NetSTREIT(NTST) - 2021 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements detail the company's financial position, performance, equity changes, and cash flows Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Metric | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total assets | $913,014 | $725,815 | | Real estate, net | $699,590 | $537,622 | | Cash, cash equivalents and restricted cash | $88,140 | $92,643 | | Total liabilities | $203,538 | $197,742 | | Total equity | $709,476 | $528,073 | - Total assets increased by $187,199 thousand (25.8%) from December 31, 2020, to June 30, 2021, primarily driven by an increase in real estate held for investment[9] Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Rental revenue (including reimbursable) | $13,798 | $7,117 | $25,730 | $12,625 | | Total operating expenses | $16,031 | $7,440 | $26,267 | $13,051 | | Net loss | $(2,630) | $(405) | $(1,889) | $(1,957) | | Net loss attributable to common shareholders | $(2,536) | $(300) | $(1,835) | $(1,427) | | Basic EPS | $(0.07) | $(0.03) | $(0.06) | $(0.13) | - Rental revenue significantly increased by 93.8% for the three months and 103.8% for the six months ended June 30, 2021, due to portfolio growth, while net loss increased for the quarter but decreased for the six-month period[12] Condensed Consolidated Statements of Changes in Equity Condensed Consolidated Statements of Changes in Equity | Metric | December 31, 2020 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Stockholders' Equity | $494,098 | $683,705 | | Total Equity | $528,073 | $709,476 | - Total equity increased by $181,403 thousand, primarily due to the issuance of common stock in a public offering, partially offset by dividends and net loss[14][110][116] - Noncontrolling interests decreased from $33,975 thousand to $25,771 thousand, largely due to OP Units converted to common stock[14][117] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | | Operating activities | $13,758 | $1,796 | | Investing activities | $(198,156) | $(216,186) | | Financing activities | $179,895 | $53,056 | | Net change in cash | $(4,503) | $(161,334) | | Cash at end of period | $88,140 | $7,985 | - Net cash from operating activities increased by $11,962 thousand, while net cash from financing activities increased by $126,839 thousand driven by common stock offerings[19][173][174][175] Notes to the Condensed Consolidated Financial Statements Note 1 – Organization and Description of Business NETSTREIT Corp operates as an internally managed UPREIT with a diversified portfolio of single-tenant retail properties - The Company operates as an internally managed UPREIT and elected REIT status for U.S. federal income tax purposes beginning December 31, 2019[21][22] - As of June 30, 2021, the Company owned 267 properties (including three under development) in 39 states[22] Capital Raising Activities | Offering Type | Date | Shares Sold | Net Proceeds (millions) | | :--- | :--- | :--- | :--- | | Private Offering | Dec 2019 | 8,860,760 | $219.0 | | Over-allotment | Feb 2020 | 2,936,885 | $54.6 | | Initial Public Offering | Aug 2020 | 12,244,732 | $227.3 | | April 2021 Offering | Apr 2021 | 10,915,688 | $194.2 | Note 2 – Summary of Significant Accounting Policies This note outlines the company's accounting policies, including GAAP compliance, estimates, and the non-material impact of COVID-19 - The Company's interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules[30][31] - COVID-19 has not materially impacted the Company's operations or cash flows, with 100% of rent payments collected and no rent deferrals since August 1, 2020[36] Estimated Useful Lives of Assets | Asset Type | Estimated Useful Life | | :--- | :--- | | Buildings | 13 – 35 years | | Building improvements | 15 years | | Tenant improvements | Shorter of lease term or useful life | | Acquired in-place leases | Remaining terms of respective leases | | Assembled workforce | 3 years | | Computer equipment | 3 years | Impairment Provisions | Impairment Provision | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total provision for impairment | $3,469 | $1,410 | $3,539 | $1,410 | | Number of properties impaired (held for sale) | 2 | 2 | 2 | 2 | | Number of properties impaired (disposed) | — | — | 1 | — | Note 3 – Leases The Company's portfolio of 266 single-tenant retail properties generates fixed and variable lease income under operating leases - As of June 30, 2021, the Company owned 266 single-tenant retail net leased properties across 39 states, with remaining lease terms ranging from 2-33 years[71] Lease Income Breakdown | Lease Income Type | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Fixed lease income | $12,497 | $6,633 | $23,450 | $11,858 | | Variable lease income | $1,067 | $354 | $1,856 | $645 | | Total Rental Revenue | $13,798 | $7,117 | $25,730 | $12,625 | Future Minimum Base Rental Receipts | Period | Future Minimum Base Rental Receipts (in thousands) | | :--- | :--- | | Remainder of 2021 | $26,948 | | 2022 | $54,308 | | 2023 | $54,354 | | 2024 | $54,324 | | 2025 | $54,122 | | Thereafter | $308,366 | | Total | $552,422 | Note 4 – Real Estate Investments The Company acquired 66 properties for $205.2 million and sold five properties for $12.3 million in the first half of 2021 Real Estate Activity Summary | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Properties Acquired | 66 | 68 | | Total Purchase Price | $205.2 million | $224.7 million | | Properties Sold | 5 | 2 | | Total Sales Price, net | $12.3 million | $9.9 million | | Gain on Sales | $0.5 million | $1.0 million | - The Company invested $1.9 million in a development project in Yuma, Arizona, and $3.4 million in two build-to-suit projects in Fond Du Lac, Wisconsin[79][80] Note 5 – Intangible Assets and Liabilities Net intangible assets totaled $99.6 million as of June 30, 2021, primarily consisting of in-place and above-market leases Net Carrying Amount of Intangibles | Intangible Asset/Liability | June 30, 2021 Net Carrying Amount (in thousands) | December 31, 2020 Net Carrying Amount (in thousands) | | :--- | :--- | :--- | | In-place leases | $83,884 | $65,324 | | Above-market leases | $15,087 | $9,126 | | Assembled workforce | $427 | $574 | | Lease incentives | $222 | $0 | | Total Intangible assets | $99,620 | $75,024 | | Below-market leases | $22,186 | $16,930 | Weighted Average Amortization Period | Intangible Asset/Liability | June 30, 2021 Weighted Average Amortization Period (Years) | December 31, 2020 Weighted Average Amortization Period (Years) | | :--- | :--- | :--- | | In-place leases | 10.3 | 11.1 | | Above-market leases | 13.5 | 12.6 | | Below-market leases | 12.6 | 13.4 | | Assembled workforce | 1.5 | 2.0 | | Lease incentives | 13.2 | — | Amortization and Revenue Adjustments | Amortization Type | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Amortization expense | $2,206 | $936 | $3,999 | $1,676 | | Net adjustment to rental revenue | $234 | $130 | $423 | $122 | Note 6 – Debt The Company's debt consists of a $175.0 million Term Loan and a $250.0 million Revolving Credit Facility, with all covenants met Debt Summary | Debt Component | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Term Loan, net | $174,217 | $174,105 | | Total debt, net | $173,220 | $172,907 | - The Term Loan matures on December 23, 2024, and the Revolver matures on December 23, 2023, with interest rates tied to LIBOR plus a margin[89] - An interest rate derivative fixed the Term Loan's interest rate to 1.36% effective September 28, 2020[92] - The Company was in compliance with all debt covenants as of June 30, 2021[99] Note 7 – Derivative Financial Instruments The Company uses interest rate swaps with a notional amount of $175.0 million to hedge its variable rate Term Loan - The Company uses interest rate swaps as cash flow hedges for its variable rate Term Loan, with a notional amount of $175.0 million as of June 30, 2021[101][104] - Derivative valuations are classified as Level 2 in the fair value hierarchy, reflecting observable market-based inputs[108] Fair Value of Derivatives | Derivative Type | June 30, 2021 Fair Value (in thousands) | December 31, 2020 Fair Value (in thousands) | | :--- | :--- | :--- | | Interest rate swaps | $2,311 | $253 | Note 8 – Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets This note provides a detailed breakdown of other assets and other liabilities on the balance sheet Other Assets, Net | Other Assets, Net Component | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Earnest money deposits | $285 | $634 | | Deferred financing costs, net | $997 | $1,198 | | Accounts receivable, net | $2,215 | $1,489 | | Deferred rent receivable | $1,648 | $1,407 | | Fair value of interest rate swaps | $2,311 | $253 | | Other assets | $1,508 | $743 | | Total Other Assets, Net | $8,964 | $5,724 | Accounts Payable, Accrued Expenses and Other Liabilities | Accounts Payable, Accrued Expenses and Other Liabilities Component | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Accrued expenses | $2,861 | $2,035 | | Accrued bonus | $908 | $1,561 | | Prepaid rent | $1,688 | $1,551 | | Accounts payable | $715 | $916 | | Other liabilities | $561 | $245 | | Total Accounts Payable, Accrued Expenses and Other Liabilities | $6,733 | $6,308 | Note 9 – Shareholders' Equity, Partners' Capital and Preferred Equity The Company issued 10.9 million common shares for $194.2 million and declared dividends totaling $0.40 per share - On April 12, 2021, the Company issued 10,915,688 shares of common stock in a public offering, generating net proceeds of $194.2 million[110] - During the six months ended June 30, 2021, 396,517 OP Units were redeemed into common stock on a one-for-one basis[117] Common Stock Dividends | Declaration Date | Dividend Per Share | Total Amount (in thousands) | Payment Date | | :--- | :--- | :--- | :--- | | March 3, 2021 | $0.20 | $5,687 | March 30, 2021 | | April 27, 2021 | $0.20 | $7,890 | June 15, 2021 | | Total | $0.40 | $13,577 | | Note 10 – Stock-Based Compensation The Company recognized $1.6 million in stock-based compensation expense for the six months ended June 30, 2021 - Total stock-based compensation costs recognized in general and administrative expense were $1.0 million for the three months and $1.6 million for the six months ended June 30, 2021[119] - As of June 30, 2021, the remaining unamortized stock-based compensation expense totaled $9.1 million[121][124][127] Restricted Stock Unit (RSU) Activity | RSU Type | Unvested Grants as of Dec 31, 2020 | Granted During Period | Vested During Period | Unvested Grants as of Jun 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Performance-Based | 207,803 | — | (15,190) | 192,613 | | Service-Based | 169,793 | 161,185 | — | 330,978 | | Market-Based | — | 135,766 | — | 135,766 | Note 11 – Earnings Per Share The Company reported a basic and diluted net loss per common share of $(0.06) for the six months ended June 30, 2021 Earnings Per Share Calculation | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to common shares, basic | $(2,536) (in thousands) | $(300) (in thousands) | $(1,835) (in thousands) | $(1,427) (in thousands) | | Weighted average common shares outstanding | 38,018,588 | 11,797,645 | 33,236,262 | 11,105,709 | | Basic EPS | $(0.07) | $(0.03) | $(0.06) | $(0.13) | | Diluted EPS | $(0.07) | $(0.03) | $(0.06) | $(0.13) | - For the periods presented, diluted net loss per common share did not assume the conversion of OP Units or unvested RSUs because such conversion would be antidilutive[130][131] Note 12 – Commitments and Contingencies The Company has no material litigation and has commitments to fund $10.4 million for properties under development - The Company is not currently subject to any material lawsuits, claims, or regulatory matters[133] - As of June 30, 2021, the Company had commitments to fund properties under development totaling $10.4 million, with $5.3 million already funded[136] - The Alignment of Interest Program, a liability-classified award for employees, has an estimated fair value of approximately $1.0 million as of June 30, 2021[137] Note 13 – Related-Party Transactions The Company incurred approximately $0.1 million in related expenses for office rent and shared expenses for the six-month period Related-Party Expenses | Related Expense | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Office rent and related expenses | <$0.1 | <$0.1 | ~$0.1 | ~$0.1 | Note 14 – Subsequent Events The Board of Directors declared a cash dividend of $0.20 per share for the third quarter of 2021 - On July 27, 2021, the Company declared a cash dividend of $0.20 per share for Q3 2021, payable on September 15, 2021[140] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial conditions, operating results, portfolio growth, liquidity, and non-GAAP financial measures Special Note Regarding Forward-Looking Statements - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[142] - The risks identified, including those related to COVID-19, are heightened, and the Company disclaims any obligation to update these statements[143] Overview - NETSTREIT Corp is an internally-managed REIT focused on a diversified portfolio of 264 single-tenant, retail commercial real estate properties across 39 states[144] - The portfolio focuses on necessity goods and essential services in defensive, e-commerce resistant retail industries[144] Portfolio Snapshot (as of June 30, 2021) | Metric | Value | | :--- | :--- | | Annualized Base Rent (ABR) | $55.3 million | | Occupancy | 100% | | Weighted Average Lease Term (WALT) | 9.9 years | | Investment Grade Tenants (by ABR) | ~70% | | Investment Grade Profile Tenants (by ABR) | ~14% | COVID-19 - The Company's operations and cash flows were not materially impacted by COVID-19 for the three and six months ended June 30, 2021 and 2020[145] - The Company collected 100.0% of all rent payments for the three and six months ended June 30, 2021, and has not provided any rent abatements or deferrals since August 1, 2020[36] Recent Developments - The Company deployed all $227.3 million of its initial public offering proceeds for acquisitions by March 31, 2021[146] - On April 12, 2021, the Company completed a public offering of 10,915,688 shares of common stock, generating net proceeds of $194.2 million[146] - Net proceeds from the April 2021 offering were used to repay $13.0 million of outstanding borrowings under the Revolver[146] Results of Operations Overall - The Company increased its asset base from 203 properties as of December 31, 2020, to 267 properties as of June 30, 2021[147] - Since December 23, 2019, the Company has raised $640.5 million of net equity capital through private and public offerings[147] - The Company committed to three real estate development projects with a total projected capital spend of $10.4 million[147] Acquisitions Acquisition Summary | Period | Properties Acquired | Total Purchase Price (inclusive of capitalized acquisition costs) | Weighted Average Lease Term (WALT) | Underwritten Weighted-Average Capitalization Rate | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2021 | 35 | $116.8 million | ~9.7 years | ~6.5% | | Six Months Ended June 30, 2021 | 66 | $205.2 million | ~9.3 years | ~6.6% | Development - The Company invested $1.9 million in a development project in Yuma, Arizona, during the six months ended June 30, 2021[150] - The Company invested $3.4 million in two build-to-suit projects in Fond Du Lac, Wisconsin, during the three months ended June 30, 2021[151] Dispositions Disposition Summary | Period | Number of Properties Sold | Sales Price, Net of Disposal Costs (in thousands) | Gain on Sale (in thousands) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2021 | 5 | $12,319 | $497 | | Six Months Ended June 30, 2021 | 5 | $12,319 | $497 | Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020 - The increase in rental revenue is primarily due to the growth of the real estate portfolio from 94 to 264 properties[153] - Operating expenses increased due to portfolio growth, higher provisions for impairment ($3.5M vs $1.4M), and increased stock-based compensation ($1.0M)[154][155][159] Q2 2021 vs Q2 2020 Performance | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental revenue | $13,798 | $7,117 | $6,681 | 93.9% | | Total operating expenses | $16,031 | $7,440 | $8,591 | 115.5% | | Interest expense, net | $(894) | $(1,098) | $204 | -18.6% | | Gain on sales of real estate, net | $497 | $1,016 | $(519) | -51.1% | | Net loss | $(2,630) | $(405) | $(2,225) | 549.4% | Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020 - Rental revenue increased by $13.1 million, driven by the expansion of the real estate portfolio from 94 to 264 properties[160] - Operating expenses increased due to portfolio growth, higher provisions for impairment ($3.5M vs $1.4M), and increased stock-based compensation ($1.6M)[161][162][163] H1 2021 vs H1 2020 Performance | Metric | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental revenue | $25,730 | $12,625 | $13,105 | 103.8% | | Total operating expenses | $26,267 | $13,051 | $13,216 | 101.3% | | Interest expense, net | $(1,799) | $(2,797) | $998 | -35.7% | | Gain on sales of real estate, net | $497 | $1,016 | $(519) | -51.1% | | Net loss | $(1,889) | $(1,957) | $68 | -3.5% | Liquidity and Capital Resources - Primary capital requirements include property acquisitions, interest payments, and operating expenses[165] - Capital resources consist of cash from operations, sales of equity securities (including $194.2 million from the April 2021 public offering), and borrowings[165] - As of June 30, 2021, the Company had a $175.0 million Term Loan and no outstanding borrowings under its $250.0 million Revolver[165] - Management believes current resources are adequate to support operations for at least the next 12 months[165] Contractual Obligations - The Company has commitments to fund properties under development totaling $10.4 million, with the remainder expected within eight months[168] Debt and Fee Obligations | Contractual Obligations | Total (in thousands) | From July 1, 2021 to December 31, 2021 (in thousands) | 1 – 3 Years (in thousands) | 3 – 5 Years (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Term Loan – Principal | $175,000 | $0 | $0 | $175,000 | | Term Loan – Variable interest | $8,264 | $1,188 | $4,752 | $2,324 | | Unutilized borrowing fees on Revolver | $1,549 | $313 | $1,236 | $0 | | Total | $184,813 | $1,501 | $5,988 | $177,324 | Credit Facility - The Credit Facility consists of a $175.0 million Term Loan (matures Dec 2024) and a $250.0 million Revolver (matures Dec 2023)[169][170] - Interest rates are variable, based on LIBOR plus a margin, and the Term Loan's variable cash flows are hedged by an interest rate derivative[170][171] Historical Cash Flow Information Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020 - Net cash provided by operating activities increased by $12.0 million, primarily due to higher rental receipts from a larger real estate portfolio[173] - Net cash used in investing activities decreased by $18.0 million, mainly due to less spent on real estate acquisitions[174] - Net cash provided by financing activities increased by $126.8 million, driven by additional net proceeds from the April 2021 public offering[175] Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | | Operating activities | $13,758 | $1,796 | | Investing activities | $(198,156) | $(216,186) | | Financing activities | $179,895 | $53,056 | Income Taxes - The Company elected REIT status for U.S. federal income tax purposes beginning December 31, 2019, and generally will not be subject to corporate income tax[176] - NETSTREIT TRS, a taxable REIT subsidiary, may be subject to U.S. federal, state, and local income taxes[177] Recent Accounting Pronouncements - A discussion of new accounting standards and their possible effects is included in Note 2 – Summary of Significant Accounting Policies[179] Critical Accounting Policies and Estimates - The preparation of financial statements requires management to make judgments, estimates, and assumptions, which are continually evaluated[180] - There have been no material changes to the critical accounting policies and estimates disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[180] Non-GAAP Financial Measures FFO, Core FFO and AFFO - FFO, Core FFO, and AFFO are non-GAAP measures used by analysts and investors to compare REIT operating performance[181][185] Reconciliation of Net Loss to FFO, Core FFO, and AFFO | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(2,630) | $(405) | $(1,889) | $(1,957) | | FFO | $7,339 | $3,029 | $14,002 | $3,748 | | Core FFO | $7,339 | $3,599 | $14,002 | $4,777 | | AFFO | $8,066 | $2,747 | $15,012 | $3,932 | EBITDA, EBITDAre and Adjusted EBITDAre - EBITDA, EBITDAre, and Adjusted EBITDAre are non-GAAP measures providing supplemental information on operating performance[190] Reconciliation of Net Loss to EBITDA, EBITDAre, and Adjusted EBITDAre | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(2,630) | $(405) | $(1,889) | $(1,957) | | EBITDA | $5,105 | $3,679 | $12,540 | $6,180 | | EBITDAre | $8,077 | $4,073 | $15,582 | $6,574 | | Adjusted EBITDAre | $8,896 | $3,766 | $16,717 | $6,573 | NOI and Cash NOI - NOI and Cash NOI are non-GAAP measures used to assess operating results, reflecting property-level income and expenses on an unlevered basis[193] Reconciliation of Net Loss to NOI and Cash NOI | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(2,630) | $(405) | $(1,889) | $(1,957) | | NOI | $12,483 | $6,683 | $23,465 | $11,906 | | Cash NOI | $12,027 | $5,676 | $22,578 | $10,754 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to interest rate risk from its floating rate debt, which is partially hedged by an interest rate derivative - The Company's $175.0 million Term Loan and Revolver are floating rate debt, exposing it to interest rate fluctuations[196] - An interest rate derivative hedges the Term Loan, converting its variable rate to a fixed rate of 0.21% plus a 1.15% margin as of June 30, 2021[197] - The discontinuation of USD LIBOR after June 30, 2023, presents risks related to transitioning contracts to an alternative rate[198][199][201][203] - A 1% adverse change in the Revolver's interest rate would result in an estimated market risk exposure of less than $0.1 million for 2021[197] Item 4. Controls and Procedures The Company's disclosure controls and procedures were deemed effective, with no material changes in internal control identified - The Company's disclosure controls and procedures were effective as of the end of the period covered by the report[206] - No material changes in internal control over financial reporting were identified during the reporting period[207] PART II – OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently subject to any material lawsuits, claims, or other legal proceedings - The Company is not currently subject to any lawsuits, claims, or other legal proceedings that could have a material adverse effect on its business[209] Item 1A. Risk Factors This section refers to the 'Risk Factors' in the Company's Annual Report, noting no material changes since its filing - For a discussion of significant risk factors, refer to the Annual Report on Form 10-K for the year ended December 31, 2020[210] - There have been no material changes to the risk factors disclosed in the Annual Report[210] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None[211] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - Not applicable[211] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - Not applicable[211] Item 5. Other Information There is no other information to report for the period - Not applicable[212] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL-related documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Label Linkbase, Presentation Linkbase, and Definition Linkbase documents[214] Signatures The report is duly signed on July 29, 2021, by the company's principal executive, financial, and accounting officers - The report was signed on July 29, 2021, by Mark Manheimer (President, CEO, and Director), Andrew Blocher (CFO, Treasurer, and Secretary), and Patricia McBratney (SVP and Chief Accounting Officer)[215][216][217]