Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2024

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation:

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the financial statements of the Company and its wholly owned subsidiaries. If the Company determines that it has an interest in a variable interest entity within the meaning of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation, the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Our Operating Partnership meets the criteria of a variable interest entity. The Company is the primary beneficiary and, accordingly, we consolidate our Operating Partnership. All material intercompany transactions have been eliminated in consolidation. The ownership interests of the other investors in the Operating Partnership are recorded as noncontrolling interests.

None of the prior year amounts have been reclassified for consistency with the current year presentation.

Use of Estimates

Use of Estimates:

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. All of these estimates reflect management’s best judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates could change, which may result in impairments of certain assets. Significant estimates include the useful lives of long-

lived assets including property, equipment and intangible assets, impairment of assets, collectability of receivables, contingencies, stock-based compensation, and fair value of assets and liabilities acquired in business combinations.

Real Estate

Real Estate:

Real estate assets are stated at cost, less accumulated depreciation and amortization. All costs related to the improvement or replacement of real estate properties, including interest expense on development properties, are capitalized. Acquisition-related costs are capitalized for asset acquisitions. Additions, renovations, and improvements that enhance and/or extend the useful life of a property are also capitalized. Expenditures for ordinary maintenance, repairs, and improvements that do not materially prolong the normal useful life of an asset, are charged to operations as incurred.

The Company capitalizes all direct costs of real estate under development until the end of the development period. In addition, the Company capitalizes the indirect cost of insurance and real estate taxes allocable to real estate under development during the development period. The Company also capitalizes interest using the avoided cost method for real estate under development during the development period. The Company will cease the capitalization of these costs when development activities are substantially completed and the property is available for occupancy by tenants, but no later than one year from the completion of major construction activity at which time the property is placed in service and depreciation commences. If the Company suspends substantially all activities related to development of a qualifying asset, the Company will cease capitalization of these costs until activities are resumed. The Company had no real estate under development as of December 31, 2024, or December 31, 2023.

Upon the acquisition of real estate properties, the relative fair value of the real estate purchased is allocated to the acquired tangible assets (generally consisting of land, buildings and building improvements, and tenant improvements) and identified intangible assets and liabilities (generally consisting of above-market and below-market leases and the origination value of in-place leases) in accordance with GAAP. We utilize methods similar to those used by independent appraisers in estimating the fair value of acquired assets and liabilities. The fair value of the tangible assets of an acquired property considers the value of the property “as-if-vacant.” In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases is estimated based on the differences between contractual rentals and the estimated market rents over the applicable lease term discounted back to the date of acquisition utilizing a discount rate adjusted for the credit risk associated with the respective tenants. The aggregate value of in-place leases is measured based on the avoided costs associated with lack of revenue over a market-oriented lease-up period, the avoided leasing commissions, and other avoided costs common in similar leasing transactions. Mortgage notes payable assumed in connection with acquisitions are recorded at their fair value using current market interest rates for similar debt at the time of acquisitions.

The capitalized above-market lease values are amortized as a reduction of rental revenue over the remaining term of the respective leases and the capitalized below-market lease values are amortized as an increase to rental revenue over the remaining term of the respective leases. The value of in-place leases is based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during expected lease-up periods, current market conditions, and costs to execute similar leases. The values of in-place leases are amortized over the remaining term of the respective leases and are included in depreciation and amortization in the accompanying consolidated statements of operations. If a tenant vacates its space prior to its contractual expiration date, any unamortized balance of the related intangible assets or liabilities is recorded as income or expense in the period. The total net impact to rental revenues due to the amortization of above-market and below-market leases was a net increase in rental revenue of approximately $0.4 million and $0.6 million for the years ended December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024, approximately $0.7 million and $5.0 million (net of accumulated amortization) relating to above-market and in-place leases, respectively, are included in acquired lease intangible assets, net in the accompanying consolidated balance sheets. As of December 31, 2023, approximately $0.8 million and $5.0 million (net of accumulated amortization) relating to above-market and in-place leases, respectively, are included in acquired lease intangible assets, net in the accompanying consolidated balance sheets. As of December 31, 2024, and 2023, $0.5 million and $1.1 million (net of accumulated amortization), respectively, relating to below-market leases is included in acquired lease intangible liabilities, net in the accompanying consolidated balance sheets.

The following table presents the projected increase (decrease) to rental revenue from the amortization of the acquired above-market and below-market lease intangibles and the increase to amortization expense of the in-place lease intangibles for properties owned at December 31, 2024, over the next five years and thereafter (in thousands):

	Net increase (decrease) to rental revenues			Increase to amortization expense
2025	$	63		$	1,037
2026		(13	)		907
2027		4			673
2028		4			549
2029		(46	)		481
Thereafter		(171	)		1,367
	$	(159	)	$	5,014

Investment in Unconsolidated Affiliates

Investment in Unconsolidated Affiliate:

The Company has an investment in an entity that is accounted for under the equity method of accounting. The equity method of accounting is used when an investor has influence, but not control, over the investee. The Company records its share of the profits and losses of the investee in the period when these profits and losses are also reflected in the accounts of the investee.

On February 28, 2018, the Company purchased a 50% interest in Two CPS Developers LLC (the “Investee”) for $5.25 million. The Company has the ability to exercise significant influence over the Investee, does not have a controlling interest in the Investee, and the Investee is not a variable interest entity. Therefore, the Company accounts for this investment under the equity method of accounting. The Company recorded income of $0.2 million from this investment for each of the years ended December 31, 2024 and 2023.

The Company recognizes income for distributions in excess of its investment where there is no recourse to the Company and no intention or obligation to contribute additional capital. For investments in which there is recourse to the Company or an obligation or intention to contribute additional capital exists, distributions in excess of the investment are recorded as a liability. When characterizing distributions from equity investees within the Company’s consolidated statement of cash flows, all distributions received are first applied as returns on investment to the extent there are cumulative earnings related to the respective investment and are classified as cash inflows from operating activities. If cumulative distributions are in excess of cumulative earnings, distributions are considered a return of investment. In such cases, the distribution is classified as cash inflows from investing activities.

The Company periodically reviews its investments in unconsolidated joint ventures for other-than-temporary losses in investment value. Any decline that is not expected to be recovered based on the underlying assets of the investment is considered other than temporary and an impairment charge is recorded as a reduction in the carrying value of the investment. During the periods presented there were no impairment charges related to the Company’s investment in unconsolidated affiliate.

The total assets and liabilities of the Company’s investment in unconsolidated affiliate as of December 31, 2024 were $15.9 million and $8.6 million, respectively. Total revenues and expenses of the Company’s investment in unconsolidated affiliate for the year ended December 31, 2024 were $1.8 million and $1.4 million, respectively. The total assets and liabilities of the Company’s investment in unconsolidated affiliate as of December 31, 2023 were $16.5 million and $9.0 million, respectively. Total revenues and expenses of the Company’s investment in unconsolidated affiliate for the year ended December 31, 2023 were $1.8 million and $1.4 million, respectively.

Depreciation and Amortization

Depreciation and Amortization:

The Company uses the straight-line method for depreciation and amortization. Properties and property improvements are depreciated over their estimated useful lives, which range from 5 to 40 years. Furniture, fixtures, and equipment are depreciated over estimated useful lives that range from 5 to 10 years. Tenant improvements are amortized over the shorter of the remaining non-cancellable term of the related leases or their useful lives.

Deferred Charges

Deferred Charges:

Deferred charges consist principally of leasing commissions, which are amortized over the life of the related tenant leases, and financing costs relating to our revolving credit facility, which are amortized over the terms of the respective debt agreements. These deferred charges are included in other assets on the consolidated balance sheets. If leases or loans are terminated, the unamortized charges are expensed.

Real Estate Impairment

Real Estate Impairment:

Management reviews each real estate investment for impairment whenever events or circumstances indicate that the carrying value of a real estate investment may not be recoverable. Significant management judgment is involved in determining if impairment indicators exist, assessing investments for recoverability, and, if required, measuring the fair value of the real estate investments. The review of recoverability is based on an estimate of the undiscounted future cash flows that are expected to result from the real estate investment’s use and eventual disposition. Such cash flow analyses consider assumptions such as expected future market rents, future revenue, market capitalization rates and holding periods, as well as the effects of leasing demand, competition and other factors. If an impairment event exists due to the projected inability to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds estimated fair value. Management is required to make subjective assessments as to whether there are impairments in the value of the Company’s real estate holdings. These assessments could have a direct impact on net income, because an impairment loss is recognized in the period that the assessment is made. Management has determined that there was no impairment relating to its long-lived assets for the years ended December 31, 2024 and 2023.

Reportable Segments

Reportable Segments:

The Company manages its operations on an aggregated, single segment basis for purposes of assessing performance and making operating decisions and, accordingly, has only one reporting and operating segment. Our primary activities include acquiring, leasing and managing industrial properties across various geographic markets within the United States. We manage our operations on a consolidated basis to assess performance and make strategic operating decisions. Although we have target markets, we do not operate individual markets independently from our overall portfolio nor do we distinguish our business or group our operations on a geographical basis for purposes of assessing overall performance. Our Chief Operating Decision Maker (“CODM”) is a joint team of our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer.

The CODM uses consolidated net income as the primary measure to assess overall company performance and to allocate resources. Consolidated net income is presented in our Consolidated Financial Statements and provides a comprehensive view of the Company’s financial performance, including both property and non-property financial results. The CODM reviews significant expenses associated with the Company’s single operating segment, including property-related and corporate-level expenses, which are presented in the consolidated statements of operations.

The CODM also assesses the performance of the segment based upon funds from operations (“FFO”) and net operating income (“NOI”). FFO is calculated in accordance with the standards established by the National Association of Real Estate Investment Trusts. FFO represents GAAP net income (loss), excluding gains (or losses) from sales of property, excluding impairment write-downs of depreciated property, plus real estate-related depreciation and amortization. NOI is defined as rental income, which includes billings for common area maintenance, real estate taxes and insurance, less property operating expenses, real estate tax expense and insurance expense.

Revenue Recognition

Revenue Recognition:

Rental income includes the base rent that each tenant is required to pay in accordance with the terms of their respective leases reported on a straight-line basis over the term of the lease. In order for management to determine, in its judgment, that the unbilled rent receivable applicable to each specific property is collectible, management reviews billed and unbilled rent receivables and takes into consideration the tenant’s payment history and financial condition. If the Company determines that the collectability of a tenant’s lease payments is not probable, the write-off of the entire tenant receivable, including straight-line rent receivable, is presented as a reduction of revenue rather than an operating expense on the consolidated statements of operations. Rental income related to tenants where the collectability of lease payments is not deemed probable will be recorded on a cash basis. Some of the leases provide for additional contingent rental revenue in the form of percentage rents and increases based on the consumer price index, subject to certain maximums and minimums. For the year ended December 31, 2024, the Company determined that collectability of one former tenant's outstanding lease payments was not probable and, therefore, the Company recorded a write-off of the entire tenant receivable in the amount of $0.1 million and placed the tenant on the cash basis as of March 31, 2024. In addition, the Company received $0.6 million in February 2024 in full settlement of amounts due from a previous tenant that was placed on the cash basis during 2023.

Substantially all of the Company’s properties are subject to long-term net leases under which the tenant is typically responsible to pay for its pro rata share of real estate taxes, insurance, and ordinary maintenance and repairs for the property.

Property operating expense recoveries from tenants of common area maintenance, real estate taxes, and other recoverable costs are recognized as revenues in the period that the related expenses are incurred.

Tenant receivables at December 31, 2024 and 2023 were $1.2 million and $0.5 million, respectively, and are included in other assets in the accompanying consolidated balance sheets.

Lease Accounting

Lease Accounting:

As lessor, the Company has made an accounting policy election to account for lease concessions related to the effects of COVID-19 consistent with how those concessions would be accounted for under Topic 842, which is as though the enforceable rights and obligations for those concessions existed regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract. The Company elected to utilize the practical expedient provided by Accounting Standards Update (“ASU”) 2018-11 related to the separation of lease and non-lease components and as a result, revenues related to leases are reported on one line in the presentation within the consolidated statements of operations.

The Company elected not to evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, these costs will be accounted for as if they are lessee costs. Consequently, the Company excludes from the consideration in the contract and from variable payments not included in the consideration in the contract all collections from lessees of taxes within the scope of the election and provides certain disclosures. The accounting policy election includes sales, use, value added, and some excise taxes but excludes real estate taxes.

The following table presents additional disclosures regarding the Company’s rental income for the twelve months ended December 31, 2024 and 2023 (in thousands):

	2024		2023
Fixed lease revenue	$	65,066	$	62,415
Variable lease revenue		13,684		12,858
Total lease revenue	$	78,750	$	75,273

As lessee, the Company elected to utilize the practical expedient in the implementation of ASU 2016-02 related to not separating non-lease components from the associated lease component. The Company is a party to an office lease, effective October 1, 2021, having a term of ten years, with future lease obligations aggregating to $2.8 million and $3.2 million as of December 31, 2024 and December 31, 2023 respectively (see Note 9). The Company has recorded a right-of-use asset and corresponding right-of-use liability at the present value of the remaining future minimum lease payments, based upon an incremental borrowing rate of 3.86%, of $3.1 million, as of October 1, 2021.

The following table presents the future lease obligations of the Company’s office lease on December 31, 2024, over the next five years and thereafter (in thousands):

2025	$	363
2026		374
2027		385
2028		397
2029		409
Thereafter		890
Total future minimum lease payments		2,818
Less imputed interest		332
Total right-of-use liability – operating lease	$	2,486

The following table presents additional disclosures regarding the Company’s office leases for the years ended December 31, 2024 and 2023 (in thousands):

	2024		2023
Operating lease costs	$	352	$	340
Variable lease costs		19		33
Total lease costs	$	371	$	373

Earnings Per Share Information

Earnings Per Share Information:

The Company presents both basic and diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding

for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower per share amount. Restricted stock was included in the computation of basic and diluted earnings per share. Stock option awards were included in the computation of diluted earnings per share in 2024 and 2023 because the option awards were dilutive.

Cash and Cash Equivalents

Cash and Cash Equivalents:

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash

Restricted Cash:

Restricted cash includes reserves used to pay real estate taxes, leasing costs and capital improvements.

Fair Value Measurement

Fair Value Measurement:

The Company determines fair value in accordance with ASC 820-10-05 for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

Assets and liabilities disclosed at fair values are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are defined by ASC 820-10-35, are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities. Determining which category an asset or liability falls within the hierarchy requires significant judgment, and the Company evaluates its hierarchy disclosures each quarter. The three-tier fair value hierarchy is as follows:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting management’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

Income Taxes

Income Taxes:

The Company is organized and conducts its operations to qualify as a REIT for Federal income tax purposes. Accordingly, the Company is generally not subject to Federal income taxation on the portion of its distributable income that qualifies as REIT taxable income, to the extent that it distributes at least 90% of its REIT taxable income to its stockholders and complies with certain other requirements as defined in the Code.

The Company also participates in certain activities conducted by entities which elected to be treated as taxable subsidiaries under the Code. As such, the Company is subject to federal, state, and local taxes on the income from these activities.

The Company accounts for income taxes of the taxable subsidiaries under the asset and liability method as required by the provisions of ASC 740-10-30. Under this method, deferred tax assets and liabilities are established based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

ASC 740-10-65 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-65, the Company may recognize the tax benefit from an uncertain

tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10-65 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2024, and 2023, the Company had determined that no liabilities are required in connection with unrecognized tax positions. As of December 31, 2024, the Company’s tax returns for the prior three years are subject to review by the Internal Revenue Service. Any interest and penalties would be expensed as incurred.

Concentrations of Credit Risk

Concentrations of Credit Risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, which from time to time exceed the federal depository insurance coverage. All non-interest bearing transaction accounts deposited at an insured depository institution are insured by the Federal Deposit Insurance Corporation up to the standard maximum deposit insurance amount of $250,000. Management believes that the Company is not exposed to any significant credit risk due to the credit worthiness of the financial institutions.

Rental income of $9.5 million, derived from five leases with the City of New York, represented 12% of the Company’s total rental income for the year ended December 31, 2024. Rental income of $9.5 million, derived from five leases with the City of New York, represented 13% of the Company’s total rental income for the year ended December 31, 2023.

Rental income of $11.6 million, derived from six leases with Federal Express, represented 15% of the Company’s total rental income for the year ended December 31, 2024. Rental income of $10.9 million, derived from six leases with Federal Express, represented 15% of the Company’s total rental income for the year ended December 31, 2023.

Rental income of $7.7 million, derived from one lease with Avis Rent-A-Car Systems, Inc.(“Avis”), represented 10% of the Company’s total rental income for the year ended December 31, 2024. Rental income of $7.7 million, derived from one lease with Avis, represented 10% of the Company’s total rental income for the year ended December 31, 2023.

Stock-Based Compensation

Stock-Based Compensation:

The Company has a stock-based compensation plan, which is described below in Note 6. The Company accounts for stock-based compensation in accordance with ASC 718, which establishes accounting for stock-based awards. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is expensed at the grant date (for the portion that vests immediately) or ratably over the respective vesting periods. The impact of the forfeiture of awards is recognized as forfeitures occur.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements:

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures.” The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on the income taxes paid. The guidance is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09 applies to all entities subject to income taxes. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the requirements will be effective for annual periods beginning after December 15, 2025. The guidance will be applied on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures,” which amends disclosure requirements about a public company’s reportable segments and addresses requests from investors for additionally detailed information about a reportable segment’s expenses. A public entity should apply the amendments provided by ASU 2023-07 retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the amendment during the year ended December 31, 2024 and it did not have a material impact to the consolidated financial statements.