operating profitably.
This could create risks in addition to those we face in more familiar regions, such as our not complying with the applicable rules and regulation in such markets or not sufficiently anticipating conditions or trends in a new market and, therefore a property not operating profitably.
A property may need to remain vacant during the period of development or redevelopment and we may not receive any rental income during such period. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition or result of operations.
A property may need to remain vacant during the period of development or redevelopment and we may not receive any rental income during such period. The occurrence of any of the foregoing could have a material adverse effect on us.
Current economic conditions could lead our office tenants electing not to renew their leases, or to renew their leases for less space than they currently occupy, which could increase vacancy rates and decrease rental income. Remote and hybrid work practices are likely to continue in a post-pandemic environment.
Current economic conditions, including the endurance of remote and hybrid work practices in a post-pandemic environment, could lead our office tenants to elect not to renew their leases, or to renew their leases for less space than they currently occupy, which could increase vacancy rates and decrease rental income.
In the future, we may experience additional geographic concentrations, which could adversely affect our business, financial condition, and result of operations if conditions become less favorable in any of the states or markets within such states in which we have a concentration of properties.
In the future, we may experience additional geographic and/or sector concentrations, which could adversely affect us if conditions become less favorable in any of the states or markets within such states in which we have a concentration of properties.
Special use properties may be relatively illiquid compared to other types of real estate and financial assets. Upon expiration or early termination of a lease, this illiquidity could limit our ability to quickly pivot in response to changes in economic, market or other conditions to an even greater extent than the typically illiquid nature of real estate assets.
Upon expiration or early termination of a lease, this illiquidity could limit our ability to quickly pivot in response to changes in economic, market or other conditions to an even greater extent than the typically illiquid nature of real estate assets.
Additionally, if substantial office space reconfiguration is required, it may be more attractive for our tenants to pursue relocating to other office space than renewing their leases and renovating their existing space, which could have a material adverse effect on us. Further, our current business plan contemplates the sale of a number of our office assets.
Additionally, if substantial office space reconfiguration is required, it may be more attractive for our tenants to pursue relocating to other office space than renewing their leases and renovating their existing space, which could have a material adverse effect on us.
These provisions would affect our ability to turn our investments into cash and thus affect cash available for the payment of dividends to our shareholders and may prohibit us from reducing the outstanding indebtedness with respect to any such properties by repaying or refinancing such indebtedness.
These provisions would affect our ability to turn our investments into cash and thus affect cash available for the payment of dividends to our shareholders and may prohibit us from reducing the outstanding indebtedness with respect to any such properties by repaying or refinancing such indebtedness. Any mortgage debt that we place on our properties may also impose prepayment penalties.
Based on Annualized Base Rent, as of December 31, 2023, our weighted average lease term was approximately 6.5 years and approximately 98.2% of our leases contain fixed rental rate increases.
Based on Annualized Base Rent, as of December 31, 2024, our weighted average lease term was approximately 6.4 years and approximately 97.6% of our leases contain fixed rental rate increases.
Our ability to sell our office assets at attractive prices may be limited in the current economic climate, and there is no assurance that we will be able to effect such sales on attractive terms, or at all.
Our current business plan contemplates the sale of a number of our office assets. Our ability to sell our office assets at attractive prices may be limited in the current economic climate, and there is no assurance that we will be able to affect such sales on attractive terms, or at all.
The vesting of any restricted shares or other equity awards granted to certain trustees, executive officers and other employees under our equity incentive plan, or the issuance of our common shares, or OP Units in connection with future acquisitions of and/or other investments in properties, could have an adverse effect on the market price of our common shares.
In addition, the vesting of any restricted shares or other equity awards granted to certain trustees, executive officers and other employees under our equity incentive plan, or the issuance of our common shares or other securities convertible into, or exchangeable or exercisable for, our common shares in connection with future acquisitions of and/or other investments in properties, could dilute shareholders and have an adverse effect on the market price of our common shares.
We may pursue acquisitions of and/or other investments in properties as part of our business plan. Acquisitions of and/or other investments in properties entail risks, such as the risk that such properties fail to perform as expected. We may pursue acquisitions of and/or other investments in properties in regions where we have not previously owned properties.
Acquisitions of and/or other investments in properties entail risks, such as the risk that such properties fail to perform as expected. We may pursue acquisitions of and/or other investments in properties in regions where we have not previously owned properties, including outside of the United States.
These investments, and other future similar investments, also have the potential risk of creating impasses on decisions, such as a sale, financing or development, because neither we nor our partner or other owner has full control over the partnership or joint venture.
Joint ventures and partnerships have the potential risk of creating impasses on decisions, such as a sale, financing or development, if neither we nor our partner or other owner has full control over the partnership or joint venture.
Additionally, if we incur variable rate debt, increases in interest rates would increase our interest costs, could reduce our cash flows and our ability to pay dividends to shareholders at our current level or otherwise have a material adverse effect on us.
Increases in the interest we pay on our indebtedness could adversely affect our ability to pay dividends to shareholders, among other consequences. Additionally, if we incur variable rate debt, increases in interest rates would increase our interest costs, could reduce our cash flows and our ability to pay dividends to shareholders or otherwise have a material adverse effect on us.
As we complete property dispositions, the overall size of our post-closing indemnification and retained liability obligations to purchasers may increase, and no assurance can be given that the extent of such indemnification obligations and retained liabilities will not, individually or in the aggregate, be material to our business, financial condition or results of operations.
As we complete property dispositions, the overall size of our post-closing indemnification and retained liability obligations to purchasers may increase, and no assurance can be given that the extent of such indemnification obligations and retained liabilities will not, individually or in the aggregate, have a material adverse effect on us.
Our operating results will be affected by economic and regulatory changes, such as inflation and rising interest rates, that have an adverse impact on the real estate market in general, and we cannot provide any assurance that we will be profitable or that we will realize growth in the value of the real estate we own and/or are invested in.
Our operating results will be affected by economic and regulatory changes, including changes in national, regional and/or local economic conditions, that have an adverse impact on the real estate market in general, and we cannot provide any assurance that we will be profitable or that we will realize growth in the value of the real estate we own and/or are invested in.
However, the coverage and amounts of our environmental, flood and earthquake insurance policies may not be sufficient to cover our entire risk. We cannot assure shareholders that we will have adequate coverage for losses.
However, the coverage and amounts of our environmental, flood and earthquake insurance policies may not be sufficient to cover our entire risk or may contain exclusions which may result in risks that are not covered. We cannot assure shareholders that we will have adequate coverage for losses.
Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay dividends to shareholders at our current level or otherwise have a material adverse effect on us. We expect that we will incur indebtedness in the future.
Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay dividends to shareholders or otherwise have a material adverse effect on us. We have incurred and intend to continue to incur indebtedness.
As we seek to dispose of certain properties, in some circumstances market conditions may impact the terms on which we are able to sell properties, which may require us to provide warranties, representations and covenants, and agree to indemnification obligations or to retain certain liabilities, in order to complete such dispositions.
We may not be able to control the extent of warranties and indemnities we may be required to provide when disposing of properties. 14 Table of Contents As we seek to sell certain properties, in some circumstances market conditions may impact the terms on which we are able to sell properties, which may require us to provide warranties, representations and covenants, and agree to indemnification obligations or to retain certain liabilities, in order to complete such dispositions.
Our ability to manage our assets is also subject to federal bankruptcy laws and state laws that limit creditors’ rights and remedies available to real property owners to collect delinquent rents.
Our ability to manage our assets is subject to federal and state bankruptcy, insolvency and receivership laws that limit creditors’ rights and remedies available to real property owners to collect delinquent rents and/or gain possession of a property.
If a development or redevelopment of a newly acquired property is unsuccessful, either because we do not receive the rents we expected or are unable to lease the property, then we could experience a material adverse effect on our business, financial condition or results of operation. 13 Table of Contents Additionally, the development or redevelopment of a property may be time consuming and experience delays.
If a development or redevelopment of a property is unsuccessful, either because we do not receive the rents we expected or are unable to lease the property, then we could experience a material adverse effect on us. Additionally, the development or redevelopment of a property may be time consuming and experience delays.
The assumptions in our corporate credit agreement and mortgage debt regarding values, cash flow and debt service coverage, and individual asset underwriting of key performance metrics such as loan-to-value ratios, debt service coverage ratios and debt yields that support our current borrowings may be subject to change, as market conditions change and/or lending standards become more stringent.
Any of the foregoing could have a material adverse effect on us. 20 Table of Contents In addition, the assumptions in our corporate credit agreement and mortgage debt regarding values, cash flow and debt service coverage, and individual asset underwriting of performance metrics such as loan-to-value ratios, debt service coverage ratios and debt yields that support our current borrowings may be subject to change, as market conditions change and/or lending standards become more stringent.
Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of common shares with the opportunity to realize a premium price for our common shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then-outstanding voting shares at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter impose fair price and/or supermajority shareholder voting requirements on these combinations; and • “control share” provisions that provide that a shareholder’s “control shares” of our Company (defined as shares (other than shares acquired directly from us) that, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights with respect to their control shares, except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) that are applicable to Maryland real estate investment trusts may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of common shares with the opportunity to realize a premium price for our common shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between a Maryland real estate investment trust and an “interested shareholder” (defined generally as any person who owns, directly or indirectly, 10% or more of the voting power of the Maryland real estate investment trust’s outstanding voting shares of beneficial interest or an affiliate or associate of the Maryland real estate investment trust who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding voting shares of beneficial interest at any time within the two-year period immediately prior to the date in question) or an affiliate of such interested shareholder for five years after the most recent date on which the interested shareholder becomes an interested shareholder, and thereafter impose either fair price or supermajority shareholder voting requirements on these combinations; • “control share” provisions that provide that holders of “control shares” of a Maryland real estate investment trust (defined as shares (other than shares acquired directly from the real estate investment trust) that, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights with respect to their control shares, except to the extent approved by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares; and 27 Table of Contents • T itle 3, Subtitle 8 of the MGCL, which permits the board of trustees of a Maryland real estate investment trust, without shareholder approval and notwithstanding any contrary provisions in the declaration of trust or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not yet have.
Operating expenses associated with owning a property typically include real estate taxes, insurance, maintenance, repair and renovation costs, the cost of compliance with governmental regulation (including zoning) and the potential for liability under applicable laws.
Operating expenses associated with owning a property typically include real estate taxes, utilities, insurance, maintenance, repair and renovation costs, the cost of compliance with governmental regulation (including complying with applicable zoning regulations and obtaining and maintaining necessary occupancy, land use and other governmental permissions) and the potential for liability under applicable laws.
Additionally, partners or other owners could have economic or other business interests or goals that are inconsistent with our own business interests or goals, and could be in a position to take actions contrary to our policies or objectives.
It is possible that the Company’s partners or co-venturers could have economic or other business interests or goals that are inconsistent with our own business interests or goals, and could be in a position to take actions contrary to our policies or objectives.
In addition, our processing of Confidential Information, including personally identifiable information, subjects us to various federal, state and local laws, regulations and industry standards governing the collection, use, storage, sharing, transmission and other processing of personal information.
The occurrence of any of the foregoing risks could have a material adverse effect on us. In addition, our processing of Confidential Information, including personally identifiable information, subjects us to various federal, state and local laws, regulations and industry standards governing the collection, use, storage, sharing, transmission and other processing of personal information.
In addition, there is no assurance that we will be able to lease the property for the rent previously received or sell the property without incurring a loss due to its being vacant. 14 Table of Contents We depend on current key personnel for our future success, and the loss of such personnel or inability to attract and retain personnel could harm our business and the loss of services of one or more members of our executive management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our investment opportunities and weaken our business relationships with lenders, business partners, companies that may lease or guarantee our properties and other industry participants, any of which could have a material adverse effect on us.
We depend on current key personnel for our future success, and the loss of such personnel or inability to attract and retain personnel could harm our business and the loss of services of one or more members of our executive management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our 15 Table of Contents investment opportunities and weaken our business relationships with lenders, business partners, companies that may lease or guarantee our properties and other industry participants, any of which could have a material adverse effect on us.
Moreover, if we have net income from “prohibited transactions”, that income will be subject to a 100% tax. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT.
In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT.
We may be subject to litigation relating to our business including securities class action litigation following any period of volatility in the price of our common shares. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which we may not be insured against.
We may be subject to litigation relating to our business, which could have a material adverse effect on us and could result in significant defense costs and potentially significant judgments against us. We may be subject to litigation relating to our business including securities class action litigation following any period of volatility in the price of our common shares.
Therefore, if we were to sell any of these assets prior to the favorable re-leasing of the space or without electing to redevelop a space, we may suffer a loss on our investment.
Therefore, if we were to sell any of these assets prior to the favorable re-leasing of the space or without electing to invest additional capital to redevelop a space, we may be forced to re-lease or sell these assets for unfavorable terms and suffer a loss on our investment.
We may own or invest in special use single tenant properties, and, as such, it may be difficult to re-lease or sell these properties, which could have a material adverse effect on us. We focus our investments on industrial and office properties, a number of which may have special uses.
We may own or invest in special use single tenant properties, and, as such, it may be difficult to re-lease or sell these properties, which could have a material adverse effect on us. A number of our assets have special uses. Special use properties may be relatively illiquid compared to other types of real estate and financial assets.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our Confidential Information, Critical Systems and the broader enterprise IT environment; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of Service Providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness and spear-phishing resistance training of our employees, incident response personnel, and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a vendor management policy for Service Providers.
Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, but only that we may source controls applicable to our industry from these frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. 30 Table of Contents Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our Confidential Information, Critical Systems and the broader enterprise IT environment; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of Service Providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness and spear-phishing resistance training of our employees, incident response personnel, and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a vendor management policy for Service Providers that provide an automated service or system that stores, transmits or processes our Confidential Information.
The team has primary responsibility for our overall cybersecurity risk management program. Our management team works closely with Connetic, which has provided information technology support, security audit and on-call services to financial industry participants for more than 25 years.
The team has primary responsibility for our overall cybersecurity risk management program. Connetic has provided information technology support, security audit and on-call services to financial industry participants for more than 25 years.
CYBERSECURITY Cybersecurity Risk Management and Strategy 30 Table of Contents The cybersecurity risk management program, processes and strategy described in this section are limited to the personal and business information belonging to or maintained by the Company (collectively, “Confidential Information”), our own third-party critical systems and services supporting or used by the Company (collectively, “Critical Systems”), and Service Providers.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy The cybersecurity risk management program, processes and strategy described in this section are limited to the personal and business information belonging to or maintained by the Company (collectively, “Confidential Information”), our own third-party critical systems and services supporting or used by the Company (collectively, “Critical Systems”), and Service Providers.
See “ Risk Factors—General Risks—Cybersecurity risks and cyber incidents or the failure to comply with laws and regulations concerning data privacy and security may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, any of which could have a material adverse effect on us.” Cybersecurity Governance Our executive management team, along with our managed information technology Service Provider, Strebe Corporation, a California corporation d/b/a Connetic (“Connetic”), is responsible for assessing and managing risks from cybersecurity threats to the Company, including our Confidential Information and Critical Systems.
See “ Risk Factors—General Risks—Cybersecurity risks and cyber incidents or the failure to comply with laws and regulations concerning data privacy and security may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, any of which could have a material adverse effect on us.” Cybersecurity Governance A security team consisting of our executive management team, other members of senior management, and our managed information technology Service Provider, Connetic, LLC, a Delaware limited liability company (“Connetic”) is responsible for assessing and managing risks from cybersecurity threats to the Company, including our Confidential Information and Critical Systems.
Our management team meets with Connetic regularly to discuss then-current cybersecurity issues, which may include efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including threat intelligence and other information obtained from governmental, public or private sources, and external service providers engaged by us; and alerts and reports produced by security tools deployed in the information technology environment including a spear-phishing report. 31 Table of Contents Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee of the Board (the “Audit Committee”) oversight of cybersecurity and other information technology risks.
Our management team meets with Connetic regularly to discuss then-current cybersecurity issues, which may include efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including threat intelligence and other information obtained from governmental, public or private sources, and external service providers engaged by us; and alerts and reports produced by security tools deployed in the information technology environment including a spear-phishing report.
The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives period reports from management or Connetic on our cybersecurity risks and cybersecurity risk management program. The full Board members receives presentations on cybersecurity topics from Connetic as part of the Board’s continuing education on topics that impact public companies.
The full Board also receives period reports from management or Connetic on our cybersecurity risks and cybersecurity risk management program. Our Board receives presentations on cybersecurity topics from Connetic as part of the Board’s continuing education on topics that impact public companies.
The Audit Committee oversees management’s implementation of our cybersecurity risk management program. The Audit Committee receives periodic reports from management or Connetic on our cybersecurity risks and cybersecurity risk management program. In addition, the executive management team is responsible for updating the Audit Committee, as necessary, regarding significant cybersecurity incidents.
The Audit Committee receives periodic reports from management or Connetic on our cybersecurity risks and cybersecurity risk management program. In addition, the executive management team is responsible for updating the Audit Committee, as necessary, regarding significant cybersecurity incidents. The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program and includes a cybersecurity incident response plan. We design and assess our program based on the information security standards published by the International Organization for Standardization 27002 (“ISO 27002”).
We design and assess our program based on industry standard cybersecurity frameworks published by the International Organization for Standardization and the National Institute of Standards and Technology.
Removed
This does not imply that we meet any particular technical standards, specifications, or requirements, but only that we use the ISO 27002 as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Added
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Added
Additionally, we maintain a cybersecurity insurance policy to mitigate certain risks associated with cybersecurity incidents. However, the costs, damages, and expenses arising from cybersecurity incidents may not be completely covered by such insurance.
Added
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee of the Board (the “Audit Committee”) oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(2) Includes properties held for sale and sold subsequent to year-end. 32 Table of Contents By Industry: The percentage of Annualized Base Rent as of December 31, 2023, by industry, based on the respective in-place leases, is as follows (dollars in thousands): Industry (1)(3) Annualized Base Rent (unaudited) Number of Lessees Percentage of Annualized Base Rent Capital Goods $ 32,436 15 16.5 % Consumer Services 21,597 5 11.0 Materials 19,980 5 10.2 Food, Beverage & Tobacco 16,677 3 8.5 Commercial & Professional Services 11,701 7 5.9 Utilities 11,297 2 5.7 Retailing 9,727 2 4.9 Technology Hardware & Equipment 9,179 3 4.7 Diversified Financials 9,127 3 4.6 Health Care Equipment & Services 9,032 3 4.6 Subtotal 150,753 48 76.6 All others (2) 45,978 19 23.4 Total $ 196,731 67 100.0 % (1) Industry classification based on the Global Industry Classification Standard.
Biggest changeBy Industry: The percentage of ABR by industry for the Company’s portfolio as of December 31, 2024 is presented as follows (dollars in thousands): Industry (1) ABR (unaudited) Number of Lessees Percentage of ABR Capital Goods $ 34,745 26 18.8 % Materials 17,500 5 9.5 Food, Beverage & Tobacco 17,163 3 9.3 Retailing 12,085 4 6.5 Utilities 11,513 2 6.2 Health Care Equipment & Services 11,389 4 6.2 Commercial & Professional Services 11,313 6 6.1 Consumer Services 11,129 2 6.0 E-Commerce 9,978 2 5.4 Diversified Financials 8,977 2 4.9 Subtotal 145,792 56 78.9 All Others (2) 39,264 27 21.1 Total $ 185,056 83 100.0 % (1) Industry classification based on the Global Industry Classification Standard.
“Exhibits, Financial Statement Schedules—Schedule III—Real Estate and Accumulated Depreciation and Amortization,” of this Annual Report on Form 10-K for a detailed listing of our properties. See Note 5 , Debt, to our consolidated financial statements included in this Annual Report on Form 10-K for more information about our indebtedness secured by our properties.
“Exhibits, Financial Statement Schedules—Schedule III—Real Estate and Accumulated Depreciation and Amortization,” of this Annual Report on Form 10-K for a detailed listing of our properties. See Note 5 , Debt, 31 Table of Contents to our consolidated financial statements included in this Annual Report on Form 10-K for more information about our indebtedness secured by our properties.
As of December 31, 2023, our top 10 tenants are as follows (dollars in thousands): Tenant Annualized Base Rent (unaudited) Percentage of Annualized Base Rent Keurig Dr.
The top 10 tenants by ABR for the Company’s portfolio as of December 31, 2024 is presented as follows (dollars in thousands): Tenant ABR (unaudited) Percentage of ABR Keurig Dr.
Revenue Concentration By State: The percentage of Annualized Base Rent as of December 31, 2023, by state, based on the respective in-place leases, is as follows (dollars in thousands): State Annualized Base Rent (unaudited) Number of Properties (2) Percentage of Annualized Base Rent Arizona $ 23,336 7 11.9 % New Jersey 19,532 5 9.9 Colorado 16,471 4 8.4 Ohio 13,261 5 6.7 Massachusetts 12,449 3 6.3 California 12,271 2 6.2 Alabama 10,307 2 5.2 South Carolina 9,853 3 5.0 North Carolina 9,079 6 4.6 Illinois 8,865 3 4.5 Subtotal 135,424 40 68.7 All Others (1) 61,307 31 31.3 Total $ 196,731 71 100.0 % (1) All others account for 3.9% or less of total Annualized Base Rent on an individual state basis.
By State: The percentage of ABR by state for the Company’s portfolio as of December 31, 2024 is presented as follows (dollars in thousands): State ABR (unaudited) Number of Properties Percentage of ABR Arizona $ 20,287 5 11.0 % Colorado 13,989 4 7.6 Massachusetts 12,839 3 6.9 California 12,610 2 6.8 New Jersey 11,649 8 6.3 South Carolina 11,415 7 6.2 Florida 10,768 8 5.8 Ohio 10,762 4 5.8 Tennessee 10,204 7 5.5 Alabama 9,409 1 5.1 Subtotal 123,932 49 67.0 All Others (1) 61,124 54 33.0 Total $ 185,056 103 100.0 % (1) “ All Others” account for less than 5.1% of total ABR on an individual basis.
Square Feet Percentage of Annualized Base Rent 2024 $ 17,045 9 1,398,500 8.7 % 2025 8,090 7 788,700 4.1 2026 13,308 4 1,449,100 6.8 2027 14,349 7 570,700 7.3 2028 18,726 11 2,027,200 9.5 2029 38,756 10 2,394,100 19.7 >2029 86,457 31 8,595,800 43.9 Leased Amenity Space — — 2,000 — Vacant — — 642,800 — Total $ 196,731 79 17,868,900 100.0 % (1) Expirations that occur on the last day of the year are shown as expiring in the subsequent year.
Square Feet ABR (per square foot) (2) Annualized Net Effective Base Rent (per square foot) (3) 2025 $ 1,508 0.9 % 2 73,000 $ 20.66 $ 20.04 2026 9,813 6.0 3 1,273,500 7.71 8.74 2027 14,524 8.9 7 570,700 25.45 23.98 2028 15,684 9.6 7 1,762,500 8.90 8.58 2029 30,247 18.6 7 2,015,100 15.01 14.88 2030 26,137 16.0 5 2,342,700 11.16 11.01 2031 16,217 10.0 4 1,379,500 11.76 11.88 2032 12,206 7.5 6 1,457,100 8.38 8.78 2033 8,429 5.2 4 1,454,900 5.79 5.99 2034 — — — — — — >2034 28,122 17.3 9 1,964,500 14.32 16.34 Vacant — — — 69,000 — — Total $ 162,887 100.0 % 54 14,362,500 $ 11.40 $ 11.69 (1) Expirations that occur on the last day of the year are shown as expiring in the subsequent year.
Removed
ITEM 2. PROPERTIES As of December 31, 2023, we owned a fee simple interest in 66 and a ground leasehold interest in 5 properties, encompassing approximately 17.9 million rentable square feet. See Part IV, Item 15.
Added
ITEM 2. PROPERTIES As of December 31, 2024, the Company’s portfolio was comprised of 103 properties, consisting of 97 operating properties and six redevelopment properties (those designated for redevelopment or repositioning) reported in two segments – Industrial and Office. See Part IV, Item 15.
Removed
(2) No individual industry included within “all others” accounts for more than 4.4% of total Annualized Base Rent. (3) Includes properties held for sale and sold subsequent to year-end. Top Ten Tenants: Pursuant to the respective in-place leases, no lessee or property generated more than 5.9% of our total Annualized Base Rent as of December 31, 2023.
Added
Revenue Concentration The Company presents the following concentrations based on Annualized Base Rent (“ABR”), which is calculated as the monthly contractual base rent for leases that have commenced as of the end of the quarter, excluding rent abatements, multiplied by 12 months and deducting base year operating expenses for gross and modified leases, unless otherwise specified.
Removed
Pepper $ 11,532 5.9 % Southern Company 9,224 4.7 % LPL 8,701 4.4 % Amazon 8,590 4.4 % Freeport McMoRan 7,867 4.0 % Maxar Technologies 7,723 3.9 % RH 7,487 3.8 % Wyndham Hotels & Resorts 7,392 3.8 % McKesson 6,123 3.1 % Travel & Leisure, Co. 5,826 3.0 % Subtotal 80,465 41.0 % All Others (1) 116,266 59.0 % Total $ 196,731 100.0 % (1) No individual tenant included within “All others” account for more than 2.8% of Annualized Base Rent. 33 Table of Contents Lease Expirations: As of December 31, 2023, our lease expirations by year are as follows (dollars in thousands): Year of Lease Expiration (1)(2) Annualized Base Rent (unaudited) Number of Leases Approx.
Added
For leases in effect at the end of any quarter that provide for rent abatement during the last month of that quarter, the Company used the monthly contractual base rent payable following expiration of the abatement period.
Removed
(2) Includes properties held for sale and sold subsequent to year-end.
Added
(2) “ All Others” account for less than 4.2% of total ABR on an individual basis. 32 Table of Contents Top Ten Tenants: No lessee or property generated more than 6.4% of our total ABR as of December 31, 2024.
Added
Pepper $ 11,897 6.4 % Amazon 9,978 5.4 % Southern Company Services 9,409 5.1 % LPL Holdings 8,853 4.8 % Maxar Technologies 7,916 4.3 % Freeport McMoRan 7,867 4.3 % RH 7,637 4.1 % McKesson Corporation 6,276 3.4 % Travel & Leisure, Co. 5,928 3.2 % IGT 5,201 2.8 % Subtotal 80,962 43.8 % All Others (1) 104,094 56.2 % Total $ 185,056 100.0 % (1) “All Others” account for less than 2.8% of ABR on an individual basis.
Added
Lease Expirations: The tables below provide a summary of our upcoming lease expirations in our portfolio, excluding unexercised renewal options and early termination rights.
Added
As of December 31, 2024, the lease expirations for the Company’s portfolio are presented as follows (dollars in thousands): Year of Lease Expiration (1) ABR (unaudited) Percentage of Annualized Base Rent 2025 $ 1,984 1.1 % 2026 12,208 6.6 % 2027 18,834 10.2 % 2028 20,100 10.9 % 2029 32,316 17.5 % 2030 27,851 15.1 % 2031 19,589 10.6 % 2032 14,423 7.8 % 2033 9,629 5.1 % 2034 — — % >2034 28,122 15.1 % Vacant — — % Total $ 185,056 100.0 % (1) Expirations that occur on the last day of the year are shown as expiring in the subsequent year. 33 Table of Contents As of December 31, 2024, the lease expirations for leases based on square footage are presented as follows: Year of Lease Expiration (1) ABR (unaudited, in thousands) Percentage of Annualized Base Rent Number of Leases Approx.
Added
(2) ABR (per square foot) is calculated as (i) ABR divided by (ii) square footage under lease as of the end of the quarter.
Added
(3) Annualized Net Effective Base Rent (per square foot) is calculated as (i) the contractual base rent for leases that have commenced as of the end of the quarter calculated on a straight-line basis, including amortization of rent abatements, but without regard to tenant improvement allowances and leasing commissions, and deducting base year operating expenses for gross and modified gross leases, unless otherwise specified, multiplied by 12 months divided by (ii) square footage under lease as of the end of the end of the quarter.
Added
Rent abatements include rent credits that are granted from time to time in connection with unused tenant improvement allowances. As of December 31, 2024, the lease expirations for leases based on acres are presented as follows: Year of Lease Expiration (1) ABR (unaudited, in thousands) Percentage of Annualized Base Rent Number of Leases Approx.
Added
Usable Acres ABR (per usable acre) (2) Annualized Net Effective Base Rent (per usable acre) (3) 2025 $ 476 2.1 % 2 12 $ 38,387 $ (74,194) 2026 2,395 10.8 7 29 81,574 72,446 2027 4,310 19.4 12 62 69,371 72,316 2028 4,416 19.9 9 91 48,363 50,871 2029 2,069 9.3 5 37 56,438 59,793 2030 1,714 7.7 4 21 81,619 95,190 2031 3,372 15.2 3 61 56,209 63,644 2032 2,217 10.1 4 23 96,100 123,400 2033 1,200 5.5 2 20 60,000 68,800 2034 — — — — — — >2034 — — — — — — Vacant — — — 2 — — Redevelopment properties (4) — — — 82 — — Total $ 22,169 100.0 % 48 440 $ 62,286 $ 63,430 (1) Expirations that occur on the last day of the year are shown as expiring in the subsequent year.
Added
(2) ABR (per usable acre) is calculated as (i) ABR divided by (ii) usable acreage under lease as of the end of the quarter.
Added
(3) Annualized Net Effective Base Rent (per usable acre) is calculated as (i) the contractual base rent for leases that have commenced as of the end of the quarter calculated on a straight-line basis, including amortization of rent abatements, but without regard to tenant improvement allowances and leasing commissions, and deducting base year operating expenses for gross and modified gross leases, unless otherwise specified, multiplied by 12 months divided by (ii) acreage under lease as of the end of the quarter.
Added
Rent abatements include rent credits that are granted from time to time in connection with unused tenant improvement allowances.
Added
(4) Represents unleased space at redevelopment properties. 34 Table of Contents Leasing Information As of December 31, 2024, we estimate that the current average market rental rates for all leases in our operating portfolio that are scheduled to expire within the next four years are: (i) for our Industrial segment, approximately 30% to 35% greater than the weighted average in-place cash rental rates; and (ii) for our Office segment, approximately 5% to 10% less than the weighted average in-place cash rental rates.
Added
Our estimates regarding current average market rental rates are based on our internal analysis and/or third-party broker quotes, when available, and there is no assurance that these estimates will prove to be accurate.
Added
Market rental rates and the demand for our properties are impacted by general economic conditions, including the pace of economic growth and access to capital in the submarkets in which our properties are located. Therefore, there is no assurance that expiring leases will be renewed or that available space will be re-leased above, below or at current market rental rates.
Added
The following tables set forth certain information regarding leasing activity for our operating portfolio during the year ended December 31, 2024: Leases Commenced (1) : Number of Leases Approx.
Added
Square Feet Weighted Average Lease Term LC (per square feet) TI (per square feet) GAAP Rent Change (2) Cash Rent Change (3) New Leases 1 26,800 2.0 $ 1.87 $ — 75.0 % 71.0 % Renewal Leases 7 810,600 4.6 $ 2.88 $ 8.57 31.0 % 21.0 % Total / Weighted Average 8 837,400 4.5 $ 2.85 $ 8.30 32.0 % 23.0 % (1) Represents leasing activity for leases that commenced during the period.
Added
(2) Calculated as the change between GAAP rents for new/renewal leases and the expiring GAAP rents for the same space. (3) Calculated as the change between cash rents for new/renewal leases and the expiring cash rents for the same space. Leases Executed (1) : Number of Leases Approx.
Added
Square Feet Weighted Average Lease Term LC (per square feet) TI (per square feet) GAAP Rent Change (2) Cash Rent Change (3) New Leases 1 26,800 2.0 $ 1.87 $ — 75.0 % 71.0 % Renewal Leases 7 810,600 4.6 $ 2.88 $ 8.57 31.0 % 21.0 % Total / Weighted Average 8 837,400 4.5 $ 2.85 $ 8.30 32.0 % 23.0 % (1) Represents leasing activity for leases that were executed during the period.
Added
(2) Calculated as the change between GAAP rents for new/renewal leases and the expiring GAAP rents for the same space. (3) Calculated as the change between cash rents for new/renewal leases and the expiring cash rents for the same space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 PART II
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 35 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+3 added−3 removed3 unchanged
Biggest changeThe following performance graph is a comparison of the cumulative return of our common shares for the period from our Listing through December 31, 2023. The graph also shows the cumulative total returns of the Standard and Poor’s 500 Index (“S&P 500”), and industry peer groups during the same period.
Biggest changeThe following performance graph is a comparison of the cumulative return of our common shares for the period from April 13, 2023, being the date on which the Company listed its common shares on the New York Stock Exchange (the “Listing”), through December 31, 2024.
Dividends We intend to pay dividends on a quarterly basis at the discretion of our Board, unless our results of operations, our general financial condition, general economic conditions, or other factors inhibit us from doing so. Recent Sales of Unregistered Securities During the year ended December 31, 2023, there were no sales of unregistered securities.
Dividends We intend to pay dividends on a quarterly basis at the discretion of our Board, unless our results of operations, our general financial condition, general economic conditions, or other factors indicate we should refrain from doing so. Recent Sales of Unregistered Securities During the year ended December 31, 2024, there were no sales of unregistered securities.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE under the ticker symbol “PKST”. As of February 20, 2024, there were 11,616 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE under the ticker symbol “PKST”. As of February 17, 2025, there were 36,755,389 holders of record of our common stock.
The historical information set forth on the following performance graph is not necessarily indicative of future performance. 35 Forfeitures During the quarter ended December 31, 2023, the Company repurchased shares as follows: For the Month Ended Total Number of Shares Repurchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs October 31, 2023 — $ — — — November 30, 2023 — $ — — — December 31, 2023 58,982 (1) $ 19.92 — — (1) Consists of shares withheld (i.e. forfeited) pursuant to provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.
Repurchases of Equity Securities During the quarter ended December 31, 2024, the Company repurchased shares as follows: For the Month Ended Total Number of Shares Repurchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs October 31, 2024 — $ — — — November 30, 2024 — $ — — — December 31, 2024 113,101 $ 11.06 — — (1) Consists of shares withheld (i.e. forfeited) pursuant to provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Prior to the listing of the Company’s shares on the New York Stock Exchange (the “Listing”), the Company had adopted the share redemption program (as amended and restated, the “SRP”) that enabled shareholders to sell their shares to the Company in limited circumstances.
Added
The graph also shows the cumulative total returns of the Russell 2000 Index (“RUT”) and FTSE NAREIT All Equity REITs Index (“FNER”) during the same period.
Removed
Pursuant to the terms of the SRP, during any calendar year, with respect to each share class, the Company was permitted to redeem no more than 5% of the weighted average number of shares of such class outstanding during the prior calendar year, and the Company would redeem shares as of the last business day of each quarter (with quarterly redemptions capped at $5 million) at a price equal to the most recently published net asset value (“NAV”) per share for the applicable class prior to quarter end.
Added
The historical information set forth on the following performance graph is not necessarily indicative of future performance. 36 (1) Prior to the Listing, our published NAV as of June 30, 2022, June 30, 2021, and December 31, 2020, was as follows: $66.78, $81.90 and $80.55, respectively.
Removed
The SRP was suspended during certain periods prior to Listing and terminated in connection with the Listing. During the year ended December 31, 2023, the Company redeemed 941 shares.
Added
The cumulative investment (loss) for the NAV as of June 30, 2022, June 30, 2021, and December 31, 2020, was as follows: (21.0%), (2.6%), and (4.1%) respectively. ITEM 6. [Reserved] 37

Item 7. Management's Discussion & Analysis

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

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Biggest changeIn the future, NAREIT may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure. 45 Our calculation of FFO and AFFO is presented in the following table for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share amounts): Year Ended December 31, 2023 2022 2021 Net (loss) income $ (605,102) $ (441,382) $ 11,570 Adjustments: Depreciation of building and improvements 72,273 113,191 125,388 Amortization of leasing costs and intangibles 40,318 77,926 84,598 Impairment provision, real estate 409,511 127,577 4,242 Equity interest of depreciation of building and improvements - unconsolidated entities 24,623 4,643 — (Gain) Loss from disposition of assets, net (29,164) 139,280 326 Company's share of loss on sale of unconsolidated entity — 3,558 (8) FFO $ (87,541) $ 24,793 $ 226,116 Dividends to redeemable preferred shareholders (2,375) (10,063) (9,698) Preferred units redemption charge (4,970) — — FFO attributable to common shareholders and partners $ (94,886) $ 14,730 $ 216,418 Reconciliation of FFO to AFFO: FFO attributable to common shareholders and partners $ (94,886) $ 14,730 $ 216,418 Adjustments: Revenues in excess of cash received, net (7,953) (15,407) (10,780) Amortization of share-based compensation 10,063 9,573 7,470 Deferred rent - ground lease 1,724 1,951 2,064 Amortization of above/(below) market rent, net (1,240) (2,205) (1,323) Amortization of debt premium/(discount), net 419 409 409 Amortization of below tax benefit amortization 1,494 1,494 1,252 Amortization of deferred financing costs 3,632 3,544 3,184 Amortization of lease inducements 150 537 278 Company's share of amortization of deferred financing costs- unconsolidated entity 31,061 3,740 — Amortization of ground leasehold interests (389) (372) (350) Loss on debt breakage costs — write-off of deferred financing costs — 1,771 — Company's share of revenues in excess of cash received (straight-line rents) - unconsolidated entity (2,207) (257) — Unrealized loss (gain) on investments 17 195 (15) Company's share of amortization of above/(below) market rent - unconsolidated entity (532) (58) — Employee separation expense 4,096 72 777 Write-off of reserve liability — — (1,166) Write-off of transaction costs 115 28 65 Transaction expenses 24,982 22,386 966 Impairment provision, goodwill 16,031 135,270 — Debt breakage costs — 13,249 — Preferred unit redemption charge 4,970 — — Other income - proration adjustments for dispositions (1,587) — — Impairment provision, investment in unconsolidated entity 129,334 — — Write off of Company’s proportionate share of other comprehensive income - unconsolidated entity (1,226) — — AFFO available to common shareholders and partners $ 118,068 $ 190,650 $ 219,249 FFO per share, basic and diluted $ (2.40) $ 0.37 $ 5.71 AFFO per share, basic and diluted $ 2.99 $ 4.81 $ 5.79 Weighted-average common shares outstanding - basic and diluted EPS 35,988,231 36,057,825 34,361,208 Weighted-average OP Units 3,472,770 3,537,654 3,537,654 Weighted-average common shares and OP Units outstanding - basic and diluted FFO/AFFO 39,461,001 39,595,479 37,898,862 46 NOI and Cash NOI Net operating income is a non-GAAP financial measure calculated as net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairment of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, investment income or loss and termination income.
Biggest changeIn the future, NAREIT may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure. 47 Our calculation of FFO and AFFO is presented in the following table for the years ended December 31, 2024, 2023 and 2022 (in thousands, except per share amounts): Year Ended December 31, 2024 2023 2022 Net loss $ (11,363) $ (605,102) $ (441,382) Adjustments: Depreciation of building and improvements 64,191 72,273 113,191 Amortization of leasing costs and intangibles 31,179 40,318 77,926 Impairment provision, real estate 53,313 409,511 127,577 Gain (loss) from disposition of assets, net (38,368) (29,164) 139,280 Equity interest of depreciation of building and improvements - unconsolidated entity — 24,623 4,643 Company's share of loss on sale of unconsolidated entity — — 3,558 FFO $ 98,952 $ (87,541) $ 24,793 Distribution to redeemable preferred shareholders — (2,376) (10,063) Preferred units redemption charge — (4,970) — FFO attributable to common shareholders and noncontrolling interests $ 98,952 $ (94,887) $ 14,730 Reconciliation of FFO to AFFO: FFO attributable to common shareholders and noncontrolling interests $ 98,952 $ (94,887) $ 14,730 Adjustments: Revenues in excess of cash received, net (4,182) (7,953) (15,407) Amortization of share-based compensation 7,896 10,063 9,573 Deferred rent - ground lease 1,661 1,724 1,951 Unrealized loss (gain) on investments (377) 17 195 Amortization of above/(below) market rent, net (2,232) (1,240) (2,205) Amortization of debt premium/(discount), net 103 419 409 Amortization of ground leasehold interests (389) (389) (372) Amortization of below tax benefit amortization 1,498 1,494 1,494 Amortization of deferred financing costs 4,757 3,632 3,544 Amortization of lease inducements 127 150 537 Write-off of dead deal costs 140 115 28 Gain on extinguishment of debt (10,466) — — Employee separation expense 358 4,096 72 Transaction expenses 821 24,982 22,386 Impairment provision, goodwill 10,274 16,031 135,270 Lease termination and other non-recurring adjustments (2,339) — — Debt breakage costs — — 13,249 Preferred units redemption charge — 4,970 — Other income - proration adjustments for dispositions — (1,587) — Impairment provision, investment in unconsolidated entity — 129,334 — Write-off of Company's share of accumulated other comprehensive income - unconsolidated entity — (1,226) — Company’s share of amortization of deferred financing costs- unconsolidated entity — 31,061 3,740 Loss on debt breakage costs — write-off of deferred financing costs — — 1,771 Company’s share of revenues in excess of cash received (straight-line rent) - unconsolidated entity — (2,207) (257) Company's share of amortization of above/(below) market rent - unconsolidated entity — (532) (58) AFFO available to common shareholders and noncontrolling interests $ 106,602 $ 118,067 $ 190,650 FFO per share/unit, basic and diluted $ 2.50 $ (2.40) $ 0.37 AFFO per share/unit, basic and diluted $ 2.69 $ 2.99 $ 4.81 Weighted-average common shares outstanding - basic and diluted shares 36,375,053 35,988,231 36,057,825 Weighted-average OP Units outstanding (1) 3,202,727 3,472,770 3,537,654 Weighted-average common shares and OP Units outstanding - basic and diluted FFO/AFFO 39,577,780 39,461,001 39,595,479 (1) Represents weighted-average outstanding OP Units that are owned by unitholders other than Peakstone Realty Trust.
Therefore, NOI and Cash NOI should not be considered as alternatives to net (loss) income, as computed in accordance with GAAP. NOI and Cash NOI may not be comparable to similarly titled measures of other companies.
Therefore, NOI and Cash NOI should not be considered as alternatives to net income (loss), as computed in accordance with GAAP. NOI and Cash NOI may not be comparable to similarly titled measures of other companies.
Fair value is determined through certain valuation techniques involving (i) discounted cash flow models 43 applying significant assumptions related to market rent, terminal capitalization rates, and discount rates or (ii) estimated selling prices based on quoted market values and comparable property sales.
Fair value is determined through certain valuation techniques involving (i) discounted cash flow models applying significant assumptions related to market rent, terminal capitalization rates, and discount rates or (ii) estimated selling prices based on quoted market values and comparable property sales.
The use of AFFO as a measure of long-term operating performance on value is also limited if we do not continue to operate under our current business plan as noted above. FFO and AFFO should not be viewed as a more prominent measure of performance than net income (loss) and each should be reviewed in connection with GAAP measurements.
The use of AFFO as a measure of long-term operating performance on value is also limited if we do not continue to operate under our current business plan. FFO and AFFO should not be viewed as a more prominent measure of performance than net income (loss) and each should be reviewed in connection with GAAP measurements.
It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do, making comparisons less meaningful. 44 Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance.
It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do, making comparisons less meaningful. 46 Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance.
The Second Amended and Restated Credit Agreement also provides the option, subject to obtaining additional commitments from lenders and certain other customary conditions, to increase the commitments under the Revolving Credit Facility, to increase the existing term loans and/or incur new term loans by up to an additional $1.0 billion in the aggregate.
The Second Amended and Restated Credit Agreement also provides the option, subject to obtaining additional commitments from lenders and certain other customary conditions, to increase the commitments under the Revolving Credit Facility, existing term loans and/or incur new term loans by up to an additional $218.0 million in the aggregate.
Net operating income on a cash basis (“Cash NOI”) is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease intangibles adjustments required by GAAP.
NOI on a cash basis (“Cash NOI”) is NOI adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease intangibles adjustments required by GAAP.
Recoverability of real estate assets requires estimates of future market and economic conditions impacting our strategic disposition plan, including assumptions related to estimated selling prices, anticipated hold periods, potential vacancies, capitalization rates, market rental income amounts subsequent to the expiration of current lease agreements, and property operating expenses.
Recoverability of real estate assets requires estimates of future market and 45 economic conditions, including assumptions related to estimated selling prices, anticipated hold periods, potential vacancies, capitalization rates, market rental income amounts subsequent to the expiration of current lease agreements, and property operating expenses.
AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or our future ability to pay or sustain dividends.
AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results.
Under the quantitative assessment, we focus on the fair value of real estate assets and mortgage loans, as those comprise the significant components of fair value within each reporting unit. The analysis involves estimates around significant assumptions such as market rent, discount rates, terminal capitalization rates, and borrowing rates.
Under the quantitative assessment, the Company focuses on the fair value of real estate assets and mortgage loans, as those comprise the significant components of fair value within each reporting unit. The analysis involves estimates around significant assumptions related to market rent, discount rates, terminal capitalization rates, and borrowing rates.
Other Potential Future Sources of Capital Other potential future sources of capital include proceeds from potential private or public offerings of our shares or OP Units, proceeds from secured or unsecured financings from banks or other lenders, including debt assumed in a real estate transaction, proceeds from the sale of properties and undistributed funds from operations, and entering into joint venture arrangements to invest in assets.
Other Potential Sources of Capital Other potential sources of capital include proceeds from private or public offerings of our common shares or OP Units, proceeds from secured or unsecured financings from banks or other lenders, including debt assumed in a real estate transaction, and entering into joint venture arrangements to invest in assets.
For the years ended December 31, 2023 and 2022, the Company recorded a net loss of $605.1 million and $441.4 million.
For the years ended December 31, 2024 and 2023, the Company recorded a net loss of $11.4 million and $605.1 million.
Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common shares, capital needs, and our determinations of the appropriate sources of funding. During the year ended December 31, 2023, we did not sell shares under the ATM program.
Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common shares, capital needs, and our determinations of the appropriate sources of funding. As of December 31, 2024, we have not sold any shares under the ATM program.
Critical Accounting Estimates We have established accounting estimates which conform to GAAP. The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
The Company evaluates performance of each segment based on segment net operating income (“NOI”), which is defined as property revenue less property expenses. The Company excludes the following from segment NOI because they are addressed on a corporate level: (i) the Office Joint Venture, (ii) interest expense, and (iii) general administrative expenses.
The CODM evaluates performance of each segment based on segment net operating income (“NOI”), which is defined as property revenue less property expenses. The Company excludes the following from segment NOI because they are addressed on a corporate level: (i) depreciation and amortization, (ii) real estate impairment, and (iii) general administrative expenses.
PKST OP, L.P., our operating partnership (the “Operating Partnership”), owns, directly and indirectly all of the Company’s assets. As of December 31, 2023, the Company owned approximately 91.8% of the outstanding common units of limited partnership interest in the Operating Partnership (“OP Units”).
PKST OP, L.P., our operating partnership (the “Operating Partnership”), owns, directly and indirectly all of the Company’s assets. As of December 31, 2024, the Company owned, directly and indirectly through a wholly-owned subsidiary, approximately 93.0% of the outstanding common units of limited partnership interest in the Operating Partnership (“OP Units”).
As such, the following critical accounting estimates discussion reflects what we believe are the most significant estimates, assumptions, and judgments that have had or are reasonably likely to have a material impact on our financial condition or our results of operations.
For the year ended December 31, 2024, the following critical accounting estimates reflects what we believe are the most significant estimates, assumptions, and judgments that have had or are reasonably likely to have a material impact on our financial conditions or our results of operations.
The payments on our mortgage debt do not include the premium/discount or debt financing costs. (2) Projected interest payments are based on the outstanding principal amounts at December 31, 2023. Projected interest payments on the Credit Facility and Term Loan are based on the contractual interest rates in effect at December 31, 2023.
The payments on our mortgage debt do not include the premium/discount or debt financing costs. (2) Projected interest payments are based on the outstanding principal amounts at December 31, 2024. Projected interest payments on our KeyBank Loans are based on the contractual interest rates through maturity in effect at December 31, 2024.
When real estate assets are not recoverable, we calculate an impairment charge as the amount the carrying value exceeds the estimated fair value of the real estate property as of the measurement date.
When the carrying amounts of the real estate assets are not recoverable based on the estimated undiscounted cash flows, we calculate an impairment charge in the amount the carrying value exceeds the estimated fair value of the real estate asset as of the measurement date.
The success of our business strategy will depend, to a significant degree, on our ability to access these various capital sources. 52 To qualify as a REIT, we must meet a number of organizational and operational requirements on a continuing basis, including the requirement that we annually distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gain, to our shareholders.
Additionally, to qualify as a REIT, we must meet a number of organizational and operational requirements on a continuing basis, including the requirement that we annually distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gain, to our shareholders and holders of OP Units.
Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance and ability to sustain our current dividend level. More specifically, AFFO isolates the financial results of our operations.
We believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry and is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance and isolates the financial results of our operations.
By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities. For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to net income (loss) are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio.
For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to net income (loss) are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio.
The Company considers segment NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations and valuations of our properties.
The Company considers segment NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations and valuations of our properties. On December 31, 2024, the Company sold its final property in the Other segment, and as a result, the Other segment was eliminated.
Our Same Store portfolio includes properties which were held for a full period for all periods presented.
Our Same Store portfolio includes properties which were held in-service for a full period for all periods presented (thus, the IOS Portfolio is excluded for these periods).
Refer to Note 14, Segment Reporting , for allocation of goodwill for each of the Company’s segments. Funds from Operations and Adjusted Funds from Operations Our reported results are presented in accordance with GAAP. We also disclose Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”) both of which are non-GAAP financial measures.
Funds from Operations and Adjusted Funds from Operations Our reported results are presented in accordance with GAAP. We also disclose Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”) both of which are non-GAAP financial measures.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” in our Form 10-K for the year ended December 31, 2022, filed with the SEC on March 24, 2023, for a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” in our Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024, for a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022. 44 Critical Accounting Estimates We have established accounting estimates which conform to GAAP.
Corporate Operating Expense to Related Parties Corporate operating expenses to related parties decreased approximately $0.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to the amendments and subsequent termination of the Administrative Services Agreement in 2023, which reduced the total services provided.
Corporate Operating Expense to Related Parties Corporate operating expenses to related parties decreased $0.5 million, or 47%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to the termination of the Administrative Services Agreement in 2023.
We perform a qualitative analysis to determine whether a potential impairment of goodwill exists prior to quantitatively estimating the fair value of each reporting unit. If an impairment exists, we recognize an impairment of goodwill based on the excess of the reporting unit’s carrying value compared to its fair value, up to the amount of goodwill for that reporting unit.
If an impairment exists, the Company recognizes an impairment of goodwill based on the excess of the reporting unit’s carrying value compared to its fair value, up to the amount of goodwill for that reporting unit.
For a discussion of material trends and uncertainties that have impacted or may impact the Company’s financial condition, results of operations or cash flows, see (i) the discussion above, and (ii) the risks highlighted in the “Risk Factors” section in Part I. 37 Segment Information The Company internally evaluates all of the properties and interests therein as three reportable segments: Industrial, Office and Other.
For a discussion of material trends and uncertainties that have impacted or may impact the Company’s financial condition, results of operations or cash flows, see (i) the discussion above, and (ii) the risks highlighted in the “Risk Factors” section in Part I. Segment Information Michael Escalante, the Company's Chief Executive Officer, is identified as the chief operating decision maker ("CODM").
We test goodwill for impairment on an annual basis for each reporting unit as of October 1st of each period, or more frequently if events or changes in circumstances indicate that the asset is more likely than not impaired.
Impairment of Goodwill The Company’s goodwill has an indeterminate life and is not amortized. Goodwill is tested for impairment annually for each reporting unit, as applicable, or more frequently if events or changes in circumstances indicate that goodwill is more likely than not impaired.
Our calculation of each of NOI and Cash NOI is presented in the following table for the year ended December 31, 2023, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2023 2022 2021 Reconciliation of Net (Loss) Income to Total NOI Net (loss) income $ (605,102) $ (441,382) $ 11,570 General and administrative expenses 42,962 38,995 39,051 Corporate operating expenses to affiliates 1,154 1,349 2,520 Impairment provision, real estate 409,512 127,577 4,242 Impairment provision, goodwill 16,031 135,270 — Depreciation and amortization 112,204 190,745 209,638 Interest expense 65,623 84,816 85,087 Debt breakage costs — 13,249 — Other expense (income), net (13,111) 943 (93) Loss (income) from investment in unconsolidated entities 176,767 9,993 (8) Loss (gain) from disposition of assets (29,164) 139,280 326 Transaction expense 24,982 22,386 966 Total NOI $ 201,858 $ 323,221 $ 353,299 47 Year Ended December 31, 2023 2022 2021 Cash NOI Adjustments Industrial: Industrial NOI $ 49,649 $ 53,477 $ 52,125 Straight-line rents (344) (1,018) (1,700) Amortization of acquired lease intangibles (384) (369) (345) Deferred termination income (24) (39) — Industrial Cash NOI 48,897 52,051 50,080 Office: Office NOI 118,439 230,967 260,255 Straight-line rents (9,046) (12,207) (12,171) Amortization of acquired lease intangibles (306) (1,346) (231) Deferred ground lease 1,739 1,945 2,066 Other intangible amortization 1,494 1,495 1,252 Inducement amortization 150 537 278 Office Cash NOI 112,470 221,391 251,449 Other NOI 33,770 38,777 40,919 Straight-line rents 1,461 634 313 Amortization of acquired lease intangibles (549) (489) (749) Deferred termination income — (2,779) 2,779 Deferred ground lease (15) 5 (3) Other Cash NOI 34,667 36,148 43,259 Total Cash NOI $ 196,034 $ 309,590 $ 344,788 48 Liquidity and Capital Resources Overview Property rental income is our primary source of operating cash flow and is dependent on a number of factors including occupancy levels and rental rates, as well as the ability and willingness of our tenants’ to pay rent.
Our calculation of each of NOI and Cash NOI is presented in the following table for the year ended December 31, 2024, 2023 and 2022 (dollars in thousands): Year Ended December 31, 2024 2023 2022 Reconciliation of Net (Loss) Income to NOI Net loss $ (11,363) $ (605,102) $ (441,382) General and administrative expenses 36,973 42,962 38,995 Corporate operating expenses to related parties 617 1,154 1,349 Real estate impairment provision 53,313 409,512 127,577 Goodwill impairment provision 10,274 16,031 135,270 Depreciation and amortization 94,982 112,204 190,745 Interest expense 62,050 65,623 84,816 Debt breakage costs — — 13,249 Other income (expense), net (14,482) (13,111) 943 Net loss from investment in unconsolidated entity — 176,767 9,993 Net gain (loss) from disposition of assets (38,368) (29,164) 139,280 Gain on extinguishment of debt (10,466) — — Transaction expenses 821 24,982 22,386 Total NOI $ 184,351 $ 201,858 $ 323,221 49 Year Ended December 31, 2024 2023 2022 Cash NOI Adjustments Industrial: Industrial NOI $ 55,678 $ 49,649 $ 53,477 Straight-line rents (4,931) (344) (1,018) Amortization of acquired lease intangibles (1,455) (384) (369) Deferred termination income 819 (24) (39) Industrial Cash NOI 50,111 48,897 52,051 Office: Office NOI 109,838 118,439 230,967 Straight-line rents (2,690) (9,046) (12,207) Amortization of acquired lease intangibles (515) (306) (1,346) Deferred termination income 1,851 — — Deferred ground lease 1,701 1,739 1,945 Other intangible amortization 1,498 1,494 1,495 Inducement amortization — 150 537 Office Cash NOI 111,683 112,470 221,391 Other: Other NOI 18,835 33,770 38,777 Straight-line rents 769 1,461 634 Amortization of acquired lease intangibles (262) (549) (489) Deferred termination income — — (2,779) Deferred ground lease (40) (15) 5 Inducement amortization 127 — — Other Cash NOI 19,429 34,667 36,148 Total Cash NOI $ 181,223 $ 196,034 $ 309,590 50 Liquidity and Capital Resources Overview We believe that cash flow generated from our properties, including proceeds from dispositions, will continue to enable us to fund our normal operating expenses, regular debt service obligations, capital expenditures, possible acquisitions of, or investments in, assets, and all dividends and distribution requirements in accordance with applicable REIT requirements in both the short-term and long-term.
Comparison of the cash flow activity for the year ended December 31, 2023 to December 31, 2022 is as follows (in thousands): Year Ended December 31, 2023 2022 Change Net cash provided by operating activities $ 89,152 $ 152,676 $ (63,524) Net cash provided by investing activities $ 308,555 $ 1,098,343 $ (789,788) Net cash used in financing activities $ (234,641) $ (1,199,215) $ 964,574 Cash and cash equivalents and restricted cash were $401.0 million and $237.9 million, respectively.
Summary of Cash Flows Comparison of cash flow activity as of December 31, 2024 and December 31, 2023 is as follows (in thousands): Year Ended December 31, 2024 2023 Change Net cash provided by operating activities $ 94,655 $ 89,152 $ 5,503 Net cash (used in) provided by investing activities $ (215,839) $ 308,555 $ (524,394) Net cash used in financing activities $ (125,616) $ (234,641) $ 109,025 Cash and cash equivalents, and restricted cash were $154.2 million and $401.0 million as of December 31, 2024 and December 31, 2023 respectively.
In August 2023, we entered into an at-the-market equity offering (the “ATM”) pursuant to which we may sell common shares up to an aggregate purchase price of $200.0 million. We may sell such shares in amounts and at times to be determined by us from time to time, but we have no obligation to sell any of the shares.
We may sell such shares in amounts and at times to be determined by us from time to time, but we have no obligation to sell any of the shares.
Reconciliation of Net Loss to Same Store NOI Total net loss for the years ended December 31, 2023 and December 31, 2022 was $605.1 million and $441.4 million, respectively.
The Other segment consisted of vacant and non-core properties, together with other properties in the same cross-collateralized loan pool. 40 Reconciliation of Net Loss to Same Store NOI Total net loss for the years ended December 31, 2024 and December 31, 2023 was $11.4 million and $605.1 million, respectively.
Transaction Expenses Transaction expenses for the year ended December 31, 2023 were $24.9 million, which is an increase of approximately $2.6 million compared to the year ended December 31, 2022 primarily due to fees and expenses relating to the Listing, including banking, advisory, and listing fees. Comparison of the Years Ended December 31, 2022 and 2021. Refer to “Item 7.
Transaction Expenses Transaction expenses decreased approximately $24.2 million, or 97%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily because the Listing related expenses were incurred in 2023. Comparison of the Years Ended December 31, 2023 and 2022. Refer to “Item 7.
We expect to pay dividends on a quarterly basis unless our results of operations, our general financial condition, general economic conditions, or other factors inhibit us from doing so.
We expect to pay dividends on a quarterly basis unless our results of operations, our general financial condition, general economic conditions, or other factors inhibit us from doing so. During the three months ended December 31, 2024, our Board declared an all-cash distributions in the amount of $0.225 per common share or OP Unit.
Net Gain (Loss) from Disposition of Assets Gain from disposition of assets increased approximately $168.4 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Net Gain from Disposition of Assets Gain from disposition of assets increased approximately $9.2 million, or 32%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to increased number of sales with realized gains in 2024.
Refer to Note 3, Real Estate , to our consolidated financial statements included in this Annual Report on Form 10-K for details. Impairment of Goodwill We recorded goodwill as a result of the transaction that resulted in the internalization of PKST management in December 2018 (“Self-Administration Transaction”).
Refer to Note 3, Real Estate , to our consolidated financial statements included in this Annual Report on Form 10-K for details.
Cash used in financing activities for the years ended December 31, 2023 and 2022 consisted of the following (in thousands): Year Ended December 31, 2023 2022 Increase (decrease) Sources of cash provided by financing activities: Proceeds from borrowings - Revolving Loan $ 400,000 $ — $ 400,000 Total sources of cash provided by financing activities $ 400,000 $ — $ 400,000 Uses of cash (used in) provided by financing activities: Principal payoff of secured indebtedness - Mortgage Debt $ (41,283) $ (469,777) $ 428,494 Principal pay down of indebtedness - Revolving Loan — (373,500) 373,500 Principal payoff of indebtedness - Term Loan (400,000) (200,000) (200,000) Principal amortization payments on secured indebtedness (6,973) (8,736) 1,763 Repurchase of common shares to satisfy employee tax withholding requirements (2,625) (3,189) 564 Redemption of preferred units (125,000) — (125,000) Repurchase of common shares (4,443) (5,617) 1,174 Dividends to common shareholders (40,807) (114,110) 73,303 Dividends paid on preferred units subject to redemption (4,891) (10,063) 5,172 Dividends to noncontrolling interests (3,974) (11,136) 7,162 Deferred financing costs (3,530) (2,724) (806) Offering costs (796) (43) (753) Financing lease payment (319) (320) 1 Total sources of cash (used in) provided by financing activities $ (634,641) $ (1,199,215) $ 564,574 Net cash (used in) provided by financing activities $ (234,641) $ (1,199,215) $ 964,574 Dividends Dividends will be authorized at the discretion of our Board and be paid to our shareholders as of the record date selected by our Board.
Cash used in financing activities for the year ended December 31, 2024 and 2023 consisted of the following (in thousands): Year Ended December 31, 2024 2023 Change Sources of cash provided by (used in) financing activities: Proceeds from borrowings - Credit Facility $ 280,000 $ 400,000 $ (120,000) Proceeds from borrowings - Term Loan 175,000 — 175,000 Proceeds from borrowings - Mortgage debt 110,326 — 110,326 Total sources of cash provided by financing activities $ 565,326 $ 400,000 $ 165,326 Uses of cash for financing activities: Principal payoff of secured indebtedness - Mortgage Debt (225,228) (41,283) (183,945) Principal payoff of indebtedness - Term Loan (190,000) (400,000) 210,000 Principal pay down of indebtedness - Credit Facility (215,000) — (215,000) Principal amortization payments on secured indebtedness (5,655) (6,973) 1,318 Deferred financing costs (17,286) (3,530) (13,756) Redemption of preferred units — (125,000) 125,000 Offering costs (143) (796) 653 Repurchase of common shares — (4,443) 4,443 Repurchase of common shares to satisfy employee tax withholding requirements (1,329) (2,625) 1,296 Dividends paid on preferred units subject to redemption — (4,891) 4,891 Distributions to noncontrolling interests (2,892) (3,974) 1,082 Distributions to common shareholders (33,077) (40,807) 7,730 Financing lease payment (332) (319) (13) Total sources of cash used in financing activities $ (690,942) $ (634,641) $ (56,301) Net cash (used in) provided by financing activities $ (125,616) $ (234,641) $ 109,025 55
The following table reconciles net loss to NOI for the year ended December 31, 2023 and 2022 (dollars in thousands): 40 Year Ended December 31, 2023 2022 Increase/(Decrease) Percentage Change Reconciliation of Net (Loss) Income to NOI Net (loss) income $ (605,102) $ (441,382) $ (163,720) 37 % General and administrative expenses 42,962 38,995 3,967 10 % Corporate operating expenses to related parties 1,154 1,349 (195) (14) % Real estate impairment provision 409,512 127,577 281,935 221 % Goodwill impairment provision 16,031 135,270 (119,239) (88) % Depreciation and amortization 112,204 190,745 (78,541) (41) % Interest expense 65,623 84,816 (19,193) (23) % Debt breakage costs — 13,249 (13,249) (100) % Other (income) expense, net (13,111) 943 (14,054) (1490) % Net loss from investment in unconsolidated entity 176,767 9,993 166,774 1669 % (Gain) loss from disposition of assets (29,164) 139,280 (168,444) (121) % Transaction expenses 24,982 22,386 2,596 12 % Total NOI $ 201,858 $ 323,221 $ (121,363) (38) % The following table provides further detail regarding segment NOI for the years ended December 31, 2023 and 2022 (dollars in thousands): Year Ended December 31, 2023 2022 Increase/Decrease Percentage Change Industrial NOI Total Industrial revenues $ 57,304 $ 61,347 $ (4,043) (7) % Industrial operating expenses (7,655) (7,870) 215 (3) % Industrial NOI 49,649 53,477 (3,828) (7) % Office NOI Total Office revenues 142,734 297,110 (154,376) (52) % Office operating expenses (24,295) (66,143) 41,848 (63) % Office NOI 118,439 230,967 (112,528) (49) % Other NOI Total Other revenues 54,246 58,029 (3,783) (7) % Other operating expenses (20,476) (19,252) (1,224) 6 % Other NOI 33,770 38,777 (5,007) (13) % Total NOI $ 201,858 $ 323,221 $ (121,363) (38) % NOI Total NOI decreased by $121.4 million, or 38%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, consisting of: A decrease in Office segment NOI by $112.5 million, or 49%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The following table reconciles net loss to NOI for the years ended December 31, 2024 and 2023 (dollars in thousands): Year Ended December 31, 2024 2023 Increase/(Decrease) Percentage Change Reconciliation of Net (Loss) Income to NOI Net loss $ (11,363) $ (605,102) $ 593,739 (98) % General and administrative expenses 36,973 42,962 (5,989) (14) % Corporate operating expenses to related parties 617 1,154 (537) (47) % Real estate impairment provision 53,313 409,512 (356,199) (87) % Goodwill impairment provision 10,274 16,031 (5,757) (36) % Depreciation and amortization 94,982 112,204 (17,222) (15) % Interest expense 62,050 65,623 (3,573) (5) % Other income, net (14,482) (13,111) (1,371) 10 % Net loss from investment in unconsolidated entity — 176,767 (176,767) (100) % Net gain from disposition of assets (38,368) (29,164) (9,204) 32 % Gain on extinguishment of debt (10,466) — (10,466) 100 % Transaction expenses 821 24,982 (24,161) (97) % Total NOI $ 184,351 $ 201,858 $ (17,507) (9) % The following table provides further detail regarding segment NOI for the years ended December 31, 2024 and 2023 (dollars in thousands): 42 Year Ended December 31, 2024 2023 Increase/Decrease Percentage Change Industrial NOI Industrial revenues $ 64,750 $ 57,304 $ 7,446 13 % Industrial operating expenses (9,072) (7,655) (1,417) 19 % Industrial NOI 55,678 49,649 6,029 12 % Office NOI Office revenues 132,541 142,734 (10,193) (7) % Office operating expenses (22,703) (24,295) 1,592 (7) % Office NOI 109,838 118,439 (8,601) (7) % Other NOI Other revenues 30,782 54,246 (23,464) (43) % Other operating expenses (11,947) (20,476) 8,529 (42) % Other NOI 18,835 33,770 (14,935) (44) % Total NOI $ 184,351 $ 201,858 $ (17,507) (9) % NOI Total NOI decreased by $17.5 million, or 9%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Interest Expense Interest expense decreased approximately $19.2 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Interest Expense Interest expense decreased $3.6 million, or 5%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to debt payoffs in 2023 and 2024.
Impairment of Real Estate and Related Intangible Assets and Liabilities In accordance with the provisions of the Impairment or Disposal of Long-Lived Assets Subsections of ASC 360, we assess the carrying values of real estate assets whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable.
Impairment of Real Estate and Related Intangible Assets and Liabilities In accordance with the provisions of the Impairment or Disposal of Long-Lived Assets Subsections of ASC 360, where indicators of impairment exist, we evaluate the recoverability of our real estate assets by comparing the carrying amounts of the assets to the estimated undiscounted cash flows.
During the year ended December 31, 2023, we generated $89.2 million in cash from operating activities compared to $152.7 million for the year ended December 31, 2022.
During the year ended December 31, 2024, we generated $94.7 million in cash from operating activities compared to $89.2 million for the year ended December 31, 2023. The increase in cash from operating activities was primarily due to significant decreases in transaction expenses incurred as a result of the Listing in 2023, partially offset by the impact of property dispositions.
Second Amended and Restated Credit Agreement Pursuant to the Second Amended and Restated Credit Agreement dated as of April 30, 2019 (as amended by the First Amendment to the Second Amended and Restated Credit Agreement dated as of October 1, 2020 (the “First Amendment”), the Second Amendment to the Second Amended and Restated Credit Agreement dated as of December 18, 2020 (the “Second Amendment”), the Third Amendment to the Second Amended and Restated Credit Agreement dated as of July 14, 2021 (the “Third Amendment”), the Fourth Amendment to the Second Amended and Restated Credit Agreement dated as of April 28, 2022 (the “Fourth Amendment”), the Fifth Amendment to the Second Amended and Restated Credit Agreement dated as of September 28, 2022 (the “Fifth Amendment”), the Sixth Amendment to the Second Amended and Restated Credit Agreement dated as of November 30, 2022 (the “Sixth Amendment”), and the Seventh Amendment to the Amended and Restated Credit Agreement dated as of March 21, 2023 (the “Seventh Amendment”), and together with the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, and the Sixth Amendment, the “Second Amended and Restated Credit Agreement”)), with KeyBank National Association (“KeyBank”) as administrative agent, and a syndicate of lenders, the Operating Partnership, as the borrower, has been provided with a $1.3 billion credit facility consisting of (i) a $750.0 million senior unsecured revolving credit facility (the “Revolving Credit Facility”), under which the Company has drawn $400 million (the “Revolving Loan”), maturing on March 30, 2024 (with two extension options to January 31, 2026, subject to the satisfaction of certain customary conditions, the first of which the Company exercised subsequent to year-end as described below), (ii) a $400.0 million senior unsecured term loan maturing in December 2025 (the “$400M 2025 5-Year Term Loan”), and (iii) a $150.0 million senior unsecured term loan maturing in April 2026 (the “$150M 2026 7-Year Term Loan”) and, together with the Revolving Credit Facility and the $400M 2025 5-Year Term Loan, the “KeyBank Loans”).
Credit Facility As of December 31, 2024, pursuant to the Second Amended and Restated Credit Agreement with KeyBank National Association, as administrative agent, and a syndicate of lenders, the Operating Partnership, as the borrower, has been provided with a $1.1 billion credit facility (with the right to elect to increase total commitments to $1.3 billion) consisting of (i) a $547.0 million senior unsecured revolving credit facility (the “Revolving Credit Facility”), under which the Operating Partnership has drawn $465.0 million (the “Revolving Loan”) maturing in July 2028, (ii) a $210.0 million senior unsecured term loan maturing in July 2028 (the “2028 Term Loan I”), (iii) a $175.0 million senior unsecured term loan maturing in October 2028, assuming the one-year extension option is exercised (the “2028 Term Loan II”) and (iv) a $150.0 million senior unsecured term loan maturing in April 2026 (the “2026 Term Loan” and together with the Revolving Loan, the 2028 Term Loan I and the 2028 Term Loan II, the “KeyBank Loans”).
Impairment Provision, Real Estate Impairment provision, real estate increased approximately $281.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to the impairment of seventeen properties in 2023 compared to the impairment of eleven properties in 2022.
Real Estate Impairment Provision Real estate impairment decreased $356.2 million, or 87%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to fewer impairments in 2024 compared to 2023.
FFO and AFFO have been revised to include amounts available to both common shareholders and limited partners for all periods presented. AFFO is a measure used among our peer group. We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry.
By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities. FFO and AFFO have been revised to include amounts available to both common shareholders and limited partners for all periods presented.
Operating Activities. Cash flows provided by operating activities are primarily dependent on the occupancy level, the rental rates of our leases, the collectability of rent and recovery of operating expenses from our tenants, and the timing of acquisitions of and/or other investments in properties.
Operating Activities. Cash flows provided by operating activities are primarily dependent occupancy levels, rental rates, the ability and willingness of our tenants to pay rent, the timing and success of our investment activities, and general financial and economic conditions.
For the year ended December 31, 2023, we recorded an impairment provision related to seventeen properties, consisting of nine Office segment properties and eight Other segment properties. As part of our impairment analysis, we noted certain properties in both segments that had potential indicators of impairment, but the future undiscounted cash flows were sufficient to recover the carrying amount.
As part of our impairment analysis, we noted certain properties that had potential indicators of impairment, but the future undiscounted cash flows were sufficient to recover the carrying amount. Refer to Note 3, Real Estate , to our consolidated financial statements included in this Annual Report on Form 10-K for details.
The following table reconciles net loss to Same Store NOI for the years ended December 31, 2023 and December 31, 2022, (dollars in thousands): Year Ended December 31, 2023 2022 Reconciliation of Net Loss to Same Store NOI Net loss $ (605,102) $ (441,382) General and administrative expenses 42,962 38,995 Corporate operating expenses to related parties 1,154 1,349 Real estate impairment provision 409,512 127,577 Goodwill impairment provision 16,031 135,270 Depreciation and amortization 112,204 190,745 Interest expense 65,623 84,816 Debt breakage costs — 13,249 Other (income) expense, net (13,111) 943 Net loss from investment in unconsolidated entity 176,767 9,993 (Gain) loss from disposition of assets (29,164) 139,280 Transaction expenses 24,982 22,386 Total NOI $ 201,858 $ 323,221 Same Store Adjustments: Recently acquired properties — — Recently disposed properties (8,922) (123,899) Total Same Store NOI $ 192,936 $ 199,322 Same Store Analysis Comparison of the Years Ended December 31, 2023 and December 31, 2022 For the year ended December 31, 2023, our “Same Store” portfolio consisted of 71 properties, encompassing approximately 17.9 million square feet, with an acquisition value of $3.0 billion and Annualized Base Rent as of December 31, 2023 of $196.7 million.
The following table reconciles net loss to Same Store NOI for the years ended December 31, 2024 and December 31, 2023 (dollars in thousands): Year Ended December 31, 2024 2023 Reconciliation of Net Loss to Same Store NOI Net loss $ (11,363) $ (605,102) General and administrative expenses 36,973 42,962 Corporate operating expenses to related parties 617 1,154 Real estate impairment provision 53,313 409,512 Goodwill impairment provision 10,274 16,031 Depreciation and amortization 94,982 112,204 Interest expense 62,050 65,623 Other income (expense), net (14,482) (13,111) Net loss from investment in unconsolidated entity — 176,767 Net gain (loss) from disposition of assets (38,368) (29,164) Gain on extinguishment of debt (10,466) — Transaction expenses 821 24,982 Total NOI $ 184,351 $ 201,858 Same Store Adjustments: Adjustment for Acquired Properties (1) (4,848) — Adjustment for Disposed Properties (2) (19,525) (44,465) Corporate related adjustment (38) 16 Total Same Store NOI $ 159,940 $ 157,409 (1) “Acquired Properties” represent (a) for 2023, all properties acquired by the Company from January 1, 2023 through December 31, 2023; and (b) for 2024, all properties acquired by the Company from January 1, 2024 through December 31, 2024.
Cash provided by investing activities for the years ended December 31, 2023 and 2022 consisted of the following (in thousands): 53 Year Ended December 31, 2023 2022 Increase (decrease) Net cash provided by investing activities: Proceeds from disposition of properties $ 325,160 $ 1,120,803 $ (795,643) Sale of investment in unconsolidated entities — 31,000 (31,000) Total sources of cash provided by investing activities $ 325,160 $ 1,151,803 $ (826,643) Uses of cash for investing activities: Restricted reserves $ — $ (266) $ 266 Payments for construction in progress (16,323) (17,494) 1,171 Purchase of investment in unconsolidated entities — (34,558) 34,558 Purchase of investments (282) (1,142) 860 Total sources of cash (used in) provided by investing activities $ (16,605) $ (53,460) $ 36,855 Net cash (used in) provided by investing activities $ 308,555 $ 1,098,343 $ (789,788) Financing Activities.
Cash used in investing activities for the year ended December 31, 2024 and 2023 consisted of the following (in thousands): Year Ended December 31, 2024 2023 Change Sources of cash provided by investing activities: Proceeds from disposition of properties $ 281,528 $ 325,160 $ (43,632) Total sources of cash provided by investing activities $ 281,528 $ 325,160 $ (43,632) Uses of cash for investing activities: Acquisition of properties, net (493,496) — (493,496) Payments for construction in progress (3,871) (16,323) 12,452 Sale (Purchase) of investments — (282) 282 Total uses of cash used in investing activities $ (497,367) $ (16,605) $ (480,762) Net cash (used in) provided by investing activities $ (215,839) $ 308,555 $ (524,394) 54 Financing Activities .
Refer to Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements included in this Annual Report on Form 10-K for details. As of December 31, 2023, the Company’s goodwill balance was $78.6 million, of which $68.4 million was allocated to the Industrial segment and $10.3 million was allocated to the Other segment.
During the year ended December 31, 2024, the Company sold all remaining assets within its Other segment, which resulted in the complete impairment of the remaining goodwill balance allocated to the Other segment. Refer to Note 8, Fair Value Measurements , to our consolidated financial statements included in this Annual Report on Form 10-K for details.
A decrease in Other segment Same Store NOI by $0.5 million, or 2%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease is primarily due to an increase of non-recoverable operating expenses at one property. Portfolio Analysis Comparison of the Years Ended December 31, 2023 and 2022.
Industrial Same Store NOI increased $1.5 million, or 3%, primarily due to lease extensions in 2024. Office Same Store NOI increased $1.0 million, or 1%, primarily due to a lease commencement in 2024, partially offset by lease terminations and expirations in 2023. Portfolio Analysis Comparison of the Years Ended December 31, 2024 and 2023.
If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. To the extent we are not able to secure additional financing in the form of a credit facility or other third party source of liquidity, we will be heavily dependent upon our current financing and income from operations.
To the extent we are not able to secure other potential sources of capital, we will be heavily dependent upon income from operations and our current financing. Sources of Liquidity Cash Resources As of December 31, 2024, we had approximately $146.5 million of cash and cash equivalents on hand.
General and Administrative Expenses General and administrative expenses increased approximately $4.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to increases in employee severance expenses (including legal fees).
General and Administrative Expenses General and administrative expenses decreased $6.0 million, or 14%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to the vesting of certain time-based restricted share units and time-based restricted shares (together, “Restricted Share Units”) in the prior year, including accelerated vesting for employee severances.
Depreciation and Amortization Depreciation and amortization decreased approximately $78.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to (i) the sale of 48 Office segment properties 2022 and the sale of eleven total properties across all segments in 2023; (ii) accelerated amortization due to amended, naturally expiring and early terminated leases; and (iii) real estate impairments, which lowered the depreciable book bases of the impaired assets.
Goodwill Impairment Provision The Company recorded $10.3 million of goodwill impairment in 2024 related to its Other segment, which represents the complete write-off of the Other segment goodwill resulting from the final disposition of the Other segment property as of December 31, 2024. 43 Depreciation and Amortization Depreciation and amortization decreased $17.2 million, or 15%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to (i) property dispositions in 2023 and 2024; (ii) accelerated amortization due to expired and terminated leases; and (iii) real estate impairments, which lowered the depreciable book bases of the impaired assets, partially offset by (iv) the acquisition of the IOS Portfolio in fourth quarter of 2024.
Transaction Activity: • Prior to the Listing, we sold two Industrial segment properties, and one Office segment property for approximately $169.6 million in gross disposition proceeds and a net gain of approximately $30.6 million. • Subsequent to the Listing, we sold four Office segment properties and four Other segment properties for approximately $166.3 million in gross disposition proceeds and recognized a net loss of approximately $1.4 million.
These properties span a total of 440 usable acres across 14 states. • During the year ended December 31, 2024, we sold two Office segment properties and 17 Other segment properties for approximately $317.4 million in gross disposition proceeds and recognized a net gain of approximately $38.4 million.
Removed
Overview Peakstone Realty Trust is an internally managed, publicly traded real estate investment trust (“REIT”) that owns and operates a high-quality, newer-vintage portfolio of predominantly single-tenant industrial and office properties located in diverse, strategic growth markets. These assets are generally leased to creditworthy tenants under long-term net lease agreements with contractual rent escalations.
Added
Company Overview Peakstone Realty Trust (NYSE: PKST) is an internally managed real estate investment trust currently shifting its portfolio composition towards industrial properties. PKST’s objective is to grow its portfolio through investments in the industrial outdoor storage (“IOS”) subsector. The Company’s existing portfolio includes high-quality, predominantly single-tenant industrial and office properties located in strategic markets.
Removed
As of December 31, 2023, the Company’s wholly-owned portfolio (i) consisted of 71 properties located in 24 states, (ii) was 96.4% leased with a weighted average remaining lease term (“WALT”) of approximately 6.5 years, and (iii) generated approximately $196.7 million Annualized Base Rent (“ABR”).
Added
As of December 31, 2024, the Company’s portfolio was comprised of 103 properties, consisting of 97 operating properties and six redevelopment properties (those designated for redevelopment or repositioning) reported in two segments – Industrial and Office.
Removed
The Company reports the results of its wholly-owned portfolio in three segments which had the following characteristics as of December 31, 2023: • Industrial: This segment (i) comprised 19 industrial properties and (ii) was 100% leased with a WALT of approximately 6.7 years. • Office: This segment (i) comprised 35 office properties and (ii) was 98.8% leased with a WALT of approximately 7.6 years. • Other: This segment (i) comprised 17 properties and (ii) was 82.4% leased with a WALT of approximately 2.6 years.
Added
Highlights The following provides a summary of the significant developments related to our business during the year ended December 31, 2024: Transaction Activity: • On November 4, 2024, we acquired a portfolio of 51 industrial outdoor storage properties (“IOS Portfolio”) located throughout the United States for a gross contractual purchase price of $490.0 million.
Removed
Results of Operations The Company’s results of operations are primarily impacted by the Company’s ability to re-lease space, dispose of and acquire and/or invest in select properties, all of which impact period-to-period comparisons. Due to current remote and hybrid work practices, demand for office space nationwide has declined and may continue to decline.
Added
The 51-property portfolio is comprised of 45 Operating Properties and six Redevelopment Properties.
Removed
While we have seen some positive trends recently, office utilization remains down materially relative to pre-pandemic levels. Brand new office buildings (urban and suburban), with high walk-scores, immediate access to retail amenities and transportation hubs continue to attract tenants and market rental rates.
Added
As a result of these dispositions, we have eliminated our Other segment. • On August 28, 2024, we sold our entire interest in the unconsolidated Office Joint Venture. Leasing Activity: • For the year ended December 31, 2024, the Company completed 837,400 square feet of new leases and lease extensions, with a weighted average lease term of 4.5 years.
Removed
In addition, challenging economic conditions and volatility in the capital markets (including bank failures) throughout 2023 adversely impacted commercial real estate overall and, in particular, the office sector.
Added
This leasing activity resulted in weighted average releasing spreads of 32% (GAAP) and 23% (cash). 38 Financing Activity : Secured Debt: • Payoffs: ◦ On March 26, 2024, we paid off the outstanding debt balance of the $11.4 million Highway 94 Mortgage Loan. ◦ On September 26, 2024, we paid off the outstanding debt balance of the $17.1 million Pepsi Bottling Ventures Mortgage Loan. ◦ As of December 31, 2024, following the sales of the Other segment assets, we extinguished all associated AIG debt, resulting in a gain on extinguishment of the AIG Loans of $11.0 million. • New Debt: ◦ On November 1, 2024, we obtained a mortgage loan in the principal amount of $49.6 million (the “Florida Mortgage Loan”), at a fixed interest rate of 5.48% per annum, with a 7.5-year term (maturity date is May 6, 2032), and secured by an Industrial property located in Florida. ◦ On November 1, 2024, we obtained a mortgage loan in the principal amount of $37.7 million (the “Georgia Mortgage Loan”), at a fixed interest rate of 5.31% per annum, with a 5-year term (maturity date is November 6, 2029), and secured by an Industrial property located in Georgia. ◦ On November 4, 2024, we obtained a mortgage loan in the principal amount of $23.0 million (the “Illinois Mortgage Loan”), at a fixed interest rate of 6.51% per annum, with a 5-year term (maturity date is November 6, 2029), and secured by an Industrial property located in Illinois.
Removed
These market conditions and the potential for increased capital costs and availability of debt financing, among other things, have driven many companies to be more reticent in making office or other real estate related investments.
Added
Credit Facility: • On July 25, 2024, the Company entered into that certain Eighth Amendment to Second Amended and Restated Credit Agreement which provides, among other things, as follows: ◦ Reduction of the outstanding principal balance of a term loan from $400.0 million to $210.0 million, and extension of the maturity date of that term loan to July 25, 2028 (now, the “2028 Term Loan I”); ◦ Reductions of the maximum commitment amount under the Revolving Credit Facility from $750.0 million to $547.0 million (calculated as of June 30, 2024), and extension of the maturity date of the Revolving Credit Facility to July 25, 2028; ◦ An option, subject to obtaining additional commitments from lenders and satisfying certain other customary conditions, to increase the commitments under the Revolving Credit Facility, to increase the outstanding principal balance under existing term loans and/or incur new term loans by up to approximately $400.0 million in the aggregate (for a maximum facility size of $1.3 billion). • On October 31, 2024, the Company entered into that certain Ninth Amendment to Second Amended and Restated Credit Agreement which provides, among other things, as follows: ◦ A $175.0 million senior unsecured term loan (the “2028 Term Loan II”) maturing on October 31, 2028, assuming exercise of the one-year extension option. 39 Results of Operations Overview Our strategic focus is to reposition the portfolio towards industrial assets.
Removed
The potential for a reversal of interest rates by the Fed has brought some relief to investor sentiment, however, we are still seeing a negative investment psychology at this moment, especially for office product. All of these trends and uncertainties may adversely impact the Company’s business, financial condition, results of operations and cash flows.
Added
This will be accomplished through the continued divestment of non-core assets and reinvestment in industrial outdoor storage (“IOS”) opportunities. We will maintain a balanced approach to capital allocation, prioritizing investments in the IOS subsector while also optimizing our leverage to support long-term growth. Our goal is to enhance portfolio performance, maximize shareholder value, and ensure financial flexibility for future opportunities.
Removed
The Company’s long-term objective is to maximize shareholder value through the ownership and operation of industrial and select office assets located in strategic growth markets. We are focused on maintaining a strong balance sheet that enables us to execute multi-channel investments across the risk and capital spectrum as they arise.
Added
Business Environment Real estate investors are closely monitoring current market conditions, which are shaped by a mix of economic factors, geopolitical tensions,and changes in monetary policy. These factors have created an environment where caution has been the prevailing sentiment. Despite these challenges, investors continue to seek opportunities to generate returns through real estate investments.
Removed
It is our intention to continue to maximize our balance sheet flexibility through free cash flow generation and the execution of our strategic disposition plan. We seek to generate internal and external growth by increasing the cash flow from our properties and expanding our portfolio by making industrial-focused investments.
Added
In the industrial sector, trends including onshoring and nearshoring of manufacturing and warehousing operations, a predicted rise in U.S. industrial production, and the continued growth of e-commerce are anticipated to drive sustained demand for our properties and the sector as a whole.
Removed
To accomplish our objectives, we will leverage our experienced, operationally-minded and cycle-tested management team.
Added
Major supply factors include the slowing pace of construction, limited quantity of existing sites zoned for broad industrial uses, increasing resistance from municipalities for new industrial development and steady redevelopment of infill properties into other uses, all of which are expected to decrease supply.
Removed
Highlights The following provides a summary of the significant developments related to our business during and subsequent to 2023: Listing: • On April 13, 2023, we listed our common shares on the New York Stock Exchange (“NYSE”).
Added
Although vacancy rates are higher compared to recent years, we believe the combination of long-term demand drivers and supply constraints will benefit strong long-term demand for industrial real estate. The office market is still adapting to evolving workplace preferences.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+2 added−2 removed3 unchanged
Biggest changeAs of December 31, 2023, our debt consisted of approximately $1.2 billion in fixed rate debt (including the effect of interest rate swaps) and approximately $200.0 million in variable rate debt (excluding unamortized deferred financing cost and discounts, net, of approximately $5.6 million).
Biggest changeAs of December 31, 2024, our debt, excluding unamortized deferred financing cost and discounts/premiums, consisted of approximately $1.1 billion in fixed rate debt (including the effect of interest rate swaps) and $250.0 million of variable rate debt.
Our future earnings and fair values relating to variable rate financial instruments are primarily dependent upon prevalent market rates of interest, such as SOFR. However, our interest rate swap agreements are intended to reduce the effects of interest rate changes.
Our future earnings and fair values relating to variable rate debt are primarily dependent upon prevalent market rates of interest, such as SOFR. However, our Interest Rate Swaps are intended to reduce the effects of interest rate changes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The primary market risk to which we believe we may be exposed is interest rate risk, including the risk of changes in the underlying rates on our variable rate debt, which may result from factors that are beyond our control.
The primary market risk to which we believe we may be exposed is interest rate risk, including the risk of changes in the underlying rates on our variable rate debt, which may result from factors that are beyond our control.
Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change.
Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur, which may result in us taking actions to further mitigate our exposure to the change.
The use of these types of instruments to hedge a portion of our exposure to changes in interest rates carries additional risks, such as counterparty credit risk and the legal enforceability of hedging contracts.
The use of these types of instruments to hedge a portion of our exposure to changes in interest rates carries additional risks, such as counterparty credit risk and the legal enforceability of hedging contracts. Changes in interest rates have different impacts on the fixed and variable rate debt.
The effect of an increase of 100 basis points in interest rates, assuming a SOFR floor of 0%, on our variable-rate debt, including our KeyBank loans, after considerin g the effect of our interest rate swap agreements, would decrease our future earnings and cash flows by approx imately $2.0 million annually.
As of December 31, 2024, the effect of an increase of 100 basis points in interest rates, assuming a SOFR floor of 0%, on our variable-rate debt, including our KeyBank Loans, after considering the effect of our Interest Rate Swaps, would decrease our future earnings and cash flows by approximately $4.9 million annually.
Removed
We may utilize a variety of financial instruments, including interest rate swap agreements, caps, floors, and other interest rate exchange contracts. We will not enter into these financial instruments for speculative purposes.
Added
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In this section, market risk is defined to generally include the exposure to loss resulting from changes in interest rates, foreign currency exchange rates and equity prices.
Removed
As of December 31, 2022, our debt consisted of approximately $1.3 billion in fixed rate debt (including the effect of interest rate swaps) and approximately $200.0 million in variable rate debt (excluding unamortized deferred financing cost and discounts, net, of approximately $4.4 million). Changes in interest rates have different impacts on the fixed and variable rate debt.
Added
We may enter into interest rate hedging instruments (collectively, “Interest Rate Swaps”) to provide greater predictability in interest expense by protecting against potential increases in floating interest rates and allow for more precise budgeting, financial planning and forecasting. We will not enter into these instruments for trading or speculative purposes.

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