FIRST INDUSTRIAL REALTY TRUST INC (FR)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections of this Form 10-K titled "Forward-Looking Statements" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.

Summary of 2024

Our operating results were strong in 2024. Our year end in-service occupancy was 96.2%, representing a 70-basis-point increase compared to December 31, 2023. Additionally, during the year ended December 31, 2024, we achieved a 50.8% increase in cash rental rates on new and renewal leases, while same store performance on a cash basis rose by 8.4%. At December 31, 2024, we had eight projects under development, totaling approximately 2.0 million square feet of GLA, with an aggregate estimated investment of approximately $280.4 million.

In 2024, we completed the following significant real estate activities:

•We executed 13 leases at development properties with the following characteristics:

Additionally, within our Joint Venture, we fully leased an industrial building totaling approximately 0.4 million square feet of GLA to two tenants and executed a lease, which is expected to commence in the first quarter of 2025, for 48% of an industrial building totaling approximately 1.0 million square feet of GLA.

•We acquired five industrial properties totaling approximately 0.3 million square feet of GLA located in our Houston and Southern California markets for an aggregate purchase price of $44.8 million, excluding transaction costs. These properties were 100% leased at December 31, 2024.

•We acquired approximately 81.4 acres of land for development located in our South Florida and Southern California markets for an aggregate purchase price of $25.9 million, excluding transaction costs.

•We placed in-service seven industrial properties totaling approximately 2.8 million square feet of GLA located in our Central/Eastern Pennsylvania, Central Florida, Northern California and Southern California markets at an estimated total cost of $392.0 million. These properties were 96% leased at December 31, 2024.

•We commenced speculative development of seven industrial buildings totaling approximately 1.9 million square feet of GLA in our Central/Eastern Pennsylvania, Houston, Nashville and South Florida markets. These properties were 40% pre-leased at December 31, 2024.

•We sold 22 industrial properties totaling approximately 1.2 million square feet of GLA for gross proceeds of $162.8 million.

We completed the following financing activities during the year ended December 31, 2024:

•We declared an annual cash dividend of $1.48 per common share or Unit, an increase of 15.6% from 2023.

•At December 31, 2024, we had $467.5 million available for additional borrowings under our Unsecured Credit Facility and cash and cash equivalents and restricted cash was $51.2 million, after excluding our Joint Venture partner's 6% share that we consolidate and report in our financial statements.

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Results of Operations

Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023

Our net income was $296.0 million and $285.8 million for the years ended December 31, 2024 and 2023, respectively.

The tables below summarize our revenues, property expenses and depreciation and other amortization by various categories for the years ended December 31, 2024 and 2023. Same store properties are properties owned prior to January 1, 2023 and held as an in-service property through December 31, 2024 and developments and redevelopments that were placed in service prior to January 1, 2023. Properties that are at least 75% occupied at acquisition are placed in service, unless we anticipate the tenant move-outs within two years of ownership would drop occupancy below 75%. Properties that are less than 75% occupied at the date of acquisition are placed in service as they reach the earlier of 90% occupancy or one year subsequent to acquisition. Developments, redevelopments and acquired income-producing land parcels for which our ultimate intent is to redevelop or develop on the land parcel are placed in service as they reach the earlier of 90% occupancy or one year subsequent to development/redevelopment construction completion. Acquired properties with occupancy greater than 75% at acquisition, but with tenants that we anticipate will move out within two years of ownership, will be placed in service upon the earlier of reaching 90% occupancy or twelve months after move out. Properties are moved from the same store classification to the redevelopment classification when capital expenditures for a project are estimated to exceed 25% of the undepreciated gross book value of the property. Acquired properties are properties that were acquired subsequent to December 31, 2022 and held as an operating property through December 31, 2024. Sold properties are properties that were sold subsequent to December 31, 2022. Developments and redevelopments (collectively referred to as "(Re)Developments") include (re)developments that were not: a) substantially complete 12 months prior to January 1, 2023; or b) stabilized prior to January 1, 2023. Other revenues are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, interest income, joint venture fees and other miscellaneous revenues. Other property expenses are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, vacant land expenses and other miscellaneous regional expenses.

Our future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition, (re)development and sale of properties. Our future revenues and expenses may vary materially from historical rates.

For the years ended December 31, 2024 and 2023, the average daily occupancy rate of our same store properties was 96.8% and 97.6%, respectively.

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Revenues from same store properties increased $30.6 million primarily due to increases in rental rates and tenant recoveries, offset by a slight decrease in occupancy. Revenues from acquired properties increased $4.3 million due to the nine industrial properties acquired subsequent to December 31, 2022 totaling approximately 0.4 million square feet of GLA. Revenues from sold properties decreased $12.2 million due to the 33 industrial properties sold subsequent to December 31, 2022 totaling approximately 2.2 million square feet of GLA. Revenues from (re)developments increased $32.5 million due to an increase in occupancy and tenant recoveries. Revenues from other increased $0.5 million due to revenues from income-producing land parcels for which our ultimate intent is to redevelop, develop or sell the applicable land parcel, offset by a decrease in joint venture fees and legal settlement proceeds.

Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased $8.7 million primarily due to increases in real estate tax expense and snow removal costs. Property expenses from acquired properties increased $1.0 million due to properties acquired subsequent to December 31, 2022. Property expenses from sold properties decreased $3.4 million due to properties sold subsequent to December 31, 2022. Property expenses from (re)developments increased $9.1 million primarily due to the substantial completion of developments. Property expenses from other increased $1.9 million primarily due to an increase in real estate tax expense related to land parcels, demolition costs incurred to prepare certain land sites for construction and miscellaneous expenses.

General and administrative expense increased by $3.8 million, or 10.3%, primarily driven by higher equity compensation expense which is primarily due to the accelerated recognition of expense for certain tenured employees who are, or will soon become, retirement eligible prior to the standard vesting schedule. Additionally, the increase was influenced by a modest increase in overall compensation and a slight decrease in the amount of compensation capitalized to development activities.

Joint Venture development services expense, representing payments made to a third party for property development assistance within the Joint Venture, decreased by $2.1 million, or 58.3%. This decrease is primarily attributable to a reduction in development activities by our Joint Venture during the year ended December 31, 2024, compared to the year ended December 31, 2023.

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Depreciation and other amortization from same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased $1.7 million due to properties acquired subsequent to December 31, 2022. Depreciation and other amortization from sold properties decreased $2.5 million due to properties sold subsequent to December 31, 2022. Depreciation and other amortization from (re)developments increased $10.5 million primarily due to an increase in depreciation and amortization related to completed developments. Depreciation from corporate furniture, fixtures and equipment and other remained relatively unchanged.

For the year ended December 31, 2024, we recognized $112.0 million of gain on sale of real estate related to the sale of 22 industrial properties comprising approximately 1.2 million square feet of GLA. For the year ended December 31, 2023, we recognized $95.7 million of gain on sale of real estate related to the sale of 11 industrial properties comprising approximately 1.0 million square feet of GLA and two land parcels.

Interest expense increased $8.6 million, or 11.6%, primarily due to a $5.5 million reduction in capitalized interest during the year ended December 31, 2024, compared to the year ended December 31, 2023. Additionally, the increase in interest expense was influenced by a higher weighted average debt balance of $2,220.7 million for the year ended December 31, 2024, up from $2,175.0 million for the year ended December 31, 2023, as well as an increase in the weighted average interest rate to 4.11% for the year ended December 31, 2024, compared to 4.05% for the year ended December 31, 2023.

Amortization of debt issuance costs remained relatively unchanged.

Equity in income of joint venture for the year ended December 31, 2024 was $4.3 million representing our pro-rata share of the net income generated by the Joint Venture. This income is derived from rental operations and expenses related to three industrial properties, totaling 1.8 million square feet of GLA, that were completed by the joint venture during this period. In comparison, equity in income of joint venture for the year ended December 31, 2023 was $32.2 million. This higher amount included our pro-rata share of gain from the sale of real estate by the Joint Venture and related incentive fees. Both periods include the 6% interest held by our partner in the Joint Venture, which is consolidated and reported in our financial statements.

Income tax expense decreased $2.6 million, or 30.1%, primarily due to a reduction in our pro-rata share of taxable gain and incentive fees from the Joint Venture. This decrease was partially offset by an increase in income tax expense associated with gains from the sale of real estate.

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Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022

A discussion of changes in our results of operations between 2023 and 2022 can be found in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Critical Accounting Policies

A critical accounting policy is one that involves an estimate or assumption that is subjective and requires management judgment about the effect of a matter that is inherently uncertain and material to an entity's financial condition and results of operations. Of the significant accounting policies discussed in Note 2 to the Consolidated Financial Statements, we believe the following policies relate to the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements:

•Acquisitions of Real Estate Assets: We allocate the purchase price of acquired real estate, including real estate acquired as a portfolio, based upon the fair value of the assets acquired and liabilities assumed, which generally consists of land, buildings, tenant improvements, construction in progress, leasing commissions and deferred lease intangible assets and liabilities. The purchase price is allocated to the fair value of the tangible assets of an acquired property by valuing the property as if it were vacant. This valuation incorporates significant assumptions such as land comparables, discount rates, terminal capitalization rates and market rent assumptions. Above and below market lease intangibles are valued based on the present value of the difference between prevailing market rental rates and the in-place rental rates measured over a period equal to the remaining term of the lease for above market leases or the remaining term of the lease plus the term of any below market fixed rate renewal options for below market leases. The purchase price is further allocated to in-place lease values based on an estimate of the lease revenue expected during a reasonable lease-up period, assuming the property was vacant on the date of acquisition.

•Impairment of Real Estate Assets: We review the carrying value of our long-lived real estate assets for possible impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The judgments regarding the existence of indicators of impairment are based on the operating performance, market conditions, and our intent and ability to hold each property. The judgments regarding whether the carrying amounts of these assets may not be recoverable are based on estimates of future undiscounted cash flows from properties which include estimates of future operating performance and market conditions. If any real estate investment is considered permanently impaired, a loss is recorded to reduce the carrying value of the property to its estimated fair value. The impairment assessment and fair value measurement requires the use of estimates and assumptions, including the timing and amounts of cash flow projections, discount rates and terminal capitalization rates.

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Liquidity and Capital Resources

Cash Flow Activity

The following table summarizes our cash flow activity for the Company for the years ended December 31, 2024 and 2023:

The following table summarizes our cash flow activity for the Operating Partnership for the years ended December 31, 2024 and 2023:

Changes in cash flow for the year ended December 31, 2024, compared to the prior year are described as follows:

Operating Activities: Cash provided by operating activities increased $47.7 million, primarily due to the following:

•increase in net operating income from same store properties, acquired properties and recently developed properties of $48.7 million, offset by a decrease in net operating income due to the disposition of real estate of $8.8 million; and

•increase in accounts payable, accrued expenses, other liabilities, rents received in advance and security deposits due to timing of cash payments; offset by:

◦decrease in distributions from our Joint Venture of $4.5 million in 2024 as compared to 2023; and

◦increase of $8.6 million in interest expense.

Investing Activities: Cash used in investing activities decreased $246.7 million, primarily due to the following:

•decrease of $203.6 million related to the acquisition, development and investment in real estate attributed to fewer acquisitions and reduced expenditures for developments under construction during the year ended December 31, 2024 as compared to the year ended December 31, 2023;

•increase of $38.5 million in net proceeds received from the disposition of real estate in 2024 as compared to 2023; and

•decrease of $6.6 million in contributions to the Joint Venture in 2024 as compared to 2023.

Financing Activities: Cash used in financing activities increased $185.2 million ($185.3 million for the Operating Partnership), primarily due to the following:

•decrease in net borrowings under our Unsecured Credit Facility of $173.0 million in 2024 as compared to 2023; and

•increase in dividend and unit distributions of $24.1 million due to the Company increasing the dividend rate in 2024 as well as an increase in common shares and units outstanding; offset by:

◦decrease in distributions to noncontrolling interests of $11.4 million in 2024 as compared to 2023.

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Material Cash Requirements

At December 31, 2024, our cash and cash equivalents and restricted cash was approximately $51.2 million, after excluding our Joint Venture partner's share of cash and cash equivalents that we consolidate and report in our financial statements. We also had $467.5 million available for additional borrowings under our Unsecured Credit Facility as of December 31, 2024.

We have considered our short-term liquidity needs through December 31, 2025, as well as the adequacy of our estimated cash flow from operations and other expected liquidity sources to meet those needs. As of December 31, 2024, our Unsecured Credit Facility had an outstanding balance of $282.0 million, maturing on July 7, 2025, with two six-month extension options available. We are evaluating whether to extend the maturity by exercising the extension options or enter into a new facility. Additionally, we have a $300.0 million unsecured term loan maturing on August 12, 2025, with two one-year extension options. We are considering either extending the maturity by exercising the extension option or refinancing part or all of this term loan with new indebtedness. Apart from these payment obligations, we believe that our principal short-term liquidity needs include funding normal recurring expenses, property acquisitions, developments, renovations, expansions, other nonrecurring capital improvements, debt service requirements, the minimum distributions required to maintain the Company's REIT qualification under the Code and distributions approved by the Company's Board of Directors. We anticipate that these needs will be met with cash flows provided by operating activities as well as the disposition of select assets. These needs may also be met by the issuance of other debt or equity securities or borrowings under our Unsecured Credit Facility, subject to market conditions.

We expect to meet long-term (after December 31, 2025) liquidity requirements such as property acquisitions, developments, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through long-term unsecured and secured indebtedness, the disposition of select assets and the issuance of additional equity or debt securities, subject to market conditions.

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We believe that we were in compliance with our financial covenants as of December 31, 2024, and we anticipate that we will be able to operate in compliance with our financial covenants in 2025. However, these financial covenants are complex and there can be no assurance that these provisions would not be interpreted by our lenders and noteholders in a manner that could impose and cause us to incur material costs and our access to borrowings on our Unsecured Credit Facility may be limited if we fail to meet any of these covenants. Total debt, exclusive of unamortized debt issuance costs and unamortized discounts, at December 31, 2024 and 2023 is detailed below.

(A) These loans have a fixed interest rate.

(B) The interest rate is based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.85%. We have interest rate swaps, with an aggregate notional value of $200.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 1.83% at December 31, 2024. These interest rate swaps mature in February 2026.

(C) The interest rate is based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.84%. We have interest rate swaps, with an aggregate notional value of $425.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 3.63% at December 31, 2024. These interest rate swaps mature in September 2027.

(D) The interest rate is based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.84%. We have interest rate swaps, with an aggregate notional value of $300.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 4.87% at December 31, 2024. These interest rate swaps mature in December 2025 ($150.0 million notional) and August 2027 ($150.0 million notional). Weighted average maturity reflected in the table above assumes we extended the maturity pursuant to two, one-year extension options, subject to certain conditions.

(E) The interest rate is a variable rate based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.775% and a facility fee of 15 basis points. Our balance under our Unsecured Credit Facility changes depending on our cash needs and the interest rate and facility fee are each subject to adjustment based on our leverage and investment grade rating. Weighted average maturity reflected in the table above assumes we extended the maturity pursuant to two, six-month extension options, subject to certain conditions. As of February 13, 2025, we had approximately $480.5 million available for additional borrowings under our Unsecured Credit Facility.

As of December 31, 2024, our senior unsecured notes have been assigned credit ratings from Standard & Poor's, Moody's and Fitch Ratings of BBB/Stable, Baa2/Stable and BBB/Positive, respectively. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization. In the event of a downgrade, we believe we would continue to have access to sufficient capital. However, our cost of borrowing would increase and our ability to access certain financial markets may be limited.

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Our other material cash requirements from known contractual and other obligations as of December 31, 2024 include an estimate of remaining payments on the completion of development projects under construction for the Company of $177.5 million which includes all costs necessary to place the properties into service. In addition, the remaining estimated equity that the Company will need to contribute to complete the development projects in our Joint Venture is approximately $9.7 million. The majority of the construction costs and our proportionate share of equity contributions to the Joint Venture need to be funded in one year or less.

Off-Balance Sheet Arrangements

At December 31, 2024, we had letters of credit and performance bonds outstanding amounting to $32.2 million in the aggregate. The letters of credit and performance bonds are not reflected as liabilities on our balance sheet. We have no other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operation or liquidity and capital resources.

Environmental

We paid approximately $0.8 million and $0.7 million during the years ended December 31, 2024 and 2023, respectively, related to environmental expenditures. We estimate 2025 expenditures of approximately $1.9 million which has been accrued at December 31, 2024. We estimate that the aggregate expenditures which need to be expended in 2025 and beyond with regard to currently identified environmental issues will not exceed approximately $4.6 million which has been accrued at December 31, 2024.

Inflation

Inflation had a minimal impact on the operating performance of our industrial properties across our markets prior to 2021, due to relatively low inflation rates. However, inflation increased significantly in 2021 and 2022, remain elevated relative to pre-2021 levels and the future direction of inflation rates is uncertain. If inflation rates increase, this could impact our operations and financial performance. Many of our leases contain provisions designed to mitigate the adverse impact of inflation, including contractual rent escalations and requirements for tenants to pay their proportionate share of property operating expenses. Such expenses include common area expenses, utilities, insurance, real estate taxes, and certain capital expenditures for property maintenance. These measures help reduce our exposure to inflation-driven increases in property operating expenses. However, we remain exposed to certain non-reimbursable property operating expenses, such as costs associated with vacant premises. In addition, while some of our existing leases are below current market rental rates, we believe that lease renewals or re-leasing opportunities will allow us to adjust rental rates upward, aligning them more closely with market rates. These adjustments could offset inflationary pressures on our operating expenses. Inflation also continues to affect our development portfolio. Rising costs for materials and other costs increase the expense of property development, impacting our ability to achieve anticipated returns on these projects. With respect to our outstanding indebtedness, we periodically evaluate our exposure to interest rate fluctuations, and may continue to enter into derivatives that mitigate, but do not eliminate, the impact of interest rate changes on our Unsecured Credit Facility.

Market Risk

The following discussion about our risk-management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Our business subjects us to market risk from interest rates, as described below.

Interest Rate Risk

The following analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments that are held by us at December 31, 2024 that are sensitive to changes in interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast.

In the normal course of business, we also face risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis.

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At December 31, 2024, $1,933.2 million, or 87.3%, of our total debt, excluding unamortized debt issuance costs, was fixed rate debt, while $282.0 million, or 12.7%, was variable rate debt. At December 31, 2023, $1,933.5 million, or 86.6%, of our total debt, excluding unamortized debt issuance costs, was fixed rate debt, while $299.0 million, or 13.4%, was variable rate debt. At December 31, 2024 and 2023, the fixed rate debt amounts include variable rate debt that has been effectively swapped to a fixed rate through the use of derivative instruments with an aggregate notional amount outstanding of $925.0 million that mitigate our exposure to our Unsecured Term Loans' variable interest rates, which are currently based on SOFR. The use of derivative financial instruments allows us to manage risks of increases in interest rates with respect to the effect these fluctuations would have on our earnings and cash flows. We designated all of the swaps related to our Unsecured Term Loans as cash flow hedges. Currently, we do not enter into financial instruments for trading or other speculative purposes. See Material Cash Requirements for further details on the derivative instruments. As of December 31, 2024 and 2023, the estimated fair value of our debt was approximately $2,125.3 million and $2,135.7 million, respectively, based on our estimate of the then-current market interest rates.

For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not our earnings or cash flows. Conversely, for variable rate debt, changes in the base interest rate used to calculate the all-in interest rate generally do not impact the fair value of the debt, but would affect our future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on us until we are required to refinance such debt. See Note 4 to the Consolidated Financial Statements for a discussion of the maturity dates of our various fixed rate debt.

Our variable rate debt is subject to risk based upon prevailing market interest rates. If the SOFR rate component relevant to our variable rate debt were to have increased 10%, we estimate that our interest expense during the years ended December 31, 2024 and 2023 would have increased by approximately $1.5 million and $1.3 million, respectively, based on our average outstanding floating-rate debt during the years ended December 31, 2024 and 2023. Additionally, if weighted average interest rates on our weighted average fixed rate debt were to have increased by 10% due to refinancing, interest expense would have increased by approximately $7.5 million and $7.5 million during the years ended December 31, 2024 and 2023, respectively.

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Supplemental Earnings Measure

Investors and analysts in the real estate industry commonly use funds from operations ("FFO") and net operating income ("NOI") as supplemental performance measures of an equity REIT. Historical cost accounting for real estate assets in accordance with accounting principles generally accepted in the United States of America ("GAAP") implicitly assumes that the value of real estate assets diminishes predictably over time through depreciation. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors prefer to supplement operating results that use historical cost accounting with measures such as FFO and NOI, among others. We provide information related to FFO and same store NOI ("SS NOI") both because such industry analysts are interested in such information, and because our management believes FFO and SS NOI are important performance measures. FFO and SS NOI are factors used by management in measuring our performance, including for purposes of determining the compensation of our executive officers under our 2024 incentive compensation plan.

Neither FFO nor SS NOI should be considered as a substitute for net income, or any other measures derived in accordance with GAAP. Neither FFO nor SS NOI represents cash generated from operating activities in accordance with GAAP and neither should be considered as an alternative to cash flow from operating activities as a measure of our liquidity, nor is either indicative of funds available for our cash needs, including our ability to make cash distributions.

Funds From Operations

The National Association of Real Estate Investment Trusts ("NAREIT") has recognized and defined for the real estate industry a supplemental measure of REIT operating performance, FFO, that excludes historical cost depreciation, among other items, from net income determined in accordance with GAAP. FFO is a non-GAAP financial measure. FFO is calculated by us in accordance with the definition adopted by the Board of Governors of NAREIT and may not be comparable to other similarly titled measures of other companies. In accordance with the NAREIT definition of FFO, we calculate FFO to be equal to net income available to First Industrial Realty Trust, Inc.'s common stockholders and participating securities, plus depreciation and other amortization of real estate, plus impairment of real estate, minus gain (or plus loss) on sale of real estate, adjusted for any associated income tax provision or benefits. Similar adjustments are made for our share of net income from an unconsolidated joint venture.

Management believes that the use of FFO available to common stockholders and participating securities, combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Management believes that, by excluding gains or losses related to sales of real estate assets, impairment of real estate assets and real estate asset depreciation and amortization, investors and analysts are able to identify the operating results of the long-term assets that form the core of a REIT's activity and use these operating results for assistance in comparing these operating results between periods or to those of different companies.

The following table shows a reconciliation of net income available to common stockholders and participating securities to the calculation of FFO available to common stockholders and participating securities as follows:

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Same Store Net Operating Income

SS NOI is a non-GAAP financial measure that provides a measure of rental operations and, as calculated by us, that does not factor in joint venture fees, depreciation and amortization, general and administrative expense, joint venture development services expense, interest expense, equity in income and loss from joint ventures, income tax benefit and provision and gains and losses on the sale of real estate.

We define SS NOI as revenues minus property expenses such as real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses, minus the NOI of properties that are not same store properties and minus the impact of straight-line rent, the amortization of above/below market leases and lease termination fees. As so defined, SS NOI may not be comparable to same store net operating income or similar measures reported by other REITs that define same store properties or NOI differently. The major factors influencing SS NOI are occupancy levels, rental rate increases or decreases and tenant recoveries increases or decreases. Our success depends largely upon our ability to lease space and to recover the operating costs associated with those leases from our tenants.

The following table shows a reconciliation of the same store revenues and property expenses disclosed in the results of operations (and reconciled to revenues and expenses reflected on the statements of operations) to SS NOI for the years ended December 31, 2024 and 2023.

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The following table shows a reconciliation of net income available to common stockholders and participating securities to cash basis SS NOI without lease termination fees for the years ended December 31, 2024 and 2023.

Subsequent Events

Subsequent to December 31, 2024, we sold two industrial buildings for a sales price of approximately $11.9 million, excluding transaction costs.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections of this Form 10-K titled "Forward-Looking Statements" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.

Summary of 2023

Our operating results were solid in 2023. Our year end in-service occupancy was 95.5%, 330 basis points lower than our in-service occupancy at December 31, 2022, reflecting the impact of completed developments in lease-up entering our in-service portfolio. Also, during the year ended December 31, 2023, we grew cash rental rates by 58.3% on new and renewal leasing, establishing a new annual company record for this metric. At December 31, 2023, we had six projects comprising 1.9 million square feet of GLA under development with an estimated investment of $284.8 million. Additionally, we continue to position ourselves for future development activity by acquiring land located in our target markets with an emphasis on supply constrained coastal markets.

In 2023, we completed the following significant real estate activities:

•We acquired four industrial properties comprised of approximately 0.2 million square feet of GLA located in our Houston and Southern California markets for an aggregate purchase price of $43.9 million, excluding transaction costs. These properties were 100% leased at December 31, 2023.

•We acquired approximately 239.2 acres of land for development located in our Central Florida, Nashville, Philadelphia, South Florida and Southern California markets for an aggregate purchase price of $80.6 million, excluding transaction costs.

•We placed in-service 13 industrial properties comprising approximately 2.8 million square feet of GLA located in our Central Florida, Chicago, Denver, Nashville, Philadelphia, Seattle and South Florida markets at an estimated total cost of $354.9 million. These properties were 45% leased at December 31, 2023.

•We commenced speculative development of four industrial buildings comprised of 0.8 million square feet of GLA in our Central Florida, Philadelphia, South Florida and Southern California markets.

•We sold 11 industrial properties comprising approximately 1.0 million square feet of GLA and two land parcels for gross proceeds of $125.3 million.

•Our Joint Venture sold approximately 31 acres of land located in Phoenix for gross proceeds of $50 million. Our pro-rata share of the gain was $17.3 million and we recognized an incentive fee of $7.1 million. These amounts exclude our partner's 6% share in the Joint Venture that we consolidate and report in our financial statements as Noncontrolling Interest.

We completed the following financing activities during the year ended December 31, 2023:

•We declared an annual cash dividend of $1.28 per common share or Unit, an increase of 8.5% from 2022.

•At December 31, 2023, we had $449.8 million available for additional borrowings under our Unsecured Credit Facility and cash and cash equivalents was $42.9 million, after excluding our Joint Venture minority partner's share of cash and cash equivalents that we consolidate and report in our financial statements.

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Results of Operations

Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022

Our net income was $285.8 million and $381.6 million for the years ended December 31, 2023 and 2022, respectively.

The tables below summarize our revenues, property expenses and depreciation and other amortization by various categories for the years ended December 31, 2023 and 2022. Same store properties are properties owned prior to January 1, 2022 and held as an in-service property through December 31, 2023 and developments and redevelopments that were placed in service prior to January 1, 2022. Properties which are at least 75% occupied at acquisition are placed in service, unless we anticipate the tenants to move out within the first two years of ownership. Acquisitions that are less than 75% occupied at the date of acquisition, developments and redevelopments are placed in service as they reach the earlier of (a) stabilized occupancy (defined as 90% occupied), or (b) one year subsequent to acquisition or development/redevelopment construction completion. Acquired properties with occupancy greater than 75% at acquisition, but with tenants that we anticipate will move out within two years of ownership, will be placed in service upon the earlier of reaching 90% occupancy or twelve months after move out. Properties are moved from the same store classification to the redevelopment classification when capital expenditures for a project are estimated to exceed 25% of the undepreciated gross book value of the property. Acquired properties are properties that were acquired subsequent to December 31, 2021 and held as an operating property through December 31, 2023. Sold properties are properties that were sold subsequent to December 31, 2021. (Re)Developments include developments and redevelopments that were not: (a) substantially complete 12 months prior to January 1, 2022; or (b) stabilized prior to January 1, 2022. Other revenues are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, interest income and other miscellaneous revenues. Other property expenses are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, vacant land expenses and other miscellaneous regional expenses.

Our future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition, (re)development and sale of properties. Our future revenues and expenses may vary materially from historical rates.

For the years ended December 31, 2023 and 2022, the average occupancy rates of our same store properties were 97.4% and 98.0%, respectively.

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Revenues from same store properties increased $35.5 million primarily due to increases in rental rates and tenant recoveries, offset by a slight decrease in occupancy. Revenues from acquired properties increased $5.4 million due to the 15 industrial properties acquired subsequent to December 31, 2021 totaling approximately 0.6 million square feet of GLA. Revenues from sold properties decreased $12.0 million due to the 20 industrial properties sold subsequent to December 31, 2021 totaling approximately 3.2 million square feet of GLA. Revenues from (re)developments increased $36.0 million due to an increase in occupancy and tenant recoveries. Revenues from other increased $9.2 million due to joint venture fees, legal settlement proceeds, interest income earned on cash balances, revenues from income-producing land parcels for which our ultimate intent, for the majority of the land parcels, is to redevelop or develop in the future and revenues related to acquisitions that were not yet stabilized at December 31, 2021 and therefore are not yet included in the same store pool.

Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased $8.0 million primarily due to increases in real estate tax expense and insurance expense. Property expenses from acquired properties increased $1.2 million due to properties acquired subsequent to December 31, 2021. Property expenses from sold properties decreased $2.8 million due to properties sold subsequent to December 31, 2021. Property expenses from (re)developments increased $13.4 million primarily due to the substantial completion of developments. Property expenses from other increased $2.2 million primarily due to an increase in real estate tax expense related to land parcels purchased in 2022 and 2023 and an increase in certain miscellaneous expenses.

General and administrative expense increased by $3.1 million, or 9.3%, due to an increase in compensation and other professional costs.

Joint Venture development services expense increased by $2.8 million, or 303.4%, for the year ended December 31, 2023, which primarily relates to expenses paid to a third party to assist with the development of properties in the Joint Venture.

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Depreciation and other amortization from same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased $1.8 million due to properties acquired subsequent to December 31, 2021. Depreciation and other amortization from sold properties decreased $3.1 million due to properties sold subsequent to December 31, 2021. Depreciation and other amortization from (re)developments increased $14.3 million primarily due to an increase in depreciation and amortization related to completed developments. Depreciation from corporate furniture, fixtures and equipment and other increased $1.2 million primarily due to depreciation and amortization related to properties acquired that were not yet stabilized at December 31, 2021 and therefore are not yet included in the same store pool.

For the year ended December 31, 2023, we recognized $95.7 million of gain on sale of real estate related to the sale of eleven industrial properties comprising approximately 1.0 million square feet of GLA and two land parcels. For the year ended December 31, 2022, we recognized $128.3 million of gain on sale of real estate related to the sale of nine industrial properties comprising approximately 2.2 million square feet of GLA and one land parcel.

Interest expense increased $25.3 million, or 51.7%, primarily due to an increase in the weighted average interest rate for the year ended December 31, 2023 (4.05%) as compared to the year ended December 31, 2022 (3.41%), an increase in the weighted average debt balance outstanding for the year ended December 31, 2023 ($2,175.0 million) as compared to the year ended December 31, 2022 ($1,917.4 million) and a decrease in capitalized interest of $2.5 million caused by a decrease in development projects eligible for capitalization during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Amortization of debt issuance costs increased $0.4 million, or 13.8%, primarily due to debt issuance costs incurred during the year ended December 31, 2022 related to the issuance of a $300.0 million term loan.

Equity in income of joint venture decreased $82.7 million, or 72.0%, due to a decrease in our pro-rata share of gain from the sale of real estate by the Joint Venture and incentive fees related to the Joint Venture, partially offset by an increase in rental and interest income we earned from the Joint Venture. These amounts include our partner's 6% interest in the Joint Venture that we consolidate and report within our financial statements.

Income tax expense decreased $14.7 million, or 62.8%, primarily due to decreases in our share of taxable gains and incentive fees from the Joint Venture, partially offset by an increase in our share of equity in income from the Joint Venture related to increases in rental and interest income recognized by the Joint Venture.

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Comparison of Year Ended December 31, 2022 to Year Ended December 31, 2021

A discussion of changes in our results of operations between 2022 and 2021 can be found in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Year Ended December 31, 2022 to Year Ended December 31, 2021" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Critical Accounting Policies

A critical accounting policy is one that involves an estimate or assumption that is subjective and requires management judgment about the effect of a matter that is inherently uncertain and material to an entity's financial condition and results of operations. Of the significant accounting policies discussed in Note 2 to the Consolidated Financial Statements, we believe the following policies relate to the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements:

•Acquisitions of Real Estate Assets: We allocate the purchase price of acquired real estate, including real estate acquired as a portfolio, based upon the fair value of the assets acquired and liabilities assumed, which generally consists of land, buildings, tenant improvements, construction in progress, leasing commissions and deferred lease intangible assets and liabilities. The purchase price is allocated to the fair value of the tangible assets of an acquired property by valuing the property as if it were vacant. The determination of fair value includes the use of significant assumptions such as land comparables, discount rates, terminal capitalization rates and market rent assumptions. Acquired above and below market lease intangibles are valued based on the present value of the difference between prevailing market rental rates and the in-place rental rates measured over a period equal to the remaining term of the lease for above market leases or the remaining term of the lease plus the term of any below market fixed rate renewal options for below market leases. The purchase price is further allocated to in-place lease values based on an estimate of the lease revenue received during a reasonable lease-up period as if the property was vacant on the date of acquisition.

•Impairment of Real Estate Assets: We review the carrying value of our long-lived real estate assets for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. The judgments regarding the existence of indicators of impairment are based on the operating performance, market conditions, as well as our ability to hold and our intent with regard to each property. The judgments regarding whether the carrying amounts of these assets may not be recoverable are based on estimates of future undiscounted cash flows from properties which include estimates of future operating performance and market conditions. If any real estate investment is considered permanently impaired, a loss is recorded to reduce the carrying value of the property to its estimated fair value. The impairment assessment and fair value measurement requires the use of estimates and assumptions related to the timing and amounts of cash flow projections, discount rates and terminal capitalization rates.

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Liquidity and Capital Resources

Cash Flow Activity

The following table summarizes our cash flow activity for the Company for the years ended December 31, 2023 and 2022:

The following table summarizes our cash flow activity for the Operating Partnership for the years ended December 31, 2023 and 2022:

Changes in cash flow for the year ended December 31, 2023, compared to the prior year are described as follows:

Operating Activities: Cash provided by operating activities decreased $106.1 million, primarily due to the following:

•decrease in distributions from our Joint Venture of $110.6 million in 2023 as compared to 2022 due to funds received from a sale of real estate from our Joint Venture;

•increase of $25.3 million in interest expense; and

•decrease in accounts payable, accrued expenses, other liabilities, rents received in advance and security deposits due to timing of cash payments; offset by:

◦increase in net operating income from same store properties, acquired properties and recently developed properties of $54.3 million, offset by a decrease in net operating income due to the disposition of real estate of $9.2 million; and

◦decrease of $14.7 million in income tax provision.

Investing Activities: Cash used in investing activities decreased $250.8 million, primarily due to the following:

•decrease of $334.7 million related to the acquisition, development and investment in real estate attributable to fewer acquisitions and a reduction in expenditures related to developments under construction during the year ended December 31, 2023 as compared to the year ended December 31, 2022; and

•decrease of $4.3 million in escrow deposits; offset by:

◦decrease of $55.0 million in net proceeds received from the disposition of real estate in 2023 as compared to 2022; and

◦decrease of $36.1 million in net distributions from our Joint Venture in 2023 as compared to 2022.

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Financing Activities: Cash used in financing activities was $27.8 million for the year ended December 31, 2023 as compared to $304.5 million provided by financing activities for the year ended December 31, 2022, resulting in a decrease of cash provided by financing activities of $332.3 million, primarily due to the following:

•decrease of $465.0 million in proceeds from refinancing the expiring $260.0 million unsecured term loan with a $425.0 million unsecured term loan in 2022 and $300.0 million related to the new unsecured term loan we entered into in 2022;

•increase in dividend and unit distributions of $14.0 million due to the Company increasing the dividend rate in 2023 as well as an increase in common shares and Units outstanding;

•decrease of $12.8 million related to net proceeds from the issuance of 218,230 shares of the Company's common stock under our ATM in 2022; and

•increase in distributions to noncontrolling interests of $7.1 million in 2023 as compared to 2022; offset by:

◦increase in net borrowings under our Unsecured Credit Facility of $92.0 million in 2023 as compared to 2022;

◦decrease in repayments of mortgage loans payable of $69.1 million in 2023 compared to 2022; and

◦decrease in debt issuance costs of $5.1 million related to the $425.0 million unsecured term loan refinancing and $300.0 million unsecured term loan issuance.

Material Cash Requirements

At December 31, 2023, our cash and cash equivalents were $42.9 million, after excluding our Joint Venture partner's share of cash and cash equivalents that we consolidate and report in our financial statements. We also had $449.8 million available for additional borrowings under our Unsecured Credit Facility as of December 31, 2023.

We have considered our short-term (through December 31, 2024) liquidity needs and the adequacy of our estimated cash flow from operations and other expected liquidity sources to meet these needs. We believe that our principal short-term liquidity needs are to fund normal recurring expenses, property acquisitions, developments, renovations, expansions and other nonrecurring capital improvements, debt service requirements, the minimum distributions required to maintain the Company's REIT qualification under the Code and distributions approved by the Company's Board of Directors. We anticipate that these needs will be met with cash flows provided by operating activities as well as the disposition of select assets. These needs may also be met by the issuance of other debt or equity securities, subject to market conditions or borrowings under our Unsecured Credit Facility.

We expect to meet long-term (after December 31, 2024) liquidity requirements such as property acquisitions, developments, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through long-term unsecured and secured indebtedness, the disposition of select assets and the issuance of additional equity or debt securities, subject to market conditions.

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We believe that we were in compliance with our financial covenants as of December 31, 2023, and we anticipate that we will be able to operate in compliance with our financial covenants in 2024. However, these financial covenants are complex and there can be no assurance that these provisions would not be interpreted by our lenders and noteholders in a manner that could impose and cause us to incur material costs and our access to borrowings on our Unsecured Credit Facility may be limited if we fail to meet any of these covenants. Total debt, exclusive of unamortized debt issuance costs and unamortized discounts, at December 31, 2023 and 2022 is detailed below.

(A) These loans have a fixed interest rate.

(B) The interest rate is based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.85%. We have interest rate swaps, with an aggregate notional value of $200.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 1.81% at December 31, 2023. These interest rate swaps mature in February 2026.

(C) The interest rate is based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.85%. We have interest rate swaps, with an aggregate notional value of $425.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 3.64% at December 31, 2023. These interest rate swaps mature in September 2027.

(D) The interest rate is based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.85%. We have interest rate swaps, with an aggregate notional value of $300.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 4.88% at December 31, 2023. These interest rate swaps mature in December 2025 ($150.0 million notional) and August 2027 ($150.0 million notional). Weighted average maturity reflected in the table above assumes we extended the maturity pursuant to two, one-year extension options, subject to certain conditions.

(E) The interest rate is a variable rate based on SOFR, plus a 0.10% SOFR adjustment, plus a credit spread of 0.775% and a facility fee of 15 basis points. Our balance under our Unsecured Credit Facility changes depending on our cash needs and the interest rate and facility fee are each subject to adjustment based on our leverage and investment grade rating. Weighted average maturity reflected in the table above assumes we extended the maturity pursuant to two, six-month extension options, subject to certain conditions. As of February 14, 2024, we had approximately $409.9 million available for additional borrowings under our Unsecured Credit Facility.

As of December 31, 2023, our senior unsecured notes have been assigned credit ratings from Standard & Poor's, Moody's and Fitch Ratings of BBB/Stable, Baa2/Stable and BBB/Stable, respectively. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization. In the event of a downgrade, we believe we would continue to have access to sufficient capital; however, our cost of borrowing would increase and our ability to access certain financial markets may be limited.

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Our other material cash requirements from known contractual and other obligations as of December 31, 2023 include an estimate of remaining payments on the completion of development projects under construction for the Company of $113.8 million which includes all costs necessary to place the properties into service. In addition, the remaining estimated equity that the Company will need to contribute to complete the development projects in our Joint Venture is approximately $7.9 million. The majority of the construction costs and our proportionate share of equity contributions to the Joint Venture need to be funded in one year or less.

Off-Balance Sheet Arrangements

At December 31, 2023, we had letters of credit and performance bonds outstanding amounting to $20.7 million in the aggregate. The letters of credit and performance bonds are not reflected as liabilities on our balance sheet. We have no other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operation or liquidity and capital resources.

Environmental

We paid approximately $0.7 million and $0.6 million during the years ended December 31, 2023 and 2022, respectively, related to environmental expenditures. We estimate 2024 expenditures of approximately $2.1 million which has been accrued at December 31, 2023. We estimate that the aggregate expenditures which need to be expended in 2024 and beyond with regard to currently identified environmental issues will not exceed approximately $5.5 million which has been accrued at December 31, 2023.

Inflation

Prior to 2021, inflation had been low and had a minimal impact on the operating performance of our industrial properties in our markets of operation; however, inflation significantly increased in 2021 and 2022 and, while it moderated in 2023, it could increase in the future. Many of our leases contain provisions designed to mitigate the adverse impact of inflation, including contractual rent escalations and requirements for tenants to pay their proportionate share of property operating expenses, including common area expenses, utilities, insurance, and real estate taxes, and certain capital expenditures related to the maintenance of our properties, thereby reducing our exposure to increases in property operating expenses resulting from inflation. However, under our leases we typically have exposure to increases in non-reimbursable property operating expenses, including expenses incurred related to vacant premises. In addition, we believe that some of the existing rental rates under our leases subject to renewal are below current market rates for comparable space and that upon renewal or re-leasing, such rates may be increased to be consistent with, or closer to, current market rates, which may also offset our exposure to inflationary expense pressures related to our leased properties. We also have exposure to inflation with respect to our development portfolio, as increases in materials and other costs related to our development activities make it more expensive to develop properties. With respect to our outstanding indebtedness, we periodically evaluate our exposure to interest rate fluctuations, and may continue to enter into derivatives that mitigate, but do not eliminate, the impact of changes in interest rates on our Unsecured Credit Facility.

Market Risk

The following discussion about our risk-management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Our business subjects us to market risk from interest rates, as described below.

Interest Rate Risk

The following analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments which are held by us at December 31, 2023 that are sensitive to changes in interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast.

In the normal course of business, we also face risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis.

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At December 31, 2023, $1,933.5 million or 86.6% of our total debt, excluding unamortized debt issuance costs, was fixed rate debt. As of the same date, $299.0 million or 13.4% of our total debt, excluding unamortized debt issuance costs, was variable rate debt. At December 31, 2022, $1,933.8 million or 93.1% of our total debt, excluding unamortized debt issuance costs, was fixed rate debt. As of the same date, $143.0 million or 6.9% of our total debt, excluding unamortized debt issuance costs, was variable rate debt. At December 31, 2023 and 2022, the fixed rate debt amounts include variable rate debt that has been effectively swapped to a fixed rate through the use of derivative instruments with an aggregate notional amount outstanding of $925.0 million that mitigate our exposure to our Unsecured Term Loans' variable interest rates, which are currently based on SOFR. The use of derivative financial instruments allows us to manage risks of increases in interest rates with respect to the effect these fluctuations would have on our earnings and cash flows. We designated all of the swaps related to our Unsecured Term Loans as cash flow hedges. Currently, we do not enter into financial instruments for trading or other speculative purposes. See Material Cash Requirements for further details on the derivative instruments. As of December 31, 2023 and 2022, the estimated fair value of our debt was approximately $2,135.7 million and $1,945.4 million, respectively, based on our estimate of the then-current market interest rates.

For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not our earnings or cash flows. Conversely, for variable rate debt, changes in the base interest rate used to calculate the all-in interest rate generally do not impact the fair value of the debt, but would affect our future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on us until we are required to refinance such debt. See Note 4 to the Consolidated Financial Statements for a discussion of the maturity dates of our various fixed rate debt.

Our variable rate debt is subject to risk based upon prevailing market interest rates. If the SOFR and LIBOR rates relevant to our variable rate debt were to have increased 10%, we estimate that our interest expense during the years ended December 31, 2023 and 2022 would have increased by approximately $1.3 million and $0.8 million, respectively, based on our average outstanding floating-rate debt during the years ended December 31, 2023 and 2022. Additionally, if weighted average interest rates on our fixed rate debt were to have increased by 10% due to refinancing, interest expense would have increased by approximately $7.5 million and $5.5 million during the years ended December 31, 2023 and 2022.

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Supplemental Earnings Measure

Investors in and industry analysts following the real estate industry utilize funds from operations ("FFO") and net operating income ("NOI") as supplemental operating performance measures of an equity REIT. Historical cost accounting for real estate assets in accordance with accounting principles generally accepted in the United States of America ("GAAP") implicitly assumes that the value of real estate assets diminishes predictably over time through depreciation. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors prefer to supplement operating results that use historical cost accounting with measures such as FFO and NOI, among others. We provide information related to FFO and same store NOI ("SS NOI") both because such industry analysts are interested in such information, and because our management believes FFO and SS NOI are important performance measures. FFO and SS NOI are factors used by management in measuring our performance, including for purposes of determining the compensation of our executive officers under our 2023 incentive compensation plan.

Neither FFO nor SS NOI should be considered as a substitute for net income, or any other measures derived in accordance with GAAP. Neither FFO nor SS NOI represents cash generated from operating activities in accordance with GAAP and neither should be considered as an alternative to cash flow from operating activities as a measure of our liquidity, nor is either indicative of funds available for our cash needs, including our ability to make cash distributions.

Funds From Operations

The National Association of Real Estate Investment Trusts ("NAREIT") has recognized and defined for the real estate industry a supplemental measure of REIT operating performance, FFO, that excludes historical cost depreciation, among other items, from net income determined in accordance with GAAP. FFO is a non-GAAP financial measure. FFO is calculated by us in accordance with the definition adopted by the Board of Governors of NAREIT and therefore may not be comparable to other similarly titled measures of other companies.

Management believes that the use of FFO available to common stockholders and participating securities, combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Management believes that, by excluding gains or losses related to sales of real estate assets, real estate asset depreciation and amortization and impairment of real estate, investors and analysts are able to identify the operating results of the long-term assets that form the core of a REIT's activity and use these operating results for assistance in comparing these operating results between periods or to those of different companies.

The following table shows a reconciliation of net income available to common stockholders and participating securities to the calculation of FFO available to common stockholders and participating securities as follows:

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Same Store Net Operating Income

SS NOI is a non-GAAP financial measure that provides a measure of rental operations and, as calculated by us, that does not factor in joint venture fees, depreciation and amortization, general and administrative expense, joint venture development services expense, interest expense, equity in income and loss from joint ventures, income tax benefit and provision and gains and losses on the sale of real estate. We define SS NOI as revenues minus property expenses such as real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses, minus the NOI of properties that are not same store properties and minus the impact of straight-line rent, the amortization of above/below market leases and lease termination fees. As so defined, SS NOI may not be comparable to same store net operating income or similar measures reported by other REITs that define same store properties or NOI differently. The major factors influencing SS NOI are occupancy levels, rental rate increases or decreases and tenant recoveries increases or decreases. Our success depends largely upon our ability to lease space and to recover the operating costs associated with those leases from our tenants.

The following table shows a reconciliation of the same store revenues and property expenses disclosed in the results of operations (and reconciled to revenues and expenses reflected on the statements of operations) to SS NOI for the years ended December 31, 2023 and 2022.

Subsequent Events

From January 1, 2024 to February 14, 2024, we sold five industrial buildings and one land parcel for a sales price of approximately $33.0 million, excluding transaction costs.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections of this Form 10-K titled "Forward-Looking Statements" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.

Summary of 2022

Our operating results remained strong in 2022. Our year end in-service occupancy was 98.8%, which is a 70 basis point increase compared to our in-service occupancy at December 31, 2021. Also, during the year ended December 31, 2022, we grew cash rental rates by 26.7% on new and renewal leases. At December 31, 2022, we had 14 projects comprising 3.6 million square feet of GLA under development with an estimated investment of approximately $556 million. Additionally, we continue to position ourselves for future development activity by acquiring land located in our target markets.

In 2022, we completed the following significant real estate activities:

•We acquired 11 industrial properties comprised of approximately 0.5 million square feet of GLA located in our Northern California, Seattle, South Florida and Southern California markets for an aggregate purchase price of $137.1 million, excluding transaction costs. These properties were 100% leased at December 31, 2022. We additionally acquired three income-producing land parcels in our Northern California, Seattle and Southern California markets for an aggregate purchase price of $56.5 million, excluding transaction costs.

•We added to our development pipeline 116 acres of land located in our Central/Eastern Pennsylvania, Houston, Northern California, South Florida and Southern California markets for an aggregate purchase price of $105.5 million, excluding transaction costs.

•We placed in-service ten industrial properties comprising approximately 4.1 million square feet of GLA located in our Central/Eastern Pennsylvania, Dallas/Ft.Worth, Nashville, New Jersey, Phoenix, South Florida, and Southern California markets at an estimated total cost of $447.8 million. These properties were 100% leased at December 31, 2022.

•We commenced speculative development of 11 industrial buildings totaling 3.3 million square feet of GLA in our Central/Eastern Pennsylvania, Chicago, Denver, Lehigh Valley, Northern California, South Florida and Southern California markets.

•We sold nine industrial properties comprising approximately 2.2 million square feet of GLA and one land parcel for gross sales proceeds of $178.3 million.

•Our Joint Venture sold 391 acres of land located in Phoenix for gross proceeds of $255.3 million. Our pro-rata share of gain was $74.0 million and we earned an incentive fee of $27.6 million. These amounts exclude our minority partner's share that we consolidate and report in our financial statements as Noncontrolling Interest.

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We completed the following financing activities during the year ended December 31, 2022:

•We paid off $68.0 million in mortgage loans payable, increasing the percentage of our real estate that was unencumbered to 99.3% at December 31, 2022.

•We replaced our $260.0 million term loan that was scheduled to mature in September 2022 with a $425.0 million term loan that matures on October 18, 2027. Based on our current credit ratings and leverage and the related interest rate hedges with a notional value of $425.0 million that we entered into and commenced in October 2022, our all-in interest rate on this term loan is 3.64% at December 31, 2022.

•In November, we drew down the entire principal on a new $300.0 million term loan that matures in August, 2025 unless we extend the term, at our election, pursuant to two, one-year extension options at our election ("2022 Unsecured Term Loan II"). Based on our current credit ratings and leverage and the related interest rate hedges with a notional value of $300.0 million that we entered into and commenced in December 2022, our all-in interest rate on this term loan is 4.88% at December 31, 2022.

•We issued 218,230 shares of our common stock, through "at-the-market" ("ATM") offerings, resulting in net proceeds of $12.8 million.

•We declared an annual cash dividend of $1.18 per common share or Unit, an increase of 9.3% from 2021.

•At December 31, 2022, we had $604.1 million available for additional borrowings under our Unsecured Credit Facility and cash and cash equivalents and restricted cash was $132.2 million, after excluding our Joint Venture minority partner's share of cash and cash equivalents that we consolidate and report in our financial statements.

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Results of Operations

Comparison of Year Ended December 31, 2022 to Year Ended December 31, 2021

Our net income was $381.6 million and $277.2 million for the years ended December 31, 2022 and 2021, respectively.

The tables below summarize our revenues, property expenses and depreciation and other amortization by various categories for the years ended December 31, 2022 and 2021. Same store properties are properties owned prior to January 1, 2021 and held as an in-service property through December 31, 2022 and developments and redevelopments that were placed in service prior to January 1, 2021. Properties which are at least 75% occupied at acquisition are placed in service, unless we anticipate the tenants to move out within the first two years of ownership. Acquisitions that are less than 75% occupied at the date of acquisition, developments and redevelopments are placed in service as they reach the earlier of a) stabilized occupancy (defined as 90% occupied), or b) one year subsequent to acquisition or development/redevelopment construction completion. Acquired properties with occupancy greater than 75% at acquisition, but with tenants that we anticipate will move out within two years of ownership, will be placed in service upon the earlier of reaching 90% occupancy or twelve months after move out. Properties are moved from the same store classification to the redevelopment classification when capital expenditures for a project are estimated to exceed 25% of the undepreciated gross book value of the property. Acquired properties are properties that were acquired subsequent to December 31, 2020 and held as an operating property through December 31, 2022. Sold properties are properties that were sold subsequent to December 31, 2020. (Re)Developments include developments and redevelopments that were not: a) substantially complete 12 months prior to January 1, 2021; or b) stabilized prior to January 1, 2021. Other revenues are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company and other miscellaneous revenues. Other property expenses are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, vacant land expenses and other miscellaneous regional expenses.

Our future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition, (re)development and sale of properties. Our future revenues and expenses may vary materially from historical rates.

For the years ended December 31, 2022 and 2021, the average occupancy rates of our same store properties were 98.0% and 96.0%, respectively.

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Revenues from same store properties increased $37.5 million primarily due to an increase in rental rates and recoverable income from property expenses, an increase in occupancy and an insurance settlement gain of $1.4 million. Revenues from acquired properties increased $6.9 million due to the 15 industrial properties acquired subsequent to December 31, 2020 totaling approximately 0.7 million square feet of GLA. Revenues from sold properties decreased $13.6 million due to the 38 industrial properties sold subsequent to December 31, 2020 totaling approximately 5.1 million square feet of GLA. Revenues from (re)developments increased $23.9 million due to an increase in occupancy and tenant recoveries. Revenues from other increased $9.0 million due to revenues related to acquisitions that were not yet stabilized at December 31, 2020 and therefore are not yet included in the same store pool, revenues from income-producing land parcels for which our ultimate intent is to redevelop or develop in the future, joint venture development fees and interest income earned on our cash and cash equivalent balances.

Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased $5.0 million primarily due to increases in real estate tax expense, repairs and maintenance, insurance and property management expense. Property expenses from acquired properties increased $1.4 million due to properties acquired subsequent to December 31, 2020. Property expenses from sold properties decreased $2.8 million due to properties sold subsequent to December 31, 2020. Property expenses from (re)developments increased $4.6 million primarily due to the substantial completion of developments. Property expenses from other increased $4.2 million primarily due to an increase in real estate tax expense related to land parcels purchased in 2021 and 2022 and an increase in certain miscellaneous expenses.

General and administrative expense remained relatively unchanged.

Joint Venture development services expense of $0.9 million for the year ended December 31, 2022, are expenses paid to a third party to assist with the development of properties in the Joint Venture for which we earn Joint Venture Fees.

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Depreciation and other amortization from same store properties increased $3.4 million primarily due to improvements completed at our properties subsequent to December 31, 2021. Depreciation and other amortization from acquired properties increased $3.2 million due to properties acquired subsequent to December 31, 2020. Depreciation and other amortization from sold properties decreased $2.4 million due to properties sold subsequent to December 31, 2020. Depreciation and other amortization from (re)developments increased $10.3 million primarily due to an increase in depreciation and amortization related to completed developments. Depreciation from corporate furniture, fixtures and equipment and other increased $1.9 million due to depreciation and amortization related to properties acquired that were not yet stabilized at December 31, 2020 and therefore are not yet included in the same store pool.

For the year ended December 31, 2022, we recognized $128.3 million of gain on sale of real estate related to the sale of nine industrial properties comprising approximately 2.2 million square feet of GLA and one land parcel. For the year ended December 31, 2021, we recognized $150.3 million of gain on sale of real estate related to the sale of 29 industrial properties comprising approximately 2.9 million square feet of GLA and one land parcel.

Interest expense increased $4.9 million, or 11.1%, primarily due to an increase in the weighted average debt balance outstanding for the year ended December 31, 2022 ($1,917.4 million) as compared to the year ended December 31, 2021 ($1,631.9 million), offset by an increase in capitalized interest of $4.2 million caused by an increase in development projects eligible for capitalization during the year ended December 31, 2022 as compared to the year ended December 31, 2021, and a decrease in the weighted average interest rate for the year ended December 31, 2022 (3.41%) as compared to the year ended December 31, 2021 (3.45%).

Amortization of debt issuance costs decreased $0.2 million, or 6.9%, primarily due to mortgages paid off in 2021 and 2022.

Equity in income of Joint Ventures of $114.9 million for the year ended December 31, 2022 includes our pro-rata share of gain on sale of real estate by the Joint Venture of $84.1 million as well as incentive fees of $31.3 million we earned from the Joint Venture. These amounts include our partner's 6% interest in the Joint Venture that we consolidate and report within our financial statements. Equity in loss of Joint Ventures for the year ended December 31, 2021 was $0.2 million. However, during the year ended December 31, 2021, we deferred $10.2 million of equity in income and incentive fees earned from the sale of the remaining 138 acres of developable land from one of the Joint Ventures since the Company was the purchaser of the land. This deferral was netted against the basis of the land acquired.

Income tax expense increased $18.5 million, or 378.8%, primarily due to an increase in taxable gains and incentive fees one of our TRSs recognized from its share of equity in income from the Joint Ventures in the year ended December 31, 2022 compared to the year ended December 31, 2021.

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Comparison of Year Ended December 31, 2021 to Year Ended December 31, 2020

A discussion of changes in our results of operations between 2021 and 2020 can be found in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Year Ended December 31, 2021 to Year Ended December 31, 2020" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Critical Accounting Policies

A critical accounting policy is one that involves an estimate or assumption that is subjective and requires management judgment about the effect of a matter that is inherently uncertain and material to an entity's financial condition and results of operations. Of the significant accounting policies discussed in Note 2 to the Consolidated Financial Statements, we believe the following policies relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements:

•Acquisitions of Real Estate Assets: We allocate the purchase price of acquired real estate, including real estate acquired as a portfolio, based upon the fair value of the assets acquired and liabilities assumed, which generally consists of land, buildings, tenant improvements, construction in progress, leasing commissions and deferred lease intangible assets and liabilities. The purchase price is allocated to the fair value of the tangible assets of an acquired property by valuing the property as if it were vacant. The determination of fair value includes the use of significant assumptions such as land comparables, discount rates, terminal capitalization rates and market rent assumptions. Acquired above and below market lease intangibles are valued based on the present value of the difference between prevailing market rental rates and the in-place rental rates measured over a period equal to the remaining term of the lease for above market leases or the remaining term of the lease plus the term of any below market fixed rate renewal options for below market leases. The purchase price is further allocated to in-place lease values based on an estimate of the lease revenue received during a reasonable lease-up period as if the property was vacant on the date of acquisition.

•Impairment of Real Estate Assets: We review the carrying value of our long-lived real estate assets for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. The judgments regarding the existence of indicators of impairment are based on the operating performance, market conditions, as well as our ability to hold and our intent with regard to each property. The judgments regarding whether the carrying amounts of these assets may not be recoverable are based on estimates of future undiscounted cash flows from properties which include estimates of future operating performance and market conditions. If any real estate investment is considered permanently impaired, a loss is recorded to reduce the carrying value of the property to its estimated fair value. The impairment assessment and fair value measurement requires the use of estimates and assumptions related to the timing and amounts of cash flow projections, discount rates and terminal capitalization rates.

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Liquidity and Capital Resources

Cash Flow Activity

The following table summarizes our cash flow activity for the Company for the years ended December 31, 2022 and 2021:

The following table summarizes our cash flow activity for the Operating Partnership for the years ended December 31, 2022 and 2021:

Changes in cash flow for the year ended December 31, 2022, compared to the prior year are described as follows:

Operating Activities: Cash provided by operating activities increased $144.0 million for the Company (increased $143.9 million for the Operating Partnership), primarily due to the following:

•increase in distributions from our Joint Ventures of $118.0 million in 2022 as compared to 2021 due to funds received from a sale of real estate from our Joint Venture;

•increase in net operating income from same store properties, acquired properties and recently developed properties of $57.3 million, offset by a decrease in net operating income due to the disposition of real estate of $10.8 million; and

•increase in accounts payable, accrued expenses, other liabilities, rents received in advance and security deposits due to timing of cash payments; offset by:

◦increase in tenant accounts receivable, prepaid expenses and other assets due to timing of cash receipts.

Investing Activities: Cash used in investing activities increased $212.3 million, primarily due to the following:

•increase of $160.7 million related to the acquisition and development of real estate as well as payments for improvements and leasing commissions in 2022 as compared to 2021; and

•decrease of $59.3 million in net proceeds received from the disposition of real estate in 2022 as compared to 2021; offset by:

◦increase in net proceeds of $3.9 million resulting from distributions from and contributions to our Joint Ventures in 2022 as compared to 2021;

◦increase of $1.5 million related to the collection of insurance settlement proceeds; and

◦decrease of $4.0 million in escrow deposits.

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Financing Activities: Cash provided by financing activities increased $295.5 million for the Company (increased $295.6 million for the Operating Partnership), primarily due to the following:

•increase of $465.0 million in proceeds from refinancing the $260.0 million unsecured term loan with a $425.0 million unsecured term loan in 2022 and $300.0 million related to the new unsecured term loan we entered into in 2022; offset by:

◦decrease of $132.9 million related to net proceeds from the issuance of 218,230 shares of the Company's common stock under our ATM in 2022 as compared to the net proceeds from the issuance of 2,513,758 shares of the Company's common stock under our ATM in 2021;

◦increase in dividend and unit distributions of $15.6 million due to the Company increasing the dividend rate in 2022 as well as an increase in common shares and units outstanding;

◦decrease in net borrowings under our Unsecured Credit Facility of $15.0 million in 2022 as compared to 2021;

◦increase in repayments of mortgage loans payable of $5.0 million in 2022 compared to 2021; and

◦increase in net distributions to noncontrolling interests of $4.4 million in 2022 as compared to 2021.

Material Cash Requirements

At December 31, 2022, our combined restricted cash and cash and cash equivalents were $132.2 million, after excluding our Joint Venture partner's share of cash and cash equivalents that we consolidate and report in our financial statements. We also had $604.1 million available for additional borrowings under our Unsecured Credit Facility as of December 31, 2022.

We have considered our short-term (through December 31, 2023) liquidity needs and the adequacy of our estimated cash flow from operations and other expected liquidity sources to meet these needs. We believe that our principal short-term liquidity needs are to fund normal recurring expenses, property acquisitions, developments, renovations, expansions and other nonrecurring capital improvements, debt service requirements, the minimum distributions required to maintain the Company's REIT qualification under the Code and distributions approved by the Company's Board of Directors. We anticipate that these needs will be met with cash flows provided by operating activities as well as the disposition of select assets. These needs may also be met by the issuance of other debt or equity securities, subject to market conditions or borrowings under our Unsecured Credit Facility.

We expect to meet long-term (after December 31, 2023) liquidity requirements such as property acquisitions, developments, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through long-term unsecured and secured indebtedness, the disposition of select assets and the issuance of additional equity or debt securities, subject to market conditions.

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We believe that we were in compliance with our financial covenants as of December 31, 2022, and we anticipate that we will be able to operate in compliance with our financial covenants in 2023. However, these financial covenants are complex and there can be no assurance that these provisions would not be interpreted by our lenders and noteholders in a manner that could impose and cause us to incur material costs and our access to borrowings on our Unsecured Credit Facility may be limited if we fail to meet any of these covenants. Total debt, exclusive of unamortized debt issuance costs and unamortized discounts, at December 31, 2022 and 2021 is detailed below.

(A) These loans have a fixed interest rate.

(B) The interest rate is based on one-month LIBOR plus a spread of 0.85%. We have interest rate swaps, with an aggregate notional value of $200.0 million, that effectively fix the LIBOR rate that results in an all-in interest rate of 1.84% at December 31, 2022. These interest rate swaps mature in February 2026.

(C) The interest rate is based on one-month SOFR plus a spread of 0.85% plus a SOFR adjustment of 0.10%. We have interest rate swaps, with an aggregate notional value of $425.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 3.64% at December 31, 2022. These interest rate swaps mature in September 2027.

(D) The interest rate is based on daily SOFR plus a spread of 0.85% plus a SOFR adjustment of 0.10%.We have interest rate swaps, with an aggregate notional value of $300.0 million, that effectively fix the SOFR rate that results in an all-in interest rate of 4.88% at December 31, 2022. These interest rate swaps mature in December 2025 ($150.0 million notional) and August 2027 ($150.0 million notional). Weighted average maturity reflected in the table above assumes we extended the maturity pursuant to two, one-year extension options, subject to certain conditions.

(E) The interest rate is a variable rate based on one-month LIBOR plus 77.5 basis points and a facility fee of 15 basis points. Our balance under our Unsecured Credit Facility changes depending on our cash needs and the interest rate and facility fee are each subject to adjustment based on our leverage and investment grade rating. Weighted average maturity reflected in the table above assumes we extended the maturity pursuant to two, six-month extension options, subject to certain conditions. As of February 15, 2023, we had approximately $610.1 million available for additional borrowings under our Unsecured Credit Facility.

As of December 31, 2022, our senior unsecured notes have been assigned credit ratings from Standard & Poor's, Moody's and Fitch Ratings of BBB/Stable, Baa2/Stable and BBB/Stable, respectively. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization. In the event of a downgrade, we believe we would continue to have access to sufficient capital; however, our cost of borrowing would increase and our ability to access certain financial markets may be limited.

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Our other material cash requirements from known contractual and other obligations as of December 31, 2022 include an estimate of remaining payments on the completion of development projects under construction for the Company and our proportionate share of the Joint Venture of $263.1 million and $25.0 million, respectively, which includes all costs necessary to place the properties into service. The majority of these construction costs will need to be funded in one year or less.

Off-Balance Sheet Arrangements

At December 31, 2022, we had letters of credit and performance bonds outstanding amounting to $22.6 million in the aggregate. The letters of credit and performance bonds are not reflected as liabilities on our balance sheet. We have no other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operation or liquidity and capital resources.

Environmental

We paid approximately $0.6 million and $1.0 million during the years ended December 31, 2022 and 2021, respectively, related to environmental expenditures. We estimate 2023 expenditures of approximately $2.0 million which has been accrued at December 31, 2022. We estimate that the aggregate expenditures which need to be expended in 2023 and beyond with regard to currently identified environmental issues will not exceed approximately $5.9 million which has been accrued at December 31, 2022.

Inflation

Prior to 2021, inflation had been low and had a minimal impact on the operating performance of our industrial properties in our markets of operation; however, inflation has significantly increased in 2021 and 2022 and may continue to be elevated or increase further. Many of our leases contain provisions designed to mitigate the adverse impact of inflation, including contractual rent escalations and requirements for tenants to pay their proportionate share of property operating expenses, including common area expenses, utilities, insurance, and real estate taxes, and certain capital expenditures related to the maintenance of our properties, thereby reducing our exposure to increases in property operating expenses resulting from inflation. However, under our leases we typically have exposure to increases in non-reimbursable property operating expenses, including expenses incurred related to vacant premises. In addition, we believe that some of the existing rental rates under our leases subject to renewal are below current market rates for comparable space and that upon renewal or re-leasing, such rates may be increased to be consistent with, or closer to, current market rates, which may also offset our exposure to inflationary expense pressures related to our leased properties. We also have exposure to inflation with respect to our development portfolio, as increases in materials and other costs related to our development activities make it more expensive to develop properties. With respect to our outstanding indebtedness, we periodically evaluate our exposure to interest rate fluctuations, and may continue to enter into derivatives that mitigate, but do not eliminate, the impact of changes in interest rates on our Unsecured Credit Facility.

Market Risk

The following discussion about our risk-management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Our business subjects us to market risk from interest rates, as described below.

Interest Rate Risk

The following analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments which are held by us at December 31, 2022 that are sensitive to changes in interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast.

In the normal course of business, we also face risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis.

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The Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after June 30, 2023. As a result, in the U.S., the Federal Reserve Board and the Federal Reserve Bank of New York identified the SOFR as its preferred alternative rate for USD LIBOR in debt and derivative financial instruments. As of December 31, 2022, our Unsecured Credit Facility, our 2021 Unsecured Term Loan and related interest rate swaps are indexed to LIBOR. Our loan documents contain provisions that contemplate alternative methods to determine the base rate applicable to our LIBOR-indexed debt to the extent LIBOR-indexed rates are not available. We plan to modify the affected debt agreements and the related interest rate swaps prior to June 2023 and do not anticipate the modifications will have a material impact on our Consolidated Financial Statements.

At December 31, 2022, $1,933.8 million or 93.1% of our total debt, excluding unamortized debt issuance costs, was fixed rate debt. As of the same date, $143.0 million or 6.9% of our total debt, excluding unamortized debt issuance costs, was variable rate debt. At December 31, 2021, $1,538.3 million or 95.1% of our total debt, excluding unamortized debt issuance costs, was fixed rate debt. As of the same date, $79.0 million or 4.9% of our total debt, excluding unamortized debt issuance costs, was variable rate debt. At December 31, 2022 and 2021, the fixed rate debt amounts include variable rate debt that has been effectively swapped to a fixed rate through the use of derivative instruments with an aggregate notional amount outstanding of $925.0 million and $460.0 million, respectively, that mitigate our exposure to our Unsecured Term Loans' variable interest rates, which are based on LIBOR and SOFR. The use of derivative financial instruments allows us to manage risks of increases in interest rates with respect to the effect these fluctuations would have on our earnings and cash flows. We designated all of the swaps related to our Unsecured Term Loans as cash flow hedges. Currently, we do not enter into financial instruments for trading or other speculative purposes. See Material Cash Requirements for further details on the derivative instruments. As of December 31, 2022 and 2021, the estimated fair value of our debt was approximately $1,945.4 million and $1,691.3 million, respectively, based on our estimate of the then-current market interest rates.

For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not our earnings or cash flows. Conversely, for variable rate debt, changes in the base interest rate used to calculate the all-in interest rate generally do not impact the fair value of the debt, but would affect our future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on us until we are required to refinance such debt. See Note 4 to the Consolidated Financial Statements for a discussion of the maturity dates of our various fixed rate debt.

Our variable rate debt is subject to risk based upon prevailing market interest rates. If the LIBOR and SOFR rates relevant to our variable rate debt were to have increased 10%, we estimate that our interest expense during the years ended December 31, 2022 and 2021 would have increased by approximately $0.8 million and $0.01 million, respectively, based on our average outstanding floating-rate debt during the years ended December 31, 2022 and 2021. Additionally, if weighted average interest rates on our fixed rate debt were to have increased by 10% due to refinancing, interest expense would have increased by approximately $5.5 million and $5.6 million during the years ended December 31, 2022 and 2021.

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Supplemental Earnings Measure

Investors in and industry analysts following the real estate industry utilize funds from operations ("FFO") and net operating income ("NOI") as supplemental operating performance measures of an equity REIT. Historical cost accounting for real estate assets in accordance with accounting principles generally accepted in the United States of America ("GAAP") implicitly assumes that the value of real estate assets diminishes predictably over time through depreciation. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors prefer to supplement operating results that use historical cost accounting with measures such as FFO and NOI, among others. We provide information related to FFO and same store NOI ("SS NOI") both because such industry analysts are interested in such information, and because our management believes FFO and SS NOI are important performance measures. FFO and SS NOI are factors used by management in measuring our performance, including for purposes of determining the compensation of our executive officers under our 2022 incentive compensation plan.

Neither FFO nor SS NOI should be considered as a substitute for net income, or any other measures derived in accordance with GAAP. Neither FFO nor SS NOI represents cash generated from operating activities in accordance with GAAP and neither should be considered as an alternative to cash flow from operating activities as a measure of our liquidity, nor is either indicative of funds available for our cash needs, including our ability to make cash distributions.

Funds From Operations

The National Association of Real Estate Investment Trusts ("NAREIT") has recognized and defined for the real estate industry a supplemental measure of REIT operating performance, FFO, that excludes historical cost depreciation, among other items, from net income determined in accordance with GAAP. FFO is a non-GAAP financial measure. FFO is calculated by us in accordance with the definition adopted by the Board of Governors of NAREIT and therefore may not be comparable to other similarly titled measures of other companies.

Management believes that the use of FFO available to common stockholders and participating securities, combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Management believes that, by excluding gains or losses related to sales of real estate assets, real estate asset depreciation and amortization and impairment of real estate, investors and analysts are able to identify the operating results of the long-term assets that form the core of a REIT's activity and use these operating results for assistance in comparing these operating results between periods or to those of different companies.

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The following table shows a reconciliation of net income available to common stockholders and participating securities to the calculation of FFO available to common stockholders and participating securities as follows:

(A) In December 2018, NAREIT issued a white paper restating the definition of FFO. The restated definition provides an option to include or exclude gains and losses as well as impairment of non-depreciable real estate if the sales are deemed incidental. Prior to January 1, 2019, we included gains and losses on sales and impairment of our non-depreciable real estate in our calculation of NAREIT FFO. On January 1, 2019, we adopted the restated definition of NAREIT FFO on a prospective basis and began excluding gains and losses on sales and impairment of our non-depreciable real estate that we deem incidental. We also exclude the same adjustments from our share of net income from unconsolidated joint ventures.

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Same Store Net Operating Income

SS NOI is a non-GAAP financial measure that provides a measure of rental operations and, as calculated by us, that does not factor in depreciation and amortization, general and administrative expense, interest expense, equity in income and loss from joint ventures, income tax benefit and provision and gains and losses on the sale of real estate. We define SS NOI as revenues minus property expenses such as real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses, minus the NOI of properties that are not same store properties and minus the impact of straight-line rent, the amortization of above/below market leases and lease termination fees. As so defined, SS NOI may not be comparable to same store net operating income or similar measures reported by other REITs that define same store properties or NOI differently. The major factors influencing SS NOI are occupancy levels, rental rate increases or decreases and tenant recoveries increases or decreases. Our success depends largely upon our ability to lease space and to recover the operating costs associated with those leases from our tenants.

The following table shows a reconciliation of the same store revenues and property expenses disclosed in the results of operations (and reconciled to revenues and expenses reflected on the statements of operations) to SS NOI for the years ended December 31, 2022 and 2021.

Subsequent Events

From January 1, 2023 to February 15, 2023, we acquired one industrial building for a purchase price of approximately $6.0 million, excluding transaction costs.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections of this Form 10-K titled "Forward-Looking Statements" and "Selected Financial Data" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.

Summary of 2021

Despite the COVID-19 pandemic, our operating results remained strong in 2021. Our year end in-service occupancy was 98.1%, which is a 240 basis point increase compared to our in-service occupancy at December 31, 2020. Also, during the year ended December 31, 2021, we grew cash rental rates by 16.2% on new and renewal leases. After resuming speculative development in the fourth quarter of 2020, we started 16 additional speculative buildings and one build-to-suit building comprising, in the aggregate, 5.8 million square feet of GLA during the year ended December 31, 2021. We continued to position ourselves for future development activity by acquiring land located in our target markets. Although the impact of COVID-19 pandemic has had an overall minimal impact on us in 2021, we cannot predict the future impact it may have on our business, future financial condition and operating results.

In 2021, we completed the following significant real estate activities:

•We added to our development pipeline 750 acres of land located in our Central Florida, Central New Jersey, Central Pennsylvania, Denver, Inland Empire, Northern California, Philadelphia, Phoenix and Seattle markets for an aggregate purchase price of $300.0 million, excluding transaction costs.

•We placed in-service seven industrial properties comprising approximately 0.9 million square feet of GLA located in our Inland Empire, Philadelphia and South Florida markets at an estimated total cost of $98.2 million. These properties were 100% leased at December 31, 2021.

•We commenced speculative development of 16 industrial buildings and one build-to-suit facility totaling 5.8 million square feet of GLA in our Central Florida, Central New Jersey, Central Pennsylvania, Dallas/Fort Worth, Denver, Inland Empire, Nashville, Phoenix, Seattle and South Florida markets.

•We acquired four industrial properties comprised of approximately 0.2 million square feet of GLA located in the Central Florida, Denver and Northern California markets for an aggregate purchase price of $38.7 million, excluding transactions costs. These properties were 56% leased at December 31, 2021.

•We sold 29 industrial properties comprising approximately 2.9 million square feet of GLA and one land parcel for gross sales proceeds of $243.4 million.

•One of the Joint Ventures sold its remaining 138 acres (for which the Company was the purchaser and such land purchase is included above) for a sale price of $31.8 million. We netted our share of gain on sale and incentive fees of $10.2 million against the basis of the land.

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We completed the following financing activities during the year ended December 31, 2021:

•We amended and restated our Unsecured Credit Facility, extending the maturity date to July 7, 2025 and increasing our borrowing capacity thereunder to $750.0 million. The current credit spread under this facility is 32.5 basis points lower than the spread on the prior facility.

•We amended and restated our $200.0 million 2020 Unsecured Term Loan, extending the maturity date to July 7, 2026. The current credit spread under this loan is 65 basis points lower than the spread on the 2020 Unsecured Term Loan.

•We paid off $60.5 million in mortgage loans payable, increasing the percentage of our real estate that was unencumbered to 95.9% at December 31, 2021.

•We issued 2,513,758 shares of our common stock, through "at-the-market" ("ATM") offerings, resulting in net proceeds of $145.8 million.

•We declared an annual cash dividend of $1.08 per common share or Unit, an increase of 8.0% from 2020.

•At December 31, 2021, we had $666.3 million available for additional borrowings under our Unsecured Credit Facility and cash and cash equivalents was $58.6 million.

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Results of Operations

Comparison of Year Ended December 31, 2021 to Year Ended December 31, 2020

Our net income was $277.2 million and $200.2 million for the years ended December 31, 2021 and 2020, respectively.

The tables below summarize our revenues, property expenses and depreciation and other amortization by various categories for the years ended December 31, 2021 and 2020. Same store properties are properties owned prior to January 1, 2020 and held as an in-service property through December 31, 2021 and developments and redevelopments that were placed in service prior to January 1, 2020. Properties which are at least 75% occupied at acquisition are placed in service, unless we anticipate the tenants to move out within the first two years of ownership. Acquisitions that are less than 75% occupied at the date of acquisition, developments and redevelopments are placed in service as they reach the earlier of a) stabilized occupancy (defined as 90% occupied), or b) one year subsequent to acquisition or development/redevelopment construction completion. Acquired properties with occupancy greater than 75% at acquisition, but with tenants that we anticipate will move out within two years of ownership, will be placed in service upon the earlier of reaching 90% occupancy or twelve months after move out. Properties are moved from the same store classification to the redevelopment classification when capital expenditures for a project are estimated to exceed 25% of the undepreciated gross book value of the property. Acquired properties are properties that were acquired subsequent to December 31, 2019 and held as an operating property through December 31, 2021. Sold properties are properties that were sold subsequent to December 31, 2019. (Re)Developments include developments and redevelopments that were not: a) substantially complete 12 months prior to January 1, 2020; or b) stabilized prior to January 1, 2020. Other revenues are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company and other miscellaneous revenues. Other property expenses are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, vacant land expenses and other miscellaneous regional expenses.

During the year ended December 31, 2016, one industrial property, comprising approximately 28 thousand square feet of GLA, was taken out of service due to a fire which caused complete destruction of the building. The results of this property are included in the (re)development classification. During the year ended December 31, 2019, we completed the rebuild of this property and as of December 31, 2019, the property was 100% leased. This property returned to the same store classification in the first quarter 2021.

Our future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition, (re)development and sale of properties. Our future revenues and expenses may vary materially from historical rates.

For the years ended December 31, 2021 and 2020, the average occupancy rates of our same store properties were 96.8% and 96.6%, respectively.

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Revenues from same store properties increased $24.6 million primarily due to an increase in rental rates and recoverable income from property expenses and a decrease in bad debt reserves taken on tenant accounts receivable, offset by final insurance settlement proceeds of $1.1 million received and recorded in 2020 as revenue related to a property that was destroyed by fire in 2016. Revenues from acquired properties increased $9.4 million due to the 12 industrial properties acquired subsequent to December 31, 2019 totaling approximately 1.7 million square feet of GLA. Revenues from sold properties decreased $18.4 million due to the 58 industrial properties sold subsequent to December 31, 2019 totaling approximately 4.8 million square feet of GLA. Revenues from (re)developments increased $17.4 million due to an increase in occupancy and tenant recoveries. Revenues from other decreased $4.7 million primarily due to final insurance settlement proceeds of $5.4 million received and recorded in 2020 related to a property that was destroyed by fire in 2017, offset by revenues related to acquisitions of partially occupied properties during 2019 that were not yet stabilized at December 31, 2019 and therefore are not yet included in the same store pool.

Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased $8.6 million primarily due to an increase in real estate tax expense, insurance and snow removal costs. Property expenses from acquired properties increased $1.3 million due to properties acquired subsequent to December 31, 2019. Property expenses from sold properties decreased $3.6 million due to properties sold subsequent to December 31, 2019. Property expenses from (re)developments increased $3.5 million primarily due to the substantial completion of developments. Property expenses from other increased $2.3 million primarily due to an increase in certain miscellaneous expenses.

General and administrative expense increased by $1.8 million, or 5.4%, primarily due to an increase in compensation, offset by severance and regional wind-down expenses associated with the closing of our Indianapolis office during the year ended December 31, 2020.

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Depreciation and other amortization from same store properties decreased $4.1 million primarily due to accelerated depreciation and amortization recognized during the year ended December 31, 2020 attributable to the early termination of certain tenants' leases. Depreciation and other amortization from acquired properties increased $5.1 million due to properties acquired subsequent to December 31, 2019. Depreciation and other amortization from sold properties decreased $4.3 million due to properties sold subsequent to December 31, 2019. Depreciation and other amortization from (re)developments increased $4.8 million primarily due to an increase in depreciation and amortization related to completed developments. Depreciation from corporate furniture, fixtures and equipment and other remained relatively unchanged.

For the year ended December 31, 2021, we recognized $150.3 million of gain on sale of real estate related to the sale of 29 industrial properties comprising approximately 2.9 million square feet of GLA and one land parcel. For the year ended December 31, 2020, we recognized $86.8 million of gain on sale of real estate related to the sale of 29 industrial properties comprising approximately 1.9 million square feet of GLA.

Interest expense decreased $7.2 million, or 14.0%, primarily due to an increase in capitalized interest of $5.3 million caused by an increase in development projects eligible for capitalization during the year ended December 31, 2021 as compared to the year ended December 31, 2020, and a decrease in the weighted average interest rate for the year ended December 31, 2021 (3.45%) as compared to the year ended December 31, 2020 (3.65%), partially offset by an increase in the weighted average debt balance outstanding for the year ended December 31, 2021 ($1,631.9 million) as compared to the year ended December 31, 2020 ($1,593.5 million).

Amortization of debt issuance costs remained relatively unchanged.

Equity in loss of Joint Ventures for the year ended December 31, 2021 was $0.2 million. However, during the year ended December 31, 2021, we deferred $10.2 million of equity in income and incentive fees earned from the sale of the remaining 138 acres of developable land from one of the Joint Ventures since the Company was the purchaser of the land. This deferral was netted against the basis of the land acquired. Equity in income of Joint Ventures for the year ended December 31, 2020 was $4.2 million which primarily consists of our pro-rata share of gain related to the sale of real estate and accrued incentive fees.

Income tax expense increased $2.5 million, or 102.6%, primarily due to taxable gains from the sales of real estate from one of our TRSs in 2021.

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Comparison of Year Ended December 31, 2020 to Year Ended December 31, 2019

A discussion of changes in our results of operations between 2020 and 2019 can be found in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Year Ended December 31, 2020 to Year Ended December 31, 2019" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Critical Accounting Policies

A critical accounting policy is one that involves an estimate or assumption that is subjective and requires management judgment about the effect of a matter that is inherently uncertain and material to an entity's financial condition and results of operations. Of the significant accounting policies discussed in Note 2 to the Consolidated Financial Statements, we believe the following policies relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements:

•Acquisitions of Real Estate Assets: We allocate the purchase price of acquired real estate, including real estate acquired as a portfolio, based upon the fair value of the assets acquired and liabilities assumed, which generally consists of land, buildings, tenant improvements, construction in progress, leasing commissions and lease intangibles including in-place leases and above market and below market lease assets and liabilities. The purchase price is allocated to the fair value of the tangible assets of an acquired property by valuing the property as if it were vacant. The determination of fair value includes the use of significant assumptions such as land comparables, discount rates, terminal capitalization rates and market rent assumptions. Acquired above and below market lease intangibles are valued based on the present value of the difference between prevailing market rental rates and the in-place rental rates measured over a period equal to the remaining term of the lease for above market leases or the remaining term of the lease plus the term of any below market fixed rate renewal options for below market leases. The purchase price is further allocated to in-place lease values based on an estimate of the lease revenue received during a reasonable lease-up period as if the property was vacant on the date of acquisition.

•Impairment of Real Estate Assets: We review our tangible and intangible real estate assets held for use for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. The judgments regarding the existence of indicators of impairment are based on the operating performance, market conditions, as well as our ability to hold and our intent with regard to each property. The judgments regarding whether the carrying amounts of these assets may not be recoverable are based on estimates of future undiscounted cash flows from properties which include estimates of future operating performance and market conditions. If any real estate investment is considered permanently impaired, a loss is recorded to reduce the carrying value of the property to its estimated fair value. The impairment assessment and fair value measurement requires the use of estimates and assumptions related to the timing and amounts of cash flow projections, discount rates and terminal capitalization rates.

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Liquidity and Capital Resources

At December 31, 2021, our cash and cash equivalents were approximately $58.6 million. We also had $666.3 million available for additional borrowings under our Unsecured Credit Facility as of December 31, 2021.

We have considered our short-term (through December 31, 2022) liquidity needs and the adequacy of our estimated cash flow from operations and other expected liquidity sources to meet these needs. We have a $260.0 million term loan maturing in September 2022 and we have $69.2 million in mortgage loans payable outstanding at December 31, 2021 maturing in September 2022. We expect to satisfy these payment obligations on or prior to the maturity dates through the issuance of other debt or equity securities. With the exception of the $260.0 million term loan and the mortgage maturities, we believe that our principal short-term liquidity needs are to fund normal recurring expenses, property acquisitions, developments, renovations, expansions and other nonrecurring capital improvements, debt service requirements, the minimum distributions required to maintain the Company's REIT qualification under the Code and distributions approved by the Company's Board of Directors. We anticipate that these needs will be met with cash flows provided by operating activities as well as the disposition of select assets. These needs may also be met by the issuance of other debt or equity securities, subject to market conditions or borrowings under our Unsecured Credit Facility.

We expect to meet long-term (after December 31, 2022) liquidity requirements such as property acquisitions, developments, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through long-term unsecured and secured indebtedness, the disposition of select assets and the issuance of additional equity or debt securities, subject to market conditions.

As of February 17, 2022, we had approximately $570.3 million available for additional borrowings under our Unsecured Credit Facility. Our Unsecured Credit Facility contains certain financial covenants including limitations on incurrence of debt and debt service coverage. Our access to borrowings may be limited if we fail to meet any of these covenants. We believe that we were in compliance with our financial covenants as of December 31, 2021, and we anticipate that we will be able to operate in compliance with our financial covenants in 2022. However, these financial covenants are complex and there can be no assurance that these provisions would not be interpreted by our lenders and noteholders in a manner that could impose and cause us to incur material costs.

As of December 31, 2021, our senior unsecured notes have been assigned credit ratings from Standard & Poor's, Moody's and Fitch Ratings of BBB/Stable, Baa2/Stable and BBB/Stable, respectively. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization. In the event of a downgrade, we believe we would continue to have access to sufficient capital; however, our cost of borrowing would increase and our ability to access certain financial markets may be limited.

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Cash Flow Activity

The following table summarizes our cash flow activity for the Company for the years ended December 31, 2021 and 2020:

The following table summarizes our cash flow activity for the Operating Partnership for the years ended December 31, 2021 and 2020:

Changes in cash flow for the year ended December 31, 2021, compared to the prior year are described as follows:

Operating Activities: Cash provided by operating activities increased $26.5 million for the Company (increased $25.9 million for the Operating Partnership), primarily due to the following:

•increase in net operating income from same store properties, acquired properties and recently developed properties of $38.0 million, offset by a decrease in net operating income due to the disposition of real estate of $14.8 million; and

•increase in accounts payable, accrued expenses, other liabilities, rents received in advance and security deposits due to timing of cash payments; offset by:

◦increase in tenant accounts receivable, prepaid expenses and other assets due to timing of cash receipts.

Investing Activities: Cash used in investing activities increased $165.1 million, primarily due to the following:

•increase of $248.3 million related to the acquisition and development of real estate as well as payments for improvements and leasing commissions in 2021 as compared to 2020; and

•decrease of $6.5 million related to the collection of insurance settlement proceeds in 2020; offset by:

◦increase in distributions from and a decrease in contributions to our Joint Ventures resulting in a net reduction of $42.7 million in 2021 as compared to 2020;

◦increase of $30.9 million in net proceeds received from the disposition of real estate in 2021 as compared to 2020; and

◦decrease of $16.2 million in escrow and other balances.

Financing Activities: Cash provided by financing activities decreased $49.2 million for the Company (decreased $48.7 million for the Operating Partnership), primarily due to the following:

•decrease of $300.0 million related to the issuance of unsecured notes in a private placement in 2020;

•increase in repayments of mortgage loans payable of $34.3 million in 2021 compared to 2020;

•increase in dividend and unit distributions of $12.4 million due to the Company raising the dividend rate in 2021; and

•increase in debt and equity issuance costs of $3.1 million in 2021 compared to 2020; offset by:

◦increase in net borrowings from our Unsecured Credit Facility of $237.0 million in 2021 compared to 2020; and

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◦increase of $67.0 million related to net proceeds from the issuance of 2,513,758 shares of the Company's common stock under our ATM in 2021 as compared to the net proceeds from the issuance of 1,842,281 shares of the Company's common stock under our ATM in 2020.

Contractual Obligations and Commitments

The following table lists our contractual obligations and commitments as of December 31, 2021:

_______________

(A)Not on balance sheet.

(B)Represents estimated remaining payments on the completion of development projects under construction. Estimated remaining costs include all costs necessary to place the properties into service and could extend beyond one year.

(C)Excludes interest expense on our Unsecured Credit Facility. Includes interest expense on our unsecured term loans, inclusive of the impact of interest rate swaps which effectively swap the variable interest rate to a fixed interest rate. Due to the maturity of three interest rate swaps in February 2026, the remaining interest expense payments on our outstanding $200 million unsecured term loan is an estimate based on LIBOR and our current spread as of December 31, 2021, which is an interest rate of 0.94925%.

(D)Represents fees on our Unsecured Credit Facility which has a contractual maturity in July 2025.

Off-Balance Sheet Arrangements

At December 31, 2021, we had letters of credit and performance bonds outstanding amounting to $24.9 million in the aggregate. The letters of credit and performance bonds are not reflected as liabilities on our balance sheet. We have no other off-balance sheet arrangements, as defined in Item 303 of Regulation S-K, other than those disclosed on the Contractual Obligations and Commitments table above that have or are reasonably likely to have a current or future effect on our financial condition, results of operation or liquidity and capital resources.

Environmental

We paid approximately $1.0 million and $1.1 million during the years ended December 31, 2021 and 2020, respectively, related to environmental expenditures. We estimate 2022 expenditures of approximately $2.2 million which has been accrued at December 31, 2021. We estimate that the aggregate expenditures which need to be expended in 2022 and beyond with regard to currently identified environmental issues will not exceed approximately $5.4 million which has been accrued at December 31, 2021.

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Inflation

Prior to 2021, inflation had been low and had a minimal impact on the operating performance of our industrial properties in our markets of operation; however, inflation has significantly increased in 2021 and may continue to be elevated or increase further. Many of our leases contain provisions designed to mitigate the adverse impact of inflation, including contractual rent escalations and requirements for tenants to pay their proportionate share of property operating expenses, including common area expenses, utilities, insurance, and real estate taxes, and certain capital expenditures related to the maintenance of our properties, thereby reducing our exposure to increases in property operating expenses resulting from inflation. However, under our leases we typically have exposure to increases in non-reimbursable property operating expenses, including expenses incurred related to vacant premises. In addition, we believe that some of the existing rental rates under our leases subject to renewal are below current market rates for comparable space and that upon renewal or re-leasing, such rates may be increased to be consistent with, or closer to, current market rates, which may also offset our exposure to inflationary expense pressures related to our leased properties. We also have exposure to inflation with respect to our development portfolio, as increases in materials and other costs related to our development activities make it more expensive to develop properties. With respect to our outstanding indebtedness, we periodically evaluate our exposure to interest rate fluctuations, and may continue to enter into derivatives that mitigate, but do not eliminate, the impact of changes in interest rates on our variable rate loans.

Market Risk

The following discussion about our risk-management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Our business subjects us to market risk from interest rates, as described below.

Interest Rate Risk

The following analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments which are held by us at December 31, 2021 that are sensitive to changes in interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast.

In the normal course of business, we also face risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis.

At December 31, 2021, $1,538.3 million or 95.1% of our total debt, excluding unamortized debt issuance costs, was fixed rate debt. As of the same date, $79.0 million or 4.9% of our total debt, excluding unamortized debt issuance costs, was variable rate debt. At December 31, 2020, $1,602.7 million or 100% of our total debt, excluding unamortized debt issuance costs, was fixed rate debt. Fixed rate debt for both years includes $460.0 million of variable-rate debt that has been effectively swapped to a fixed rate through the use of derivative instruments.

For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not our earnings or cash flows. Conversely, for variable rate debt, changes in the base interest rate used to calculate the all-in interest rate generally do not impact the fair value of the debt, but would affect our future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on us until we are required to refinance such debt. See Note 4 to the Consolidated Financial Statements for a discussion of the maturity dates of our various fixed rate debt.

Our variable rate debt is subject to risk based upon prevailing market interest rates. If the LIBOR rates relevant to our variable rate debt were to have increased 10%, we estimate that our interest expense during the years ended December 31, 2021 and 2020 would have increased by approximately $0.01 million and $0.09 million, respectively, based on our average outstanding floating-rate debt during the years ended December 31, 2021 and 2020. Additionally, if weighted average interest rates on our fixed rate debt were to have increased by 10% due to refinancing, interest expense would have increased by approximately $5.6 million and $5.7 million during the years ended December 31, 2021 and 2020.

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The Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after June 30, 2023. As a result, in the U.S., the Federal Reserve Board and the Federal Reserve Bank of New York identified the Secured Overnight Financing Rate as its preferred alternative rate for USD LIBOR in debt and derivative financial instruments. Our Unsecured Credit Facility, our unsecured term loans and related interest rate swaps are indexed to LIBOR. Our loan documents contain provisions that contemplate alternative methods to determine the base rate applicable to our LIBOR-indexed debt to the extent LIBOR-indexed rates are not available. Additionally, no mandatory prepayment or redemption provisions would be triggered under our loan documents in the event that the LIBOR-indexed rates are not available. If our debt agreements and derivative contracts are not transitioned to a preferred alternative rate and LIBOR-indexed rates are discontinued or if the methods of calculating the rates change, interest rates on our current or future indebtedness may be adversely affected. While we currently expect LIBOR-indexed rates to be available until June 30, 2023, it is possible that they will become unavailable prior to that time. We anticipate managing the transition to a preferred alternative rate using the language set out in our agreements, however, future market conditions may not allow immediate implementation of desired modifications and we may incur significant associated costs in doing so. We will continue to monitor and evaluate the potential impact on our debt payments and value of our related debt, however, we are not able to predict when LIBOR-indexed rates will cease to be available.

As of December 31, 2021 and 2020, the estimated fair value of our debt was approximately $1,691.3 million and $1,703.2 million, respectively, based on our estimate of the then-current market interest rates.

The use of derivative financial instruments allows us to manage risks of increases in interest rates with respect to the effect these fluctuations would have on our earnings and cash flows. As of December 31, 2021 and 2020, we had derivative instruments with a notional aggregate amount outstanding of $460.0 million which mitigate our exposure to our unsecured term loans' variable interest rates, which are based upon LIBOR (the "Term Loan Swaps"). We designated the Term Loan Swaps as cash flow hedges. See Note 12 to the Consolidated Financial Statements for a more detailed discussion of these derivative instruments. Currently, we do not enter into financial instruments for trading or other speculative purposes.

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Supplemental Earnings Measure

Investors in and industry analysts following the real estate industry utilize funds from operations ("FFO") and net operating income ("NOI") as supplemental operating performance measures of an equity REIT. Historical cost accounting for real estate assets in accordance with accounting principles generally accepted in the United States of America ("GAAP") implicitly assumes that the value of real estate assets diminishes predictably over time through depreciation. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors prefer to supplement operating results that use historical cost accounting with measures such as FFO and NOI, among others. We provide information related to FFO and same store NOI ("SS NOI") both because such industry analysts are interested in such information, and because our management believes FFO and SS NOI are important performance measures. FFO and SS NOI are factors used by management in measuring our performance, including for purposes of determining the compensation of our executive officers under our 2021 incentive compensation plan.

Neither FFO nor SS NOI should be considered as a substitute for net income, or any other measures derived in accordance with GAAP. Neither FFO nor SS NOI represents cash generated from operating activities in accordance with GAAP and neither should be considered as an alternative to cash flow from operating activities as a measure of our liquidity, nor is either indicative of funds available for our cash needs, including our ability to make cash distributions.

Funds From Operations

The National Association of Real Estate Investment Trusts ("NAREIT") has recognized and defined for the real estate industry a supplemental measure of REIT operating performance, FFO, that excludes historical cost depreciation, among other items, from net income determined in accordance with GAAP. FFO is a non-GAAP financial measure. FFO is calculated by us in accordance with the definition adopted by the Board of Governors of NAREIT and therefore may not be comparable to other similarly titled measures of other companies.

Management believes that the use of FFO available to common stockholders and participating securities, combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Management believes that, by excluding gains or losses related to sales of real estate assets, real estate asset depreciation and amortization and impairment of real estate, investors and analysts are able to identify the operating results of the long-term assets that form the core of a REIT's activity and use these operating results for assistance in comparing these operating results between periods or to those of different companies.

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The following table shows a reconciliation of net income available to common stockholders and participating securities to the calculation of FFO available to common stockholders and participating securities as follows:

(A) In December 2018, NAREIT issued a white paper restating the definition of FFO. The restated definition provides an option to include or exclude gains and losses as well as impairment of non-depreciable real estate if the sales are deemed incidental. Prior to January 1, 2019, we included gains and losses on sales and impairment of our non-depreciable real estate in our calculation of NAREIT FFO. On January 1, 2019, we adopted the restated definition of NAREIT FFO on a prospective basis and now exclude gains and losses on sales and impairment of our non-depreciable real estate that we deem incidental. We also exclude the same adjustments from our share of net income from unconsolidated joint ventures.

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Same Store Net Operating Income

SS NOI is a non-GAAP financial measure that provides a measure of rental operations and, as calculated by us, that does not factor in depreciation and amortization, general and administrative expense, interest expense, equity in income and loss from joint ventures, income tax benefit and provision and gains and losses on the sale of real estate. We define SS NOI as revenues minus property expenses such as real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses, minus the NOI of properties that are not same store properties and minus the impact of straight-line rent, the amortization of above/below market leases and lease termination fees. As so defined, SS NOI may not be comparable to same store net operating income or similar measures reported by other REITs that define same store properties or NOI differently. The major factors influencing SS NOI are occupancy levels, rental rate increases or decreases and tenant recoveries increases or decreases. Our success depends largely upon our ability to lease space and to recover the operating costs associated with those leases from our tenants.

The following table shows a reconciliation of the same store revenues and property expenses disclosed in the results of operations (and reconciled to revenues and expenses reflected on the statements of operations) to SS NOI for the years ended December 31, 2021 and 2020.

(A) The year ended December 31, 2020 includes $1.1 million of insurance settlement gain related to a building destroyed by fire in 2016. Excluding this gain, the percent increase to Same Store Net Operating Income would be 5.3% for the year ended December 31, 2021.

Subsequent Events

From January 1, 2022 to February 17, 2022, we acquired two industrial buildings and one land parcel for an aggregate purchase price of approximately $21.8 million, excluding transaction costs.