Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Leases

Lessor – Operating leases

The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s net lease properties which consists of fixed annual rent that escalates annually throughout the term of the applicable leases, and the tenant is generally responsible for all property-related expenses, including taxes, insurance, and maintenance. The Company's net lease properties are each leased to a single tenant.

The following table details the components of operating lease income from leases in which the Company is the lessor.

	Year Ended December 31, 2023		From Inception through December 31, 2022
Base rent(1)	$	149,087	$	28,986
Straight-line rental revenue, net(2)	20,958		2,480
Variable lease payments(3)	16,913		5,046
Amortization of below market lease intangibles	187		35
Total Rental revenue	$	187,145	$	36,547

__________________

(1)Base rent consists of fixed lease payments.

(2)Represents lease income related to the excess (deficit) of straight-line rental revenue over fixed lease payments.

(3)Consists of reimbursement of common area maintenance (“CAM”) and real estate taxes, and amortization of tenant inducements.

The following table presents the undiscounted future minimum rents the Company expects to receive for its net lease properties classified as operating leases as of December 31, 2023.

Year	Future Minimum Rents
2024	$	165,690
2025	168,101
2026	170,904
2027	173,417
2028	176,038
Thereafter	2,028,992
Total	$	2,883,142

Lessor – Financing receivables

In accordance with ASC 842, certain of the Company’s sales-type lease contracts are primarily accounted for as failed sale-leaseback transactions and were recorded as an Investment in leases - Financing receivables. During the year ended December 31, 2023, and the period from Inception through December 31, 2022, the Company executed three and 14 such sale-leaseback transactions for $47,855 and $519,212, respectively. During the year ended December 31, 2023, and the period from Inception through December 31, 2022, the Company recognized interest income of $57,094, and $9,169, respectively, on an effective interest basis at a constant rate of return over the term of the applicable leases. Cash received from the sales-type leasing agreements was $46,654 and $7,348 during the year ended December 31, 2023 and the period from Inception through December 31, 2022.

All of the lease payments are triple net basis to the tenant and the Company has rights in accordance with the individual lease agreements to protect the value of our leased properties. As of December 31, 2023, the future minimum

payments of sales-type lease receivables were as follows:

Year	Future Minimum Payments
2024	$	46,746
2025	47,611
2026	48,507
2027	49,544
2028	51,771
Thereafter	6,922,641
Total lease payment receivable	7,166,820
Less deferred interest income	6,587,492
Less allowance for credit losses	16,638
Total Investment in leases - Financing receivables, net	$	562,690

The following table reflects the roll-forward of the allowance for credit losses on our real estate portfolio for the year ended December 31, 2023:

	Year Ended December 31, 2023
Balance as of December 31, 2022	$	—
Initial allowance upon adoption	7,157
Current period change in credit allowance	9,481
Ending Balance as of December 31, 2023	$	16,638

We assess the credit quality of our investments through the credit ratings of the lessee. The credit quality indicators are reviewed by us on a quarterly basis as of quarter-end. In instances where the lessee does not have a public credit rating, we use either a comparable proxy company or the overall corporate credit rating, as applicable. We also use this credit rating to determine the probability of default (“PD”) when estimating credit losses for each investment.

The following tables detail the amortized cost basis of our investments by the credit quality indicator as of December 31, 2023 and January 1, 2023:

	December 31, 2023
	B1		Ba1		Ba2		Baa2		Ba3		B2		Caa2		Total
Investment in leases - Financing Receivable	$	—	$	204,364	$	—	$	52,247	$	—	$	111,803	$	210,914	$	579,328

	January 1, 2023
	B1		Ba1		Ba2		Baa2		Ba3		B2		Caa2		Total
Investment in leases - Financing Receivable	$	—	$	201,265	$	50,973	$	—	$	159,217	$	109,578	$	—	$	521,033

Our current year change in credit allowance is primarily the result of a credit rating downgrade for one of our tenants.

Purchase Option Provisions

Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property during a specified period for the Company’s gross investment plus a specified proportion of appreciation. The Company expects that the purchase price will be greater than its net investment in the property at the time of potential exercise by the lessee.

Lessee - DST Program Master Lease

During the year ended December 31, 2023, the Company contributed two industrial assets to the DST as part of the initial DST Program offering. The assets are leased back to the Company by a wholly-owned subsidiary of the Company under the master lease agreement. The following table presents the undiscounted future minimum rent payment obligation of the wholly-owned subsidiary:

Year	Future Minimum Payments
2024	$	4,478
2025	4,478
2026	4,478
2027	4,478
2028	4,636
Thereafter	78,197
Total	$	100,745

Leases

Leases

Lessor – Operating leases

The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s net lease properties which consists of fixed annual rent that escalates annually throughout the term of the applicable leases, and the tenant is generally responsible for all property-related expenses, including taxes, insurance, and maintenance. The Company's net lease properties are each leased to a single tenant.

The following table details the components of operating lease income from leases in which the Company is the lessor.

	Year Ended December 31, 2023		From Inception through December 31, 2022
Base rent(1)	$	149,087	$	28,986
Straight-line rental revenue, net(2)	20,958		2,480
Variable lease payments(3)	16,913		5,046
Amortization of below market lease intangibles	187		35
Total Rental revenue	$	187,145	$	36,547

__________________

(1)Base rent consists of fixed lease payments.

(2)Represents lease income related to the excess (deficit) of straight-line rental revenue over fixed lease payments.

(3)Consists of reimbursement of common area maintenance (“CAM”) and real estate taxes, and amortization of tenant inducements.

The following table presents the undiscounted future minimum rents the Company expects to receive for its net lease properties classified as operating leases as of December 31, 2023.

Year	Future Minimum Rents
2024	$	165,690
2025	168,101
2026	170,904
2027	173,417
2028	176,038
Thereafter	2,028,992
Total	$	2,883,142

Lessor – Financing receivables

In accordance with ASC 842, certain of the Company’s sales-type lease contracts are primarily accounted for as failed sale-leaseback transactions and were recorded as an Investment in leases - Financing receivables. During the year ended December 31, 2023, and the period from Inception through December 31, 2022, the Company executed three and 14 such sale-leaseback transactions for $47,855 and $519,212, respectively. During the year ended December 31, 2023, and the period from Inception through December 31, 2022, the Company recognized interest income of $57,094, and $9,169, respectively, on an effective interest basis at a constant rate of return over the term of the applicable leases. Cash received from the sales-type leasing agreements was $46,654 and $7,348 during the year ended December 31, 2023 and the period from Inception through December 31, 2022.

All of the lease payments are triple net basis to the tenant and the Company has rights in accordance with the individual lease agreements to protect the value of our leased properties. As of December 31, 2023, the future minimum

payments of sales-type lease receivables were as follows:

Year	Future Minimum Payments
2024	$	46,746
2025	47,611
2026	48,507
2027	49,544
2028	51,771
Thereafter	6,922,641
Total lease payment receivable	7,166,820
Less deferred interest income	6,587,492
Less allowance for credit losses	16,638
Total Investment in leases - Financing receivables, net	$	562,690

The following table reflects the roll-forward of the allowance for credit losses on our real estate portfolio for the year ended December 31, 2023:

	Year Ended December 31, 2023
Balance as of December 31, 2022	$	—
Initial allowance upon adoption	7,157
Current period change in credit allowance	9,481
Ending Balance as of December 31, 2023	$	16,638

We assess the credit quality of our investments through the credit ratings of the lessee. The credit quality indicators are reviewed by us on a quarterly basis as of quarter-end. In instances where the lessee does not have a public credit rating, we use either a comparable proxy company or the overall corporate credit rating, as applicable. We also use this credit rating to determine the probability of default (“PD”) when estimating credit losses for each investment.

The following tables detail the amortized cost basis of our investments by the credit quality indicator as of December 31, 2023 and January 1, 2023:

	December 31, 2023
	B1		Ba1		Ba2		Baa2		Ba3		B2		Caa2		Total
Investment in leases - Financing Receivable	$	—	$	204,364	$	—	$	52,247	$	—	$	111,803	$	210,914	$	579,328

	January 1, 2023
	B1		Ba1		Ba2		Baa2		Ba3		B2		Caa2		Total
Investment in leases - Financing Receivable	$	—	$	201,265	$	50,973	$	—	$	159,217	$	109,578	$	—	$	521,033

Our current year change in credit allowance is primarily the result of a credit rating downgrade for one of our tenants.

Purchase Option Provisions

Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property during a specified period for the Company’s gross investment plus a specified proportion of appreciation. The Company expects that the purchase price will be greater than its net investment in the property at the time of potential exercise by the lessee.

Lessee - DST Program Master Lease

During the year ended December 31, 2023, the Company contributed two industrial assets to the DST as part of the initial DST Program offering. The assets are leased back to the Company by a wholly-owned subsidiary of the Company under the master lease agreement. The following table presents the undiscounted future minimum rent payment obligation of the wholly-owned subsidiary:

Year	Future Minimum Payments
2024	$	4,478
2025	4,478
2026	4,478
2027	4,478
2028	4,636
Thereafter	78,197
Total	$	100,745