CTO Realty Growth Inc

Previous wording

Commercial Loans and Investments: A portfolio of four commercial loan investments and one preferred equity investment which is classified as a commercial loan investment.

Current wording

Commercial Loans and Investments: A portfolio of three commercial loan investments and one preferred equity investment which is classified as a commercial loan investment.

Previous wording

Real Estate Operations: An inventory of mitigation credits produced by the Company’s formerly owned mitigation bank. During the three months ended March 31, 2024, the Company sold its portfolio of subsurface mineral interests associated with approximately 352,000 surface acres in 19 counties in the State of Florida (“Subsurface Interests”), as further described in Note 6, “Real Estate Operations”. As part of the Subsurface Interests sale, the Company entered into a management agreement with the buyer to provide ongoing management services (the “Subsurface Management Agreement”).

Current wording

Real Estate Operations: An inventory of mitigation credits produced by the Company’s formerly owned mitigation bank. During the six months ended June 30, 2024, the Company sold its portfolio of subsurface mineral interests associated with approximately 352,000 surface acres in 19 counties in the State of Florida (“Subsurface Interests”), as further described in Note 6, “Real Estate Operations”. As part of the Subsurface Interests sale, the Company entered into a management agreement with the buyer to provide ongoing management services (the “Subsurface Management Agreement”).

Previous wording

Our business also includes our investment in PINE. As of March 31, 2024, the fair value of our investment totaled $35.6 million, or 15.7% of PINE’s outstanding equity, including the units of limited partnership interest (“OP Units”) we hold in Alpine Income Property OP, LP (the “PINE Operating Partnership”), which are redeemable for cash, based upon the value of an equivalent number of shares of PINE common stock at the time of the redemption, or shares of PINE common stock on a one-for-one basis, at PINE’s election. Our investment in PINE generates investment income through the dividends distributed by PINE. In addition to the dividends we receive from PINE, our investment in PINE may benefit from any appreciation in PINE’s stock price, although no assurances can be provided that such appreciation will occur,

Current wording

Our business also includes our investment in PINE. As of June 30, 2024, the fair value of our investment totaled $36.6 million, or 15.8% of PINE’s outstanding equity, including the units of limited partnership interest (“OP Units”) we hold in Alpine Income Property OP, LP (the “PINE Operating Partnership”), which are redeemable for cash, based upon the value of an equivalent number of shares of PINE common stock at the time of the redemption, or shares of PINE common stock on a one-for-one basis, at PINE’s election. Our investment in PINE generates investment income through the dividends distributed by PINE. In addition to the dividends we receive from PINE, our investment in PINE may benefit from any appreciation in PINE’s stock price, although no assurances can be provided that such appreciation will occur,

Previous wording

We believe investment in income-producing assets provides attractive opportunities for generally stable cash flows and increased returns over the long run through potential capital appreciation. Our focus on acquiring income-producing investments includes a continual review of our existing income property portfolio to identify opportunities to recycle our capital through the sale of income properties based on, among other possible factors, the current or expected performance of the property and favorable market conditions. During the three months ended March 31, 2024, the Company sold one income property for a sales price of $20.0 million and a gain on sale of $4.6 million. As a result of entering into the Exclusivity and Right of First Offer Agreement with PINE (the “ROFO Agreement”) which generally prevents us from investing in single-tenant net lease income properties, our income property investment strategy is focused on multi-tenant, primarily retail-oriented, properties. We may pursue this strategy by monetizing certain of our single-tenant properties, and should we do so, we would seek to utilize the 1031 like-kind exchange structure to preserve the tax-deferred gain on the original transaction(s) that pertains to the replacement asset.

Current wording

We believe investment in income-producing assets provides attractive opportunities for generally stable cash flows and increased returns over the long run through potential capital appreciation. Our focus on acquiring income-producing investments includes a continual review of our existing income property portfolio to identify opportunities to recycle our capital through the sale of income properties based on, among other possible factors, the current or expected performance of the property and favorable market conditions. During the six months ended June 30, 2024, the Company sold one income property for a sales price of $20.0 million and a gain on sale of $4.6 million. As a result of entering into the Exclusivity and Right of First Offer Agreement with PINE (the “ROFO Agreement”) which generally prevents us from investing in single-tenant net lease income properties, our income property investment strategy is focused on multi-tenant, primarily retail-oriented, properties. We may pursue this strategy by monetizing certain of our single-tenant properties, and should we do so, we would seek to utilize the 1031 like-kind exchange structure to preserve the tax-deferred gain on the original transaction(s) that pertains to the replacement asset.

Previous wording

Our current portfolio of 14 multi-tenant properties generates $75.0 million of revenue from annualized straight-line base lease payments and had a weighted average remaining lease term of 5.2 years as of March 31, 2024. Our current portfolio of 6 single-tenant income properties generates $5.6 million of revenues from annualized straight-line base lease payments and had a weighted average remaining lease term of 6.0 years as of March 31, 2024.

Current wording

Our current portfolio of 14 multi-tenant properties generates $75.5 million of revenue from annualized straight-line base lease payments and had a weighted average remaining lease term of 5.7 years as of June 30, 2024. Our current portfolio of 6 single-tenant income properties generates $5.6 million of revenues from annualized straight-line base lease payments and had a weighted average remaining lease term of 5.0 years as of June 30, 2024.

Previous wording

Total revenue for the three months ended March 31, 2024 increased to $28.1 million, compared to $24.7 million during the three months ended March 31, 2023. The $3.4 million increase in total revenue is primarily attributable to increased income produced by the Company’s recent income property acquisitions versus that of properties disposed of by the Company during the comparative period, as well as more revenue from our commercial loans and investments and mitigation credit sales included in real estate operations.

Current wording

Total revenue for the three months ended June 30, 2024 increased to $28.8 million, compared to $26.0 million during the three months ended June 30, 2023. The $2.8 million increase in total revenue is primarily attributable to increased income produced by the Company’s recent income property acquisitions versus that of properties disposed of by the Company during the comparative period, as well as more same store revenue from our properties owned during each period. Additionally, revenues from our commercial loans and investments increased, which was offset by reduced revenues from our real estate operations.

Previous wording

Revenue and operating income from our income property operations totaled $24.6 million and $17.9 million, respectively, during the three months ended March 31, 2024, compared to total revenue and operating income of $22.4 million and $15.3 million, respectively, for the three months ended March 31, 2023. The direct costs of revenues for our income property operations totaled $6.8 million and $7.2 million for the three months ended March 31, 2024 and 2023, respectively. The increase in revenues of $2.2 million, or 9.8%, during the three months ended March 31, 2024 is primarily related to the overall growth of the Company’s income property portfolio, as well as the timing of acquisitions versus dispositions. The increase in operating income of $2.6 million from our income property operations reflects increased rent revenues, as well as a decrease of $0.4 million in our direct costs of revenues.

Current wording

Revenue and operating income from our income property operations totaled $25.9 million and $17.8 million, respectively, during the three months ended June 30, 2024, compared to total revenue and operating income of $22.8 million and $16.1 million, respectively, for the three months ended June 30, 2023. The direct costs of revenues for our income property operations totaled $8.1 million and $6.7 million for the three months ended June 30, 2024 and 2023, respectively. The increase in revenues of $3.1 million, or 13.7%, during the three months ended June 30, 2024 is primarily related to the overall growth and lease up of the Company’s income property portfolio, as well as the timing of acquisitions versus dispositions. The increase in operating income of $1.7 million from our income property operations reflects increased rent revenues related to net investment as well as leasing activity.

Previous wording

Revenue from our management services from PINE totaled $1.0 million and $1.1 million during the three months ended March 31, 2024 and 2023, respectively, due to the decrease in PINE’s total equity. Management services during the three months ended March 31, 2024 also included less than $0.1 million of revenue, from each of the asset management agreement with a third party to manage a portfolio of multi-tenant and single-tenant assets (the “Portfolio Management Agreement”) and the Subsurface Management Agreement.

Current wording

Revenue from our management services from PINE totaled $1.0 million and $1.1 million during the three months ended June 30, 2024 and 2023, respectively, which decrease is due to the decrease in PINE’s total equity. Management services during the three months ended June 30, 2024 also included less than $0.1 million of revenue, from each of the asset management agreement with a third party to manage a portfolio of multi-tenant and single-tenant assets (the “Portfolio Management Agreement”) and the Subsurface Management Agreement, with no such revenue recognized during the three months ended June 30, 2023.

Previous wording

Interest income from our commercial loans and investments totaled $1.4 million and $0.8 million during the three months ended March 31, 2024 and 2023, respectively. The increase is primarily due to increased income as a result of the timing of investments made related to the new loan originations during the three months ended December 31, 2023 and March 31, 2024.

Current wording

Interest income from our commercial loans and investments totaled $1.4 million and $1.1 million during the three months ended June 30, 2024 and 2023, respectively. The increase is primarily due to increased income as a result of the timing of investments made related to new loan originations during the three months ended December 31, 2023, and the three months ended March 31, 2024, partially offset by a reduction in interest income attributable to the repayment of one loan during the three months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2024 and 2023, operating income from real estate operations was $0.2 million and $0.3 million on revenues totaling $1.0 million and $0.4 million, respectively. During the three months ended March 31, 2024, there was $0.9 million more mitigation credit sales revenue as compared to the same period in 2023, which led to $0.7 million more in the cost of sales on mitigation credit sales during the three months ended March 31, 2024, as compared to the same period in 2023. The increase in mitigation credit sales was partially offset by reduced subsurface sales revenue of $0.2 million during the three months ended March 31, 2024, as compared to the same period in 2023.

Current wording

During the three months ended June 30, 2024 and 2023, operating income from real estate operations was $0.1 million and $0.5 million on revenues totaling $0.4 million and $1.1 million, respectively. During the three months ended June 30, 2024, there was $0.6 million less in mitigation credit sales revenue as compared to the same period in 2023, which led to $0.4 million less in the cost of sales on mitigation credit sales during the three months ended June 30, 2024, in addition to a reduction of subsurface sale revenues of $0.2 million as compared to the same period in 2023.

Previous wording

The primary reason for the increase in total general and administrative expenses is the overall higher employee count as a result of the increased operating activity from the significant increase in managed income property assets, as well as an increase in non-employee director compensation.

Current wording

The primary reason for the increase in total general and administrative expenses is the overall higher employee count as a result of the increased operating activity from the significant increase in managed income property assets, partially offset by a decrease in executive compensation during the three months ended June 30, 2024.

Previous wording

Depreciation and amortization totaled $10.9 million and $10.3 million during the three months ended March 31, 2024 and 2023, respectively. The increase of $0.6 million is due to the overall growth in the Company’s income property portfolio.

Current wording

Depreciation and amortization totaled $11.5 million and $10.8 million during the three months ended June 30, 2024 and 2023, respectively. The increase of $0.7 million is due to the overall growth in the Company’s income property portfolio.

Previous wording

2023 Dispositions. There were no income property dispositions during the three months ended March 31, 2023.

Current wording

Gain on Dispositions of Assets. There were no income property dispositions during the three months ended June 30, 2024. During the three months ended June 30, 2023, the Company sold one income property, an outparcel of the multi-tenant property known as Eastern Commons, located in Henderson, Nevada, for $2.1 million, resulting in a gain of $0.8 million.

Previous wording

During the three months ended March 31, 2024, the closing stock price of PINE decreased by $1.63 per share, with a closing price of $15.28 on March 31, 2024. During the three months ended March 31, 2023, the closing stock price of PINE decreased by $2.25 per share, with a closing price of $16.83 on March 31, 2023. The change in stock price resulted in unrealized non-cash losses on the Company’s investment in PINE in the amount of $3.8 million and $4.9 million which is included in investment and other income (loss) in the consolidated statements of operations for the three months ended March 31, 2024 and 2023, respectively.

Current wording

During the three months ended June 30, 2024, the closing stock price of PINE increased by $0.28 per share, with a closing price of $15.56 on June 30, 2024. During the three months ended June 30, 2023, the closing stock price of PINE decreased by $0.58 per share, with a closing price of $16.25 on June 30, 2023. The change in stock price resulted in an unrealized non-cash gain (loss) on the Company’s investment in PINE in the amount of $0.7 million and ($1.4) million which is included in investment and other income (loss) in the consolidated statements of operations for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

The Company earned dividend income from the investment in PINE of $0.6 million during each of the three months ended March 31, 2024 and 2023, respectively.

Current wording

The Company earned dividend income from the investment in PINE of $0.6 million during each of the three month periods ended June 30, 2024 and 2023.

Previous wording

Provision for Impairment. There were no impairment charges on the Company’s income property portfolio during the three months ended March 31, 2024 and 2023. The Company recorded impairment charges of $0.05 million and $0.5 million during the three months ended March 31, 2024 and 2023, respectively, representing the provision for credit losses related to our commercial loans and investments.

Current wording

Provision for Impairment. There were no impairment charges on the Company’s income property portfolio during the six months ended June 30, 2024 and 2023. The Company recorded impairment charges of $0.1 million and $0.5 million during the six months ended June 30, 2024 and 2023, respectively, representing the provision for credit losses related to our commercial loans and investments. The $0.1 million of impairment charges during the six months ended June 30, 2024, was comprised of a $0.2 million charge related to the discount provided to the borrower on their early repayment of the Sabal Pavilion loan, as described in Note 4, “Commercial Loans and Investments”, offset by a $0.1 million reduction in our CECL allowance due to a net decrease in principal outstanding.

Previous wording

Net income (loss) attributable to the Company totaled $5.8 million and $(6.0) million during the three months ended March 31, 2024 and 2023, respectively. The $11.8 million increase in net income is attributable to the factors described above, most notably the $9.2 million in gains on dispositions of assets during the three months ended March 31, 2024, as compared to no such gains during the three months ended March 31, 2023.

Current wording

Net income (loss) attributable to the Company totaled $3.1 million and $(4.2) million during the six months ended June 30, 2024 and 2023, respectively. The $7.3 million increase in net income is attributable to the factors described above, most notably the $8.2 million increase in gain on disposition of assets as described above.

Previous wording

Cash and cash equivalents totaled $6.8 million at March 31, 2024, while restricted cash totaled $8.1 million, see Note 2, “Summary of Significant Accounting Policies” under the heading Restricted Cash for the Company’s disclosure related to its restricted cash balance at March 31, 2024.

Current wording

Cash and cash equivalents totaled $4.8 million at June 30, 2024, while restricted cash totaled $1.4 million, see Note 2, “Summary of Significant Accounting Policies” under the heading Restricted Cash for the Company’s disclosure related to its restricted cash balance at June 30, 2024.

Previous wording

Our cash flows provided by operating activities totaled $11.7 million during the three months ended March 31, 2024, as compared to $9.3 million during the three months ended March 31, 2023, an increase of $2.4 million. The primary reason for the increase is from increased cash flows provided by income properties, which is the result of theoverall growth of the Company’s income property portfolio, as well as increased cash flows from our commercial loans and investments, which is partially offset by an increase in cash paid for interest expense as the result of higher overall debt balances.

Current wording

Our cash flows provided by operating activities totaled $24.6 million during the six months ended June 30, 2024, as compared to $25.0 million during the six months ended June 30, 2023, a decrease of $0.4 million. The primary reason for the decrease is an increase in interest expense as the result of higher overall debt balances during the six months ended June 30, 2024, offset by increased cash flows provided by income properties, which is the result of theoverall growth and lease up of the Company’s income property portfolio, as well as increased cash flows from our commercial loans and investments.

Previous wording

Our cash flows used in investing activities totaled $52.0 million during the three months ended March 31, 2024, as compared to $25.6 million during the three months ended March 31, 2023, an increase in cash outflows of $26.4 million. The increase in cash used in investing activitiesis primarily the result of an increase in acquisition activity of income properties, net of sales of income properties and principal repayments received on commercial loan investments, for an

Current wording

Our cash flows used in investing activities totaled $40.7 million during the six months ended June 30, 2024, as compared to $106.4 million during the six months ended June 30, 2023, a decrease in cash outflows of $65.7 million. The decrease in cash used in investing activitiesis primarily the result of a decrease in acquisition activity of income properties, net of sales of income properties and principal repayments received on commercial loan investments, for a decrease in net cash used of $56.6 million during thesix months ended June 30, 2024 as compared to the same period in 2023.

Previous wording

Our cash flows provided by financing activities totaled $37.2 million for the three months ended March 31, 2024, compared to $3.6 million for the three months ended March 31, 2023, an increase in cash inflows of $33.6 million. The increase is primarily related to a $27.1 million increase in cash inflows provided by net debt activity as well as a decrease in cash outflows of $4.3 million as there were more repurchases of the Company’s common and preferred stock during the three months ended March 31, 2023 and an increase in cash inflowsof $2.1 million due to proceeds from the sale of shares of Company common stock during thethree months ended March 31, 2024 with no such activity during thethree months ended March 31, 2023.

Current wording

Our cash flows provided by financing activities totaled $4.4 million for the six months ended June 30, 2024, compared to $70.3 million for the six months ended June 30, 2023, a decrease in cash inflows of $65.9 million. The decrease is primarily related to a $108.9 million decrease in cash inflows provided by net debt activity, partially offset by proceeds from preferred equity issuances of $33.0 million, proceeds from common stock issuances of $6.4 million and a decrease in cash outflows of $4.4 million due to fewer repurchases of the Company’s common and preferred stock during the six months ended June 30, 2024 as compared to the same period in 2023.

Previous wording

*Long-Term Debt.*At March 31, 2024, the current commitment level under the Credit Facility was $300.0 million. The undrawn commitment under the Credit Facility totaled $90.5 million. As of March 31, 2024, the Credit Facility had a $209.5 million balance outstanding. See Note 15, “Long-Term Debt” for the Company’s disclosure related to its long-term debt balance at March 31, 2024.

Current wording

*Long-Term Debt.*At June 30, 2024, the current commitment level under the Credit Facility was $300.0 million. The undrawn commitment under the Credit Facility totaled $150.0 million. As of June 30, 2024, the Credit Facility had a $150.0 million balance outstanding. See Note 15, “Long-Term Debt” for the Company’s disclosure related to its long-term debt balance at June 30, 2024.

Previous wording

Acquisitions and Investments. During the three months ended March 31, 2024, the Company acquired the Marketplace at Seminole Towne Center, a multi-tenant income property located in Sanford, Florida, for a purchase price of $68.7 million, or a total acquisition cost of $68.8 million including capitalized acquisition costs. The Marketplace at Seminole Towne Center comprises 315,066 square feet, was 98% occupied at acquisition, and had a weighted average remaining lease term of 4.7 years at acquisition. During the three months ended March 31, 2024, the Company also acquired the remaining 4,000 square foot property, within the 28,100 square foot retail portion of Phase II of The Exchange at Gwinnett located in Buford, Georgia for an aggregate purchase price of $2.3 million including capitalized acquisition costs. The Company previously purchased the Sprouts-anchored Phase I portion of The Exchange at Gwinnett in December 2021. The Company also originated one structured investment, to provide $10.0 million of funding towards the construction of improvements on seven outparcel locations located in Lake Worth, Florida, of which $6.7 million was funded as of March 31, 2024.

Current wording

Acquisitions and Investments. During the six months ended June 30, 2024, the Company acquired the Marketplace at Seminole Towne Center, a multi-tenant income property located in Sanford, Florida, for a purchase price of $68.7 million, or a total acquisition cost of $68.8 million including capitalized acquisition costs. The Marketplace at Seminole Towne Center comprises 315,066 square feet, was 98% occupied at acquisition, and had a weighted average remaining lease term of 4.7 years at acquisition. During the six months ended June 30, 2024, the Company also acquired a vacant land parcel, for future development, within the previously acquired West Broad Village property, located in the Short Pump submarket of Richmond, Virginia, for a purchase price of $1.5 million and the remaining 4,000 square foot property, within the 28,100 square foot retail portion of Phase II of The Exchange at Gwinnett located in Buford, Georgia for an aggregate purchase price of $2.3 million including capitalized acquisition costs. The Company previously purchased the Sprouts-anchored Phase I portion of The Exchange at Gwinnett in December 2021. The Company also originated one structured investment, to provide $10.0 million of funding towards the construction of improvements on seven outparcel locations located in Lake Worth, Florida, of which $6.7 million was funded as of June 30, 2024. During the six months ended June 30, 2023, the Company acquired the Plaza at Rockwall, a multi-tenant income property located in Rockwall,

Previous wording

The Company’s guidance for 2024 investments in income-producing properties, including structured investments, ranges from $100.0 million to $150.0 million. We expect to fund future acquisitions utilizing cash on hand, cash from operations, proceeds from the dispositions of income properties through 1031 like-kind exchanges, borrowings on our Credit Facility, if available, and additional financing sources. See Note 23, “Subsequent Events” for an update on cash flows received from the Company’s public offering of 1,718,417 additional shares of the Company’s 6.375% Series A Cumulative Redeemable Preferred Stock, which closed in April 2024. We expect dispositions of income properties will qualify under the like-kind exchange deferred-tax structure.

Current wording

The Company’s guidance for 2024 investments in income-producing properties, including structured investments, ranges from $200.0 million to $250.0 million. We expect to fund future acquisitions utilizing cash on hand, cash from operations, proceeds from the dispositions of income properties through 1031 like-kind exchanges, borrowings on our Credit Facility, if available, and additional financing sources. We expect dispositions of income properties will qualify under the like-kind exchange deferred-tax structure.

Previous wording

2024 Dispositions. During the three months ended March 31, 2024, the Company sold one mixed use income property in downtown Santa Fe, NM for $20.0 million, resulting in a gain of $4.6 million. Additionally, during the three months ended March 31, 2024, the Company sold its portfolio of Subsurface Interests for $5.0 million, resulting in a gain of $4.5 million.

Current wording

Dispositions. During the six months ended June 30, 2024, the Company sold one mixed use income property in downtown Santa Fe, NM for $20.0 million resulting in a gain of $4.6 million. During the six months ended June 30, 2023, the Company sold one income property, an outparcel of the multi-tenant property known as Eastern Commons, located in Henderson, Nevada, for $2.1 million, resulting in a gain of $0.8 million.

Previous wording

ATM Program. The Company sold 125,857 shares of common stock under the 2022 ATM Program during the three months ended March 31, 2024 for gross proceeds of $2.1 million at a weighted average price of $17.05 per share, generating net proceeds of $2.1 million after deducting transaction fees totaling less than $0.1 million.

Current wording

ATM Program. During the six months ended June 30, 2024, the Company sold 374,817 shares under the 2022 ATM Program for gross proceeds of $6.5 million at a weighted average price of $17.43 per share, generating net proceeds of $6.4 million after deducting transaction fees of $0.1 million.

Previous wording

*Other Matters.*We believe we will have sufficient liquidity to fund our operations, capital requirements, maintenance, and debt service requirements over the next twelve months and into the foreseeable future, with cash on hand, cash flow from our operations, $135.6 million of availability remaining under the 2022 ATM Program, and $90.5 million undrawn commitment under the existing $300.0 million Credit Facility as of March 31, 2024.

Current wording

*Other Matters.*We believe we will have sufficient liquidity to fund our operations, capital requirements, maintenance, and debt service requirements over the next twelve months and into the foreseeable future, with cash on hand, cash flow from our operations, $131.2 million of availability remaining under the 2022 ATM Program, and $150.0 million undrawn commitment under the existing $300.0 million Credit Facility as of June 30, 2024.

Previous wording

Purchase Accounting for Acquisitions of Real Estate Subject to a Lease. As required by U.S. GAAP, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value. The assumptions underlying the allocation of relative fair values are based on market information including, but not limited to: (i) the estimate of replacement cost of improvements under the cost approach, (ii) the estimate of land values based on comparable sales under the sales comparison approach, and (iii) the estimate of future benefits determined by either a reasonable rate of return over a single year’s net cash flow, or a forecast of net cash flows projected over a reasonable investment horizon under the income capitalization approach. The underlying assumptions are subject to uncertainty and thus any changes to the allocation of fair value to each of the various line items within the Company’s consolidated balance sheets could have an impact on the Company’s financial condition as well as results of operations due to resulting changes in depreciation and amortization as a result of the fair value allocation. The acquisitions of real estate subject to this estimate totaled one building within an existing multi-tenant income property and one multi-tenant property for an aggregate purchase price of $71.0 million for the three months ended March 31, 2024, and one building within an existing multi-tenant income property for a purchase price of $3.3 million for the three months ended March 31, 2023.

Current wording

Purchase Accounting for Acquisitions of Real Estate Subject to a Lease. As required by U.S. GAAP, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value. The assumptions underlying the allocation of relative fair values are based on market information including, but not limited to: (i) the estimate of replacement cost of improvements under the cost approach, (ii) the estimate of land values based on comparable sales under the sales comparison approach, and (iii) the estimate of future benefits determined by either a reasonable rate of return over a single year’s net cash flow, or a forecast of net cash flows projected over a reasonable investment horizon under the income capitalization approach. The underlying assumptions are subject to uncertainty and thus any changes to the allocation of fair value to each of the various line items within the Company’s consolidated balance sheets could have an impact on the Company’s financial condition as well as results of operations due to resulting changes in depreciation and amortization as a result of the fair value allocation. The acquisitions of real estate subject to this estimate totaled one building within an existing multi-tenant income property, one vacant land parcel within an existing multi-tenant property, and one multi-tenant property for an aggregate purchase price of $72.6 million for the six months ended June 30, 2024, and four buildings within an existing multi-tenant income property and one additional multi-tenant property for an aggregate purchase price of $75.8 million for the six months ended June 30, 2023.