The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>> Peakstone Realty Trust (PKST) shares ended the last trading session 5.8% higher at $14.04. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 15.7% gain over the past four weeks. The increased investor optimism in the stock can be attributed to the favorable operating environment. Wh ...

Introduction As an investor with a significant portion of their portfolio invested in REITs, I'm always on the lookout for potential new ones in the sector. During my research, I stumbled across Peakstone Realty Trust, an internally-managed REIT that operates in 3 segments: Industrial, Office, and Other. The REIT has a short track record, having IPO'd in April of last year. They are also relatively small with only 67 properties across 22 states. Seeking Alpha I won't go too much in depth, as I mentioned pre ...

Peakstone Realty Trust (PKST) could be a solid choice for investors given its recent upgrade to a Zacks Rank #1 (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices. The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the ...

Financial Data and Key Metrics Changes - Total revenue for the quarter was $59.2 million, with NOI at $47.6 million and net income attributable to common shareholders approximately $5 million or $0.14 per share, which included two non-cash impairments totaling $6 million [16][31][32] - FFO was approximately $21.2 million or $0.54 per share on a fully diluted basis, while AFFO was approximately $27.8 million or $0.70 per share [31] - Net debt was approximately $985 million, a reduction of $65 million compared to year-end 2023, improving net debt to gross real estate from 40.2% to 38.2% [32] Business Line Data and Key Metrics Changes - The Other segment now accounts for only 13% of the company's ABR, down from previous levels due to effective dispositions [26] - The Industrial and Office segments have a combined WALT of 7.3 years, with minimal near-term rollover of less than 5% over the next three years [12][20] - Lease extensions secured during the quarter totaled approximately 241,000 square feet with strong GAAP and cash re-leasing spreads of 27% and 13%, respectively [13] Market Data and Key Metrics Changes - The company reported a positive outlook on the industrial market, expecting to capture past and future rent growth, which translates to strong re-leasing spreads [45] - The weighted average cap rate for stabilized assets is now 7.8%, slightly up from 7.6% [38] Company Strategy and Development Direction - The company is focused on bolstering its balance sheet and optimizing its portfolio to align with long-term growth objectives [11] - There is an ongoing strategy to eliminate the Other segment through effective disposition and leasing strategies [26] - The company believes that not all office portfolios are created equal, emphasizing the stability provided by their limited near-term rollover and the relatively young age of their assets [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the evolving market and maximizing shareholder value [46] - The company highlighted the importance of its experienced team in driving successful dispositions and leasing activities [4][8] Other Important Information - As of March 31, 2024, the company had $436 million in cash, with total liquidity nearing $600 million [17] - The company paid a dividend of $0.225 per common share on April 18, with future dividend decisions to be made by the Board of Trustees [19] Q&A Session Summary Question: Can you provide more details on the rent abatement in the Industrial portfolio? - Management clarified that the rent abatement occurred in the 11th year of a lease for one of their industrial properties [48] Question: What are the cap rates on dispositions that closed last quarter? - The weighted average cap rate for stabilized assets is now 7.8%, up from 7.6% [38] Question: How does the company view the split between investment-grade and sub-investment-grade assets? - The company noted that their Industrial and Office segments are just under 70% combined investment-grade, while the Other segment is only 42% investment-grade [50]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ____________________________________________________ Peakstone Realty Trust (Exact name of Registrant as specified in its charter) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 Maryland 46-4654479 (State or other jurisdiction of incorporation or organization) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SEC ...

EXHIBIT 99.1 Peakstone Realty Trust Reports First Quarter 2024 Results - Completed 241,400 Square Feet of Lease Renewals at Favorable Releasing Spreads - Strengthened Balance Sheet and Enhanced the Composition of the Portfolio El Segundo, Calif. (May 7, 2024) - Peakstone Realty Trust ("PKST" or the "Company") (NYSE: PKST), a real estate investment trust that owns and operates a high-quality, newer-vintage portfolio of predominantly single- tenant industrial and office properties, today announced its financi ...

Financial Data and Key Metrics Changes - The company reported total revenue of $63.1 million and NOI of $50.3 million for the quarter, which included approximately $1 million from lease termination fees [3] - The net loss attributable to common shareholders was approximately $19.9 million or $0.55 per share, which included two non-cash impairments [3] - Same-store cash NOI increased by approximately 4.5% year-over-year to $48.2 million [23] - For the full year 2023, AFFO was approximately $118.1 million or $2.99 per share on a fully diluted basis, with a same-store cash NOI increase of 3.6% compared to the prior year [49] Business Line Data and Key Metrics Changes - The company executed four leases totaling over 1 million square feet during the quarter, achieving weighted average GAAP and cash re-leasing spreads of 26% and 9%, respectively [19] - The industrial segment saw a significant lease extension with TransDigm, resulting in a 91% GAAP and 50% cash re-leasing spread [30] - The office segment completed a new 7.7-year lease with Spectrum, which includes a 2.4% annual rent escalation [30] Market Data and Key Metrics Changes - The company ended the year with a portfolio that is 96.4% leased and a weighted average lease term (WALT) of 6.5 years [19] - The company has approximately $392 million in cash and $159 million of available undrawn capacity on its revolver, totaling approximately $551 million in liquidity [33] Company Strategy and Development Direction - The company is focused on evolving its portfolio towards the industrial segment, which is believed to have favorable growth prospects, while moving away from the office segment [41] - The management emphasized the importance of high-quality assets and expertise in positioning the portfolio for growth and maximizing shareholder value [5] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook on the industrial market, indicating that the portfolio is well-positioned to capture past and future rent growth [5] - The company is actively monitoring the market for acquisition opportunities while maintaining a strong cash position for flexibility [54][55] Other Important Information - The company sold 11 properties for gross proceeds of $336 million during the year, with an average cash cap rate of 7.6% for stabilized assets [47] - The company has no significant debt maturities until the end of 2025, with approximately 86% of total outstanding debt at fixed rates [4][24] Q&A Session Summary Question: What are the thoughts on the 2024 lease maturities in the other segment? - Management is actively engaged with properties in the other segment and has an agreement with AIG to facilitate the sale of properties associated with AIG loans [26][37] Question: What is the appetite for office assets currently? - Management noted that the market is becoming more dependent on the ability to obtain credit, and they are opportunistically selling properties that do not align with the go-forward plan [38] Question: Is there a target leverage metric before considering acquisitions? - The company is focused on strengthening its balance sheet and will weigh options over time, with a strategy to evolve towards the industrial segment [41][55] Question: Can you provide details on the upcoming expiration of the Tech Data Corp lease in San Antonio? - Management expressed satisfaction with tenant relationships and highlighted the proactive approach taken to meet tenant needs [43] Question: What was the termination income associated with the sale in Tyler, Texas? - The property was sold for a combined total of $21.4 million, which included lease termination fees [45]

[PART I](index=7&type=section&id=PART%20I) This section provides an overview of the company's business, including its strategy, competitive landscape, regulatory environment, human capital management, and risk factors [ITEM 1. BUSINESS](index=7&type=section&id=ITEM%201.%20BUSINESS) Peakstone Realty Trust is an internally managed REIT focused on owning and operating a portfolio of predominantly single-tenant industrial and office properties in strategic growth markets - Peakstone Realty Trust is an internally managed, publicly traded REIT that owns and operates a high-quality, newer-vintage portfolio of predominantly single-tenant industrial and office properties[25](index=25&type=chunk) Portfolio Characteristics (as of Dec 31, 2023) | Metric | Value (as of Dec 31, 2023) | | :-------------------------------- | :----------------------------------- | | Number of Properties | 71 | | States of Operation | 24 | | Portfolio Leased | 96.4% | | Weighted Average Remaining Lease Term | ~6.5 years | | Annualized Base Rent (ABR) | ~$196.7 million | - The company's long-term objective is to maximize shareholder value through ownership and operation of industrial and select office assets in strategic growth markets, focusing on balance sheet flexibility and industrial-focused investments[27](index=27&type=chunk) [Overview](index=7&type=section&id=Overview) Peakstone Realty Trust is an internally managed REIT specializing in single-tenant industrial and office properties, leased under long-term net agreements with rent escalations - Peakstone Realty Trust is an internally managed, publicly traded REIT owning and operating a portfolio of predominantly single-tenant industrial and office properties[25](index=25&type=chunk) - 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")[26](index=26&type=chunk) [Our Business Strategy](index=7&type=section&id=Our%20Business%20Strategy) The company's strategy aims to maximize shareholder value by owning and operating industrial and select office assets in strategic growth markets, maintaining a strong balance sheet, and generating growth through increased property cash flow and industrial-focused investments - 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[27](index=27&type=chunk) - Focus is on maintaining a strong balance sheet, executing multi-channel investments, maximizing balance sheet flexibility through free cash flow and strategic dispositions, and generating internal and external growth by increasing cash flow and expanding industrial-focused investments[27](index=27&type=chunk) [Competition](index=7&type=section&id=Competition) The company operates in highly competitive commercial real estate markets, facing numerous public and private investors, developers, and financial institutions with greater resources for leasing, acquisition, disposition, and investment opportunities - The commercial real estate markets in which we operate are highly competitive[28](index=28&type=chunk) - Competition exists for leasing space to prospective tenants, re-leasing space to existing tenants, and for acquisition, disposition, and investment opportunities from numerous public and private real estate investors, developers, and financial institutions, some with greater financial resources[28](index=28&type=chunk) [Regulatory Matters](index=7&type=section&id=Regulatory%20Matters) The company is subject to various federal, state, and local laws and regulations, including those related to REIT status, Americans with Disabilities Act (ADA), environmental matters, and other property-specific requirements - The business is subject to many laws and governmental regulations, with frequent changes in interpretation[29](index=29&type=chunk) - The Company has elected to be taxed as a REIT, requiring adherence to specific organizational and operational requirements to avoid federal income taxes on distributed taxable income[30](index=30&type=chunk) - Compliance with the Americans with Disabilities Act (ADA) and various environmental laws (e.g., hazardous substances, climate change disclosures) may incur additional costs, fines, or liabilities, potentially affecting dividends or financial condition[31](index=31&type=chunk)[32](index=32&type=chunk) [Human Capital Management](index=9&type=section&id=Human%20Capital%20Management) As of December 31, 2023, the company employed 35 people and is internally managed by an experienced team, emphasizing employee growth, comprehensive benefits, and diversity - As of December 31, 2023, the Company employed **35 people** and is internally managed by an experienced team specializing in industrial and office properties[35](index=35&type=chunk) - The company offers comprehensive benefits, career enhancement opportunities, and values diversity, with **56% minority** and **47% women employees**, and a majority of the Board of Trustees composed of women and/or minorities[36](index=36&type=chunk)[37](index=37&type=chunk) [Available Information](index=9&type=section&id=Available%20Information) The company makes its SEC filings, including annual, quarterly, and current reports, proxy statements, and ownership reports, available free of charge on its investor website - The company provides free access to its SEC filings (10-K, 10-Q, 8-K, proxy statements, etc) on the 'SEC Filings' subpage of its investor website (www.pkst.com)[39](index=39&type=chunk) - The website is also used as a routine channel for company information, including press releases, presentations, and supplemental information, and for disclosing material non-public information under Regulation FD[39](index=39&type=chunk) [ITEM 1A. RISK FACTORS](index=9&type=page&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks across its business, debt financing, U.S federal income tax, common shares, and corporate structure - The company's income is highly dependent on the financial stability of single tenants, with five largest tenants accounting for approximately a quarter of revenue[41](index=41&type=chunk)[47](index=47&type=chunk) - A substantial portion of the portfolio (**56.3% ABR**) consists of office assets, which have experienced decreased demand and value, limiting sales ability in the current economic climate[69](index=69&type=chunk) - Refinancing existing debt or obtaining new debt on favorable terms is a significant risk, especially with **$29.1 million maturing in 2024**, potentially leading to default or inability to continue as a going concern[95](index=95&type=chunk)[96](index=96&type=chunk) [Summary of Risk Factors](index=5&type=section&id=Summary%20of%20Risk%20Factors) The company's risk profile is characterized by significant tenant concentration, illiquidity of special-use properties, and susceptibility to adverse economic conditions in specific geographic markets - Most properties are single-tenant dependent, making income vulnerable to tenant financial stability, bankruptcy, or lease termination[20](index=20&type=chunk) - Approximately a quarter of leases expire in the next four years, posing a risk if properties cannot be sold or re-leased, increasing exposure to real estate market downturns[20](index=20&type=chunk) - A substantial portion of the portfolio is office assets, which have generally experienced decreased demand and value, limiting sales ability in the current economic climate[20](index=20&type=chunk) [Risks Related to Our Business](index=9&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include high dependence on single tenants, potential difficulty in re-leasing or selling special-use properties, and the adverse impact of tenant defaults - The company's revenue is materially dependent on the financial stability of single tenants, their parents, or lease guarantors, with five largest tenants accounting for approximately a quarter of revenue[42](index=42&type=chunk)[47](index=47&type=chunk) - Approximately a quarter of leases expire in the next four years, increasing exposure to real estate downturns and potential capital expenditure requirements if properties cannot be re-leased or sold[49](index=49&type=chunk)[51](index=51&type=chunk) - A substantial portion of the portfolio (**56.3% ABR**) is office assets, which have seen decreased demand and value due to remote work trends and challenging economic conditions, limiting the ability to sell at attractive prices[69](index=69&type=chunk)[70](index=70&type=chunk) [Risks Related to Debt Financing](index=19&type=section&id=Risks%20Related%20to%20Our%20Debt%20Financing) The company faces significant risks related to debt financing, particularly the ability to refinance maturing debt on favorable terms - The company has **$29.1 million of debt maturing in 2024**, and current credit market dislocations, particularly for office assets, pose a significant risk to refinancing on favorable terms or at all[96](index=96&type=chunk) - Inability to refinance could force the use of cash on hand, potentially leading to default under loan agreements, including the unsecured corporate credit agreement, and cross-defaults[96](index=96&type=chunk)[97](index=97&type=chunk) - Increases in interest rates could raise debt payments, adversely affecting the ability to pay dividends at current levels and potentially forcing asset sales at unfavorable times[107](index=107&type=chunk) [U.S. Federal Income Tax Risks](index=21&type=section&id=U.S.%20Federal%20Income%20Tax%20Risks) U.S federal income tax risks primarily revolve around maintaining REIT qualification, which involves complex Code provisions and strict distribution requirements - Failure to maintain REIT qualification would subject the company to U.S federal income tax at corporate rates and a four-year disqualification, significantly reducing net earnings and cash for dividends[109](index=109&type=chunk)[110](index=110&type=chunk) - To qualify as a REIT, the company must distribute at least **90% of its taxable income annually**, potentially forcing it to borrow, issue securities, or sell assets to meet this requirement, even if disadvantageous[112](index=112&type=chunk) - The tax status of subsidiaries, including the Operating Partnership and taxable REIT subsidiaries (TRSs), is crucial; challenges to their partnership or disregarded entity status could jeopardize REIT qualification and increase tax liabilities[113](index=113&type=chunk)[114](index=114&type=chunk) [Risks Related to Our Common Shares](index=24&type=section&id=Risks%20Related%20to%20Our%20Common%20Shares) The market price of the company's common shares may experience significant volatility due to various factors, including financial performance, market conditions, interest rates, and industry trends - The market price of common shares may experience significant volatility due to financial performance, market conditions, interest rates, and industry trends, including impacts on REITs with significant office assets[123](index=123&type=chunk)[124](index=124&type=chunk) - Future dividends are at the sole discretion of the Board and depend on financial condition, results, cash flows, and REIT qualification; changes in dividend policy or failure to meet market expectations could adversely affect share price[126](index=126&type=chunk) - Future issuances of common shares or other convertible securities, or the resale of outstanding common shares (including OP Units), could dilute shareholders and negatively impact the market price[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Risks Related to Our Conflicts of Interest](index=26&type=section&id=Risks%20Related%20to%20Our%20Conflicts%20of%20Interest) Conflicts of interest may arise between the interests of shareholders and holders of OP Units, as trustees and officers have duties to both the Company and the Operating Partnership - Conflicts of interest may arise between shareholders and OP Unit holders due to dual fiduciary duties of trustees and officers to both the Company and the Operating Partnership[132](index=132&type=chunk) - Executive officers' participation in an incentive compensation plan controlled by the former Executive Chairman, with potential for substantial payments in cash or common shares, creates the appearance of a conflict of interest[133](index=133&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk) [Risks Related to Our Corporate Structure](index=27&type=section&id=Risks%20Related%20to%20Our%20Corporate%20Structure) The company's corporate structure includes charter provisions that limit ownership of shares to maintain REIT qualification, which could discourage tender offers or changes in control - The company's charter contains ownership limits (e.g., **9.8% of common shares**) to maintain REIT qualification, which may discourage tender offers or changes in control[137](index=137&type=chunk) - Maryland law limits the liability of trustees and officers and requires indemnification, potentially reducing the company's and shareholders' ability to recover claims against them[142](index=142&type=chunk) - Uncertainty of future capital funding sources, exacerbated by the REIT dividend requirement (**90% of taxable income**), could impair the ability to fund capital improvements, acquisitions, expenses, or business expansion[143](index=143&type=chunk) [General Risks](index=29&type=section&id=General%20Risks) General risks include cybersecurity threats, climate change, natural disasters, increased focus on ESG factors, and litigation risks, all of which can impact operations and financial condition - Cybersecurity risks, including sophisticated attacks and human error, threaten IT systems and confidential information, potentially causing operational disruption, data breaches, and reputational damage[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - Properties are exposed to climate change and natural disasters (e.g., earthquakes, severe weather), which can cause physical damage, decrease demand/value, and incur uninsured costs, especially in geographically concentrated areas[151](index=151&type=chunk)[152](index=152&type=chunk) - The company may be subject to litigation, including securities class actions, which could result in significant defense costs, judgments, or settlements, adversely impacting cash flows and management's focus[154](index=154&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=30&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) This section states that there are no unresolved staff comments [ITEM 1C. CYBERSECURITY](index=30&type=section&id=ITEM%201C.%20CYBERSECURITY) The company has implemented a cybersecurity risk management program, integrated into its enterprise risk management, to protect confidential information and critical systems, guided by ISO 27002 standards - The company has a cybersecurity risk management program, integrated into its enterprise risk management, to protect confidential information and critical systems, based on ISO 27002 standards[158](index=158&type=chunk)[159](index=159&type=chunk) - The program includes risk assessments, a security team, third-party assistance, employee training, an incident response plan, and a vendor management policy[160](index=160&type=chunk) - Cybersecurity governance involves the executive management team and managed IT service provider (Connetic), with oversight from the Board's Audit Committee, which receives periodic reports and updates[161](index=161&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [ITEM 2. PROPERTIES](index=32&type=section&id=ITEM%202.%20PROPERTIES) As of December 31, 2023, the company owned 71 properties totaling approximately 17.9 million rentable square feet, with revenue concentrated in Arizona, New Jersey, and Colorado, and significant lease expirations in the coming years - As of December 31, 2023, the company owned **71 properties** (66 fee simple, 5 ground leasehold) encompassing approximately **17.9 million rentable square feet**[166](index=166&type=chunk) Revenue Concentration by State (as of Dec 31, 2023) | State | Percentage of Annualized Base Rent | | :------------ | :--------------------------------- | | Arizona | 11.9 % | | New Jersey | 9.9 % | | Colorado | 8.4 % | | Ohio | 6.7 % | | Massachusetts | 6.3 % | Revenue Concentration by Industry (as of Dec 31, 2023) | Industry | Percentage of Annualized Base Rent | | :---------------------------- | :--------------------------------- | | Capital Goods | 16.5 % | | Consumer Services | 11.0 % | | Materials | 10.2 % | | Food, Beverage & Tobacco | 8.5 % | | Commercial & Professional Services | 5.9 % | Top Ten Tenants (as of Dec 31, 2023) | Tenant | Percentage of Annualized Base Rent | | :------------------ | :--------------------------------- | | Keurig Dr. Pepper | 5.9 % | | Southern Company | 4.7 % | | LPL | 4.4 % | | Amazon | 4.4 % | | Freeport McMoRan | 4.0 % | | Maxar Technologies | 3.9 % | | RH | 3.8 % | | Wyndham Hotels & Resorts | 3.8 % | | McKesson | 3.1 % | | Travel & Leisure, Co | 3.0 % | | **Subtotal** | **41.0 %** | Lease Expirations by Year (as of Dec 31, 2023) | Year of Lease Expiration | Percentage of Annualized Base Rent | | :----------------------- | :--------------------------------- | | 2024 | 8.7 % | | 2025 | 4.1 % | | 2026 | 6.8 % | | 2027 | 7.3 % | | 2028 | 9.5 % | | 2029 | 19.7 % | | >2029 | 43.9 % | [ITEM 3. LEGAL PROCEEDINGS](index=34&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not currently a party to, nor aware of, any material pending legal or regulatory proceedings, claims, or litigation arising in the ordinary course of business - The Company is not a party to, nor is the Company aware of any material pending legal proceedings nor is any property of the Company subject to any material pending legal proceedings[175](index=175&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=34&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company [PART II](index=35&type=section&id=PART%20II) This section covers market information for common equity, financial condition, results of operations, market risk, financial statements, and internal controls [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=35&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock is listed on the NYSE under 'PKST', with 11,616 holders of record as of February 20, 2024 - The company's common stock is listed on the NYSE under the ticker symbol 'PKST'[179](index=179&type=chunk) - As of February 20, 2024, there were **11,616 holders of record** of the company's common stock[179](index=179&type=chunk) - The Share Redemption Program (SRP) was terminated in connection with the NYSE listing, but **941 shares** were redeemed in 2023 prior to termination[182](index=182&type=chunk) Shares Repurchased for Tax Withholding (Q4 2023) | For the Month Ended | Total Number of Shares Repurchased | | :------------------ | :--------------------------------- | | December 31, 2023 | 58,982 | [ITEM 6. [Reserved]](index=36&type=section&id=ITEM%206.%20%5BReserved%5D) This item is reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=37&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Peakstone Realty Trust, an internally managed REIT, reported a net loss of $605.1 million in 2023, an increase from $441.4 million in 2022, primarily due to significant real estate impairment provisions - Peakstone Realty Trust is an internally managed, publicly traded REIT focused on single-tenant industrial and office properties[190](index=190&type=chunk) Net Loss and Total NOI (2023 vs. 2022) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | Percentage Change | | :---------- | :------------------ | :------------------ | :-------------------- | :---------------- | | Net loss | $(605,102) | $(441,382) | $(163,720) | 37 % | | Total NOI | $201,858 | $323,221 | $(121,363) | (38)% | - The decrease in Total NOI was primarily due to dispositions of 48 Office segment properties in 2022 and eleven total properties across all segments in 2023[211](index=211&type=chunk)[212](index=212&type=chunk) - The company recorded a significant real estate impairment provision of **$409.5 million** in 2023, primarily due to changes in anticipated hold periods, estimated selling prices, and potential vacancies[215](index=215&type=chunk) [Overview](index=37&type=section&id=Overview) Peakstone Realty Trust is an internally managed REIT with a portfolio of 71 single-tenant industrial and office properties across 24 states, 96.4% leased with a 6.5-year weighted average remaining lease term, generating $196.7 million in Annualized Base Rent - Peakstone Realty Trust is an internally managed, publicly traded REIT that owns and operates a high-quality, newer-vintage portfolio of predominantly single-tenant industrial and office properties[190](index=190&type=chunk) Portfolio Characteristics (as of Dec 31, 2023) | Metric | Value | | :-------------------------------- | :-------------------- | | Number of Properties | 71 | | States of Operation | 24 | | Portfolio Leased | 96.4% | | Weighted Average Remaining Lease Term | ~6.5 years | | Annualized Base Rent (ABR) | ~$196.7 million | - The company's long-term objective is to maximize shareholder value through ownership and operation of industrial and select office assets, focusing on balance sheet flexibility and industrial-focused investments, while acknowledging challenges in the office sector due to remote work and market volatility[193](index=193&type=chunk)[194](index=194&type=chunk) [Segment Information](index=38&type=section&id=Segment%20Information) The company evaluates its portfolio across three reportable segments: Industrial, Office, and Other, based on segment Net Operating Income (NOI) - The company's portfolio is divided into three reportable segments: Industrial, Office, and Other[196](index=196&type=chunk) - Segment performance is evaluated based on segment Net Operating Income (NOI), defined as property revenue less property expenses, excluding corporate-level items[196](index=196&type=chunk) [Highlights](index=38&type=section&id=Highlights) Key developments in 2023 included the company's NYSE listing on April 13, strategic property dispositions, significant debt payoffs, preferred share redemption, and an ATM equity offering program - The company listed its common shares on the New York Stock Exchange on **April 13, 2023**[197](index=197&type=chunk) - Prior to listing, the company sold two Industrial and one Office segment properties for approximately **$169.6 million** in gross proceeds, recognizing a net gain of **$30.6 million**[198](index=198&type=chunk) - In 2023, the company paid off approximately **$441.3 million of debt**, including two mortgage loans and the 2024 Term Loan[199](index=199&type=chunk) - On April 10, 2023, the company redeemed all **5,000,000 Series A Preferred Shares** for **$125.0 million** plus **$2.4 million** in unpaid dividends[200](index=200&type=chunk) - Subsequent to year-end, on January 31, 2024, one office segment property was sold for **$30.0 million**, and on February 12, 2024, the Revolving Loan Maturity Date was extended to **June 30, 2024**[200](index=200&type=chunk)[201](index=201&type=chunk) [Reconciliation of Net Loss to Same Store NOI](index=39&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Same%20Store%20NOI) The company reported a net loss of $605.1 million for the year ended December 31, 2023, with Total NOI at $201.9 million and Same Store NOI at $192.9 million Reconciliation of Net Loss to Same Store NOI (in thousands) | Metric | 2023 | 2022 | | :----------------------------------------- | :-------- | :-------- | | Net loss | $(605,102) | $(441,382) | | 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 | | (Gain) loss from disposition of assets | (29,164) | 139,280 | | **Total NOI** | **$201,858** | **$323,221** | | Recently disposed properties adjustment | (8,922) | (123,899) | | **Total Same Store NOI** | **$192,936** | **$199,322** | [Same Store Analysis](index=39&type=section&id=Same%20Store%20Analysis) For the year ended December 31, 2023, the Same Store portfolio experienced a 3% decrease in Total Same Store NOI, driven by declines in the Office and Other segments, partially offset by an increase in Industrial Same Store NOI by Segment (2023 vs. 2022, in thousands) | Segment | 2023 | 2022 | Increase/(Decrease) | Percentage Change | | :------------ | :-------- | :-------- | :------------------ | :---------------- | | Industrial NOI | $49,329 | $48,950 | $379 | 1 % | | Office NOI | $111,970 | $118,251 | $(6,281) | (5)% | | Other NOI | $31,637 | $32,121 | $(484) | (2)% | | **Total Same Store NOI** | **$192,936** | **$199,322** | **$(6,386)** | **(3)%** | - Office segment Same Store NOI decreased by **$6.3 million (5%)** primarily due to a **$7.4 million decrease in termination income**, partially offset by **$1.2 million** from net leasing activity[207](index=207&type=chunk) - Industrial segment Same Store NOI increased by **$0.4 million (1%)** due to new leasing activity at one property[206](index=206&type=chunk) [Portfolio Analysis](index=40&type=section&id=Portfolio%20Analysis) The company's total NOI decreased by $121.4 million, or 38%, in 2023 compared to 2022, primarily due to significant property dispositions and increased real estate impairment provisions Total NOI by Segment (2023 vs. 2022, in thousands) | Segment | 2023 | 2022 | Increase/(Decrease) | Percentage Change | | :------------ | :-------- | :-------- | :------------------ | :---------------- | | Industrial NOI | $49,649 | $53,477 | $(3,828) | (7)% | | Office NOI | $118,439 | $230,967 | $(112,528) | (49)% | | Other NOI | $33,770 | $38,777 | $(5,007) | (13)% | | **Total NOI** | **$201,858** | **$323,221** | **$(121,363)** | **(38)%** | - Office segment NOI decreased by **$112.5 million (49%)** primarily due to the dispositions of 48 Office segment properties in 2022 and five in 2023[211](index=211&type=chunk) - Real estate impairment provision increased by **$281.9 million** in 2023, mainly due to impairment of seventeen properties, while goodwill impairment decreased by **$119.2 million**[215](index=215&type=chunk)[216](index=216&type=chunk) - Interest expense decreased by **$19.2 million** in 2023, primarily due to the payoff of approximately **$441.3 million of debt**, partially offset by higher interest rates on unhedged variable debt[218](index=218&type=chunk) [Net Loss from Investment in Unconsolidated Entity](index=43&type=section&id=Net%20Loss%20from%20Investment%20in%20Unconsolidated%20Entity) Net loss from investment in unconsolidated entity increased by $166.8 million in 2023, primarily due to a $129.3 million other-than-temporary impairment (OTTI) of the Office Joint Venture investment - Net loss from investment in unconsolidated entity increased by approximately **$166.8 million** in 2023, primarily due to the Office Joint Venture formed in August 2022[220](index=220&type=chunk) - In September 2023, the company recorded a **$129.3 million** other-than-temporary impairment (OTTI) for its investment in the Office Joint Venture, representing a complete write-off of the remaining balance[220](index=220&type=chunk) - Subsequent to the OTTI, the company no longer records any equity income or losses from the Office Joint Venture[220](index=220&type=chunk) [Net Gain (Loss) from Disposition of Assets](index=43&type=section&id=Net%20Gain%20%28Loss%29%20from%20Disposition%20of%20Assets) The company's net gain from disposition of assets increased by $168.4 million in 2023 compared to 2022, driven by a net gain of $29.2 million from property sales in 2023 contrasting with a net loss in 2022 - Gain from disposition of assets increased by approximately **$168.4 million** in 2023 compared to 2022[221](index=221&type=chunk) - This increase is primarily due to a net gain of **$29.2 million** on the disposition of two Industrial, five Office, and four Other segment properties in 2023[221](index=221&type=chunk) - This contrasts with a net loss of **$139.3 million** on the sale of 48 Office segment properties in 2022[221](index=221&type=chunk) [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates involve significant judgment and assumptions, particularly for the impairment of real estate and related intangible assets, and goodwill - Critical accounting estimates include the impairment of real estate and related intangible assets, and goodwill, which require significant estimates and assumptions about future market and economic conditions[225](index=225&type=chunk)[226](index=226&type=chunk) - Real estate impairment involves assessing recoverability by comparing carrying amounts to estimated undiscounted cash flows, and if not recoverable, calculating impairment based on fair value using discounted cash flow models or estimated selling prices[226](index=226&type=chunk)[227](index=227&type=chunk) - Goodwill impairment is tested annually, involving a qualitative analysis followed by a quantitative assessment of reporting unit fair value, primarily based on real estate assets and mortgage loans, using assumptions like market rent, discount rates, and terminal capitalization rates[229](index=229&type=chunk)[230](index=230&type=chunk) [Funds from Operations and Adjusted Funds from Operations](index=44&type=section&id=Funds%20from%20Operations%20and%20Adjusted%20Funds%20from%20Operations) The company uses non-GAAP financial measures, Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO), to evaluate operating performance and compare with other REITs - The company uses non-GAAP financial measures, FFO and AFFO, to evaluate operating performance and compare with other REITs, believing they offer a more complete understanding of performance[232](index=232&type=chunk)[233](index=233&type=chunk) - FFO is calculated per NAREIT's definition, adjusting GAAP net income for items like depreciation of real estate assets and gains/losses from sales of depreciable real estate[233](index=233&type=chunk) - AFFO further adjusts FFO for non-routine and certain non-cash items, serving as a recognized measure of sustainable operating performance and ability to sustain current dividend levels[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) FFO and AFFO (in thousands, except per share amounts) | Metric | 2023 | 2022 | 2021 | | :----------------------------------------- | :-------- | :-------- | :-------- | | Net (loss) income | $(605,102) | $(441,382) | $11,570 | | FFO | $(87,541) | $24,793 | $226,116 | | FFO attributable to common shareholders and partners | $(94,886) | $14,730 | $216,418 | | 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 | [NOI and Cash NOI](index=47&type=section&id=NOI%20and%20Cash%20NOI) Net Operating Income (NOI) and Cash Net Operating Income (Cash NOI) are non-GAAP measures used to assess property operating performance, excluding corporate and financing costs, and non-cash depreciation/amortization - NOI and Cash NOI are non-GAAP measures used to understand core property operations, excluding corporate and financing costs, and non-cash depreciation/amortization[241](index=241&type=chunk) - Cash NOI adjusts NOI to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease intangibles[241](index=241&type=chunk) Total NOI and Cash NOI (in thousands) | Metric | 2023 | 2022 | 2021 | | :------------ | :-------- | :-------- | :-------- | | Total NOI | $201,858 | $323,221 | $353,299 | | Total Cash NOI | $196,034 | $309,590 | $344,788 | [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=56&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The primary market risk for the company is interest rate risk, particularly changes in variable rate debt, which is managed through financial instruments like interest rate swap agreements - The primary market risk is interest rate risk, specifically changes in underlying rates on variable rate debt[282](index=282&type=chunk) - As of December 31, 2023, debt consisted of approximately **$1.2 billion** in fixed rate debt (including interest rate swaps) and **$200.0 million** in variable rate debt[284](index=284&type=chunk) - A **100 basis point increase** in interest rates on variable-rate debt, after hedging, would decrease future earnings and cash flows by approximately **$2.0 million annually**[285](index=285&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=56&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section refers to the consolidated financial statements and supplementary data, which are filed starting on page F-1 of this Annual Report on Form 10-K - The financial statements and supplementary data are set forth beginning on page F-1 of this Annual Report on Form 10-K[287](index=287&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=56&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There have been no changes in or disagreements with accountants on accounting and financial disclosure [ITEM 9A. CONTROLS AND PROCEDURES](index=56&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023, with no material changes during Q4 2023 - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[289](index=289&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended December 31, 2023[290](index=290&type=chunk) - Management's report concluded that internal control over financial reporting was effective as of December 31, 2023, a conclusion audited and affirmed by Ernst & Young LLP[291](index=291&type=chunk)[292](index=292&type=chunk) [ITEM 9B. OTHER INFORMATION](index=57&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) During the three months ended December 31, 2023, no trustee or officer adopted or terminated a "Rule 10b5-1 trading agreement" or "non-Rule 10b5-1 trading agreement" - No trustee or officer adopted or terminated a "Rule 10b5-1 trading agreement" or "non-Rule 10b5-1 trading agreement" during the three months ended December 31, 2023[293](index=293&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=57&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to the company [PART III](index=58&type=section&id=PART%20III) This section details information on directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and accounting fees [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=58&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2024 Proxy Statement, to be filed within 120 days after December 31, 2023 - Information for this item is incorporated by reference to the 2024 Proxy Statement[298](index=298&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=58&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the company's 2024 Proxy Statement, to be filed within 120 days after December 31, 2023 - Information for this item is incorporated by reference to the 2024 Proxy Statement[299](index=299&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=58&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's 2024 Proxy Statement, to be filed within 120 days after December 31, 2023 - Information for this item is incorporated by reference to the 2024 Proxy Statement[300](index=300&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE](index=58&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's 2024 Proxy Statement, to be filed within 120 days after December 31, 2023 - Information for this item is incorporated by reference to the 2024 Proxy Statement[301](index=301&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES](index=58&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding principal accounting fees and services is incorporated by reference from the company's 2024 Proxy Statement, to be filed within 120 days after December 31, 2023 - Information for this item is incorporated by reference to the 2024 Proxy Statement[302](index=302&type=chunk) [PART IV](index=59&type=section&id=PART%20IV) This section includes exhibits, financial statement schedules, signatures, and the full consolidated financial statements with detailed notes [ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=59&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the documents filed as part of the Annual Report on Form 10-K, including financial statements, Schedule III, and an extensive Exhibit Index detailing various agreements and certifications - This section includes a list of financial statements, Schedule III (Real Estate and Accumulated Depreciation and Amortization), and an Exhibit Index[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk) - The Exhibit Index details various agreements, corporate documents (e.g., Declaration of Trust, Bylaws), employment agreements, and certifications (e.g., Section 302, Section 906)[308](index=308&type=chunk)[310](index=310&type=chunk)[312](index=312&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=62&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item is not applicable to the company [SIGNATURES](index=63&type=section&id=SIGNATURES) The Annual Report on Form 10-K was duly signed on behalf of Peakstone Realty Trust by its Chief Executive Officer and President, Michael J Escalante, and other principal officers and trustees on February 22, 2024 - The Annual Report on Form 10-K was signed on **February 22, 2024**, by Michael J Escalante (CEO and President), Javier F Bitar (CFO and Treasurer), Bryan K Yamasawa (Chief Accounting Officer), Casey Wold (Executive Chairman), and independent trustees[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) [INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](index=64&type=section&id=INDEX%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides an index to the consolidated financial statements, including the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income (Loss), Equity, Cash Flows, and Notes to Consolidated Financial Statements, along with Schedule III - The index lists the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income (Loss), Equity, Cash Flows, Notes to Consolidated Financial Statements, and Schedule III[321](index=321&type=chunk) [Report of Independent Registered Public Accounting Firm](index=65&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP provided an unqualified opinion on Peakstone Realty Trust's consolidated financial statements and internal control over financial reporting for the period ended December 31, 2023 - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for the period ended December 31, 2023, and on the effectiveness of internal control over financial reporting[324](index=324&type=chunk)[325](index=325&type=chunk)[340](index=340&type=chunk) - Critical audit matters included the impairment of real estate, which involved complex and subjective management assumptions in estimating future cash flows and fair value, leading to **$409.5 million** in impairment charges in 2023[330](index=330&type=chunk)[331](index=331&type=chunk) - Another critical audit matter was the valuation of goodwill for the Other Reporting Unit, which required significant estimation and judgment in determining fair value, resulting in a **$16.0 million** impairment provision[335](index=335&type=chunk) [Consolidated Financial Statements](index=70&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position, results of operations, comprehensive income (loss), equity, and cash flows for the years ended December 31, 2023, 2022, and 2021 Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2023 | December 31, 2022 | | :-------------- | :---------------- | :---------------- | | Total assets | $2,789,625 | $3,633,376 | | Total liabilities | $1,585,912 | $1,647,241 | | Total equity | $1,203,713 | $1,857,323 | Consolidated Statements of Operations Highlights (in thousands) | Metric | 2023 | 2022 | 2021 | | :-------------- | :---------- | :---------- | :-------- | | Rental income | $254,284 | $416,485 | $459,872 | | Total expenses | $618,258 | $451,930 | $362,024 | | Net (loss) income | $(605,102) | $(441,382) | $11,570 | Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | 2023 | 2022 | 2021 | | :---------------------------- | :-------- | :---------- | :---------- | | Net cash provided by operating activities | $89,152 | $152,676 | $204,979 | | Net cash provided by investing activities | $308,555 | $1,098,343 | $(62,810) | | Net cash used in financing activities | $(234,641) | $(1,199,215) | $(159,335) | [Notes to Consolidated Financial Statements](index=77&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's organization, accounting policies, and financial statement components, highlighting significant estimates and assumptions - The company operates as a REIT, with its Operating Partnership owning all assets, and the company owning **91.8% of OP Units** as of December 31, 2023[369](index=369&type=chunk)[370](index=370&type=chunk) - In 2023, the company recorded a real estate impairment provision of **$409.5 million** on seventeen properties and a goodwill impairment provision of **$16.0 million** related to the Other reporting unit[431](index=431&type=chunk)[395](index=395&type=chunk) - An other-than-temporary impairment of **$129.3 million** was recorded for the investment in the Office Joint Venture in 2023, representing a complete write-off of the remaining investment balance[449](index=449&type=chunk) Debt Summary (in thousands) | Debt Type | December 31, 2023 | December 31, 2022 | | :------------------ | :---------------- | :---------------- | | Total Mortgage Debt | $491,545 | $539,803 | | Revolving Loan | $400,000 | $0 | | 2025 Term Loan | $400,000 | $400,000 | | 2026 Term Loan | $150,000 | $150,000 | | 2024 Term Loan | $0 | $400,000 | | **Total Debt** | **$1,441,545** | **$1,489,803** | - The company redeemed all **5,000,000 Series A Cumulative Perpetual Convertible Preferred Shares** for **$125.0 million** plus **$2.4 million** in unpaid distributions in 2023[502](index=502&type=chunk) [1. Organization](index=77&type=section&id=1.%20Organization) Peakstone Realty Trust is an internally managed REIT that owns and operates 71 predominantly single-tenant industrial and office properties across 24 states, with its operating partnership holding all assets - Peakstone Realty Trust is an internally managed, publicly traded REIT owning and operating a portfolio of predominantly single-tenant industrial and office properties[369](index=369&type=chunk) - As of December 31, 2023, the company owned **91.8%** of the outstanding common units of limited partnership interest in its Operating Partnership[370](index=370&type=chunk) - The wholly-owned portfolio consists of **71 properties** in 24 states, categorized into Industrial (19), Office (35), and Other (17) segments[371](index=371&type=chunk) [2. Basis of Presentation and Summary of Significant Accounting Policies](index=77&type=section&id=2.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) The consolidated financial statements are prepared in accordance with GAAP, consolidating all accounts of the company, its Operating Partnership (a VIE), and subsidiaries, with key policies covering real estate, revenue, leases, derivatives, and income taxes - Financial statements are prepared in accordance with GAAP and consolidate all accounts of the company, its Operating Partnership, and subsidiaries[372](index=372&type=chunk)[374](index=374&type=chunk) - The Operating Partnership is a variable interest entity (VIE), with the company identified as the primary beneficiary[376](index=376&type=chunk)[378](index=378&type=chunk) - Key accounting policies include real estate purchase price allocation, depreciation and amortization, impairment of real estate and goodwill, revenue recognition (straight-line rent, tenant reimbursements), and lease accounting (ASC 842)[382](index=382&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk)[392](index=392&type=chunk)[398](index=398&type=chunk)[402](index=402&type=chunk) - The company has elected to be taxed as a REIT and treats its corporate subsidiary as a taxable REIT subsidiary (TRS)[413](index=413&type=chunk)[414](index=414&type=chunk) - The company adopted ASU 2020-04 for reference rate reform and is evaluating ASU 2023-07 for segment expense disclosures[422](index=422&type=chunk)[423](index=423&type=chunk) [3. Real Estate](index=85&type=section&id=3.%20Real%20Estate) As of December 31, 2023, the company's gross investment in real estate was $2.61 billion, with a net value of $2.06 billion, following significant property dispositions and a $409.5 million impairment provision in 2023 Gross Investment in Real Estate (in thousands) | Component | December 31, 2023 | December 31, 2022 | | :------------------------------ | :---------------- | :---------------- | | Land | $231,175 | $327,408 | | Building and improvements | $1,968,314 | $2,631,965 | | Tenant origination and absorption cost | $402,251 | $535,889 | | Construction in progress | $8,371 | $1,994 | | **Total real estate** | **$2,610,111** | **$3,497,256** | - The company sold **eleven properties** in 2023 for gross proceeds of approximately **$335.9 million**, recognizing a net gain of **$29.2 million**[428](index=428&type=chunk)[430](index=430&type=chunk) - A real estate impairment provision of approximately **$409.5 million** was recorded on **seventeen properties** in 2023, primarily in the Office and Other segments, due to changes in anticipated hold periods, estimated selling prices, and potential vacancies[431](index=431&type=chunk) - The weighted-average remaining lease term for intangible assets was approximately **6.5 years** as of December 31, 2023[433](index=433&type=chunk) [4. Investments in Unconsolidated Entities](index=88&type=section&id=4.%20Investments%20in%20Unconsolidated%20Entities) In 2022, the company invested $184.2 million for a 49% interest in the Office Joint Venture, which subsequently incurred a $129.3 million other-than-temporary impairment in 2023, leading to a complete write-off of the investment - In 2022, the company sold a majority interest in **46 office properties** for approximately **$1.27 billion** and invested **$184.2 million** for a **49% interest** in the Office Joint Venture[439](index=439&type=chunk)[440](index=440&type=chunk) - The Office Joint Venture obtained acquisition financing totaling **$1.07 billion**, with initial maturity dates in September 2023 and January 2025[444](index=444&type=chunk)[446](index=446&type=chunk) - In September 2023, the company recorded a **$129.3 million** other-than-temporary impairment (OTTI) for its investment in the Office Joint Venture, representing a complete write-off due to increased future loan extension risk[449](index=449&type=chunk) - Subsequent to the write-off, the company no longer records any equity income or losses from the Office Joint Venture[449](index=449&type=chunk)[452](index=452&type=chunk) [5. Debt](index=91&type=section&id=5.%20Debt) As of December 31, 2023, the company's total consolidated debt was $1.44 billion, with $34.2 million maturing in 2024 and $520.2 million in 2025, and the Revolving Loan maturity extended to June 30, 2024 Consolidated Debt (in thousands) | Debt Type | December 31, 2023 | December 31, 2022 | | :------------------ | :---------------- | :---------------- | | Total Mortgage Debt | $491,545 | $539,803 | | Revolving Loan | $400,000 | $0 | | 2025 Term Loan | $400,000 | $400,000 | | 2026 Term Loan | $150,000 | $150,000 | | 2024 Term Loan | $0 | $400,000 | | **Total Debt** | **$1,441,545** | **$1,489,803** | - The Revolving Loan, with **$400.0 million** drawn, had its maturity date extended to **June 30, 2024**, subsequent to year-end[461](index=461&type=chunk)[462](index=462&type=chunk) - The company was in compliance with all debt covenants as of December 31, 2023[464](index=464&type=chunk) Future Scheduled Principal Repayments (in thousands) | Year | Amount | | :--------- | :---------- | | 2024 | $34,181 | | 2025 | $520,175 | | 2026 | $552,834 | | 2027 | $2,978 | | 2028 | $253,129 | | Thereafter | $78,248 | | **Total** | **$1,441,545** | [6. Interest Rate Contracts](index=93&type=section&id=6.%20Interest%20Rate%20Contracts) The company uses interest rate swap agreements as cash flow hedges to manage exposure to variable interest rates on its debt, with a total notional amount of $750.0 million as of December 31, 2023 - The company uses interest rate swap agreements as cash flow hedges to manage exposure to variable interest rates on its debt, not for speculative purposes[468](index=468&type=chunk)[469](index=469&type=chunk) Interest Rate Swaps Summary (in thousands) | Metric | December 31, 2023 | December 31, 2022 | | :------------------ | :---------------- | :---------------- | | Total Fair Value | $26,942 | $41,404 | | Current Notional Amount | $750,000 | $750,000 | - Changes in the fair value of qualifying swaps are initially recorded in AOCI and reclassified to interest expense as payments are made[469](index=469&type=chunk) - For 2023, **$23.6 million** was reclassified from AOCI into earnings under 'Interest expense'[471](index=471&type=chunk) [7. Accrued Expenses and Other Liabilities](index=95&type=section&id=7.%20Accrued%20Expenses%20and%20Other%20Liabilities) As of December 31, 2023, total accrued expenses and other liabilities were $78.2 million, a decrease from $80.8 million in 2022, with key components including interest payable, prepaid tenant rent, and deferred compensation Accrued Expenses and Other Liabilities (in thousands) | Component | December 31, 2023 | December 31, 2022 | | :------------------------------ | :---------------- | :---------------- | | Interest payable | $17,073 | $13,654 | | Prepaid tenant rent | $9,710 | $12,399 | | Deferred compensation | $9,661 | $8,913 | | Property operating expense payable | $4,469 | $7,960 | | Real estate taxes payable | $5,165 | $6,296 | | Other liabilities | $30,417 | $26,542 | | **Total** | **$78,229** | **$80,802** | [8. Fair Value Measurements](index=95&type=section&id=8.%20Fair%20Value%20Measurements) The company measures financial instruments and certain assets/liabilities at fair value using a three-level hierarchy, with significant nonrecurring impairments recorded in 2023 for real estate, goodwill, and the Office Joint Venture investment - The company uses a three-level fair value hierarchy for financial instruments and certain assets/liabilities[476](index=476&type=chunk) Recurring Fair Value Measurements (in thousands) | Asset/Liability | December 31, 2023 Total Fair Value | | :-------------------- | :--------------------------------- | | Interest Rate Swap Asset | $26,942 | | Mutual Funds Asset | $7,148 | - Nonrecurring measurements in 2023 included a **$409.5 million** real estate impairment on **seventeen properties** and a **$16.0 million** goodwill impairment for the Other reporting unit, both based on Level 3 inputs[478](index=478&type=chunk)[480](index=480&type=chunk) - A **$129.3 million** impairment was recorded for the investment in the Office Joint Venture, also using Level 3 inputs[484](index=484&type=chunk) - The fair value of mortgage loans is estimated by discounting principal balances using current borrowing rates, classified as Level 2[486](index=486&type=chunk) [9. Equity](index=98&type=section&id=9.%20Equity) The company's common shares were listed on the NYSE on April 13, 2023, following a reverse share split, and all Series A Preferred Shares were redeemed for $125.0 million plus unpaid dividends in April 2023 - The company's common shares were listed on the NYSE on **April 13, 2023**, after a one-for-nine reverse share split on **March 10, 2023**[489](index=489&type=chunk) - As of December 31, 2023, there were **36,304,145 common shares outstanding**[489](index=489&type=chunk) - The company redeemed all **5,000,000 Series A Cumulative Perpetual Convertible Preferred Shares** for **$125.0 million** plus **$2.4 million** in unpaid dividends in April 2023[502](index=502&type=chunk) - The long-term incentive plan had **167,185 shares** available for future issuance as of December 31, 2023, with **$8.2 million** of unrecognized compensation expense[510](index=510&type=chunk) Federal Income Tax Treatment of Dividends Declared | Category | 2023 | 2022 | 2021 | | :-------------- | :---- | :---- | :--- | | Ordinary income | — % | — % | 9 % | | Capital gain | — % | — % | — % | | Return of capital | 100 % | 100 % | 91 % | | **Total** | **100 %** | **100 %** | **100 %** | | Dividends declared | $1.09 | $3.15 | $3.15 | [10. Noncontrolling Interests](index=101&type=section&id=10.%20Noncontrolling%20Interests) As of December 31, 2023, noncontrolling interests represented approximately 8.2% of total shares, with limited partners holding 3.2 million OP Units subject to an Exchange Right for cash or common shares - As of December 31, 2023, noncontrolling interests constituted approximately **8.2% of total shares** and **8.8% of weighted average shares outstanding** (assuming OP Units converted to common shares)[518](index=518&type=chunk) - Limited partners of the Operating Partnership owned approximately **3.2 million OP Units**, which are subject to an Exchange Right for cash or common shares at the company's election[520](index=520&type=chunk)[521](index=521&type=chunk) - Effective with the NYSE listing, all OP Units are subject to the same redemption process[524](index=524&type=chunk) - In December 2023, GC LLC redeemed **209,954 OP Units**, which the company satisfied with common shares, subsequently distributed to participants in GC LLC's long-term incentive plan, including executive officers[528](index=528&type=chunk) [11. Related Party Transactions](index=102&type=section&id=11.%20Related%20Party%20Transactions) Related party transaction costs decreased to $4.3 million in 2023, with the termination of the Dealer Manager Agreement and Administrative Services Agreement following the NYSE listing Related Party Transaction Costs (in thousands) | Category | 2023 Incurred | 2022 Incurred | 2021 Incurred | | :------------------ | :------------ | :------------ | :------------ | | Total incurred/payable | $4,283 | $10,744 | $13,483 | - The Dealer Manager Agreement was terminated following the NYSE listing, eliminating associated fees[534](index=534&type=chunk) - The Administrative Services Agreement (ASA) with GCC LLC and GC LLC was terminated as of **October 6, 2023**[538](index=538&type=chunk)[540](index=540&type=chunk) - The company has an office sublease for its corporate headquarters with GCC, with initial monthly base rent of approximately **$0.05 million**, expiring **June 30, 2024**[541](index=541&type=chunk)[543](index=543&type=chunk) [12. Leases](index=104&type=section&id=12.%20Leases) The company leases industrial and office space to tenants under non-cancelable operating leases, with lease income from operating lease payments totaling $219.6 million in 2023 and future minimum base rents of $1.48 billion - The company leases industrial and office space to tenants primarily under non-cancelable operating leases, with rental income recognized on a straight-line basis[545](index=545&type=chunk) Lease Income from Operating Lease Payments (in thousands) | Year | Lease Income | | :--- | :----------- | | 2023 | $219,600 | | 2022 | $343,300 | | 2021 | $378,300 | Future Minimum Base Rents to be Received (as of Dec 31, 2023, in thousands) | Year | Amount | | :--------- | :------------ | | 2024 | $196,153 | | 2025 | $189,046 | | 2026 | $185,005 | | 2027 | $166,852 | | 2028 | $152,067 | | Thereafter | $595,746 | | **Total** | **$1,484,869** | - As a lessee, the company has three operating ground leases, two financing ground leases, and two operating office space leases[548](index=548&type=chunk)[549](index=549&type=chunk) [13. Commitments and Contingencies](index=106&type=section&id=13.%20Commitments%20and%20Contingencies) The company is not currently involved in any material legal or regulatory proceedings and had aggregate remaining contractual commitments of approximately $15.7 million as of December 31, 2023 - The company is not a party to, nor aware of, any material pending legal or regulatory proceedings[554](index=554&type=chunk) - As of December 31, 2023, the company had aggregate remaining contractual commitments of approximately **$15.7 million** for repositioning, capital expenditure projects, leasing commissions, and tenant improvements[555](index=555&type=chunk) [14. Segment Reporting](index=106&type=section&id=14.%20Segment%20Reporting) The company's real estate portfolio is managed and reported across three segments: Industrial, Office, and Other, with performance evaluated using segment Net Operating Income (NOI) - The company's real estate portfolio is managed and reported across three segments: Industrial, Office, and Other, with performance evaluated using segment NOI[556](index=556&type=chunk)[557](index=557&type=chunk) Segment NOI (in thousands) | Segment | 2023 | 2022 | 2021 | | :------------ | :-------- | :-------- | :-------- | | Industrial NOI | $49,649 | $53,477 | $52,125 | | Office NOI | $118,439 | $230,967 | $260,255 | | Other NOI | $33,770 | $38,777 | $40,919 | | **Total NOI** | **$201,858** | **$323,221** | **$353,299** | Goodwill by Segment (in thousands) | Segment | December 31, 2023 | December 31, 2022 | | :--------- | :---------------- | :---------------- | | Industrial | $68,373 | $68,373 | | Other | $10,274 | $26,305 | | **Total** | **$78,647** | **$94,678** | Real Estate Assets, Net, by Segment (in thousands) | Segment | December 31, 2023 | December 31, 2022 | | :------------------ | :---------------- | :---------------- | | Industrial real estate, net | $589,384 | $624,019 | | Office real estate, net | $1,219,823 | $1,714,634 | | Other real estate, net | $250,352 | $513,964 | | **Total Real Estate, net** | **$2,059,559** | **$2,852,617** | [15. Declaration of Dividends](index=109&type=section&id=15.%20Declaration%20of%20Dividends) The Board declared various cash dividends in 2023, including daily rates for January and February, a monthly dividend for March, and quarterly dividends for the remaining quarters - The Board declared an all-cash dividend rate of **$0.008630136 per day** (**$3.15 per share annualized**) for January 2023[562](index=562&type=chunk) - A daily rate of **$0.002465753** (**$0.90 per share annualized**) was declared for February 2023[563](index=563&type=chunk) - Monthly dividend of **$0.075 per common share** for March 2023 and quarterly dividends of **$0.225 per common share** for Q2, Q3, and Q4 2023 were declared[564](index=564&type=chunk)[565](index=565&type=chunk) [16. Subsequent Events](index=109&type=section&id=16.%20Subsequent%20Events) Subsequent to December 31, 2023, the company sold an office property for $30.0 million, extended the Revolving Loan Maturity Date to June 30, 2024, and declared a Q1 2024 dividend of $0.225 per common share - On **January 31, 2024**, one office segment property was sold for **$30.0 million**, including a **$15.0 million** one-year promissory note[566](index=566&type=chunk) - On **February 12, 2024**, the Revolving Loan Maturity Date was extended to **June 30, 2024**[566](index=566&type=chunk) - On **February 21, 2024**, the Board declared an all-cash dividend of **$0.225 per common share** for the first quarter, payable on or about **April 18, 2024**[567](index=567&type=chunk)

Financial Performance - Total revenue for Q4 2023 was approximately $63.1 million, down from $75.9 million in Q4 2022, while full-year revenue was approximately $254.3 million compared to $416.5 million in 2022[7]. - Net loss attributable to common shareholders for Q4 2023 was approximately $(19.9) million, or $(0.55) per share, compared to a net loss of $(228.6) million, or $(6.34) per share, in Q4 2022[8]. - Total Net Operating Income (NOI) for Q4 2023 was $50.33 million, down from $59.88 million in Q4 2022, representing a decrease of approximately 26.5%[39]. - Funds From Operations (FFO) attributable to common shareholders and limited partners was $11.33 million in Q4 2023, compared to a loss of $121.99 million in Q4 2022[36]. - Adjusted Funds From Operations (AFFO) for Q4 2023 was approximately $31.7 million, or $0.80 per share, compared to $29.6 million, or $0.75 per share, in Q4 2022[11]. - Cash NOI for the year ended December 31, 2023, was $196.03 million, down from $309.59 million in 2022, indicating a decline of approximately 36.5%[39]. Operational Metrics - Same Store Cash Net Operating Income (NOI) for Q4 2023 was approximately $48.2 million, a 4.5% increase from $46.2 million in Q4 2022[12]. - The portfolio was 96.4% leased as of December 31, 2023, with a weighted average remaining lease term of approximately 6.5 years[5]. - The company completed 1.05 million square feet of new leases and lease extensions in Q4 2023, with weighted-average GAAP and cash releasing spreads of 26% and 9%, respectively[5]. - Total Same Store Cash NOI for the period was $48,238,000, an increase from $46,181,000 in the previous period, representing a growth of 4.5%[40]. - Office Same Store Cash NOI reached $27,330,000, up from $25,919,000, indicating a year-over-year increase of 5.4%[40]. - Other Same Store Cash NOI increased to $8,423,000 from $8,109,000, reflecting a growth of 3.9%[40]. Liquidity and Capital Structure - The company ended 2023 with total liquidity of approximately $551 million, consisting of $392 million in cash and $159 million of available undrawn capacity under its revolving credit facility[13]. - The leverage ratio improved to 6.2x from 7.7x based on Net Debt to Normalized EBITDAre[5]. - Cash and cash equivalents increased from $233,180 in 2022 to $391,802 in 2023, an increase of approximately 68%[26]. - Total liabilities decreased from $1,647,241 in 2022 to $1,585,912 in 2023, a decline of about 3.7%[26]. - The company's accumulated deficit increased from $269,926 in 2022 to $827,854 in 2023, reflecting a significant increase in losses[26]. - The company’s total shareholders' equity decreased from $1,682,668 in 2022 to $1,112,084 in 2023, a decline of approximately 33.8%[26]. Asset Management - The company sold 11 properties for gross proceeds of $336 million in 2023, with a net gain of $29.2 million from these sales[10]. - Total assets decreased from $3,633,376 in 2022 to $2,789,625 in 2023, a decline of approximately 23.3%[26]. - The company reported a real estate impairment provision of $25,373 for Q4 2023, down from $35,275 in Q4 2022; for the full year, the provision increased significantly from $127,577 in 2022 to $409,512 in 2023[28]. - The company reported a goodwill impairment provision of $16.03 million for Q4 2023, consistent with the $135.27 million recorded in Q4 2022[39]. Dividend and Shareholder Returns - The company paid a dividend of $0.225 per common share for the fourth quarter, payable on January 17, 2024[16]. - The weighted average number of common shares outstanding for Q4 2023 was 36,054,940, slightly up from 35,999,203 in Q4 2022[28]. - Weighted-average common shares outstanding for basic and diluted EPS increased slightly to 36,054,940 in Q4 2023 from 35,999,203 in Q4 2022[36]. Expense Management - Total expenses for Q4 2023 were $61,972, a decrease of 40.5% compared to $104,425 in Q4 2022; for the full year, total expenses increased from $451,930 in 2022 to $618,258 in 2023, an increase of 36.7%[28]. - The company incurred transaction expenses of $412,000 in Q4 2023, a decrease from $13.72 million in Q4 2022[39].

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) Net loss widened significantly in 2023, driven by major impairment charges and property dispositions that also reduced assets and equity Consolidated Balance Sheet Summary (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total real estate, net | $2,161,077 | $2,852,617 | | Total assets | $2,840,209 | $3,633,376 | | Debt, net | $1,442,003 | $1,485,402 | | Total liabilities | $1,594,929 | $1,647,241 | | Total equity | $1,245,280 | $1,857,323 | Consolidated Statement of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Rental income | $61,713 | $101,330 | $191,226 | $340,592 | | Real estate impairment provision | $0 | $10,697 | $397,373 | $86,254 | | Net loss from investment in unconsolidated entity | ($144,598) | $0 | ($176,767) | $0 | | Net loss | ($139,948) | ($119,373) | ($583,332) | ($193,240) | | Net loss per share, basic and diluted | ($3.55) | ($3.08) | ($14.97) | ($5.08) | Consolidated Statement of Cash Flows Summary (Nine Months Ended, in thousands) | Metric | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58,770 | $135,348 | | Net cash provided by investing activities | $289,796 | $921,545 | | Net cash used in financing activities | ($216,413) | ($1,155,150) | [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Significant 2023 events included major property dispositions, large real estate and joint venture impairments, and preferred share redemptions - During the nine months ended September 30, 2023, the company sold nine properties for gross proceeds of approximately **$308.7 million**, recognizing a net gain of **$24.7 million**[53](index=53&type=chunk)[54](index=54&type=chunk) - A real estate impairment provision of approximately **$397.4 million** was recorded on 16 properties during the first nine months of 2023[55](index=55&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - The company recorded an other-than-temporary impairment of approximately **$129.3 million** for its investment in the Office Joint Venture, representing a complete write-off[68](index=68&type=chunk)[69](index=69&type=chunk)[101](index=101&type=chunk) - On April 10, 2023, the company redeemed all shares of its Series A Preferred Stock for a payment of **$125.0 million** plus accrued distributions[123](index=123&type=chunk) Segment Net Operating Income (NOI) (in thousands) | Segment | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Industrial NOI | $36,998 | $39,912 | | Office NOI | $89,692 | $193,635 | | Other NOI | $24,842 | $29,792 | | **Total NOI** | **$151,532** | **$263,339** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes declining performance to property dispositions and significant impairments, though liquidity remains strong at $516.6 million - As of September 30, 2023, the company's wholly-owned portfolio of 73 properties was **96.4% leased** with a weighted average remaining lease term of **6.3 years**[162](index=162&type=chunk) - The increased net loss was driven by a **$311.1 million** increase in real estate impairment provisions and a **$176.8 million** increase in losses from the unconsolidated Office Joint Venture[209](index=209&type=chunk)[216](index=216&type=chunk)[221](index=221&type=chunk) - As of September 30, 2023, the company had total liquidity of **$516.6 million** from cash and its Revolving Credit Facility[239](index=239&type=chunk) Same Store NOI Comparison (Nine Months Ended, in thousands) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Industrial | $36,678 | $36,545 | 0% | | Office | $85,148 | $92,041 | (7)% | | Other | $26,227 | $26,900 | (3)% | | **Total Same Store NOI** | **$148,053** | **$155,486** | **(5)%** | FFO and AFFO per Share | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | FFO per share | ($2.79) | $0.68 | ($2.69) | $3.45 | | AFFO per share | $0.78 | $1.08 | $2.18 | $4.06 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate changes, with a hypothetical 100 bps rate increase impacting earnings by $2.0 million annually - The company's primary market risk exposure is to interest rate changes on its variable rate debt[262](index=262&type=chunk) - As of September 30, 2023, the company had approximately **$1.2 billion** in fixed-rate debt and **$200.0 million** in variable-rate debt, after considering interest rate swaps[264](index=264&type=chunk) - A hypothetical 100 basis point increase in interest rates would decrease future earnings and cash flows by approximately **$2.0 million** annually[265](index=265&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period[267](index=267&type=chunk) - **No changes** occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[268](index=268&type=chunk) [PART II. OTHER INFORMATION](index=59&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material pending legal proceedings - The company is not a party to any **material pending legal proceedings**[149](index=149&type=chunk)[269](index=269&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the risk factors disclosed in the 2022 Annual Report on Form 10-K - **No material changes** to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2022, were reported[270](index=270&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no sales of unregistered securities during the nine months ended September 30, 2023 - There were **no sales of unregistered securities** during the nine months ended September 30, 2023[271](index=271&type=chunk)