# FrontView REIT, Inc. (FVR) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from FrontView REIT, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1988494/000095017025042774/fvr-20241231.htm
Accession: 0000950170-25-042774
Filing date: 2025-03-20
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/FVR/
All MD&A years: /company/FVR/mda/
Next year: /company/FVR/mda/fy2025/ (FY 2025)

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

Except where the context suggests otherwise, as used in this Annual Report on Form 10-K, the terms “FVR,” “we,” “us,” “our,” and “our company” refer to FrontView REIT, Inc., a Maryland corporation incorporated on June 23, 2023, and, as required by context, FrontView Operating Partnership LP, a Delaware limited partnership, which we refer to as the or our “OP”, and to their respective subsidiaries.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements appearing in Item 8 “Financial Statements and Supplemental Data” in this Annual Report on Form 10-K.

Overview

We are an internally-managed net-lease REIT that is experienced in acquiring, owning and managing properties that are net leased to a diversified group of tenants. We are a growing net-lease REIT and owned a well-diversified portfolio of 307 properties across 35 U.S. states as of December 31, 2024. Our tenants include service-oriented businesses, such as restaurants, cellular stores, financial institutions, automotive stores and dealers, medical and dental providers, convenience and gas stores, car washes, home improvement stores, grocery stores, fitness operators, professional services as well as general retail tenants.

We currently derive a majority of our revenue from rents received from individual tenants of each of our properties in our portfolio. Our properties are typically leased under long-term net leases. As of December 31, 2024, the ABR weighted average remaining term of our leases was approximately 7.2 years, excluding renewal options. Approximately 97.3% of our leases (based on ABR) had contractual rent escalations, including, in some cases, pursuant to option terms. As of December 31, 2024, we had 320 tenants that represented 150 different brands. Our top 10 tenant brands (based on ABR) represented approximately 21.8% of our portfolio ABR as of December 31, 2024.

In connection with our IPO on October 2, 2024, we completed the Internalization pursuant to which we began directly employing 15 employees and entered into employment agreements with each of our named executive officers. In addition, the Internalization eliminated the management and other fees and carried interest provisions that were previously paid by our Predecessor. The historical results of operations for our Predecessor through October 2, 2024, include the payment of management fees that we will no longer pay following the Internalization and do not include the direct compensation expense associated with our aforementioned approximately 15 employees, or other asset management, acquisition or general and administrative expenses not previously incurred based upon our externally managed structure.

As of December 31, 2024, we had total debt of $268.5 million, Net Debt of $263.4 million, a Net Debt to Annualized Adjusted EBITDAre ratio of 5.2x, and a pro forma Net Debt to Annualized Adjusted EBITDAre ratio of 5.5x after giving effect to the repayment of debt with the net proceeds of our IPO and borrowings under our Revolving Credit Facility and Term Loan. Over time we plan to target a net debt to annualized adjusted EBITDAre ratio below 6.0x on a sustained basis. Net Debt and Annualized Adjusted EBITDAre are non-GAAP financial measures, and Annualized Adjusted EBITDAre is calculated based upon EBITDA, EBITDAre, and Adjusted EBITDAre, each of which is also a non-GAAP financial measure. Refer to Non-GAAP Measures below for further details concerning our calculation of non-GAAP measures and reconciliations to the comparable GAAP measure.

Factors that Affect Our Results of Operations and Financial Condition

Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. Key factors that impact our results of operations and financial condition include rental rates, lease renewals and occupancy, land values, acquisition volume, tenant growth, demand, expansion, construction costs, net-lease terms, market liquidity, financing arrangements and leverage, property dispositions, general and administrative expenses, inflation, interest rates, consumer confidence, the overall economic environment and the financial strength of our tenants.

Rental Rates

Our ability to grow rental revenue from our existing portfolio will depend on our ability to realize the rental escalations built into our leases and execute lease renewals and lease extensions. As of December 31, 2024, approximately 97.3% of our leases (based on ABR) had contractual rent escalations, including, in some cases, pursuant to options terms, with an ABR weighted average annual minimum increase of approximately 1.6%. As of December 31, 2024, approximately 95.1% of our leases (based on ABR) contained fixed annual rent increases or periodic escalations over the term of the lease (e.g. a 10% increase every five years), approximately 2.2% of our leases (based on ABR) contained annual lease escalations based on increases in the CPI, and the remaining approximately 2.7% of our leases (based on ABR) did not contain rent escalation provisions. During periods of inflation, our fixed rent increases may not keep pace with the rate of inflation while the limited number of our leases that include CPI-based increases may fare better. Conversely, during periods where inflation is more limited, our leases with fixed rate increases may fare better than our leases with CPI-based increases.

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Property Dispositions

From time to time, we may seek to sell any of our properties, in particular, where we believe the risk profile may have changed and become misaligned with our then current portfolio acquisition objectives. We also may selectively decide to sell properties that no longer meet one or more of our investment criteria or that may be sold opportunistically. The resulting gains or losses on any future dispositions may materially impact our operating results. The recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market at the time a property is listed for sale. As of the date of this Annual Report, we have sold 11 properties.

Lease Renewals and Occupancy

As of December 31, 2024, the weighted average remaining term of our leases was approximately 7.2 years, excluding renewal options. One lease representing approximately 0.2% of our leases (based on ABR) expired prior to December 31, 2024. The stability of the rental revenue generated by our properties depends principally on our tenants’ ability to pay rent and our ability to collect rent, our ability to renew expiring leases or re-lease space upon the expiration or other termination of leases, our ability to lease properties that become vacant and maintain or increase rental rates at our leased properties. To the extent our properties become vacant, we would forego rental income while remaining responsible for the payment of property taxes, insurance, maintenance and other related costs and maintaining the property until it is re-leased, which could negatively impact our operating results. As of December 31, 2024, we had seven vacant properties.

Acquisition Volume

Our historical growth in revenues and earnings has been achieved through rent escalations associated with existing in-place leases, coupled with rental income generated from property acquisitions. Our ability to grow revenue will depend, to a significant degree, on our ability to acquire additional properties. Our ability to grow requires us to identify and complete acquisitions that meet our investment criteria. Changes in capitalization rates, interest rates, inflation, market competition, economic changes, property inventory, and other factors may impact our acquisition opportunities in the future. Market conditions may also impact the total returns we can achieve on our investments. Our acquisition volume also depends on our ability to successfully access third-party debt and equity financing to fund our capital needs.

Net-Lease Terms

Substantially all of our leases are net leases pursuant to which our tenants generally are obligated to pay customary expenses associated with the leased property such as real estate taxes, insurance, maintenance and repairs, and in many cases capital costs. Some leases contain exceptions that require us to pay specified expenses such as the cost of roof, parking lot, heating, ventilation and air conditioning and structure and non-structural repairs and replacement costs, off-site improvements, lease covenants affecting off-site property, and remediation activities (unless necessitated by the tenant), as well as costs related to the operation of a property in excess of certain caps contained within the underlying lease. In certain instances, a landlord’s reimbursement obligation may include reimbursing the tenant for the unamortized costs of certain expenses incurred by the tenant for the development of the premises. In some leases, this type of reimbursement obligation is triggered by the default of the landlord under the lease, but other leases require reimbursement of the tenant due to circumstances outside of the landlord’s control. For the year ended December 31, 2024, we incurred approximately $1.7 million in aggregate of expenses that were not tenant obligations. To the extent that our properties experience an increase in roof and structure, capital or other repairs or costs for which we are contractually responsible under some leases, it could negatively impact our future operating results. In addition, an increase in the number of leases in which we are responsible for some or all of these expenses could negatively influence our future operating results.

Interest Expense

As of December 31, 2024, our debt capital was comprised of a floating rate Term Loan and a floating rate Revolving Credit Facility. Accordingly, we are subject to interest rate risk. We also expect to continue to incur debt in the future in order to fund future acquisitions, which we expect will increase the amount of interest expense we incur. In addition, although we plan to manage our total floating-rate debt exposure, changes in the interest rate environment could either increase or decrease our weighted average interest rate in the future or impact any refinancing initiatives, which could also result in principal reduction requirements and ultimate refinancing risks. Any changes to our debt structure, including borrowings under our Revolving Credit Facility and Term Loan, or debt financing associated with property acquisitions, could materially influence our operating results.

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Property Management and Asset Management Fees

Following completion of the Internalization, we no longer pay property management and asset management fees that were previously paid by our Predecessor, which historically increased as the size of our portfolio grew.

General and Administrative Expenses

Following completion of the Internalization, our general and administrative expenses include direct employee compensation costs for our approximately 15 employees. In addition, our general and administrative expenses include certain professional fees, consulting, portfolio servicing costs, board costs, public company expenses, increased audit, tax and other costs, insurance costs, and other general and administrative expenses not previously incurred by our predecessor based upon its externally managed structure.

Impact of Inflation

Our rental revenues may be impacted by inflation. Approximately 95.1% of our leases (based on ABR) contain rent escalators that increase rent at a fixed amount and may not be sufficient during periods of inflation. As of December 31, 2024, leases that contributed approximately 2.2% of our leases (based on ABR), contained rent escalators based on increases in CPI and the associated increases in rental revenue may be limited during periods of low inflation. The impact of inflation on our property and operating expenses is mitigated since substantially all of our leases are net leases, and property-level expenses are generally paid for or reimbursed to us by our tenants. Some leases contain exceptions that require us to pay specified expenses such as the cost of roof, parking lot, heating, ventilation, and air-conditioning, and structure and non-structural repairs and replacement costs, off-site improvements, lease covenants affecting off-site property, and remediation activities (unless necessitated by the tenant), as well as costs related to the operation of a property in excess of certain caps contained within the underlying lease. To the extent we bear the cost of such expense, in certain cases, warranties are in place to help mitigate future significant capital outlays, though typically such warranties only cover certain limited items and do not provide comprehensive coverage. Inflation and increased costs may also have an adverse impact on our tenants’ businesses and their creditworthiness.

Tenant Bankruptcies

Adverse economic conditions, in addition to general economic downturns, particularly those that affect the markets in which our properties are located, or downturns in our tenants’ industries could impair our tenants’ ability to meet their lease obligations to us and our ability to renew expiring leases or re-lease space. In particular, the bankruptcy or deterioration of operational performance of one or more of our tenants could adversely affect our ability to collect rents from such tenant and maintain our portfolio’s occupancy.

50

Results of Operations

The following discussion includes the results of our operations for the periods presented.

Period from January 1, 2024 to October 2, 2024 and from October 3, 2024 to December 31, 2024 Compared to Year Ended December 31, 2023

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[[/GREPCENT_TABLE]]

Rental Revenues

[[GREPCENT_TABLE]]
[["","","Successor","","","Predecessor","","","Predecessor"],["(in thousands)","","Period from October 3, 2024 through December 31, 2024","","","Period from January 1, 2024 through October 2, 2024","","","Year Ended December 31, 2023"],["Revenues:"],["Contractual rental amounts billed","","$","14,629","","","$","43,312","","","$","47,901"],["Adjustment to recognize contractual rental amounts on a straight-line basis","","","322","","","","971","","","","1,350"],["Variable rental amounts earned","","","378","","","","1,555","","","","185"],["Above/below market lease amortization, net","","","(164",")","","","(1,341",")","","","(1,469",")"],["Other income","","","12","","","","243","","","","299"],["Total rental revenues","","$","15,177","","","$","44,740","","","$","48,266"]]
[[/GREPCENT_TABLE]]

Contractual rental amounts billed for the period from January 1, 2024 to October 2, 2024 of $43.3 million and for the period from October 3, 2024 to December 31, 2024 of $14.6 million, increased by $10.0 million from $47.9 million for the year ended December 31, 2023. This $10.0 million increase was attributable to (i) the increase in contractual base rent from the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition in October 2023, (ii) recognizing a full year of revenue for all acquisitions made during 2023, (iii) growth of our real estate portfolio through 29 acquisitions during 2024 and (iv) same-store rent growth from our in-place lease escalations. This increase was partially offset by the decrease in contractual base rent from the five properties sold throughout 2024.

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Variable rental amounts earned for the period from January 1, 2024 to October 2, 2024 of $1.6 million and for the period from October 3, 2024 to December 31, 2024 of $0.4 million, increased by $1.8 million from $0.2 million for the year ended December 31, 2023. This $1.8 million increase was mainly due to lease termination fee income received during the period from January 1, 2024 to October 2, 2024 and for the period from October 3, 2024 to December 31, 2024. The timing and amount of lease termination income fluctuates each period.

Operating Expenses

Depreciation and amortization

Depreciation and amortization for the period from January 1, 2024 to October 2, 2024 of $21.6 million and for the period from October 3, 2024 to December 31, 2024 of $7.5 million, increased by $4.4 million from $24.7 million for the year ended December 31, 2023. This $4.4 million increase in depreciation and amortization was primarily due to the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition and the growth of our real estate portfolio through new acquisitions in 2024. This increase was partially offset by the decrease in depreciation and amortization from the five properties sold in the current year not having a full year of depreciation.

Property operating expenses

Property operating expenses for the period from January 1, 2024 to October 2, 2024 of $5.7 million and for the period from October 3, 2024 to December 31, 2024 of $2.2 million, increased by $2.1 million from $5.8 million for the year ended December 31, 2023. This $2.1 million increase in property operating expenses was mainly due to the increase in the number of properties in our portfolio. For the periods from January 1, 2024 to October 2, 2024 and October 3, 2024 to December 31, 2024, we incurred $1.3 million and $0.4 million, respectively, in aggregate of expenses that were not tenant obligations, which includes non-recurring legal costs and property operating expenses incurred on vacant properties.

Property Management and Asset Management Fees

Property management and asset management fees for the period from January 1, 2024 to October 2, 2024 of $4.7 million. decreased by $1.1 million from $5.8 million for the year ended December 31, 2023. The $1.1 million decrease in property management and asset management fees was due to the completion of the Internalization on October 2, 2024 which terminated the agreements for property management and asset management fees. Following completion of the Internalization, we no longer pay property management and asset management fees.

General and Administrative expenses

General and administrative expenses for the period from January 1, 2024 to October 2, 2024 of $2.1 million and for the period from October 3, 2024 to December 31, 2024 of $2.8 million, decreased by $3.2 million from $8.1 million for the year ended December 31, 2023. This $3.2 million decrease in general and administrative expenses is primarily due to decreases of $2.6 million in structuring and public company readiness costs and $2.2 million in Internalization expenses compared to the year ended December 31, 2023. This decrease was partially offset by $1.1 million for employee compensation, and $0.6 million for stock-based compensation incurred during the year ended December 31, 2024.

Other expenses and income

Interest expense

Interest expense for the period from January 1, 2024 to October 2, 2024 of $19.9 million and for the period from October 3, 2024 to December 31, 2024 of $3.5 million, increased by $5.0 million from $18.4 million for the year ended December 31, 2023. The increase was primarily due to the increase in weighted average debt of $383.3 million in 2024 compared to $323.0 million in 2023. The increase is also due to the increase in interest rates during 2023. As of December 31, 2024 and 2023, the weighted average interest rate was 5.65% and 5.17%, respectively.

Gain on sale of real estate

During the period from January 1, 2024 to October 2, 2024, we sold five properties at a net gain of approximately $0.3 million. During the year ended December 31, 2023, we sold two properties at a net gain of approximately $0.7 million.

52

Impairment loss

The following table presents the impairment for the respective periods:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

During the period from January 1, 2024 to October 2, 2024, we recorded an impairment loss of $0.6 million relating to an asset held for investment. During the period from October 3, 2024 to December 31, 2024, we recorded impairment losses of $3.9 million relating to three assets held for sale. For the year ended December 31, 2023, we recorded an impairment loss of $0.2 million relating to an asset held for sale and an impairment loss of $0.2 million with respect to an asset held for investment. The timing and amount of impairment fluctuates each period based on existing facts and circumstances.

Internalization expense

On October 2, 2024, the Company completed the Internalization and the Company’s management team and corporate staff, who were previously employed by NARS, became employees of a subsidiary of the OP, the management and other fees in the Predecessor’s Sub OP agreement were terminated, and the Company acquired the assets necessary to operate and manage the portfolio of properties. The termination of the management arrangement of $16.5 million was expensed in the period from January 1, 2024 to October 2, 2024.

Gain from acquisition of equity method investment

On October 20, 2023, we acquired the remaining 50% interest of the 50/50 Joint Venture. We recorded the assets and liabilities acquired at fair value and realized a gain of approximately $13.0 million for the year ended December 31, 2023. Commencing October 20, 2023, the results of the 50/50 Joint Venture have been consolidated into the Company.

Equity loss from investment in an unconsolidated entity

The loss for the year ended December 31, 2023 consists of the 50/50 Joint Venture’s operations from January 1, 2023 to October 20, 2023 when we closed on the 50/50 Joint Venture Acquisition to acquire the remaining 50% interest in the 54 underlying properties. The results from October 21, 2023 to December 31, 2023 are consolidated into the Company.

Liquidity and Capital Resources

Liquidity/REIT Requirements

Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs. As a REIT, we are required to distribute to our stockholders at least 90% of our taxable income determined without regard to the dividends paid deduction and excluding net capital gain, on an annual basis. As a result, it is unlikely that we will be able to retain substantial cash balances to meet our liquidity needs from our annual taxable income. Instead, we expect to meet our liquidity needs primarily by relying upon external sources of capital, such as borrowings under our debt facilities or additional equity or preferred offerings or other capital raises, which would all be subject to a number of market and other factors in order to be successfully accessible.

Short-term Liquidity Requirements

Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt and to pay distributions. Since our portfolio has had a historically strong occupancy level and substantially all of our leases are net leases, we do not currently anticipate making significant capital expenditures or incurring other significant property operating costs (unless vacancies adjust beyond historical norms) that would materially adversely impact short-term financial liquidity. We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances, net cash provided by operating activities, and borrowings under our Revolving Credit Facility and Term Loan or through the issuance of debt or equity instruments subject to market conditions. As of December 31, 2024, we have $181.5 million of available capacity under our Revolving Credit Facility.

53

Long-term Liquidity Requirements

Our long-term liquidity requirements consist primarily of funds necessary to repay debt and to invest in additional revenue generating properties. Debt capital is provided through our Revolving Credit Facility and Term Loan, as well as potentially through the issuance of debt and equity instruments subject to market conditions and Company operating performance. The source and mix of our debt capital in the future will be impacted by market conditions. We plan to prudently balance our debt portfolio with a combination of fixed and floating rate debt and will evaluate opportunities to hedge certain interest rate risk where appropriate.

We expect to meet our long-term liquidity requirements primarily from borrowings under our Revolving Credit Facility and Term Loan, any future debt and equity financings, and proceeds from limited sales of our properties. Our ability to access these capital sources may be impacted by unfavorable market conditions, particularly in the debt and equity capital markets and the real estate market in general, that are outside of our control. In addition, our success will depend on our operating performance, our borrowing restrictions, our degree of leverage, market perceptions of the Company, our access to debt, equity or other capital instruments and other factors. Our acquisition growth strategy significantly depends on our ability to obtain acquisition-financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization.

Target Leverage

As of December 31, 2024, we have total debt outstanding of $268.5 million, Net Debt of $263.4 million, and a Net Debt-to-Annualized Adjusted EBITDAre ratio of approximately 5.2x. Our long-term goal is to target a net debt-to-annualized adjusted EBITDAre ratio of 6.0x over time. We may from time to time modify our leverage policy in light of then current economic conditions, relative costs and availability of debt and equity capital, changes in the market price of our Common Stock, acquisition opportunities, and other factors.

Equity Capital Resources

As a new publicly traded REIT we plan to access the public equity markets to maintain an appropriate mix of debt and equity in line with our leverage policy, primarily through follow-on equity offerings and eventually through an at-the-market common equity offering program once we are shelf eligible. We anticipate that the net proceeds from our public offerings will be used to repay debt, fund acquisitions, and for other general corporate purposes.

Description of Existing Debt Outstanding

The following is a summary of the material provisions of our Revolving Credit Facility and Term Loan.

Revolving Credit Facility

Upon closing of our IPO, a group of lenders, including JPMorgan Chase Bank, N.A. acting as administrative agent, provided commitments for our Revolving Credit Facility, allowing borrowings of up to $250.0 million, including $20.0 million available for issuance of letters of credit. Our Revolving Credit Facility has an initial maturity in October 2027 together with two 12-month extension options, subject to certain conditions, including payment of a 0.125% fee on the aggregate outstanding amount of the revolving commitments.

The Revolving Credit Facility contains a commitment fee of 0.15% per annum if average daily usage in such quarter is over 50% of total revolving commitments and 0.25% per annum if average daily usage in such quarter is equal to or less than 50% of total revolving commitments. Borrowings under our Revolving Credit Facility will bear interest at floating rates based on Adjusted SOFR plus an applicable margin based on our leverage ratio ranging between 1.20% and 1.75% per annum. As of December 31, 2024, the applicable margin was 1.20%.

The Revolving Credit Facility contains an applicable facility fee based on our credit rating ranging between 0.125% and 0.30% per annum. As of December 31, 2024, the applicable facility fee was 0.30%.

Term Loan

Upon closing of our IPO, a group of lenders, including JPMorgan Chase Bank, N.A. as administrative agent, provided commitments for our Term Loan, allowing borrowings of up to $200.0 million. Our Term Loan is available to be drawn until October 2025 and has an initial maturity of October 2027 together with two 12-month extension options, at our election, subject to certain conditions including payment of a 0.125% fee on the aggregate outstanding principal amount of the term loan. On December 30, 2024, we borrowed $200.0 million from the Term Loan to repay our ABS Notes when they matured in December 2024. Our Term Loan includes a ticking fee of 0.20% per annum on the average daily amount of unfunded term loan commitments.

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Borrowings under our Term Loan bear interest at floating rates based on Adjusted SOFR plus an applicable margin based on our leverage ratio ranging between 1.20% and 1.75% per annum. As of December 31, 2024, the applicable margin was 1.20%.

Covenants

We are subject to various covenants and financial reporting requirements pursuant to our Revolving Credit Facility and Term Loan. The table below summarizes the applicable financial covenants. If a default or event of default exists, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification. As of December 31, 2024, we believe we were in compliance with our covenants.

[[GREPCENT_TABLE]]
[["Covenants","","Required"],["Total Leverage Ratio","","\u2264 60%"],["Adjusted EBITDA to Fixed Charges Ratio","","\u2265 1.50 to 1.00"],["Secured Leverage Ratio","","\u2264 40%"],["Unencumbered NOI to Unsecured Interest Expense Ratio","","\u2265 1.75 to 1.00"],["Unsecured Leverage Ratio","","\u2264 60%"],["Tangible Net Worth","","\u2265 sum of 75% of the Tangible Net Worth on completion of this offering plus 70% of equity issuance proceeds"]]
[[/GREPCENT_TABLE]]

Contractual Obligations

The following table provides information with respect to our contractual commitments and obligations as of December 31, 2024. Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations.

(in thousands)

[[GREPCENT_TABLE]]
[["Year of Maturity","","Revolving Credit Facility (1)","","","Term Loan (1)","","","Interest Expense (2)","","","Dividend (3)","","","Commitments to Fund Investments (4)","","","Total"],["2025","","$","\u2014","","","$","\u2014","","","$","15,163","","","$","6,101","","","$","19,493","","","$","40,757"],["2026","","","\u2014","","","","\u2014","","","","15,163","","","","\u2014","","","","\u2014","","","","15,163"],["2027","","","68,500","","","","200,000","","","","12,636","","","","\u2014","","","","\u2014","","","","281,136"],["2028","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["2029","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["Thereafter","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["Total","","$","68,500","","","$","200,000","","","$","42,962","","","$","6,101","","","$","19,493","","","$","337,056"]]
[[/GREPCENT_TABLE]]

(1)
Our Revolving Credit Facility and Term Loan contain two 12-month extension options subject to certain conditions, including the payment of an extension fee equal to 0.125% of the commitments.

(2)
Interest expense is projected based on the outstanding borrowings and interest rates in effect as of December 31, 2024.

(3)
Amounts include dividends declared as of December 31, 2024 of $0.215 per Common Stock and OP Unit. Future undeclared dividends are excluded.

(4)
Amounts include acquisitions under contract.

Derivative Instruments and Hedging Activities

We may be exposed to interest rate risk arising from changes in interest rates on any floating-rate borrowings that we make under our Revolving Credit Facility and Term Loan or other debt or capital instruments that bear interest. Borrowings under our Revolving Credit Facility and Term Loan will bear interest at floating rates based on Adjusted SOFR plus an applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, decrease or increase our net income and cash flow.

55

In the future, we may attempt to manage our interest rate risk by entering into interest rate swaps or other hedging arrangements. Under these agreements, we will receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our variable-rate borrowings. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.

Cash Flows

Cash, cash equivalents and restricted cash totaled $5.1 million as of December 31, 2024 as compared to $17.1 million as of December 31, 2023. The table below shows information concerning cash flows for the periods from January 1, 2024 to October 2, 2024, October 3, 2024 to December 31, 2024 and for the year ended December 31, 2023:

[[GREPCENT_TABLE]]
[["","","Successor","","","Predecessor","","","Predecessor"],["(in thousands)","","Period from October 3, 2024 through December 31, 2024","","","Period from January 1, 2024 through October 2, 2024","","","Year Ended December 31, 2023"],["Net cash provided by operating activities","","$","2,685","","","$","17,844","","","$","17,224"],["Net cash (used in) provided by investing activities","","","(105,103",")","","","7,934","","","","(93,812",")"],["Net cash provided by (used in) financing activities","","","95,045","","","","(30,440",")","","","52,640"],["Net decrease in cash and cash equivalents and restricted cash","","$","(7,373",")","","$","(4,662",")","","$","(23,948",")"]]
[[/GREPCENT_TABLE]]

Net cash provided by operating activities for the period from January 1, 2024 to October 2, 2024 of $17.8 million and for the period from October 3, 2024 to December 31, 2024 of $2.7 million, increased by $3.3 million from $17.2 million for the year ended December 31, 2023. The $3.3 million increase in net cash provided by operating activities for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was mainly due to growth in our real estate portfolio and increase in rental receipts offset by increased interest expense.

Net cash (used in) provided by investing activities for the period from January 1, 2024 to October 2, 2024 of $7.9 million and for the period from October 3, 2024 to December 31, 2024 of $(105.1) million, decreased by $3.4 million from $(93.8) million for the year ended December 31, 2023. The $3.4 million decrease in net cash provided by investing activities was due to increased acquisitions in the year ended December 31, 2024 as compared to the year ended December 31, 2023. During the year ended December 31, 2024, there were five properties sold and 29 properties acquired compared to two properties sold and 26 properties acquired during the year ended December 31, 2023. The Company also acquired the 50/50 Joint Venture in the previous year, which is reflected in the change in net cash used in investing activities.

Net cash provided by (used in) financing activities for the period from January 1, 2024 to October 2, 2024 of $(30.4) million and for the period from October 3, 2024 to December 31, 2024 of $95.0 million, increased by $12.0 million from $52.6 million for the year ended December 31, 2023. The $12.0 million increase in net cash provided by financing activities for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was mainly due to the proceeds received from the IPO issuance and borrowings the Company made from the Term Loan and Revolving Credit Facility. These were used to repay the CIBC Revolving Credit Facility, CIBC Term Loan, and ABS Notes during 2024.

Non-GAAP Financial Measures

Our reported results and net earnings per diluted share are presented in accordance with GAAP. We also disclose FFO, AFFO, EBITDA, EBITDAre, adjusted EBITDAre, annualized adjusted EBITDAre and net debt, each of which are non-GAAP measures. We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.

We compute FFO in accordance with the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets. To derive AFFO, we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash or non-recurring revenues and expenses, including straight-line rents, cost of debt extinguishments, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, Internalization expenses, structuring and public company readiness costs, extraordinary items, and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.

56

Our leases typically include cash rents that increase through lease escalations over the term of the lease. Our leases do not typically include significant front-loading or back-loading of payments, or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. We further exclude costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, Internalization expenses, and structuring and public company readiness costs, as these items are not indicative of ongoing operational results. We use AFFO as a measure of our performance when we formulate corporate goals.

FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers, primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by one-time cash and non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO and AFFO with the same or similar measures disclosed by other REITs may not be meaningful. FFO and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures.

Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments to FFO that we use to calculate AFFO. In the future, the SEC, Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of AFFO accordingly.

57

The following is a reconciliation of historical and pro forma net income (which is the most comparable GAAP measure) to FFO and AFFO:

Reconciliation of Historical and pro forma net income to FFO and AFFO

[[GREPCENT_TABLE]]
[["","","Successor","","","Successor","","","Predecessor","","","Predecessor"],["","","Pro Forma","","","Historical","","","Historical","","","Historical"],["(in thousands)","","Year Ended December 31, 2024","","","Period from October 3, 2024 through December 31, 2024","","","Period from January 1, 2024 through October 2, 2024","","","Year Ended December 31, 2023"],["Net loss","","$","(26,613",")","","$","(4,822",")","","$","(26,387",")","","$","(1,524",")"],["Depreciation on real property and amortization of real estate intangibles","","","33,357","","","","7,468","","","","21,581","","","","24,730"],["Share of 50/50 Joint Venture's depreciation on real property and amortization of real estate intangibles","","","\u2014","","","","\u2014","","","","\u2014","","","","1,798"],["Gain on sale of real estate","","","\u2014","","","","\u2014","","","","(337",")","","","(725",")"],["Share of 50/50 Joint Venture's gain on sale of real estate","","","\u2014","","","","\u2014","","","","\u2014","","","","(260",")"],["Impairment loss on real estate held for investment","","","4,482","","","","3,891","","","","591","","","","407"],["Gain from acquisition of equity method investment","","","\u2014","","","","\u2014","","","","\u2014","","","","(12,988",")"],["FFO","","$","11,226","","","$","6,537","","","$","(4,552",")","","$","11,438"],["Straight-line rent adjustments","","","(1,806",")","","","(322",")","","","(971",")","","","(1,350",")"],["Share of 50/50 Joint Venture's straight-line rent adjustments","","","\u2014","","","","\u2014","","","","\u2014","","","","(43",")"],["Amortization of financing transaction and discount costs","","","1,601","","","","1,588","","","","3,145","","","","2,792"],["Share of 50/50 Joint Venture's amortization of debt issuance cost","","","\u2014","","","","\u2014","","","","\u2014","","","","226"],["Amortization of above/below market lease intangibles","","","2,048","","","","164","","","","1,341","","","","1,469"],["Share of 50/50 Joint Venture's amortization of above/below market lease intangibles","","","\u2014","","","","\u2014","","","","\u2014","","","","90"],["Stock-based compensation","","","2,496","","","","608","","","","\u2014","","","","\u2014"],["Lease termination fees","","","(1,726",")","","","(342",")","","","(1,384",")","","","\u2014"],["Adjustment for structuring and public company readiness costs","","","\u2014","","","","662","","","","487","","","","4,092"],["Adjustment for Internalization expenses","","","16,498","","","","\u2014","","","","16,498","","","","2,169"],["Other non-recurring expenses","","","\u2014","","","","84","","","","\u2014","","","","172"],["AFFO","","$","30,337","","","$","8,979","","","$","14,564","","","$","21,055"]]
[[/GREPCENT_TABLE]]

We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry. We believe that this ratio provides investors and analysts with a measure of our leverage that includes our operating results unaffected by the differences in capital structures, capital investment cycles and useful life of related assets compared to other companies in our industry. In 2017, Nareit issued a white paper recommending that companies that report EBITDA also report EBITDAre in financial reports. We compute EBITDAre in accordance with the definition adopted by Nareit. Nareit defines EBITDAre as EBITDA (as defined above) excluding gains (loss) from the sales of depreciable property and provisions for impairment on investment in real estate. We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs.

EBITDA and EBITDAre are not measures of financial performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

We compute adjusted EBITDAre as EBITDAre for the applicable quarter, as adjusted to (i) reflect all investment and disposition activity that took place during the applicable quarter as if each transaction had been completed on the first day of the quarter, (ii) exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, (iii) eliminate the impact of lease termination fees from certain of our tenants, and (iv) exclude non-cash stock-based compensation expense. Annualized adjusted EBITDAre is calculated by multiplying adjusted EBITDAre for the applicable quarter by four, which we believe provides a meaningful estimate of our current run rate for all of our investments as of the end of the most

58

recently completed quarter given the contractual nature of our long term net leases. You should not unduly rely on this measure as it is based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre for future periods may be significantly different from our annualized adjusted EBITDAre.

The following table reconciles net income (which is the most comparable to GAAP measure) to EBITDA, EBITDAre, adjusted EBITDAre, and annualized adjusted EBITDAre.

Reconciliation of net income to EBITDA and EBITDAre

[[GREPCENT_TABLE]]
[["","","Successor","","","Combined Successor and Predecessor","","","Predecessor"],["","","Pro Forma","","","Historical","","","Historical"],["(unaudited, in thousands)","","Three Months Ended December 31, 2024","","","Three Months Ended December 31, 2024","","","Three Months Ended December 31, 2023"],["Net (loss) income","","$","(22,009",")","","$","(21,488",")","","$","8,429"],["Depreciation and amortization","","","8,410","","","","7,634","","","","7,993"],["Share of 50/50 Joint Venture's depreciation and amortization","","","\u2014","","","","\u2014","","","","122"],["Interest expense","","","4,517","","","","3,593","","","","6,498"],["Share of 50/50 Joint Venture's interest expense","","","\u2014","","","","\u2014","","","","130"],["Income taxes","","","236","","","","236","","","","110"],["Share of 50/50 Joint Venture's income taxes","","","\u2014","","","","\u2014","","","","2"],["EBITDA","","$","(8,846",")","","$","(10,025",")","","$","23,283"],["Gain on sale of real estate","","","\u2014","","","","\u2014","","","","(1,057",")"],["Impairment loss on real estate held for investment","","","3,891","","","","3,891","","","","407"],["Gain from acquisition of equity method investment","","","\u2014","","","","\u2014","","","","(12,988",")"],["EBITDAre","","$","(4,955",")","","$","(6,134",")","","$","9,645"],["Adjustment for current period investment activity (1)","","","\u2014","","","","1,354","","","","\u2014"],["Adjustment for current period disposition activity (2)","","","\u2014","","","","\u2014","","","","(36",")"],["Adjustment for non-cash compensation expense (3)","","","624","","","","608","","","","\u2014"],["Adjustment to exclude non-recurring (income) expenses (4)","","","16,238","","","","16,760","","","","1,361"],["Adjustment to exclude net write-offs of accrued rental income","","","63","","","","63","","","","\u2014"],["Adjusted EBITDAre","","","11,970","","","","12,651","","","","10,970"],["Annualized EBITDAre","","","(19,820",")","","","(24,536",")","","","38,580"],["Annualized adjusted EBITDAre","","$","47,880","","","$","50,604","","","$","43,880"]]
[[/GREPCENT_TABLE]]

(1)
Reflects an adjustment to give effect to all acquisitions during the period as if they had been acquired as of the beginning of the period.

(2)
Reflects an adjustment to give effect to all dispositions during the period as if they had been sold as of the beginning of the period.

(3)
Reflects an adjustment to exclude non-cash stock-based compensation expense.

(4)
Reflects an adjustment to exclude non-recurring expenses including IPO costs, lease termination fees and non-recurring income and expense.

59

Net Debt is a non-GAAP financial measure. We define Net Debt as our Gross Debt less cash, cash equivalents and restricted cash. The ratios of Net Debt to EBITDAre and Net Debt to Annualized Adjusted EBITDAre represent Net Debt as of the end of the applicable period divided by EBITDAre or Annualized Adjusted EBITDAre for the period, respectively. We believe that these ratios are useful to investors and analysts because they provide information about Gross Debt less cash and cash equivalents, which could be useful to repay debt, compared to our performance as measured using EBITDAre and Annualized Adjusted EBITDAre, which are described above.

The following table reconciles total debt (which is the most comparable GAAP measure) to Net Debt, and presents the ratios of Net Debt to EBITDAre and Net Debt to Annualized Adjusted EBITDAre:

Reconciliation of total debt to Net Debt and ratio of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","Pro Forma","","","Historical","","","Historical"],["(in thousands)","","2024","","","2024","","","2023"],["Debt"],["Term Loan","","$","200,000","","","$","200,000","","","$","\u2014"],["Revolving Credit Facility","","","68,500","","","","68,500","","","","\u2014"],["ABS Notes","","","\u2014","","","","\u2014","","","","254,489"],["CIBC Revolving Credit Facility","","","\u2014","","","","\u2014","","","","168,890"],["CIBC Term Loan","","","\u2014","","","","\u2014","","","","17,000"],["Gross Debt","","","268,500","","","","268,500","","","","440,379"],["Cash, cash equivalents and restricted cash","","","(5,094",")","","","(5,094",")","","","(17,129",")"],["Net Debt","","$","263,406","","","$","263,406","","","$","423,250"],["Leverage Ratios:"],["Net Debt to Annualized EBITDAre","","","(13.3",")","","","(10.7",")","","","11.0"],["Net Debt to Annualized Adjusted EBITDAre","","","5.5","","","","5.2","","","","9.6"]]
[[/GREPCENT_TABLE]]

Critical Accounting Policies and Estimates

The preparation of the historical consolidated financial statements in conformance with GAAP requires management to make estimates and assumptions that are subjective in nature and affect the reported amounts of assets, liabilities, revenues, and expenses as well as other disclosures in the consolidated financial statements. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates and assumptions, however, our actual results could differ materially from our estimates. A summary of our significant accounting policies is included in Note 2—Accounting Policies for Financial Statements, contained in the consolidated financial statements included elsewhere in this Form 10-K. Management believes the following critical accounting policies affect its more significant estimates and assumptions used in the preparation of our consolidated financial statements.

Purchase Price Allocation of Acquired Properties

Upon acquisition of real estate held for investment considered to be an asset acquisition, we capitalized the purchase price (including related acquisition costs) as part of the cost basis. We allocate the purchase price between land, buildings and improvements, site improvements, and identifiable intangible assets and liabilities such as amounts related to in-place leases and origination costs acquired, above- and below-market leases, based upon their fair values. The allocation of the purchase price requires judgment and significant estimates. The fair value of the land and building assets is determined on an as-if-vacant basis.

Above- and below-market leases are based upon a comparison between existing leases upon acquisition and current market rents for similar real estate. The fair value of above- and below-market leases is equal to the aggregate present value of the spread between the contract and the market rate of each of the in-place leases over their remaining term. The fair values of in-place leases and origination costs are determined based on the estimates of carrying costs during the expected lease-up periods and costs that would be incurred to put the existing leases in place under the same market terms and conditions.

We use multiple sources to estimate fair value, including information obtained about each property as a result of our pre-acquisition due diligence and marketing and leasing activities. We also consider information and other factors that impact the determination of fair value such as market conditions, industry conditions that the tenant operates in, characteristics of the real estate (e.g., location, size, value of comparative rental rates, traffic count) and tenant credit profile.

60

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If such impairment is present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The net recoverable amount represents the undiscounted estimated future cash flow expected to be earned from the long-lived asset. In the case of real estate, the undiscounted estimated future cash flows are based on expected cash flows from the use and eventual disposition of the property. We estimate fair value using data such as operating income, estimated capitalization rates or multiples, and with regards to assets held for sale, negotiated selling price, less estimated costs of disposal.

Impact of Recent Accounting Pronouncements

For information on the impact of recent accounting pronouncements on our business, see Note 2 of the Notes to the Consolidated Financial Statements included in this Form 10-K.