← Back to FVR filing summaryOriginal filing text · Part I
Item 2 — Management's Discussion and Analysis
Frontview Reit, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
View complete filing on SEC EDGAR ↗This is the extracted source text from the SEC filing. Formatting may differ from the original document.
Except where the context suggests otherwise, as used in this Quarterly Report on Form 10-Q, the terms “FVR,” “we,” “us,” “our,” and “our company” refer to FrontView REIT, Inc., a Maryland corporation incorporated on June 23, 2023, and, as required by context, FrontView Operating Partnership LP, a Delaware limited partnership, which we refer to as the or our “OP”, and to their respective subsidiaries.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying Notes to the Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Explanatory Note and Certain Defined Terms
Unless the context otherwise requires, the following terms and phrases are used throughout this MD&A as described below:
•“Adjusted SOFR” means the referenced SOFR rate plus an adjustment of 0.10% based on market convention at the time of entering into our Revolving Credit Facility and Term Loan;
•“Annualized Base Rent” or “ABR” means the annualized contractual cash rent due for the last month of the reporting period, and adjusted to remove rent from properties sold during the month and to include a full month of contractual cash rent for properties acquired during the last month of the reporting period;
•“CPI” means the Consumer Price Index for All Urban Consumers (CPI-U): U.S. City Average, All Items, as published by the U.S. Bureau of Labor Statistics, or other similar index which is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services;
•“Internalization” means the internalization of the external management team, assets and functions previously performed for our Predecessor by our external manager and its affiliates, pursuant to the terms of the Internalization Agreement, which closed contemporaneously with the closing of our initial public offering;
•“Occupancy” or a specified percentage of our portfolio that is “occupied” or “leased” means as of a specified date (i) the number of properties that are subject to a signed lease divided by (ii) the total number of properties in our portfolio;
•“Predecessor” means NADG NNN Property Fund LP, a Delaware limited partnership, and its subsidiaries;
•“Properties” means individual building properties (small or large formats) leased to one or more tenants that are in locations with direct frontage on high-traffic roads that are visible to consumers;
•“REIT Contribution Transactions” means the contributions of the interests in entities within our Predecessor's private REIT fund structure that directly or indirectly own our Predecessor's properties pursuant to the terms of the Contribution Agreements, which closed contemporaneously with the closing of our initial public offering;
•“Revolving Credit Facility” means our $250 million unsecured revolving credit facility under a credit agreement that became effective concurrently with the completion of our initial public offering;
•“Series A Preferred Stock” means our Series A Convertible Preferred Stock, par value $0.01 per share;
•“SOFR” means the Secured Overnight Financing Rate, which is a new index calculated by short-term repurchase agreements, backed by Treasury securities;
•“Term Loan” means our $200 million unsecured term loan under a credit agreement that became effective concurrently with the completion of our initial public offering; and
•“we,” “our,” “us,” “FrontView,” and “Company” mean FrontView REIT, Inc., a Maryland corporation, together with its consolidated subsidiaries, including the OP, after giving effect to the REIT Contribution Transactions and Internalization, except where it is clear from the context that the term only means FrontView REIT, Inc. before giving effect to such transactions.
Overview
We are an internally managed net-lease real estate investment trust (“REIT”) focused on acquiring, owning, and managing properties with frontage that are leased to a diversified tenant base. Our real estate-first investment strategy is centered around highly
25
visible properties in prominent retail corridors with strong underlying real estate fundamentals. We target properties along high-traffic roads that offer strong consumer visibility and adaptable building formats capable of supporting various businesses over time.
As of June 30, 2026, FrontView owned a diversified portfolio of 316 direct frontage properties across 35 U.S. states, leased primarily to service and necessity based tenants across 16 industries, including medical and dental providers, quick-service and casual dining restaurants, financial institutions, cellular retailers, automotive-related, fitness, and general retail, along with several other diversified industries.
As of June 30, 2026, we had total debt of $330.0 million, Net Debt of $324.0 million, Net Debt to Annualized Adjusted EBITDAre ratio of 5.4x and a Fixed Charge Coverage Ratio of 3.6x. Net Debt, Annualized Adjusted EBITDAre and Fixed Charge Coverage Ratio are non-GAAP financial measures, and Annualized Adjusted EBITDAre is calculated based upon EBITDA, EBITDAre, and Adjusted EBITDAre, each of which is also a non-GAAP financial measure. Refer to Non-GAAP Measures below for further details concerning our calculation of non-GAAP measures and reconciliations to the comparable GAAP measure.
Our Real Estate Investment Portfolio
To achieve an appropriate risk-adjusted return, we seek to maintain a highly diversified portfolio of properties located in prominent areas with direct frontage on high-traffic roads that are visible to consumers. We aim to ensure diversity across geographic locations, tenants, and brands, and to enable cross-diversification within each category. We discuss below our portfolio diversification based on several different metrics and information provided as of June 30, 2026.
Diversification by Tenant Brand
We typically seek tenants that operate service-oriented businesses, such as medical and dental providers, quick-service and casual dining restaurants, financial institutions, cellular retailers, automotive related, fitness, and general retail along with several other diversified industries.
As of June 30, 2026, our properties were occupied by 336 leases that operated 165 different brands, with no single tenant brand accounting for more than 2.6% of our ABR.
The following table sets forth information with respect to all of our tenant brands (based on ABR) as of June 30, 2026:
# Tenant Concepts # of Leases % of ABR
1 Verizon 9 2.6 %
2 Raising Canes 6 2.2 %
3 LA Fitness 3 2.1 %
4 Dick's 1 2.1 %
5 Fast Pace Urgent Care 7 2.0 %
6 Oak Street Health 6 2.0 %
7 IHOP 7 1.8 %
8 Mammoth Car Wash 6 1.8 %
9 Bank of America 5 1.8 %
10 Range USA 3 1.8 %
11 Dollar Tree 8 1.7 %
12 LA-Z-Boy 3 1.7 %
13 Adams Auto Group 2 1.6 %
14 PNC Bank 6 1.6 %
15 AT&T 6 1.6 %
16 T-Mobile 9 1.6 %
17 Chili's 3 1.5 %
18 Aspen Dental 7 1.4 %
19 Wells Fargo 3 1.3 %
20 Giant Eagle 1 1.3 %
21 St. Joseph Hospice 2 1.3 %
22 Heartland Dental 5 1.2 %
23 Advance Auto Parts 7 1.2 %
24 Wendy's 6 1.1 %
25 Lowe's Home Improvement 1 1.1 %
26 Academy Sports 1 1.1 %
26
27 Charles Schwab 1 1.1 %
28 VASA Fitness 1 1.1 %
29 Parachute Plasma 2 1.0 %
30 WSS 2 1.0 %
31 Take 5 Oil Change 6 1.0 %
32 Wellnow 4 0.9 %
33 Walmart 1 0.9 %
34 Jared 3 0.9 %
35 Best Buy 1 0.9 %
36 Andy's Frozen Custard 4 0.9 %
37 Burger King 4 0.9 %
38 Edge Fitness 1 0.9 %
39 Chase Bank 3 0.9 %
40 Floor & Decor 1 0.9 %
41 Applebee's 3 0.9 %
42 Walgreens 2 0.9 %
43 Chipotle 5 0.9 %
44 Buffalo Wild Wings 2 0.8 %
45 Stop & Shop Gas 3 0.8 %
46 CVS 2 0.8 %
47 Dollar General 4 0.8 %
48 Hawaiian Bros 2 0.8 %
49 Starbucks 5 0.8 %
50 Action Behavior Centers 2 0.7 %
51 Avis 1 0.7 %
52 Chuy's Mexican 2 0.7 %
53 Texas Roadhouse 2 0.7 %
54 Exxon 2 0.7 %
55 AutoSavvy 1 0.7 %
56 Physicians Immediate Care 2 0.6 %
57 Jiffy Lube 3 0.6 %
58 O'Reilly Auto Parts 4 0.6 %
59 Harbor Freight 2 0.6 %
60 AutoZone 3 0.6 %
61 WellMed 1 0.6 %
62 Planet Fitness 1 0.6 %
63 7 Brew 3 0.5 %
64 Sleep Number 2 0.5 %
65 Circle K 2 0.5 %
66 PetSmart 1 0.5 %
67 Fulton Bank 1 0.5 %
68 FitzMark 1 0.5 %
69 Longhorn Steakhouse 2 0.5 %
70 KEDPlasma 1 0.5 %
71 Stanton Optical 2 0.5 %
72 Saver's 1 0.5 %
73 Panera Bread 2 0.5 %
74 Miller's Ale House 1 0.5 %
75 Trinity Medical Center 1 0.5 %
76 Ted's Café Escondido 1 0.5 %
77 Xfinity 2 0.5 %
78 Taco Bell 2 0.4 %
79 Grifols 1 0.4 %
80 Sonic 3 0.4 %
81 Saltgrass Steakhouse 1 0.4 %
27
82 McAlister's Deli 2 0.4 %
83 7-Eleven 2 0.4 %
84 Amazon 1 0.4 %
85 Byrider 1 0.4 %
86 Mattress Firm 2 0.4 %
87 Diamonds Direct 1 0.4 %
88 Arby's 2 0.4 %
89 Quick Clean Carwash 1 0.4 %
90 Caliber Collision 1 0.4 %
91 Caliber Car Wash 1 0.4 %
92 Delta Community Credit Union 1 0.4 %
93 Southern Immediate Urgent Care 1 0.4 %
94 Chuck E Cheese 1 0.4 %
95 Rise 1 0.4 %
96 BP 1 0.4 %
97 La Petite Academy 1 0.3 %
98 Big Blue Swim School 1 0.3 %
99 Meineke 2 0.3 %
100 Pizza Hut 2 0.3 %
101 UTMB Health 1 0.3 %
102 Michigan Road Animal Hospital 1 0.3 %
103 Skechers 1 0.3 %
104 Slim Chickens 1 0.3 %
105 Sherwin Williams 2 0.3 %
106 Valvoline 2 0.3 %
107 Hook & Reel 1 0.3 %
108 Marathon Veterinarian Hospital 1 0.3 %
109 Olive Garden 1 0.3 %
110 Mavis Discount Tire 1 0.3 %
111 Hops N Drops 1 0.3 %
112 Trophy Fuel & Wash 1 0.3 %
113 City Barbeque 1 0.3 %
114 Citizens Bank 1 0.3 %
115 AMERA Gas Station 1 0.3 %
116 Roots Oil 1 0.3 %
117 H&R Block 1 0.3 %
118 National Tire & Battery 1 0.3 %
119 pOpshelf 1 0.2 %
120 HTeaO 2 0.2 %
121 Hooters 1 0.2 %
122 Express Oil 1 0.2 %
123 Wing Daddy’s 1 0.2 %
124 American Family Care 1 0.2 %
125 Consumers Credit Union 1 0.2 %
126 Strickland Brothers 1 0.2 %
127 Banner Health 1 0.2 %
128 Aaron's 1 0.2 %
129 BMO 1 0.2 %
130 MedExpress Urgent Care 1 0.2 %
131 Republic Bank 1 0.2 %
132 Sage Dental 1 0.2 %
133 Caribou Coffee 1 0.2 %
134 McDonalds 1 0.2 %
135 Long John Silvers 1 0.2 %
136 PEP Boys 1 0.2 %
28
137 Tumbleweed, Inc. 1 0.2 %
138 Panda Express (1) 2 0.2 %
139 Urgent Team 1 0.2 %
140 America's Best 1 0.2 %
141 Chicken Salad Chick 1 0.2 %
142 MOD Pizza 1 0.2 %
143 Elias Diamonds 1 0.2 %
144 Zip Car Wash 1 0.1 %
145 Go Health 1 0.1 %
146 Popeyes 1 0.1 %
147 Bojangles 1 0.1 %
148 Granny's 1 0.1 %
149 Valero 1 0.1 %
150 Nothing Bundt Cakes 1 0.1 %
151 Jimmy John's 1 0.1 %
152 Dunkin Donuts 1 0.1 %
153 Church's Chicken 1 0.1 %
154 Falafel King 1 0.1 %
155 Tropical Smoothie 1 0.1 %
156 Firehouse Subs 1 0.1 %
157 Tutti Frutti 1 0.1 %
158 Auto Glass Now 1 0.1 %
159 Miracle Ear 1 0.1 %
160 Marquette Bank 1 0.0 %
161 Regions Banks ATM 1 0.0 %
162 By Gollys (2) 2 0.0 %
163 Hair Palace (2) 1 0.0 %
164 PATH USA (2) 1 0.0 %
165 Jaggers (2) 1 0.0 %
Total Portfolio 336 100.0 %
(1)Panda Express leases one property that is currently paying rent; the other Panda Express is under a new lease, and is excluded from ABR.
(2)Represents new leases where rent has not yet commenced and is excluded from ABR.
29
Diversification by Tenant Industry
The following chart shows a breakdown of our ABR by the tenant industries that comprised our portfolio as of June 30, 2026:
30
(in thousands, except for # of Leases, percentages, and Rent per Square Foot)
Industry # of Leases ABR % of ABR Square Feet Rent per Square Foot
Medical and Dental Providers 53 $ 10,584 15.8 % 329 $ 32.20
Quick Service Restaurants 68 $ 8,980 13.4 % 190 $ 47.12
Other - Service 24 $ 7,842 11.7 % 420 $ 18.64
Casual Dining 34 $ 6,639 9.9 % 204 $ 32.57
Financial Institutions 26 $ 5,690 8.5 % 164 $ 34.63
Automotive Stores 34 $ 4,158 6.2 % 201 $ 20.68
Cellular Stores 26 $ 4,150 6.2 % 95 $ 43.69
Other - Necessity 12 $ 3,713 5.6 % 421 $ 8.83
Fitness Operators 7 $ 3,339 5.0 % 215 $ 15.52
Convenience Stores and Gas Stations 14 $ 2,485 3.7 % 37 $ 67.49
Automotive Dealers 5 $ 2,282 3.4 % 77 $ 29.73
Discount Retail 14 $ 2,209 3.3 % 168 $ 13.10
Car Washes 9 $ 1,837 2.8 % 33 $ 56.24
Home Improvement Stores 5 $ 1,689 2.5 % 263 $ 6.43
Pharmacies 4 $ 1,129 1.7 % 52 $ 21.91
Professional Services 1 $ 173 0.3 % 4 $ 42.35
Total 336 $ 66,899 100.0 % 2,873 $ 23.28
31
Diversification by Geography
As of June 30, 2026, our properties were located in 35 U.S. states, with no single state exceeding 12.9% of our ABR. The following table sets forth information with respect to geographic diversification by state in our portfolio (based on ABR) as of June 30, 2026:
(in thousands, except for # of Properties, and percentages)
State # of Properties Square Feet % of ABR
IL 34 325 12.9 %
TX 28 194 9.4 %
OH 24 203 6.1 %
GA 23 160 7.0 %
FL 19 165 6.0 %
NC 16 191 6.0 %
IN 15 81 3.8 %
VA 15 90 4.3 %
TN 12 95 3.9 %
MI 11 72 2.8 %
SC 10 87 2.7 %
OK 10 50 2.4 %
MO 9 53 2.8 %
AL 9 40 2.2 %
NY 8 259 3.4 %
PA 8 145 3.8 %
MD 7 53 2.5 %
NJ 7 40 1.3 %
KY 7 35 1.4 %
KS 7 41 2.1 %
MN 7 72 2.2 %
AZ 6 40 2.0 %
LA 5 52 2.1 %
MS 3 77 1.7 %
ME 3 186 1.6 %
UT 2 22 0.5 %
CO 2 9 0.5 %
CT 2 5 0.7 %
WV 1 1 0.2 %
WI 1 31 0.2 %
NV 1 4 0.4 %
AR 1 3 0.3 %
MA 1 2 0.2 %
ID 1 6 0.3 %
RI 1 1 0.3 %
Total 316 2,890 100.0 %
Property Acquisitions
Our acquisitions team presents potential transactions to the Real Estate Investment Committee for approval. The Real Estate Investment Committee is responsible for approving (i) the acquisition or disposition of any single property or capital entering into or exiting a single joint-venture in an amount greater than $5.0 million, (ii) the acquisition of real properties and capital entering into multiple joint-ventures in the aggregate amount up to $150.0 million in any one calendar quarter, and (iii) the disposition of real properties and capital exiting multiple joint-ventures in an aggregate amount up to $30.0 million in any one calendar quarter, in each case, prior to consulting with our Board of Directors. Further, the Real Estate Investment Committee is responsible for recommending that the Board of Directors approve, (i) individual property acquisitions or dispositions or capital entering into or exiting a single joint-venture in an amount that exceeds $25.0 million in value, (ii) the acquisition of properties and capital entering into multiple
32
joint-ventures that exceeds an aggregate amount of $150.0 million in any one calendar quarter and (iii) disposition of properties and capital exiting multiple joint-ventures that exceeds an aggregate amount of $30.0 million in any one calendar quarter.
Our Leases
Lease Maturity
Our portfolio was 99.4% leased as of June 30, 2026. Our cash flows from operations are primarily generated through our real estate investment portfolio and the monthly lease payments received under our leases with our tenants. As of June 30, 2026, the ABR weighted average remaining term of our leases was approximately 7.1 years, excluding renewal options. As of June 30, 2026, no more than 8.7% of our rental revenue was derived from leases that expire in any single year prior to 2030.
Substantially all of our leases are net, meaning our tenants are generally obligated to pay customary operating expenses associated with the leased property (such as real estate taxes, insurance, maintenance, certain repairs and capital costs).
The following table presents certain information as of June 30, 2026 based on lease expirations by year.
(in thousands, except for percentages, Rent per Square Foot, and # of Leases)
Year ABR % of ABR Square Feet Rent per Square Foot # of Leases
2026 $ 990 1.5 % 28 $ 35.36 8
2027 $ 5,833 8.7 % 311 $ 18.76 29
2028 $ 5,032 7.5 % 215 $ 23.40 30
2029 $ 5,593 8.4 % 185 $ 30.23 29
2030 $ 6,230 9.3 % 188 $ 33.14 32
2031 $ 5,778 8.6 % 192 $ 30.09 35
2032 $ 6,713 10.0 % 501 $ 13.40 27
2033 $ 4,799 7.2 % 176 $ 27.27 25
2034 $ 4,046 6.1 % 170 $ 23.80 20
Thereafter $ 21,885 32.7 % 907 $ 24.13 101
Total $ 66,899 100.0 % 2,873 $ 23.28 336
We typically purchase properties that are subject to existing long-term net leases with a variety of remaining lease years (initial terms of 10 years or more at lease signing that often have renewal options as well). Substantially all of our leases are net leases, meaning our tenants are generally obligated to pay customary operating expenses associated with the leased property (such as real estate taxes, insurance, maintenance, and in many cases, certain repairs and capital costs, subject to caps and exclusions in leases). For the six months ended June 30, 2026, we incurred an aggregate of approximately $0.5 million of expenses not reimbursed or paid for by our tenants.
Approximately 97.5% of our leases (based on ABR) have rent escalations, including the option terms, and generally ranging from 1.0% to 3.0% annually.
In general, when negotiating a new lease or an amendment to an existing lease in connection with an acquisition, redevelopment or new development, we seek to negotiate, among other things, relatively long lease terms and tenant renewal options; market rents; annual rent escalation provisions; landlord-favorable going dark, assignment, change of control provisions; limited or no exclusive or co-tenancy clauses that favor the tenant, and obligations for certain tenants and certain guarantors to periodically provide us with financial information.
We may seek to use master lease structures where it fits market practice in the particular property type, pursuant to which we seek to lease multiple properties to an individual tenant on an all or none basis. In a master lease structure, a tenant is responsible for a single lease payment relating to the entire portfolio of leased properties, as opposed to multiple lease payments relating to individually leased properties. The master lease structure prevents a tenant from “cherry picking” locations, where it unilaterally gives up underperforming properties while maintaining its leasehold interest in well-performing properties.
Factors that Affect Our Results of Operations and Financial Condition
Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. Key factors that impact our results of operations and financial condition include rental rates, lease renewals and occupancy, land values, acquisition volume, tenant growth, demand, expansion, construction costs, net-lease terms, market liquidity, financing arrangements and leverage, property dispositions, general and administrative expenses, inflation, interest rates, consumer confidence, the overall economic environment and the financial strength of our tenants. For a discussion of these factors, see “Management’s Discussion and
33
Analysis of Financial Condition and Results of Operations – Factors that Affect Our Results of Operations and Financial Condition” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Results of Operations
The following discussion includes the results of our operations for the periods presented.
Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025
(unaudited, in thousands, except for percentages) For the three months ended June 30, 2026 2025 $ %
Revenues
Rental revenues $ 17,809 $ 17,547 $ 262 1 %
Interest income on mortgage loans 196 7 189 > 100 %
Total revenues 18,005 17,554 451 3 %
Operating expenses
Depreciation and amortization 8,229 9,466 (1,237 ) (13) %
Property operating expenses 2,273 2,714 (441 ) (16) %
General and administrative expenses 3,807 3,279 528 16 %
Total operating expenses 14,309 15,459 (1,150 ) (7) %
Other expenses (income)
Interest expense 4,191 4,647 (456 ) (10) %
Gain on sale of real estate (2,262 ) (1,194 ) (1,068 ) (89) %
Impairment loss 156 2,978 (2,822 ) (95) %
Income taxes 94 194 (100 ) (52) %
Total other expenses 2,179 6,625 (4,446 ) (67) %
Net income (loss) $ 1,517 $ (4,530 ) $ 6,047 > 100 %
Rental Revenues
(unaudited, in thousands, except for percentages) For the three months ended June 30, 2026 2025 $ %
Revenues:
Contractual rental amounts billed $ 15,970 $ 15,518 $ 452 3 %
Reimbursable income 2,042 2,441 (399 ) (16) %
Percentage rent 29 146 (117 ) (80) %
Other operating income 203 97 106 > 100 %
Adjustment to recognize contractual rental amounts on a straight-line basis 22 286 (264 ) (92) %
Above/below market lease amortization, net (457 ) (941 ) 484 51 %
Total rental revenues $ 17,809 $ 17,547 $ 262 1 %
Total rental revenues for the three months ended June 30, 2026 increased $0.3 million compared to June 30, 2025, due to net acquisitions, organic escalators and re-tenanting of unoccupied properties.
The $0.4 million decrease in reimbursable income was attributable to lower property operating expenses, resulting in lower recoveries from tenants during the three months ended June 30, 2026.
Other operating income includes termination fees, late fees and, other miscellaneous income. The $0.1 million increase in other operating income was attributable to lease restructuring fees received for certain properties during the three months ended June 30, 2026.
Interest income on mortgage loans for the three months ended June 30, 2026 increased $0.2 million compared to June 30, 2025. The increase relates to seller financing in connection with the sale of certain properties entered into the later half of 2025.
Operating Expenses
Depreciation and amortization
The $1.2 million decrease in depreciation and amortization for the three months ended June 30, 2026 mainly related to a decrease in writeoffs of intangible lease assets related to dispositions compared to the same period in the prior year.
34
Property operating expenses
Substantially all of our leases are net leases pursuant to which our tenants generally are obligated to pay customary expenses associated with the leased property such as real estate taxes, insurance, maintenance, and in many cases, certain repairs and capital costs.
The following table presents the non-reimbursable property operating expenses for the respective periods:
(unaudited, in thousands) For the three months ended June 30, 2026 2025
Real estate taxes $ 1,461 $ 2,213
Other property operating expenses 812 501
Property operating expenses 2,273 2,714
Reimbursable income (2,042 ) (2,441 )
Non-reimbursable property expenses $ 231 $ 273
For the three months ended June 30, 2026 and 2025, we incurred $0.2 million and $0.3 million, respectively, in aggregate expenses that were not tenant obligations, which was mainly attributable to vacant properties.
General and administrative expenses
The $0.5 million increase in general and administrative expenses for the three months ended June 30, 2026 was primarily due to an increase of $0.9 million related to stock-based compensation, $0.2 million related to employee compensation and $0.1 million of increased professional fees incurred in the later part of 2025. For the three months ended June 30, 2025, we also incurred an additional $0.7 million of non-recurring expenses mainly attributable to executive leadership changes and structuring costs.
Other expenses and income
Interest expense
Interest expense for the three months ended June 30, 2026 decreased $0.5 million compared to the three months ended June 30, 2025. The decrease was primarily due to a decrease in effective interest rate because of the hedge impacting the revolver. As of June 30, 2026 and 2025, the weighted average interest rate was 4.79% and 5.63%, respectively.
Gain on sale of real estate
Gain on sale of real estate for the three months ended June 30, 2026 increased by $1.1 million compared to the three months ended June 30, 2025. The increase was primarily attributable to the composition of properties sold. During the three months ended June 30, 2026, we sold 10 properties at a net gain of approximately $2.3 million, of which only one was vacant. During the three months ended June 30, 2025, we sold nine properties at a net gain of approximately $1.2 million, four of which were vacant.
Impairment loss
The following table presents the impairment for the respective periods:
(unaudited, in thousands, except number of properties) For the three months ended June 30, 2026 2025
Number of properties 2 11
Carrying value prior to impairment loss $ 1,934 $ 25,062
Fair value 1,778 22,084
Impairment loss $ 156 $ 2,978
During the three months ended June 30, 2026 and 2025, we recorded an impairment loss of $0.2 million relating to two properties and an impairment loss of $3.0 million relating to 11 properties, respectively. The amount of impairment fluctuates each period based on existing facts and circumstances. The decrease in impairment loss was primarily driven by lower levels of vacant property dispositions in the current quarter. During the three months ended June 30, 2025, four vacant properties were sold to facilitate the redeployment of capital into income-producing assets.
35
Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025
(unaudited, in thousands, except for percentages) For the six months ended June 30, 2026 2025 $ %
Revenues
Rental revenues $ 35,785 $ 33,790 $ 1,995 6 %
Interest income on mortgage loans 405 7 398 > 100 %
Total revenues 36,190 33,797 2,393 7 %
Operating expenses
Depreciation and amortization 15,901 17,271 (1,370 ) (8) %
Property operating expenses 4,603 5,090 (487 ) (10) %
General and administrative expenses 7,458 6,118 1,340 22 %
Total operating expenses 27,962 28,479 (517 ) (2) %
Other expenses (income)
Interest expense 8,404 9,144 (740 ) (8) %
Gain on sale of real estate (3,225 ) (1,661 ) (1,564 ) (94) %
Impairment loss 968 3,406 (2,438 ) (72) %
Income taxes 164 296 (132 ) (45) %
Total other expenses 6,311 11,185 (4,874 ) (44) %
Net income (loss) $ 1,917 $ (5,867 ) $ 7,784 > 100 %
Rental Revenues
(unaudited, in thousands, except for percentages) For the six months ended June 30, 2026 2025 $ %
Rental revenues:
Contractual rental amounts billed $ 31,740 $ 30,538 $ 1,202 4 %
Reimbursable income 4,109 4,100 9 0 %
Percentage rent 63 180 (117 ) (65) %
Other operating income 495 216 279 > 100 %
Adjustment to recognize contractual rental amounts on a straight-line basis 456 408 48 12 %
Above/below market lease amortization, net (1,078 ) (1,652 ) 574 35 %
Total rental revenues $ 35,785 $ 33,790 $ 1,995 6 %
The $2.0 million increase in total rental revenues for the six months ended June 30, 2026 was attributable to acquisitions, re-tenanting of vacant properties and a stronger performing portfolio.
The $0.3 million increase in other operating income was attributable to lease termination and restructuring fees received for certain properties during the six months ended June 30, 2026.
Interest income on mortgage loans receivable for the six months ended June 30, 2026 increased $0.4 million compared to June 30, 2025, due to an increase in mortgage loans receivable relating to seller financing in connection with the sale of certain properties entered into the later half of 2025.
Operating Expenses
Depreciation and amortization
The $1.4 million decrease in depreciation and amortization for the six months ended June 30, 2026 was primarily attributable to a decrease in writeoffs of intangible lease assets related to dispositions compared to the same period in the prior year.
Property operating expenses
Substantially all of our leases are net leases pursuant to which our tenants generally are obligated to pay customary expenses associated with the leased property such as real estate taxes, insurance, maintenance, and in many cases, certain repairs and capital costs.
The following table presents the non-reimbursable property operating expenses for the respective periods:
36
(unaudited, in thousands) For the six months ended June 30, 2026 2025
Real estate taxes $ 3,124 $ 3,704
Other property operating expenses 1,479 1,386
Property operating expenses 4,603 5,090
Reimbursable income (4,109 ) (4,100 )
Less: Non-recurring items — (189 )
Non-reimbursable property expenses $ 494 $ 801
The $0.5 million decrease in property operating expenses for the six months ended June 30, 2026 was due to decreased vacancies compared to the six months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, we incurred $0.5 million and $0.8 million, respectively, in aggregate expenses that were not tenant obligations, which was mainly attributable to vacant properties.
General and administrative expenses
The $1.3 million increase in general and administrative expenses for the six months ended June 30, 2026 is primarily attributable to stock-based compensation.
Other expenses and income
Interest expense
Interest expense for the six months ended June 30, 2026 decreased $0.7 million compared to the six months ended June 30, 2025. The decrease was primarily due to a decrease in interest rates in 2026. As of June 30, 2026 and 2025, the weighted average interest rate was 4.79% and 5.63%, respectively.
Gain on sale of real estate
Gain on sale of real estate for the six months ended June 30, 2026 increased by $1.6 million compared to the six months ended June 30, 2025, primarily due to a higher number of properties sold. During the six months ended June 30, 2026 we sold 15 properties at a net gain of approximately $3.2 million. During the six months ended June 30, 2025, we sold 10 properties and expropriated a portion of one property at a net gain of approximately $1.7 million.
Impairment loss
The following table presents the impairment for the respective periods:
(unaudited, in thousands, except for percentages) For the six months ended June 30, 2026 2025
Number of properties 4 11
Carrying value prior to impairment loss $ 7,165 $ 31,566
Fair value 6,197 28,160
Impairment loss $ 968 $ 3,406
During the six months ended June 30, 2026, we recorded an impairment loss of $1.0 million relating to four properties. During the six months ended June 30, 2025, we recorded an impairment loss of $3.4 million relating to 11 properties. The amount of impairment fluctuates each period based on existing facts and circumstances. The decrease in impairment loss was driven by a stronger performing portfolio, resulting in fewer properties being impaired during the six months ended June 30, 2026.
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs.
Liquidity/REIT Requirements
As a REIT, we are required to distribute to our stockholders at least 90% of our taxable income determined without regard to the dividends paid deduction and excluding net capital gain, on an annual basis. As a result, it is unlikely that we will be able to retain substantial cash balances to meet our liquidity needs from our annual taxable income. Instead, we expect to meet our liquidity needs primarily by relying upon external sources of capital, such as borrowings under our debt facilities or additional equity or preferred offerings or other capital raises, which would all be subject to a number of market and other factors in order to be successfully accessible.
37
Short-term Liquidity Requirements
Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt and to pay distributions. Since our portfolio has had a historically strong occupancy level and substantially all of our leases are net leases, we do not currently anticipate making significant capital expenditures or incurring other significant property operating costs (unless vacancies adjust beyond historical norms) that would materially adversely impact short-term financial liquidity.
We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances, net cash provided by operating activities, and borrowings under our Revolving Credit Facility and Term Loan or through the issuance of debt or equity instruments subject to market conditions and Company operating performance.
Long-term Liquidity Requirements
Our long-term liquidity requirements consist primarily of funds necessary to repay debt and to invest in additional revenue generating properties. Debt capital is provided through our Revolving Credit Facility and Term Loan. The Revolving Credit Facility and Term Loan both have three-year terms with an initial maturity of October 3, 2027, with two 12-month extensions which, if exercised, would extend the maturity until October 3, 2029, subject to certain conditions. The source and mix of our debt capital in the future will be impacted by market conditions. We plan to prudently balance our debt portfolio with a combination of fixed and floating rate debt and will evaluate opportunities to hedge certain interest rate risk where appropriate.
We expect to meet our long-term liquidity requirements primarily from borrowings under our Revolving Credit Facility and Term Loan, additional issuances of Series A Preferred Stock pursuant to the Investment Agreement (as defined below), any future debt and equity financings, and proceeds from limited sales of our properties. Our ability to access these capital sources may be impacted by unfavorable market conditions, particularly in the debt and equity capital markets and the real estate market in general, that are outside of our control. In addition, our success will depend on our operating performance, our borrowing restrictions, our degree of leverage, market perceptions of the Company, our access to debt, equity or other capital instruments and other factors. Our acquisition growth strategy significantly depends on our ability to obtain acquisition-financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization.
Capital Resources
As a new publicly traded REIT, we plan to access the public equity markets to maintain an appropriate mix of debt and equity in line with our leverage policy, primarily through follow-on equity offerings and at-the-market common equity offering programs, subject to market conditions and Company operating performance. We anticipate that the net proceeds from any public offerings will be used to repay debt, fund acquisitions, and for other general corporate purposes.
On February 27, 2026, we established an at-the-market common equity offering program (“ATM Program”), through which we may, from time to time, publicly offer and sell shares of common stock having an aggregate gross sales price of up to $75.0 million. As of June 30, 2026, we sold shares of common stock for an aggregate gross sales price of $50.5 million under the ATM Program, of which $35.5 million is unsettled under the Forward Sale Agreements.
Financing Strategy
Our long-term financing strategy is to maintain a leverage profile that creates operational flexibility and generates superior risk-adjusted returns for our stockholders. We may finance our operations and investments using a variety of methods, including available unrestricted cash balances, property operating revenue, proceeds from property dispositions, available borrowings under our Revolving Credit Facility and Term Loan, common and preferred stock issuances and debt securities issuances, including mortgage indebtedness and senior unsecured debt. We determine the amount of equity and debt financing to be used when acquiring an asset by evaluating our cost of equity capital, terms available in the credit markets (such as interest rate, repayment provisions and maturity) and our assessment of the particular asset’s risk.
We may issue common stock when we believe that our share price is at a level that allows the offering proceeds to be accretively invested into additional properties, to permanently finance properties that were financed by our Revolving Credit Facility or Term Loan, or to repay outstanding debt at or before maturity.
For information on our Revolving Credit Facility and Term Loan, see Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this Form 10-Q. For information on our Stock Repurchase Program and ATM Equity Offering Program, see Note 8 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
38
Covenants
We are subject to various covenants and financial reporting requirements pursuant to our Revolving Credit Facility and Term Loan. The table below summarizes the applicable financial covenants. If a default or event of default exists, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification. As of June 30, 2026, we believe we were in compliance with our covenants.
Covenants Required
Total leverage ratio ≤ 60%
Adjusted EBITDA to fixed charges ratio ≥ 1.50 to 1.00
Secured leverage ratio ≤ 40%
Unencumbered NOI to unsecured interest expense ratio ≥ 1.75 to 1.00
Unsecured leverage ratio ≤ 60%
Tangible net worth ≥ 380,032
Contractual Obligations
The following table provides information with respect to our contractual commitments and obligations as of June 30, 2026. Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations.
(unaudited, in thousands)
Year of Maturity Revolving Credit Facility (1) Term Loan (1) Interest Expense (2) Dividend (3) Commitments to Fund Investments (4) Total
Remainder of 2026 $ — $ — $ 7,671 $ 6,710 $ 24,984 $ 39,365
2027 130,000 200,000 11,365 — — 341,365
2028 — — — — — —
2029 — — — — — —
2030 — — — — — —
Thereafter — — — — — —
Total $ 130,000 $ 200,000 $ 19,036 $ 6,710 $ 24,984 $ 380,730
(1)Our Revolving Credit Facility and Term Loan contain two 12-month extension options subject to certain conditions, including the payment of an extension fee equal to 0.125% of the commitments.
(2)Interest expense is projected based on the outstanding borrowings and interest rates in effect as of June 30, 2026. This amount includes the impact of interest rate swap agreements.
(3)Amount includes dividends declared as of June 30, 2026 on our common stock, our Series A Preferred Stock and the OP Units.
(4)Amounts include acquisitions under contract.
Derivative Instruments and Hedging Activities
We are exposed to interest rate risk arising from changes in interest rates on any floating-rate borrowings that we make under our Revolving Credit Facility and Term Loan or other debt or capital instruments that bear interest. Borrowings under our Revolving Credit Facility and Term Loan will bear interest at floating rates based on SOFR plus an applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, decrease or increase our net income and cash flow.
On March 3, 2025, we entered into interest rate swap agreements to manage interest rate risk exposure on the Term Loan. The aggregate notional amount of these contracts is $200.0 million, and they mature in March 2028. The interest rate swap agreements utilized by us effectively modify our exposure to interest rate risk by converting a portion of our floating-rate debt to a fixed rate of 4.814%, including the applicable margin of 1.15% as of June 30, 2026, thus reducing the impact of interest-rate changes on future interest expense. The agreements involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the life of the agreement without an exchange of the underlying principal amount.
On September 10, 2025, we entered into five sequential interest rate swap agreements to manage interest rate risk exposure on the Revolving Credit Facility, with the first interest rate swap agreement effective September 12, 2025. Each agreement is structured to commence immediately following the maturity of the preceding agreement. The aggregate notional amount on these contracts is $100.0 million, and they mature in six-month intervals, with the final maturity in March 2028. The interest rate swap agreements utilized by us effectively modifies our exposure to interest rate risk by converting a portion of our floating-rate debt to a weighted average fixed rate of 3.220%, reducing the impact of interest-rate changes on future interest expense. The agreements involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the life of the agreement without an exchange of the underlying principal amount.
39
In the future, we may enter into additional interest rate swaps or other hedging arrangements. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.
Cash Flows
Cash and cash equivalents totaled $6.0 million as of June 30, 2026, as compared to $8.4 million as of June 30, 2025. The table below shows information concerning cash flows for the six months ended June 30, 2026, and 2025:
For the six months ended June 30,
(unaudited, in thousands) 2026 2025
Net cash provided by operating activities $ 18,539 $ 17,359
Net cash used in investing activities (67,120 ) (51,795 )
Net cash provided by financing activities 41,064 37,705
Net (decrease) increase in cash and cash equivalents during the period $ (7,517 ) $ 3,269
The change in net cash provided by operating activities during the six months ended June 30, 2026 as compared to six months ended June 30, 2025 was mainly due to an increase of $1.7 million in cash revenues due to the increase in occupancy in our portfolio. The remainder of the change in net cash provided by operating activities relates to timing of payment of payables and accrued liabilities.
The change in net cash used in investing activities was primarily due to higher investments in property acquisitions, partially offset by proceeds from property dispositions. During the six months ended June 30, 2026, 27 properties were acquired for an aggregate purchase price (including acquisition costs) of $93.2 million and received net proceeds of $31.1 million from the 15 properties sold. During the six months ended June 30, 2025, 22 properties were acquired for an aggregate purchase price (including acquisition costs) of $67.9 million and received net proceeds of $23.2 million from the 10 properties sold and $0.6 million from the expropriated portion of one property. The remainder of the change in net cash used in investing activity relates to deferred leasing costs and other additions to real estate held for investment as well as investments in mortgage loan receivables in the prior year.
The increase in net cash provided by financing activities during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was mainly due to the net proceeds from issuance of Series A Preferred Stock of $23.9 million, the net proceeds from issuance of common stock of $17.2 million and proceeds from debt of $36.5 million, offset by $22.0 million in repayment of debt, dividends and distributions paid of $12.6 million and $1.9 million of deferred offering costs. For the six months ended June 30, 2025, the Company drew $50.0 million of debt and paid $12.3 million of dividends and distributions.
Non-GAAP Financial Measures
Our reported results and net earnings per diluted share are presented in accordance with GAAP. We also disclose FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Annualized Adjusted EBITDAre, Adjusted NOI, Annualized Adjusted NOI, Adjusted Cash NOI, Annualized Adjusted Cash NOI, Net Debt, Adjusted Net Debt and Fixed Charge Coverage Ratio, each of which are non-GAAP measures. We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.
We compute FFO in accordance with the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets. Our leases typically include cash rents that increase through lease escalations over the term of the lease. Our leases do not typically include significant front-loading or back-loading of payments, or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. To derive AFFO, we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash or non-recurring revenues and expenses, including, as applicable, straight-line rents, cost of debt extinguishments, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, Internalization expenses, structuring and public company readiness costs, extraordinary items, and other specified non-cash items. We believe that such items are not indicative of operating performance and thus we believe excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.
40
FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers, primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We also use AFFO as a measure of our performance when we formulate corporate goals. We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by one-time cash and non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO and AFFO with the same or similar measures disclosed by other REITs may not be meaningful. FFO and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures.
Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments to FFO that we use to calculate AFFO. In the future, the SEC, Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of AFFO accordingly.
The following is a reconciliation of net income (loss) (which is the most comparable GAAP measure) to FFO and AFFO:
Reconciliation of net income (loss) to FFO and AFFO
For the three months ended June 30, For the six months ended June 30,
(unaudited, in thousands, except share, per share amounts and percentages) 2026 2025 2026 2025
Net income (loss) $ 1,517 $ (4,530 ) $ 1,917 $ (5,867 )
Less: Series A Convertible Preferred Stock dividends (422 ) — (661 ) —
Net income (loss) attributable to OP common unitholders 1,095 (4,530 ) 1,256 (5,867 )
Depreciation and amortization (1) 8,229 9,466 15,901 17,271
Gain on sale of real estate (2,262 ) (1,194 ) (3,225 ) (1,661 )
Impairment loss 156 2,978 968 3,406
Funds from Operations (“FFO”) $ 7,218 $ 6,720 $ 14,900 $ 13,149
Straight-line rent adjustments (22 ) (286 ) (456 ) (408 )
Amortization of financing transaction and discount costs 400 400 795 795
Amortization of above/below market lease intangibles (2) 457 941 1,078 1,652
Stock-based compensation 1,065 200 2,126 815
Adjustment for structuring and public company readiness costs — 89 — 290
Other non-recurring expenses (3) 278 964 443 964
Adjusted Funds from Operations (“AFFO”) $ 9,396 $ 9,028 $ 18,886 $ 17,257
FFO per share $ 0.26 $ 0.24 $ 0.53 $ 0.47
AFFO per share $ 0.33 $ 0.32 $ 0.67 $ 0.62
Dividends per share $ 0.215 $ 0.215 $ 0.430 $ 0.430
Dividends per share as a percentage of AFFO 64.7 % 66.3 % 64.2 % 69.3 %
Weighted average common shares outstanding, basic 22,831,250 19,136,225 22,556,120 18,229,095
Weighted average operating partnership units outstanding 5,273,171 8,690,812 5,435,376 9,595,836
Unvested restricted stock units and LTIP units (4) 167,620 — 198,863 —
Weighted average common shares outstanding, diluted (5) 28,272,041 27,827,037 28,190,359 27,824,931
(1)Includes write-offs of intangibles of $0.3 million and $1.6 million for the three months ended June 30, 2026 and 2025, respectively, and $0.6 million and $1.6 million for the six months ended June 30, 2026 and 2025, respectively.
41
(2)Includes write-offs of $(0.1) million for both the three and six months ended June 30, 2026 and $0.4 million for both the three and six months ended June 30, 2025.
(3)Other non-recurring expenses include one-time expenses, deal pursuit costs and other non-recurring items.
(4)Excludes unvested performance based LTIP awards that are contingently issuable.
(5)Represents weighted average common shares outstanding, diluted, excluding any shares issuable upon conversion of the Company's Series A Convertible Preferred Stock.
We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry. We believe that EBITDA provides investors and analysts with a measure of our performance that includes our operating results unaffected by the differences in capital structures, capital investment cycles and useful life of related assets compared to other companies in our industry. In 2017, Nareit issued a white paper recommending that companies that report EBITDA also report EBITDAre in financial reports. We compute EBITDAre in accordance with the definition adopted by Nareit. Nareit defines EBITDAre as EBITDA (as defined above) excluding gains (loss) from the sales of depreciable property and provisions for impairment on investment in real estate. We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs.
EBITDA and EBITDAre are not measures of financial performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
We compute Adjusted EBITDAre as EBITDAre for the applicable quarter, as adjusted to (i) reflect all investment and disposition activity that took place during the applicable quarter as if each transaction had been completed on the first day of the quarter, (ii) exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, (iii) eliminate the impact of lease termination fees from certain of our tenants, and (iv) exclude non-cash stock-based compensation expense. Annualized Adjusted EBITDAre is calculated by multiplying Adjusted EBITDAre for the applicable quarter by four, which we believe provides a meaningful estimate of our current run rate for all of our investments as of the end of the most recently completed quarter given the contractual nature of our long-term net leases. You should not unduly rely on this measure as it is based on assumptions and estimates that may prove to be inaccurate. Our actual EBITDAre for future periods may be significantly different from our Annualized Adjusted EBITDAre.
Adjusted EBITDAre and Annualized Adjusted EBITDAre are not measurements of performance under GAAP, and our Adjusted EBITDAre and Annualized Adjusted EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our Adjusted EBITDAre and Annualized Adjusted EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
Adjusted Net Operating Income (“NOI”) and Adjusted Cash NOI are non-GAAP financial measures which we use to assess our operating results. We compute Adjusted NOI as Adjusted EBITDAre excluding general and administration expenses. We further adjust Adjusted NOI for non-cash revenue components of straight-line rent and other amortization expense to derive Adjusted Cash NOI. We believe Adjusted NOI and Adjusted Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level.
Adjusted NOI and Adjusted Cash NOI are not measurements of financial performance under GAAP and may not be comparable to similarly titled measures of other companies. You should not consider Adjusted NOI and Adjusted Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
Annualized Adjusted NOI is calculated by multiplying Adjusted NOI for the applicable quarter by four and Annualized Adjusted Cash NOI is calculated by multiplying Adjusted Cash NOI for the applicable quarter by four. We believe these annualized figures provide a meaningful estimate of our current run rate for all of our investments as of the end of the most recently completed quarter given the contractual nature of our long-term net leases. You should not unduly rely on these measures as they are based on assumptions and estimates that may prove to be inaccurate. Our actual Adjusted NOI and Adjusted Cash NOI for future periods may be significantly different from our Annualized Adjusted NOI and Annualized Adjusted Cash NOI.
42
The following table reconciles net income (which is the most comparable GAAP measure) to EBITDA, EBITDAre, Adjusted EBITDAre, Adjusted NOI and Adjusted Cash NOI:
Reconciliation of net income to EBITDA, EBITDAre, Adjusted EBITDAre, Adjusted NOI and Adjusted Cash NOI
(unaudited, in thousands) For the three months ended June 30, 2026
Net income $ 1,517
Depreciation and amortization (1) 8,366
Interest expense 4,191
Income taxes 94
EBITDA $ 14,168
Gain on sale of real estate (2,262 )
Impairment loss 156
EBITDAre $ 12,062
Adjustments:
Current period investment activity (2) 903
Current period disposition activity (2) (142 )
Non-cash compensation expense 1,065
Exclude non-recurring expenses (3) 278
Exclude write-offs of non-cash items 815
Adjusted EBITDAre $ 14,981
General and administrative, net of non-recurring 2,464
Adjusted Net Operating Income (“NOI”) $ 17,445
Straight-line rental revenue, net (550 )
Adjusted Cash NOI $ 16,895
Annualized Adjusted EBITDAre $ 59,924
Annualized Adjusted NOI $ 69,780
Annualized Adjusted Cash NOI $ 67,580
(1)Includes amortization of above/below market lease intangibles of $0.5 million and excludes write-offs of intangibles of $0.3 million.
(2)Reflects an adjustment to give effect to all investments and dispositions during the quarter as if they had been acquired or disposed as of the beginning of the period.
(3)Reflects an adjustment to exclude non-recurring expenses including one-time expenses, deal pursuit costs and other non-recurring items.
Net Debt is a non-GAAP financial measure. We define Net Debt as our Gross Debt less cash and cash equivalents. We then adjust Net Debt by the undrawn Series A Preferred Stock and unsettled forward equity to derive Adjusted Net Debt. The ratios of Net Debt to Annualized Adjusted EBITDAre and Adjusted Net Debt to Annualized Adjusted EBITDAre represent Net Debt and Adjusted Net Debt as of the end of the applicable period divided by Annualized Adjusted EBITDAre for the period, respectively. We believe that these ratios are useful to investors and analysts because they provide information about Gross Debt less cash and cash equivalents as well as Gross Debt less cash and cash equivalents, undrawn Series A Preferred Stock and unsettled forward equity, which could be useful to repay debt.
The following table reconciles total debt (which is the most comparable GAAP measure) to Net Debt and Adjusted Net Debt, and presents the ratios of Net Debt to Annualized Adjusted EBITDAre and Adjusted Net Debt to Annualized Adjusted EBITDAre:
Reconciliation of total debt to Net Debt and Adjusted Net Debt and ratio of Net Debt to Annualized Adjusted EBITDAre and Adjusted Net Debt to Annualized Adjusted EBITDAre:
(unaudited, in thousands) As of June 30, 2026
Debt
Term Loan $ 200,000
Revolving Credit Facility 130,000
Gross Debt 330,000
Cash and cash equivalents (6,001 )
Net Debt $ 323,999
Net value of undrawn Series A Convertible Preferred Stock (50,000 )
Net value of unsettled forward equity (32,237 )
Adjusted Net Debt $ 241,762
43
(unaudited) Leverage As of June 30, 2026
Net Debt to Annualized Adjusted EBITDAre 5.4x
Adjusted Net Debt to Annualized Adjusted EBITDAre 4.0x
The Fixed Charge Ratio is the ratio of Annualized Adjusted EBITDAre to Annualized Fixed Charges. Fixed charges are computed for the applicable quarter on a consolidated basis as interest expense (excluding amortization of fees paid in cash and discounts and premiums on debt), plus regularly scheduled principal repayments of debt (excluding any balloon or similar payments), plus any preferred dividends payable in cash.
The Annualized Fixed Charges is calculated by multiplying fixed charges for the applicable quarter by four. We believe this ratio is useful to investors and analysts as it is used to evaluate our liquidity and ability to obtain financing.
The following table summarizes our fixed charges, and presents Annualized fixed charges to Annualized Adjusted EBITDAre:
(unaudited, in thousands) As of June 30, 2026
Interest expense $ 4,191
Non-cash interest (400 )
Preferred dividends 422
Fixed charges 4,213
Annualized fixed charges 16,852
Fixed Charge Coverage Ratio 3.6x
Critical Accounting Policies and Estimates
The preparation of the historical condensed consolidated financial statements in conformance with GAAP requires management to make estimates and assumptions that are subjective in nature and affect the reported amounts of assets, liabilities, revenues, and expenses as well as other disclosures in the condensed consolidated financial statements. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates and assumptions, however, our actual results could differ materially from our estimates. A summary of our significant accounting policies is included in Note 2—Accounting Policies for Financial Statements, contained in the condensed consolidated financial statements included elsewhere in this Form 10-Q. Management believes the following critical accounting policies affect its more significant estimates and assumptions used in the preparation of our condensed consolidated financial statements.
Purchase Price Allocation of Acquired Properties
Upon acquisition of real estate held for investment considered to be an asset acquisition, we capitalized the purchase price (including related acquisition costs) as part of the cost basis. We allocate the purchase price between land, buildings and improvements, site improvements, and identifiable intangible assets and liabilities such as amounts related to in-place leases and origination costs acquired, above- and below-market leases, based upon their fair values. The allocation of the purchase price requires judgment and significant estimates. The fair value of the land and building assets is determined on an as-if-vacant basis.
Above- and below-market leases are based upon a comparison between existing leases upon acquisition and current market rents for similar real estate. The fair value of above- and below-market leases is equal to the aggregate present value of the spread between the contract and the market rate of each of the in-place leases over their remaining term. The fair values of in-place leases and origination costs are determined based on the estimates of carrying costs during the expected lease-up periods and costs that would be incurred to put the existing leases in place under the same market terms and conditions.
We use multiple sources to estimate fair value, including information obtained about each property as a result of our pre-acquisition due diligence and marketing and leasing activities. We also consider information and other factors that impact the determination of fair value such as market conditions, industry conditions that the tenant operates in, characteristics of the real estate (e.g., location, size, value of comparative rental rates, traffic count) and tenant credit profile.
44
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If such impairment is present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The net recoverable amount represents the undiscounted estimated future cash flow expected to be earned from the long-lived asset. In the case of real estate, the undiscounted estimated future cash flows are based on expected cash flows from the use and eventual disposition of the property. We estimate fair value using data such as operating income, estimated capitalization rates or multiples, and with regards to assets held for sale, negotiated selling price, less estimated costs of disposal.
Impact of Recent Accounting Pronouncements
For information on the impact of recent accounting pronouncements on our business, see Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this Form 10-Q.
45