Leases

3 Months Ended

Mar. 31, 2024

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.

	Three Months Ended
	March 31, 2024		March 31, 2023
Base rent(1)	$	40,665	$	34,898
Straight-line rental revenue, net(2)	5,112		4,162
Variable lease payments(3)	5,116		6,946
Amortization of above/below market lease intangibles	61		35
Total Rental revenue	$	50,954	$	46,041

__________________

(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 March 31, 2024.

Year	Future Minimum Rents
2024 (remaining)	$	116,967
2025	167,392
2026	170,186
2027	172,689
2028	175,294
2029	175,829
Thereafter	1,613,642
Total	$	2,591,999

Lessor – Financing receivables

In accordance with ASC 842, certain of the Company’s sales-type lease contracts are accounted for as failed-sale leaseback transactions and were recorded as an Investment in leases - Financing receivables. During the three months ended March 31, 2024, and March 31, 2023, the Company did not execute any sale-leaseback transactions that were accounted for as failed-sale leasebacks. During the three months ended March 31, 2024, and March 31, 2023, the Company recognized interest income of $14,534 and $13,669, 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 $10,898 and $12,908 during the three months ended March 31, 2024 and March 31, 2023, respectively.

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 March 31, 2024, the future minimum

payments of sales-type lease receivables were as follows:

Year	Future Minimum Payments
2024 (remaining)	$	35,730
2025	47,926
2026	48,829
2027	49,874
2028	52,110
2029	53,089
Thereafter	6,993,409
Total lease payment receivable	7,280,967
Less deferred interest income	6,694,881
Less allowance for credit losses	15,620
Total Investment in leases - Financing receivables	$	570,466

The following table reflects the change to the allowance for credit losses on our real estate portfolio for the three months ended March 31, 2024 and March 31, 2023:

	Three Months Ended
	March 31, 2024		March 31, 2023
Balance, beginning of period	$	16,638	$	—
Initial allowance upon adoption	—		7,157
Current period change in credit allowance	(1,018)		(72)
Balance, end of period	$	15,620	$	7,085

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 March 31, 2024 and January 1, 2024:

	March 31, 2024
	Ba1		Baa2		B2		Caa2		Total
Investment in leases - Financing Receivable	$	—	$	56,493	$	317,577	$	212,016	$	586,086

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

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 (remaining)	$	3,359
2025	4,478
2026	4,478
2027	4,478
2028	4,636
2029	4,885
Thereafter	73,312
Total	$	99,626

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.

	Three Months Ended
	March 31, 2024		March 31, 2023
Base rent(1)	$	40,665	$	34,898
Straight-line rental revenue, net(2)	5,112		4,162
Variable lease payments(3)	5,116		6,946
Amortization of above/below market lease intangibles	61		35
Total Rental revenue	$	50,954	$	46,041

__________________

(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 March 31, 2024.

Year	Future Minimum Rents
2024 (remaining)	$	116,967
2025	167,392
2026	170,186
2027	172,689
2028	175,294
2029	175,829
Thereafter	1,613,642
Total	$	2,591,999

Lessor – Financing receivables

In accordance with ASC 842, certain of the Company’s sales-type lease contracts are accounted for as failed-sale leaseback transactions and were recorded as an Investment in leases - Financing receivables. During the three months ended March 31, 2024, and March 31, 2023, the Company did not execute any sale-leaseback transactions that were accounted for as failed-sale leasebacks. During the three months ended March 31, 2024, and March 31, 2023, the Company recognized interest income of $14,534 and $13,669, 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 $10,898 and $12,908 during the three months ended March 31, 2024 and March 31, 2023, respectively.

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 March 31, 2024, the future minimum

payments of sales-type lease receivables were as follows:

Year	Future Minimum Payments
2024 (remaining)	$	35,730
2025	47,926
2026	48,829
2027	49,874
2028	52,110
2029	53,089
Thereafter	6,993,409
Total lease payment receivable	7,280,967
Less deferred interest income	6,694,881
Less allowance for credit losses	15,620
Total Investment in leases - Financing receivables	$	570,466

The following table reflects the change to the allowance for credit losses on our real estate portfolio for the three months ended March 31, 2024 and March 31, 2023:

	Three Months Ended
	March 31, 2024		March 31, 2023
Balance, beginning of period	$	16,638	$	—
Initial allowance upon adoption	—		7,157
Current period change in credit allowance	(1,018)		(72)
Balance, end of period	$	15,620	$	7,085

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 March 31, 2024 and January 1, 2024:

	March 31, 2024
	Ba1		Baa2		B2		Caa2		Total
Investment in leases - Financing Receivable	$	—	$	56,493	$	317,577	$	212,016	$	586,086

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

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 (remaining)	$	3,359
2025	4,478
2026	4,478
2027	4,478
2028	4,636
2029	4,885
Thereafter	73,312
Total	$	99,626