NetSTREIT(NTST) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and notes, showing a shift from net loss to net income and improved cash flow from operations for the six months ended June 30, 2025 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | Percentage Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------------------ | | Total assets | $2,311,714 | $2,259,346 | $52,368 | 2.32% | | Real estate held for investment, net | $1,871,583 | $1,834,361 | $37,222 | 2.03% | | Term loans, net | $795,976 | $622,608 | $173,368 | 27.85% | | Revolving credit facility | $127,000 | $239,000 | $(112,000) | -46.86% | | Total liabilities | $988,169 | $921,214 | $66,955 | 7.27% | | Total equity | $1,323,545 | $1,338,132 | $(14,587) | -1.09% | Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $48,286 | $39,567 | $94,196 | $77,240 | | Total operating expenses | $35,960 | $31,677 | $70,518 | $62,819 | | Interest expense, net | $(12,638) | $(7,604) | $(24,098) | $(13,784) | | Gain on sales of real estate, net | $3,533 | $8 | $5,608 | $1,006 | | Net income (loss) | $3,289 | $(2,306) | $4,989 | $(1,254) | | Basic EPS | $0.04 | $(0.03) | $0.06 | $(0.02) | | Diluted EPS | $0.04 | $(0.03) | $0.06 | $(0.02) | Condensed Consolidated Statements of Changes in Equity Condensed Consolidated Statements of Changes in Equity (in thousands) | Equity Component | Balance at Dec 31, 2024 | Issuance of common stock (6M 2025) | Dividends & distributions (6M 2025) | Other comprehensive loss (6M 2025) | Net income (6M 2025) | Balance at Jun 30, 2025 | | :------------------------------ | :---------------------- | :--------------------------------- | :---------------------------------- | :--------------------------------- | :------------------- | :---------------------- | | Common stock, par value | $816 | $19 | — | — | — | $835 | | Additional paid-in capital | $1,507,995 | $30,000 | — | — | — | $1,538,592 | | Distributions in excess of retained earnings | $(188,046) | — | $(34,316) | — | $4,963 | $(217,589) | | Accumulated other comprehensive (loss) income | $10,206 | — | — | $(15,508) | — | $(5,222) | | Total stockholders' equity | $1,330,971 | $28,352 | $(34,316) | $(15,508) | $4,963 | $1,316,616 | | Noncontrolling interests | $7,161 | — | $(178) | $(54) | $26 | $6,929 | | Total equity | $1,338,132 | $28,352 | $(34,494) | $(15,562) | $4,989 | $1,323,545 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $52,727 | $37,018 | | Net cash used in investing activities | $(96,705) | $(203,923) | | Net cash provided by financing activities | $49,398 | $150,702 | | Net change in cash, cash equivalents, and restricted cash | $5,420 | $(16,203) | | Cash, cash equivalents, and restricted cash at end of the period | $19,740 | $13,726 | Notes to the Condensed Consolidated Financial Statements Note 1 – Organization and Description of Business NETSTREIT Corp. operates as an internally managed UPREIT, focusing on acquiring, owning, and managing a diversified portfolio of single-tenant commercial retail properties under long-term net leases - The Company operates as an internally managed UPREIT, acquiring, owning, and managing a diversified portfolio of single-tenant commercial retail properties with long-term net leases[28] - As of June 30, 2025, the Company owned or had investments in 707 properties located in 45 states[28] - The Company elected to be treated as a Real Estate Investment Trust (REIT) for U.S. federal income tax purposes starting December 31, 2019[27] Note 2 – Summary of Significant Accounting Policies This note outlines the company's accounting policies, including estimates, impairment, cash management, and fair value, along with recent accounting pronouncements ASU 2023-09 and ASU 2024-03 Total Provision for Impairment (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total provision for impairment | $4,422 | $3,836 | $8,038 | $7,498 | - Restricted cash increased to $16.7 million as of June 30, 2025, from $7.9 million as of December 31, 2024, primarily due to cash proceeds from asset sales held by qualified intermediaries for tax-free exchanges[34] - For the three and six months ended June 30, 2025, no single tenant or borrower accounted for more than 10% of total revenues, indicating diversified credit risk. In contrast, for the same periods in 2024, Dollar General accounted for 11.3% and 11.5% of total revenues, respectively[42] - The Company is evaluating the potential impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation) on future financial disclosures, with effective dates in 2024 and 2026/2027 respectively[47][48] Note 3 – Leases The company's property leases are primarily long-term triple-net operating leases with a weighted average remaining lease term of 9.8 years as of June 30, 2025. Rental revenue, including fixed and variable components, increased significantly for both the three and six months ended June 30, 2025, compared to the prior year - As of June 30, 2025, the Company's weighted average remaining lease term was 9.8 years, indicating stable long-term revenue streams[49] Lease Income (in thousands) | Lease Income | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fixed lease income | $41,175 | $33,788 | $80,267 | $65,653 | | Variable lease income | $3,977 | $2,978 | $7,405 | $6,207 | | Total rental revenue | $45,158 | $36,864 | $87,748 | $72,053 | Future Minimum Base Rental Receipts (in thousands) | Period | Future Minimum Base Rental Receipts | | :---------- | :----------------------------------------------- | | Remainder of 2025 | $77,794 | | 2026 | $155,486 | | 2027 | $153,246 | | 2028 | $148,106 | | 2029 | $139,114 | | Thereafter | $948,131 | | Total | $1,621,877 | Note 4 – Real Estate Investments The company's gross real estate investment portfolio grew to approximately $2.4 billion across 707 properties, driven by acquisitions, property developments, and mortgage loans, alongside strategic dispositions - As of June 30, 2025, the Company's gross real estate investment portfolio, including properties under development and mortgage loans receivable, totaled approximately $2.4 billion, comprising 707 properties[53][54] Real Estate Investment Activity (in thousands) | Activity | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Number of properties acquired | 23 | 18 | 41 | 46 | | Purchase price of acquired properties | $96,528 | $95,611 | $173,996 | $190,764 | | Number of properties sold | 20 | 6 | 36 | 18 | | Sales price, net of disposal costs | $55,613 | $12,064 | $94,176 | $32,542 | | Gain on sales of real estate, net | $3,533 | $8 | $5,608 | $1,006 | - During the six months ended June 30, 2025, the Company invested $2.2 million in property developments, completed two projects, and reclassified $6.5 million from property under development to land, buildings, and improvements[57] Mortgage Loans Receivable (in thousands) | Mortgage Loans Receivable | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total mortgage loans receivable, net | $152,779 | $139,409 | Note 5 – Intangible Assets and Liabilities The company's net intangible assets decreased to $154.7 million as of June 30, 2025, from $164.4 million at year-end 2024, primarily due to amortization. Net intangible liabilities also saw a slight decrease. The weighted average amortization periods for these assets and liabilities range from 8.5 to 11.0 years Intangible Assets and Liabilities Net Carrying Amount (in thousands) | Intangible | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :------------------------ | :-------------------------------- | :------------------------------------ | | Total intangible assets | $154,701 | $164,392 | | Below-market leases (liabilities) | $18,294 | $20,177 | Intangible Weighted Average Amortization Periods (in years) | Intangible Category | Years Remaining (June 30, 2025) | Years Remaining (December 31, 2024) | | :------------------ | :------------------------------ | :---------------------------------- | | In-place leases | 8.5 | 8.6 | | Above-market leases | 11.0 | 11.4 | | Below-market leases | 9.7 | 10.1 | | Lease incentives | 9.4 | 10.1 | Amortization of In-Place Leases (in thousands) | Amortization | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Amortization of in-place leases | $5,661 | $5,196 | $11,217 | $10,071 | Note 6 – Debt Total net debt increased to $926.6 million due to new term loans and credit agreement amendments in January 2025, leading to significantly higher interest expense compared to the prior year Debt Component (in thousands) | Debt Component | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | 2028 Term Loan | $200,000 | $200,000 | | 2029 Term Loan | $250,000 | $250,000 | | 2030 Term Loan A | $175,000 | $175,000 | | 2030 Term Loan B | $175,000 | — | | Revolver | $127,000 | $239,000 | | Mortgage Note | $8,124 | $8,205 | | Total debt | $935,124 | $872,205 | | Total debt, net | $926,551 | $868,261 | - In January 2025, the Company amended its credit agreements, introducing a new $175.0 million 2030 Term Loan B and upsizing the Revolver to $500.0 million. The 2030 Term Loan A maturity was also extended. These changes provide revised pricing based on investment grade ratings and leverage targets[64][70][79] Interest Expense (in thousands) | Interest Expense | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revolving credit facilities | $2,104 | $1,636 | $3,566 | $2,759 | | Term loans | $8,993 | $6,491 | $17,551 | $12,200 | | Total interest expense, net | $12,638 | $7,604 | $24,098 | $13,784 | - The Company was in compliance with all debt covenants as of June 30, 2025, and expects to remain so for the twelve-month period ending December 31, 2025[88] Note 7 – Derivative Financial Instruments The company uses interest rate derivative contracts, specifically cash flow hedges, to manage variable interest rate exposure on its term loans, with $875.0 million notional amount in swaps as of June 30, 2025 - The Company uses interest rate derivative contracts (cash flow hedges) to manage exposure to changes in interest rates on its variable rate debt, with 21 outstanding instruments and a notional amount of $875.0 million as of June 30, 2025[89][97] - Key term loans are hedged to fixed rates: 2029 Term Loan at 4.99%, 2028 Term Loan at 3.88%, 2030 Term Loan B at 5.12%, and 2030 Term Loan A at 3.65%[68][77][81] Derivative Fair Value (in thousands) | Derivative Fair Value | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Derivative Assets (Interest rate swaps) | $6,831 | $16,426 | | Derivative Liabilities (Interest rate swaps) | $7,331 | — | Note 8 – Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets This note provides a breakdown of 'Other assets, net' and 'Accounts payable, accrued expenses, and other liabilities' on the condensed consolidated balance sheets. Notable changes include an increase in deferred rent receivable and deferred financing costs within assets, and a new fair value of interest rate swaps liability Other Assets, Net (in thousands) | Other Assets, Net | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Accounts receivable, net | $8,861 | $9,809 | | Deferred rent receivable | $14,312 | $11,790 | | Fair value of interest rate swaps | $6,831 | $16,426 | | Deferred financing costs, net | $4,259 | $1,200 | | Total Other assets, net | $55,116 | $58,227 | Accounts Payable, Accrued Expenses, and Other Liabilities (in thousands) | Accounts Payable, Accrued Expenses, and Other Liabilities | June 30, 2025 | December 31, 2024 | | :----------------------------------------------------------------------- | :------------ | :---------------- | | Accrued expenses | $8,022 | $4,961 | | Fair value of interest rate swaps | $7,331 | — | | Total Accounts payable, accrued expenses, and other liabilities | $37,249 | $29,664 | Note 9 – Shareholders' Equity The company utilizes ATM Programs for equity sales, with significant unsettled forward sale agreements, and declared increased dividends totaling $34.3 million for the six months ended June 30, 2025 - The Company has utilized ATM Programs (2021, 2023, 2024) for equity sales, with the 2024 ATM Program currently active and $271.3 million of remaining gross proceeds available for future issuances[105][107][109][112] - As of June 30, 2025, there were 1,743,100 shares unsettled under 2023 ATM forward sale agreements, 1,237,547 shares unsettled under 2024 ATM forward sale agreements, and 8,840,000 shares unsettled under the January 2024 follow-on offering forward sale agreements[106][110][113] Dividend Information (in thousands, except per share data) | Dividend Information | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | | Dividend Per Share | $0.420 | $0.410 | | Total Amount | $34,316 | $30,073 | - Noncontrolling interests, primarily OP Units convertible into common stock, represented 0.5% of OP Units as of June 30, 2025[117] Note 10 – Stock-Based Compensation The company recognized $2.9 million in stock-based compensation expense for the six months ended June 30, 2025, primarily from unvested service-based and performance-based RSUs - Total stock-based compensation costs recognized in general and administrative expense were $1.5 million for the three months ended June 30, 2025, and $2.9 million for the six months ended June 30, 2025[119] RSU Activity (Shares) | RSU Activity | Service-Based RSUs (June 30, 2025) | Performance-Based RSUs (June 30, 2025) | | :-------------------- | :--------------------------------- | :------------------------------------- | | Unvested grants outstanding as of Dec 31, 2024 | 326,987 | 290,442 | | Granted during the period | 279,345 | 170,213 | | Forfeited during the period | (1,546) | (68,525) | | Vested during the period | (149,434) | — | | Unvested grants outstanding as of Jun 30, 2025 | 455,352 | 392,130 | - As of June 30, 2025, remaining unamortized stock-based compensation expense totaled $5.4 million for service-based RSUs and $3.9 million for market-based RSUs, expected to be recognized over a weighted average period of 2.1 years[122][125] Note 11 – Earnings Per Share Basic and diluted earnings per share calculations are provided, showing an improvement from a net loss in 2024 to net income in 2025. The diluted EPS calculation considers the potential dilutive effect of OP Units and unvested RSUs, which were antidilutive in the prior year's net loss periods EPS Metric (per share data) | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.04 | $(0.03) | $0.06 | $(0.02) | | Diluted EPS | $0.04 | $(0.03) | $0.06 | $(0.02) | - As of June 30, 2025, there were 424,956 OP Units outstanding, which are convertible into common stock and represent potentially dilutive securities[127][131] Note 12 – Commitments and Contingencies The company has no material litigation and significant commitments for tenant improvements, property developments, and mortgage loan extensions, expected to be funded within 18 months - The Company is not currently subject to any material lawsuits, claims, or regulatory matters, nor is it aware of any environmental conditions likely to have a material adverse effect on its financial statements[132][134] Commitment Category (in millions) | Commitment Category | Amount | Expected Funding Timeline | | :------------------ | :------------------- | :------------------------ | | Tenant improvement allowances | $4.1 | Within the next 18 months | | Property developments | $6.6 | Within the next 12 months | | Mortgage loans receivable | $14.0 | Within the next 18 months | Note 13 – Subsequent Events Subsequent events after June 30, 2025, include the declaration of a Q3 2025 cash dividend of $0.215 per share, entering into additional forward sale agreements for 107,400 shares under the 2024 ATM Program, and a net repayment of $4.5 million on the Revolver in July 2025 - On July 21, 2025, the Board of Directors declared a cash dividend of $0.215 per share for the third quarter of 2025[139] - In July 2025, the Company entered into forward sale agreements for an aggregate 107,400 shares of common stock under the 2024 ATM Program at a weighted average price of $16.94 per share[140] - In July 2025, the Company repaid $4.5 million, net of borrowings, on the Revolver[141] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, highlighting asset and revenue growth, the impact of debt and equity programs, and a shift from net loss to net income, with strong liquidity Special Note Regarding Forward-Looking Statements This section serves as a cautionary statement, indicating that the report contains forward-looking statements subject to known and unknown risks and uncertainties. It advises readers that actual results may differ materially from projections and disclaims any obligation to update these statements, except as required by law - The report contains forward-looking statements regarding business strategies, investments, financing, leasing activities, and market trends, which are subject to known and unknown risks and uncertainties[142] - The Company disclaims any obligation to update or revise forward-looking statements, except as required by law, acknowledging that actual results may differ from expectations[143] Business Overview NETSTREIT Corp. is an internally managed REIT with a diversified portfolio of 707 single-tenant retail properties, boasting 99.9% occupancy and a 9.8-year weighted average remaining lease term - The Company is an internally managed REIT owning and managing 707 diversified single-tenant commercial retail properties across 45 states, with a focus on necessity goods and essential services[144] Business Overview Metrics (as of June 30, 2025) | Metric | Value | | :---------------------- | :-------------------------- | | Number of properties | 707 | | Number of states | 45 | | Number of tenants | 106 | | Retail sectors | 27 | | Annualized Base Rent (ABR) | $172.9 million | | Occupancy | 99.9% | | Weighted Average Remaining Lease Term (WALT) | 9.8 years | | ABR from investment grade credit rated tenants | 52% | | ABR from investment grade profile tenants | 17% | January 2025 Debt Transactions In January 2025, the company amended credit agreements, establishing a new $175.0 million 2030 Term Loan B, upsizing the Revolver, and extending the 2030 Term Loan A maturity, with improved pricing - On January 15, 2025, the Company amended its credit agreements, introducing a new $175.0 million 2030 Term Loan B and upsizing the Revolver to $500.0 million[145] - The maturity date of the existing $175.0 million 2030 Term Loan A was extended from January 2027 to January 2029, with an option to extend to January 2030[145] - The 2030 Term Loan B was fully funded and hedged at an all-in fixed interest rate of 5.12% through January 2030, with revised pricing available upon achieving investment-grade ratings and leverage targets[145] 2024 ATM Program The company established a $300.0 million ATM equity program in August 2024, with significant forward sale agreements entered into during 2025, generating $28.352 million in net proceeds - The Company established a $300.0 million 2024 ATM Program on August 12, 2024, for selling common stock in registered transactions[146] - During 2025, forward sale agreements for 2,190,299 shares were entered into at a weighted average price of $16.40 per share, with 1,085,000 shares remaining unsettled as of June 30, 2025[147] 2024 ATM Program Metrics (in thousands, except share and per share data) | Metric | Three and Six Months Ended June 30, 2025 | | :----------------------------------------------------- | :--------------------------------------- | | Shares of common stock issued | 1,757,815 | | Weighted average price per share | $16.32 | | Gross proceeds | $28,694 | | Sales commissions and offering costs | $342 | | Net proceeds | $28,352 | Results of Operations The company achieved significant asset and revenue growth in the first half of 2025 through acquisitions, developments, and mortgage loans, shifting from a net loss to net income despite increased expenses Overall The company expanded its investment assets in the first half of 2025 through acquisitions, developments, and mortgage loans, financed by new debt, equity, and operating cash flows - The Company grew its assets for investment in the first half of 2025 through acquisitions, property developments, and mortgage loans, with an underwritten weighted-average capitalization rate of approximately 7.7%[150] - Growth was financed by the 2030 Term Loan B, settlement of forward sale agreements ($17.9 million), issuance of common stock under the 2024 ATM Program ($10.5 million), Revolver borrowings, restricted cash from tax-free exchanges, and cash flows from operations[150] Acquisitions The company acquired 23 properties for $96.5 million in Q2 2025 and 41 properties for $174.0 million in H1 2025, with long weighted average lease terms Property Acquisition Summary | Acquisition Period | Number of Properties Acquired | Total Purchase Price (in millions) | Weighted Average Lease Term (WALT) | | :----------------- | :---------------------------- | :--------------------------------- | :--------------------------------- | | Three Months Ended June 30, 2025 | 23 | $96.5 | 15.9 years | | Six Months Ended June 30, 2025 | 41 | $174.0 | 12.9 years | Development As of June 30, 2025, two property developments were under construction, with $2.2 million invested and two projects completed in the first half of 2025 - As of June 30, 2025, the Company had two property developments under construction, with expected completion and rent commencement throughout 2025[153] Property Development Activity (in millions) | Development Activity | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------- | :------------------------------- | :----------------------------- | | Investment in property developments | $1.4 | $2.2 | | Number of developments completed | 1 | 2 | | Amounts reclassified to in-service assets | $2.74 | $6.5 | Dispositions The company disposed of 20 properties for $55.6 million (net sales price) in Q2 2025 and 36 properties for $94.2 million in H1 2025, generating net gains Property Disposition Summary (in millions) | Disposition Period | Number of Properties Sold | Sales Price, Net of Disposal Costs | Gain on Sales of Real Estate, Net | | :----------------- | :------------------------ | :----------------------------------------------- | :---------------------------------------------- | | Three Months Ended June 30, 2025 | 20 | $55.6 | $3.5 | | Six Months Ended June 30, 2025 | 36 | $94.2 | $5.6 | Investment in Mortgage Loans Receivable The company invested an additional $25.7 million in fully collateralized mortgage loans receivable, collecting $12.1 million in principal, with rates from 7.00% to 10.25% - During the six months ended June 30, 2025, the Company invested an additional $25.7 million in fully collateralized mortgage loans receivable[155] - Principal collections on mortgage loans receivable totaled $12.1 million for the six months ended June 30, 2025[155] - The mortgage loans receivable have stated interest rates ranging from 7.00% to 10.25% and are primarily collateralized by real estate leased by investment-grade credit rated tenants[155] Economic and Financial Environment Fluctuating inflation, interest rates, and global volatility have increased acquisition costs and reduced financing, potentially impacting tenant performance and property transactions - Fluctuating inflation and interest rates have increased acquisition costs and decreased financing availability, impacting the Company's ability to acquire properties on attractive terms[156] - Macroeconomic pressures, including recession fears and potential tariffs, may adversely affect tenants, potentially leading to lower rent, defaults, or delays in long-term leases[156] - The Company continuously monitors commercial real estate and credit markets to adjust its business strategy in response to changing economic and financial conditions[156] Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 For Q2 2025, the company reported a net income of $3.3 million, a significant improvement from a net loss in the prior year, driven by increased revenues and real estate sales gains Financial Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :-------------------- | :------------------------------- | :------------------------------- | :-------------------- | | Total revenues | $48,286 | $39,567 | $8,719 | | Total operating expenses | $35,960 | $31,677 | $4,283 | | Interest expense, net | $(12,638) | $(7,604) | $(5,034) | | Gain on sales of real estate, net | $3,533 | $8 | $3,525 | | Other income (expense), net | $81 | $(2,588) | $2,669 | | Net income (loss) | $3,289 | $(2,306) | $5,595 | - The increase in total revenues was attributed to growth in operating leases and properties securing mortgage loans, including additional cash rental receipts of $6.7 million[158] - Operating expenses increased by $4.3 million, primarily due to higher depreciation and amortization ($3.0 million), provisions for impairment ($0.6 million), and property-specific reimbursable expenses[159][165] Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 For H1 2025, the company achieved a net income of $5.0 million, a significant improvement from a net loss, driven by increased revenues and real estate sales gains, despite higher interest expense Financial Performance (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Total revenues | $94,196 | $77,240 | $16,956 | | Total operating expenses | $70,518 | $62,819 | $7,699 | | Interest expense, net | $(24,098) | $(13,784) | $(10,314) | | Gain on sales of real estate, net | $5,608 | $1,006 | $4,602 | | Other expense, net | $(124) | $(2,868) | $2,744 | | Net income (loss) | $4,989 | $(1,254) | $6,243 | - The $17.0 million increase in total revenues was primarily due to $13.5 million in additional cash rental receipts and $1.1 million in interest income on mortgage loans receivable, driven by portfolio growth[166] - Operating expenses increased by $7.7 million, mainly due to higher depreciation and amortization ($6.3 million) and provisions for impairment ($0.5 million), partially offset by a $1.4 million decrease in employee severance[167][175] Liquidity and Capital Resources Capital requirements for acquisitions, developments, and operations are funded by cash from operations, equity sales, and borrowing facilities, with management confident in adequate resources for the next 12 months - Primary capital requirements include funding property acquisitions, developments, mortgage loans, working capital, operating expenses, and capital expenditures[174] - Capital resources consist of cash from operations, sales of equity securities (including unsettled forward equity of $201.6 million), and available borrowing facilities[174][209] Debt Outstanding (in millions, as of June 30, 2025) | Debt Outstanding | | :------------------------------------------------ | :------------------------------------------------ | | 2028 Term Loan | $200.0 | | 2029 Term Loan | $250.0 | | 2030 Term Loan A | $175.0 | | 2030 Term Loan B | $175.0 | | Revolver | $127.0 | - The Company believes its available resources will be adequate to support ongoing operations and fund debt service, capital expenditures, and working capital for at least the next 12 months[177] Contractual Obligations and Commitments Total contractual obligations amounted to $1.08 billion, primarily debt payments, with significant commitments for property developments, mortgage loan extensions, and tenant improvements Contractual Obligations (in thousands, as of June 30, 2025) | Contractual Obligation | Total | | :------------------------------------ | :-------------------------- | | 2028 Term Loan – Principal | $200,000 | | 2029 Term Loan – Principal | $250,000 | | 2030 Term Loan A – Principal | $175,000 | | 2030 Term Loan B – Principal | $175,000 | | Revolver – Borrowings | $127,000 | | Mortgage Note – Principal | $8,124 | | Property development under contract | $6,599 | | Additional principal under mortgage loans | $13,951 | | Tenant improvement allowances | $4,089 | | Corporate office lease obligations | $4,955 | | Total | $1,080,125 | - The Company had commitments to fund property developments ($6.6 million) and extend funds under mortgage loans receivable ($14.0 million) as of June 30, 2025, expected to be funded over the next 18 months[183] Debt This section refers to detailed discussions of the company's debt structure and interest rate hedges provided in Note 6 (Debt) and Note 7 (Derivative Financial Instruments) of the condensed consolidated financial statements - Detailed information regarding the Company's debt and interest rate hedges is provided in Note 6 – Debt and Note 7 – Derivative Financial Instruments[184] Historical Cash Flow Information Net cash from operating activities increased by $15.7 million, investing activities decreased by $107.2 million, and financing activities decreased by $101.3 million for the six months ended June 30, 2025 Cash Flow Activity (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Net cash provided by operating activities | $52,727 | $37,018 | $15,709 | | Net cash used in investing activities | $(96,705) | $(203,923) | $107,218 | | Net cash provided by financing activities | $49,398 | $150,702 | $(101,304) | - The increase in operating cash flow was largely attributed to the growth of the real estate investment portfolio, with a $13.5 million increase in rental receipts[184] - The decrease in cash used in investing activities was primarily due to a $53.2 million increase in proceeds from real estate sales and a $26.5 million decrease in real estate development and improvements[185] Income Taxes The company maintains its REIT status, which generally exempts it from U.S. federal and state corporate income tax, provided it meets specific requirements, including distributing taxable income to stockholders. It also operates a Taxable REIT Subsidiary (TRS) that is subject to income taxes - The Company elected and qualifies as a REIT for U.S. federal income tax purposes, generally exempting it from corporate income tax if it meets distribution and other REIT requirements[188] - The Company maintains a Taxable REIT Subsidiary (TRS) which may be subject to U.S. federal, state, and local income taxes on its taxable income[189] Recent Accounting Pronouncements This section refers to Note 2 – Summary of Significant Accounting Policies for a discussion of recent accounting pronouncements and their potential impact on the company's condensed consolidated financial statements - A discussion of recent accounting pronouncements and their possible effects on the condensed consolidated financial statements is included in Note 2 – Summary of Significant Accounting Policies[190] Critical Accounting Policies and Estimates The company's critical accounting policies and estimates, which require significant management judgment, remain unchanged from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024. These estimates are continuously evaluated, though actual results may differ from assumptions - The Company's critical accounting policies and estimates, which involve significant management judgment, have not materially changed from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[190] Non-GAAP Financial Measures The company uses various non-GAAP financial measures, including FFO, EBITDA, and Net Debt, to provide supplemental information for evaluating operating performance and comparing REITs FFO, Core FFO, and AFFO FFO, Core FFO, and AFFO are non-GAAP measures for operating performance and distributions, showing significant improvements for the six months ended June 30, 2025 - FFO, Core FFO, and AFFO are non-GAAP financial measures used to evaluate operating performance and funds available for distributions, excluding certain non-cash items and non-recurring events[192][193][194][195][196] FFO, Core FFO, and AFFO (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | FFO | $25,611 | $19,987 | $49,702 | $41,164 | | Core FFO | $25,614 | $23,389 | $50,184 | $45,837 | | AFFO | $27,460 | $23,817 | $53,707 | $46,677 | EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre These non-GAAP measures provide supplemental operating performance information, with EBITDAre increasing to $73.8 million for H1 2025 and Adjusted Net Debt to Annualized Adjusted EBITDAre at 4.6x - EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre are non-GAAP measures used to provide supplemental information on operating performance, excluding non-cash items and other costs[200][201][202] EBITDA and EBITDAre (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EBITDA | $37,467 | $23,740 | $71,419 | $48,473 | | EBITDAre | $38,356 | $27,568 | $73,849 | $54,965 | Adjusted EBITDAre and Related Metrics (in thousands, except ratio) | Metric | Three Months Ended June 30, 2025 | | :-------------------- | :------------------------------- | | Adjusted EBITDAre | $38,825 | | Annualized Adjusted EBITDAre | $155,300 | | Adjusted Net Debt / Annualized Adjusted EBITDAre | 4.6x | Net Debt and Adjusted Net Debt Net Debt and Adjusted Net Debt are non-GAAP measures, with Net Debt at $915.4 million and Adjusted Net Debt at $713.8 million as of June 30, 2025 - Net Debt is calculated as the principal amount of total debt outstanding, excluding deferred financing costs, net discounts, and debt issuance costs, less cash, cash equivalents, and restricted cash[207] - Adjusted Net Debt further adjusts Net Debt by subtracting the net value of unsettled forward equity, providing an estimate of the net contractual amount of borrowed capital to be repaid[208] Net Debt and Adjusted Net Debt (in thousands) | Debt Metric | As of June 30, 2025 | | :------------------------- | :------------------ | | Principal amount of total debt | $935,124 | | Less: Cash, equivalents, and restricted cash | $(19,740) | | Net Debt | $915,384 | | Less: Net of unsettled forward equity value | $(201,621) | | Adjusted Net Debt | $713,763 | Property-Level NOI, Property-Level Cash NOI, and Property-Level Cash NOI - Estimated Run Rate These non-GAAP measures assess property-level operating results on an unlevered basis, with Property-Level NOI at $40.4 million for the three months ended June 30, 2025 - Property-Level NOI, Property-Level Cash NOI, and Property-Level Cash NOI - Estimated Run Rate are non-GAAP measures used to assess operating results at the property level on an unlevered basis[210] Property-Level NOI Metrics (in thousands) | Property-Level Metric | Three Months Ended June 30, 2025 | | :----------------------------------- | :------------------------------- | | Property-Level NOI | $40,445 | | Property-Level Cash NOI | $39,256 | | Property-Level Cash NOI - Estimated Run Rate | $39,415 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on floating-rate debt, with term loans hedged but the Revolver exposed to a potential $1.2 million impact from a 1% rate change - The Company's principal market risk is related to interest rate fluctuations on its floating-rate debt, which includes $200.0 million under the 2028 Term Loan, $250.0 million under the 2029 Term Loan, $175.0 million under the 2030 Term Loan A, $175.0 million under the 2030 Term Loan B, and $127.0 million of borrowings under the Revolver as of June 30, 2025[213] - Interest rate derivative contracts are used to hedge the market risk associated with the term loans, converting variable rates to fixed rates[214] - Based on a sensitivity analysis, a 1% adverse change in the Revolver's interest rate as of June 30, 2025, would result in an estimated market risk exposure of approximately $1.2 million[215] Item 4. Controls and Procedures The company's principal executive and financial officers concluded that its disclosure controls and procedures were effective as of June 30, 2025. Furthermore, no material changes in internal control over financial reporting were identified during the reporting period - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[216] - No material changes to the Company's internal control over financial reporting were identified during the period covered by the report[217] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material lawsuits, claims, or other legal proceedings that could significantly impact its business, financial condition, or results of operations - The Company is not currently subject to any material lawsuits, claims, or other legal proceedings[218] Item 1A. Risk Factors This section refers readers to the 'Risk Factors' section in the company's Annual Report on Form 10-K for a comprehensive discussion of significant factors that may adversely affect the company. No material changes to these risk factors have occurred since the Annual Report - For a discussion of significant factors that may adversely affect the Company, refer to the 'Risk Factors' section in the Annual Report on Form 10-K for the year ended December 31, 2024[219] - There have been no material changes to the risk factors disclosed in the Annual Report[219] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds during the period[220] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - This item is not applicable[220] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - This item is not applicable[221] Item 5. Other Information This item is not applicable to the company for the reporting period - This item is not applicable[222] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, incentive plans, certifications, and XBRL-related documents - The section lists various exhibits filed, including organizational documents (Articles of Amendment and Restatement, Amended and Restated Bylaws), the 2019 Omnibus Incentive Compensation Plan, certifications (Sarbanes-Oxley Act Sections 302 and 906), and XBRL documents[224] Signatures This section contains the signatures of the company's authorized officers, including the President, Chief Executive Officer, Secretary and Director (Principal Executive Officer), Chief Financial Officer and Treasurer (Principal Financial Officer), and Senior Vice President and Chief Accounting Officer (Principal Accounting Officer), certifying the report - The report is signed by the President, Chief Executive Officer, Secretary and Director (Mark Manheimer), Chief Financial Officer and Treasurer (Daniel Donlan), and Senior Vice President and Chief Accounting Officer (Sofia Chernylo) on July 23, 2025[227]