LXP Lxp Industrial Trust - 10-K

Item 1A. Risk Factors

In addition to the other information in our Annual Report on Form 10-K, you should consider the risks described below that we believe may be material to investors in evaluating the Company. This section contains forward-looking statements, and in considering these statements, you should refer to the qualifications and limitations on our forward-looking statements that are described on page four above.

Risks Related to Our Business

We are subject to risks related to defaults under, or termination or expiration of, our leases.

We focus our investment activities on industrial real estate properties that are generally net leased to single tenants, and certain of our tenants and/or their guarantors constitute a significant percentage of our rental revenues. Therefore, the financial failure of, or other default by, a single tenant under its lease is likely to cause a significant or complete reduction in the operating cash flow generated by the property leased to that tenant and might decrease the value of that property and result in a non-cash impairment charge. If the tenant represents a significant portion of our rental revenues, the impact on our financial position may be material. Further, in any such event, we will be responsible for 100% of the operating costs following a vacancy at a single-tenant building.

Under current bankruptcy law, a tenant can generally assume or reject a lease within a certain number of days of filing its bankruptcy petition. If a tenant rejects the lease, a landlord's damages, subject to availability of funds from the bankruptcy estate, are generally limited to the greater of (1) one year's rent and (2) the rent for 15% of the remaining term of the lease, not to exceed three years.

Our property owner subsidiaries may not be able to retain tenants in any of our properties upon the expiration of leases. Upon the expiration or other termination of current leases, our property owner subsidiaries may not be able to re-let all or a portion of the vacancy, or the terms of re-letting (including the cost of concessions to tenants and leasing commissions) may be less favorable than current lease terms or market rates. If one of our property owner subsidiaries is unable to promptly re-let all or a substantial portion of the vacancy, or if the rental rates a property owner subsidiary receives upon re-letting are significantly lower than current rates, our earnings and ability to satisfy our debt service obligations and to make expected distributions to our shareholders may be adversely affected due to the resulting reduction in rent receipts and increase in property operating costs.

Certain of our leases may permit tenants to terminate the leases to which they are a party.

Certain of our leases contain tenant termination options or economic discontinuance options that permit the tenants to terminate their leases. While these options generally require a payment by the tenants, in most cases, the payments will be less than the total remaining expected rental revenue. The termination of a lease by a tenant may impair the value of the property. In addition, we will be responsible for 100% of the operating costs following the termination by any such tenant and subsequent vacating of the property, and we will incur re-leasing costs.

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Our ability to fully control the maintenance of our net-leased properties may be limited.

The tenants of our net-leased properties are responsible for maintenance and other day-to-day management of the properties or their premises. If a property is not adequately maintained in accordance with the terms of the applicable lease, we may incur expenses for deferred maintenance or other liabilities once the property is no longer leased. We generally visit our properties on at least an annual basis, but these visits are not comprehensive inspections and deferred maintenance items may go unnoticed. While our leases generally provide for recourse against the tenant in these instances, a bankrupt or financially-troubled tenant may be more likely to defer maintenance, and it may be more difficult to enforce remedies against such a tenant.

You should not rely on the credit ratings of our tenants.

Some of our tenants, guarantors and/or their parent or sponsor entities are rated by certain rating agencies. In certain instances, we may disclose the credit ratings of our tenants or their parent or sponsor entities even though those parent or sponsor entities are not liable for the obligations of the tenant or guarantor under the lease. Any such credit ratings are subject to ongoing evaluation by these credit rating agencies and we cannot assure you that any such ratings will not be changed or withdrawn by these rating agencies in the future if, in their judgment, circumstances warrant. If these rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, the credit rating of a tenant, guarantor or its parent entity, the value of our investment in any properties leased by such tenant could significantly decline.

Our real estate development activities are subject to additional risks.

Development activities generally require various government and other approvals, which we may not receive. We rely on third-party construction managers and/or engineers to monitor certain construction activities. If we engage or partner with a developer, we rely on the developer to monitor construction activities and our interests may not be aligned. In addition, development activities, including speculative development and redevelopment and renovation of vacant properties, are subject to risks including, but not limited to:

• unsuccessful development opportunities could cause us to incur direct expenses;

• construction costs of a project may exceed original estimates, possibly making the project less profitable than originally estimated or unprofitable;

• time required to complete the construction of a project or to lease up the completed project may be greater than originally anticipated, thereby adversely affecting our cash flow and liquidity;

• legal action to compel performance of contractors, developers or partners may cause delays and our costs may not be reimbursed;

• changes in legal and regulatory requirements, including zoning, and public opposition to certain projects, may increase our costs;

• we may not be able to find tenants to lease the space built on a speculative basis or in a redeveloped or renovated building, which will impact our cash flow and ability to finance or sell such properties;

• there may be gaps in warranty obligations of our developers and contractors and the obligations to a tenant;

• occupancy rates and rents of a completed project may not be sufficient to make the project profitable; and

• favorable financing sources to fund development activities may not be available.

Our development activities are subject to risks related to supply-chain disruptions and inflation, which increase costs and may delay completion. In addition, we hold land for development and we are unable to estimate any further costs to develop such land until we commit to develop any such land.

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A tenant’s bankruptcy proceeding may result in the re-characterization of related sale-leaseback transactions or in the restructuring of the tenant's payment obligations to us, either of which could adversely affect our financial condition.

We have entered and may continue to enter into sale-leaseback transactions, whereby we purchase a property and then lease the same property back to the person from whom we purchased it or a related person. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture. As a result of the foregoing, the re-characterization of a sale-leaseback transaction could adversely affect our financial condition, cash flow and the amount available for distributions to our shareholders.

If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and as a result, would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of the claims outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, our tenant and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the tenant relating to the property.

A significant portion of our leases are long-term and do not have fair market rental rate adjustments, which could negatively impact our income and reduce the amount of funds available to make distributions to shareholders.

A significant portion of our rental income comes from long-term net leases, which generally provide the tenant greater discretion in using the leased property than ordinary property leases, such as the right to freely sublease the property, to make alterations in the leased premises and to terminate the lease prior to its expiration under specified circumstances. Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in fair market rental rates during those years. If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases or if we are unable to obtain any increases in rental rates over the terms of our leases, significant increases in future property operating costs, to the extent not covered under the net leases, could result in us receiving less than fair value from these leases. As a result, our income and distributions to our shareholders could be lower than they would otherwise be if we did not engage in long-term net leases.

In addition, increases in interest rates may also negatively impact the value of our properties that are subject to long-term leases. While a significant number of our net leases provide for annual escalations in the rental rate, the increase in interest rates may outpace the annual escalations.

Interests in loans receivable are subject to delinquency, foreclosure and loss.

While loan receivables are not a primary focus, we have made, and may make, loans to purchasers of our properties and developers. Our interests in loans receivable are generally non-recourse and secured by real estate properties owned by borrowers that were unable to obtain similar financing from a commercial bank. These loans are subject to many risks including delinquency. The ability of a borrower to repay a loan secured by a real estate property is typically and primarily dependent upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If a borrower were to default on a loan, it is possible that we would not recover the full value of the loan as the collateral may be non-performing or impaired.

Our inability to carry out our growth strategy could adversely affect our financial condition and results of operations.

Our plan to grow through the acquisition and development of new properties could be adversely affected by trends in the real estate and financing businesses. For example, our ability to grow will be influenced by the relationship between our expected returns on available acquisition and development opportunities in our target markets and our cost of available capital. Our ability to implement our strategy may also be impeded because we may have difficulty finding opportunities that meet our investment criteria, in addition, our acquisitions and developments may fail to perform in accordance with expectations, including operating and leasing expectations. If we are unable to carry out our growth strategy, our financial condition and results of operations could be adversely affected.

Some of our acquisitions and developments may be financed using short-term financing, such as our line of credit, with the expectation of providing permanent financing in the future, such as through an equity or debt offering. If permanent debt or equity financing is not available on attractive terms to refinance this short-term financing, further acquisitions and developments may be curtailed, or cash available to satisfy our debt service obligations and distributions to shareholders may be adversely affected.

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Our investment and disposition activity may lead to dilution.

Our strategy is to increase our investment in general purpose, well-located warehouse/distribution assets in our target markets. We believe this strategy will lessen capital expenditures over time and mitigate revenue reductions on renewals and re-tenanting. To implement this strategy, we have been selling non-industrial assets and recapitalizing special purpose industrial assets, which generally have higher capitalization rates, and buying warehouse and distribution properties, which generally have lower capitalization rates. We also may sell industrial properties outside of our target markets at capitalization rates higher than we expect to reinvest in our target markets. This strategy adversely impacts returns and cash flows in the short-term. There can be no assurance that the implementation of our strategy will lead to improved results or that we will be able to execute our strategy as contemplated or on terms acceptable to us.

Investment activities may not produce expected results and may be affected by outside factors.

The demand for industrial space in the United States is generally related to the level of economic output and consumer demand. Accordingly, reduced economic output and/or consumer demand may lead to lower occupancy rates for our properties. The concentration of our investments, among other factors, in industrial assets may expose us to the risk of economic downturns specific to industrial assets to a greater extent than if our investments were diversified.

Investment in commercial properties entail certain risks, such as (1) underwriting assumptions, including occupancy, rental rates and expenses, may differ from estimates, (2) the properties may become subject to environmental liabilities that we were unaware of at the time we acquired the property despite any environmental testing, (3) we may have difficulty obtaining financing on acceptable terms or paying the operating expenses and debt service associated with acquired properties prior to sufficient occupancy and (4) projected exit strategies may not come to fruition due to a variety of factors such as market conditions and/or tenant credit conditions at the time of dispositions.

We may not be successful in identifying suitable real estate properties or other assets that meet our investment criteria. We may also fail to complete investments on satisfactory terms. Failure to identify or complete investments could slow our growth, which could, in turn, have a material adverse effect on our financial condition and results of operations.

Properties where we have operating responsibilities and multi-tenant properties expose us to additional risks.

Properties where we have operating responsibilities involve risks not typically encountered in real estate properties which are fully operated by a single tenant. The ownership of properties which are not fully operated by a single tenant expose us to the risk of potential “CAM slippage,” which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the operating expenses paid by tenants and/or the amounts budgeted. Depending on the tenant’s leverage in the lease negotiation, the tenant may be successful in negotiating for caps on certain operating expenses and we are responsible for any amounts in excess of any cap.

Multi-tenant properties are also subject to the risk that a sufficient number of suitable tenants may not be found to enable the property to operate profitably and provide a return to us. Moreover, tenant turnover and fluctuation in occupancy rates, could affect our operating results. This risk may be compounded by the failure of existing tenants to satisfy their obligations due to various factors. These risks, in turn, could cause a material adverse impact to our results of operations and business.

Uninsured losses or a loss in excess of insured limits could adversely affect our financial condition.

We carry comprehensive liability, property, fire, extended coverage, pollution and rent loss insurance on certain of the properties in which we have an interest, with policy specifications and insured limits that we believe are customary for similar properties. However, with respect to those properties where the leases do not provide for abatement of rent under any circumstances, we may not maintain rent loss insurance. In addition, certain of our leases require the tenant to maintain all insurance on the property, and the failure of the tenant to maintain the proper insurance could adversely impact our investment in a property in the event of a loss. Furthermore, there are certain types of losses, such as losses resulting from wars, terrorism or certain acts of God, that generally are not insured because they are either uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we could lose capital invested in a property as well as the anticipated future revenues from a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types could adversely affect our financial condition and results of operations.

In addition, the cost of property and related coverage insurance is impacted by construction costs, property values and capacity in the insurance market.

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Cybersecurity incidents may adversely affect our business.

Cybersecurity incidents may result in disrupted operations, including as a result of the loss of access to our information systems, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant, investor and/or vendor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. Although we have implemented processes, procedures and internal controls to mitigate these risks, we can be subject to cybersecurity incidents.

We are also subject to third-party cybersecurity incident risks. For example, as a landlord, we are exposed to the risk of cyber attacks on our tenants and their payment systems. In addition, as a smaller company, we use third-party vendors to maintain our network and information technology requirements. While we carefully select these third-party vendors, we cannot control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, or cyber attacks and security breaches at a vendor could adversely affect our operations.

Further information relating to cybersecurity risk management is discussed in Item 1C. “Cybersecurity” in this Annual Report.

Our use of, or failure to adopt advancements in, information technology, such as artificial intelligence, may hinder or prevent us from achieving strategic objectives or otherwise harm our business.

Our use of, or inability to safely and effectively adopt and use, new technological capabilities and enhancements in line with strategic objectives, including artificial intelligence, may put us at a competitive disadvantage, including by failure to achieve efficiencies achieved by our competitors, or by misusing such technologies in ways that result in operational disruptions, reputation damage or legal liability exposure. Although we have adopted policies with respect to the use of artificial intelligence tools, we cannot be certain that such policies will be effective against the risks.

Competition may adversely affect our ability to purchase properties.

There are numerous other companies and individuals with greater financial and other resources and lower costs of capital than we have that compete with us in seeking investments and tenants. This competition may result in a higher cost for properties and lower returns and impact our ability to grow.

We may have limited control over our joint venture investments.

Our joint venture investments involve risks not otherwise present for investments made solely by us, including the possibility that our partner might, at any time, become bankrupt, have different interests or goals than we do, or take action contrary to our expectations, its previous instructions or our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT. Other risks of joint venture investments include impasses on decisions, such as a sale, because neither we nor our partner may have full control over the joint venture. Also, there is no limitation under our organizational documents as to the amount of funds that may be invested in joint ventures.

Our ability to change our portfolio is limited because real estate investments are illiquid.

Investments in real estate are relatively illiquid and, therefore, our ability to change our portfolio promptly in response to changed conditions is limited. Our Board of Trustees may establish investment criteria or limitations as it deems appropriate, but currently does not limit the number or type of properties in which we may seek to invest or on the concentration of investments in any one geographic region.

Our Board of Trustees may change our investment policy without shareholders' approval.

Subject to our fundamental investment policy to maintain our qualification as a REIT, our Board of Trustees will determine our investment and financing policies, growth strategy and our debt, capitalization, distribution, acquisition, disposition and operating policies.

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Our Board of Trustees may revise or amend these strategies and policies at any time without a vote by shareholders. Changes made by our Board of Trustees may not serve the interests of debt or equity security holders and could adversely affect our financial condition or results of operations, including our ability to satisfy our debt service obligations, distribute cash to shareholders and qualify as a REIT. Accordingly, shareholders' control over changes in our strategies and policies is limited to the election of trustees.

Industry and Economic Risks

Public health emergencies could adversely impact or cause disruption to our business, financial condition, results of operations and cash flows.

In recent years, public health emergencies, including COVID-19, have caused significant and widespread damage to the economy and the financial markets.

Public health emergencies, and the steps governments take to control them, may lead to labor shortages, supply chain issues, including longer lead times for construction materials and increased construction costs, capital markets disruptions and inflationary conditions, which may negatively affect (i) the operation of our properties, (ii) the effectiveness of our strategic decision making, (iii) the operation of our key information systems, (iv) our ability to make timely filings with the SEC and (v) our ability to maintain an effective control environment.

Disruptions in the financial markets and uncertain economic conditions could adversely affect our ability to obtain financing on reasonable terms, the value of our real estate investments, and have other adverse effects on us.

Concerns over possible economic recession, high interest rates, bank failures, political dysfunction, geopolitical issues, including military conflicts, trade wars, labor shortages, and inflation may contribute to increased financial market volatility.

The United States financial markets have periodically experienced significant dislocations and liquidity disruptions due to a variety of factors. Uncertainty in the financial markets may negatively impact our ability to access additional financing on reasonable terms, which may negatively affect our ability to execute our growth strategy. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of capital or difficulties in obtaining capital. Volatile financial markets may also have an adverse effect on our tenants.

International trade disputes and increases in U.S. trade tariffs could adversely impact demand for our properties.

Demand for our properties is impacted by trading volumes and global supply chains. International trade disputes or the imposition of significant tariffs or other trade restrictions by the U.S. on imported goods could adversely impact trading volumes and global supply chains and thereby decrease demand for our properties. In addition, the anticipation of these issues could result in a decrease in demand for our properties.

Natural disasters could adversely impact our results.

Natural disasters, including earthquakes, storms, tornados, floods and hurricanes, could impact our properties. Incurring losses, costs or business interruptions related to natural disasters may adversely affect our operating and financial results.

We are exposed to the potential direct and indirect impacts of climate change.

We are exposed to physical risks from changes in climate. Our properties, especially the properties near seaports, may be exposed to rare catastrophic weather events, such as severe storms, drought, earthquakes, floods, wildfires or other extreme weather events. If the frequency of extreme weather events increases, our exposure to these events could increase and could impact our tenants' operations and their ability to pay rent. We carry comprehensive insurance coverage to mitigate our casualty risk, in amounts and of a kind that we believe are appropriate for the markets where each of our properties and their business operations are located given climate change risk.

We may also be adversely impacted in the future by new laws or regulations relating to emissions, including stricter energy efficiency standards and “green” building codes. Such laws and regulations may require us to make improvements to our existing properties or result in increased operating costs that we may not be able to effectively pass on to our tenants.

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Risks Related to our Indebtedness

We have a substantial amount of indebtedness.

We have a substantial amount of debt. Our substantial indebtedness could adversely affect our financial condition and our ability to fulfill our obligations under the documents governing our unsecured indebtedness and otherwise adversely impact our business and growth prospects.

We have incurred, and may continue to incur, direct and indirect indebtedness in furtherance of our activities. Neither our declaration of trust nor any policy statement formerly adopted by our Board of Trustees limits the total amount of indebtedness that we may incur, and accordingly, we could become even more highly leveraged. As of December 31, 2025, our total consolidated indebtedness was approximately $1.4 billion and we had approximately $600.0 million available for borrowing under our principal credit agreement, subject to covenant compliance.

Our substantial indebtedness could adversely affect our financial condition and results of operations and have important consequences to us and our debt and equity security holders. For example, it could:

• make it more difficult for us to satisfy our indebtedness and debt service obligations and adversely affect our ability to pay distributions;

• increase our vulnerability to adverse economic and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to the payment of interest on and principal of our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures and other general corporate purposes;

• limit our ability to borrow money or sell stock to fund our development projects, working capital, capital expenditures, general corporate purposes or acquisitions;

• restrict us from making strategic acquisitions or exploiting business opportunities;

• place us at a disadvantage compared to competitors that have less debt; and

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.

In addition, the agreements that govern our current indebtedness contain, and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants, which may limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of our debt.

Furthermore, our growth strategy is dependent on speculative development of properties. Development activities do not produce current income that can be used to pay debt service obligations.

Market interest rates could have an adverse effect on our borrowing costs, profitability and the value of our fixed-rate debt securities.

We have exposure to market risks relating to increases in interest rates due to our variable-rate debt. An increase in interest rates may increase our costs of borrowing on existing variable-rate indebtedness, leading to a reduction in our earnings.

As of December 31, 2025, we had $351.0 million of variable rate debt of which $332.5 million is subject to interest rate swap agreements through January 2027 and October 2027. Also, any future borrowings under our unsecured revolving credit facility will be subject to a variable interest rate. We also have an aggregate of $1.0 billion of unsecured notes which mature from November 2028 to October 2031. We may refinance all of this indebtedness with variable-rate indebtedness.

The level of our variable-rate indebtedness along with the interest rate associated with such variable-rate indebtedness, may change in the future and materially affect our interest costs and earnings. In addition, our interest costs on our fixed-rate indebtedness may increase if we are required to refinance our fixed-rate indebtedness upon maturity at higher interest rates. Higher interest rates could also adversely affect the ability of prospective buyers to obtain financing for properties we intend to sell.

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We have engaged and may engage in hedging transactions that may limit gains or result in losses.

We have used derivatives to hedge certain of our variable-rate liabilities. As of December 31, 2025, we had seven interest rate swap agreements outstanding with an aggregate notional amount of $332.5 million. The counterparties of these arrangements are major financial institutions; however, we are exposed to credit risk in the event of non-performance or default by the counterparties. Further, additional risks, including losses on a hedge position, may reduce the return on our investments. Such losses may exceed the amount invested in such instruments. We may also have to pay certain costs, such as transaction fees or breakage costs, related to hedging transactions.

Covenants in certain of the agreements governing our debt could adversely affect our financial condition, investment activities and/or operating activities.

Our unsecured revolving credit facility, unsecured term loan and indentures governing our senior notes contain certain cross-default and cross-acceleration provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness and consummate mergers, consolidations or sales of all or substantially all of our assets. Our ability to borrow under our unsecured revolving credit facility is also subject to compliance with certain other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders' insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage than is available to us in the marketplace or on commercially reasonable terms.

We rely on debt financing, including borrowings under our unsecured revolving credit facility, unsecured term loan, debt securities, and debt secured by individual properties, for working capital, including to finance our investment activities. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations could be adversely affected.

The documents governing our non-recourse indebtedness contain restrictions on the operations of our property owner subsidiaries and their properties. Certain activities, like leasing and alterations, may be subject to the consent of the applicable lender. In addition, certain lenders engage third-party loan servicers that may not be as responsive as we would be or as the leasing market requires.

We face risks associated with refinancings.

Some of the properties in which we have an interest are subject to a mortgage or other secured notes with balloon payments due at maturity. In addition, our corporate level borrowings require interest only payments with all principal due at maturity.

Our ability to make the scheduled balloon payments on any corporate recourse note will depend on our access to the capital markets, including our ability to refinance the maturing note. Our ability to make the scheduled balloon payment on any non-recourse mortgage note will depend upon (1) in the event we determine to contribute capital, our cash balances and the amount available under our unsecured credit facility, and (2) the property owner subsidiary's ability either to refinance the related mortgage debt or to sell the related property. If the property owner subsidiary is unable to refinance or sell the related property, the property may be conveyed to the lender through foreclosure or other means or the property owner subsidiary may declare bankruptcy.

We face risks associated with returning properties to lenders.

Some of the properties in which we have an interest, primarily non-consolidated properties, are subject to non-recourse mortgages, which generally provide that a lender's only recourse upon an event of default is to foreclose on the property. In the event these properties are conveyed via foreclosure to the lenders thereof, we would lose all of our interest in these properties. The loss of a significant number of properties to foreclosure or through bankruptcy of a property owner subsidiary could adversely affect our financial condition and results of operations, relationships with lenders and ability to obtain additional financing in the future.

In addition, a lender may attempt to trigger a carve out to the non-recourse nature of a mortgage loan. To the extent a lender is successful, the ability of our property owner subsidiary to return the property to the lender may be inhibited and/or we may be liable for all or a portion of such loan.

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The effective subordination of our unsecured indebtedness and any related guaranty may reduce amounts available for payment on our unsecured indebtedness and any related guaranty.

The holders of our secured debt may foreclose on the assets securing such debt, reducing the cash flow from the foreclosed property available for payment of unsecured debt and any related guaranty. The holders of any of our secured debt also would have priority with respect to the secured collateral over unsecured creditors in the event of a bankruptcy, liquidation or similar proceeding.

None of our subsidiaries are guarantors of our unsecured debt; therefore assets of our subsidiaries may not be available to make payments on our unsecured indebtedness.

We are the sole borrower of our unsecured indebtedness and none of our subsidiaries were guarantors of our unsecured indebtedness. In the event of a bankruptcy, liquidation or reorganization of any of our subsidiaries, holders of subsidiary debt, including trade creditors, will generally be entitled to payment of their claims from the assets of our subsidiaries before any assets are made available for distribution to us.

All of our assets are held through our subsidiaries. Consequently, our cash flow and our ability to meet our debt service obligations depend in large part upon the cash flow of our subsidiaries and the payment of funds by our subsidiaries to us in the form of distributions or otherwise.

Risks Related to Investment in our Equity

We may change the dividend policy for our common shares in the future.

The decision to declare and pay dividends on our common shares in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Trustees in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. The actual dividend payable will be determined by our Board of Trustees based upon the circumstances at the time of declaration and the actual dividend payable may vary from such expected amount. Any change in our dividend policy could have a material adverse effect on the market price of our common shares.

There are certain limitations on a third party's ability to acquire us or effectuate a change in our control.

Severance payments under our executive severance policy. Substantial termination payments may be required to be paid under our executive severance policy applicable to and related agreements with our executives upon the termination of an executive. If those executive officers are terminated without cause, as defined, or resign for good reason, as defined, those executive officers may be entitled to severance benefits based on their current annual base salaries and trailing average of recent annual cash bonuses as defined in our executive severance policy and related agreements and the acceleration of certain non-vested equity awards.

Our ability to issue additional shares. Our declaration of trust authorizes 1,400,000,000 shares of beneficial interest (par value $0.0001 per share) consisting of 600,000,000 common shares, 100,000,000 preferred shares and 700,000,000 shares of beneficial interest classified as excess stock, or excess shares. Our Board of Trustees is authorized to cause us to issue these shares without shareholder approval. Our Board of Trustees may establish the preferences and rights of any such class or series of additional shares, which could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in shareholders' best interests. At December 31, 2025, in addition to common shares, we had outstanding 1,935,400 Series C Preferred Shares. Our Series C Preferred Shares include provisions, such as increases in dividend rates or adjustments to conversion rates, which may deter a change of control. The establishment and issuance of shares of our existing series of preferred shares or a future class or series of shares could make a change of control of us more difficult.

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Maryland Takeover Statutes. Certain provisions of the Maryland General Corporation Law, including the Maryland Business Combination Act, the Maryland Control Share Act, and certain elective provisions of Maryland law under Subtitle 8 of the Maryland General Corporation Law, each as further described under the heading “Restrictions on Transfers of Capital Stock and Anti-Takeover Provisions – Maryland Law” in Exhibit 4.12 of this Annual Report, are applicable to Maryland REITs, such as the Company. We are subject to the Maryland Business Combination Act, and while our by-laws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of our shares, we cannot assure you that this provision will not be amended or eliminated at any time in the future. We have also not elected to be governed by any of the specific provisions of Subtitle 8, however, through provisions of our declaration of trust and/or by-laws, as applicable, unrelated to Subtitle 8, we provide for an 80% shareholder vote to remove trustees and then only for cause, and that the number of trustees may be determined by a resolution of our Board of Trustees, subject to a minimum number. In addition, we can elect to be governed by any or all of the provisions of Subtitle 8 of the Maryland General Corporation Law at any time in the future. These statutes could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if such acquisition would be in shareholders' best interests.

Ownership Limits in Our Declaration of Trust . For us to qualify as a REIT for federal income tax purposes, among other requirements, not more than 50% of the value of our outstanding capital shares may be owned, directly or indirectly, by five or fewer individuals (as defined for federal income tax purposes to include certain entities) during the last half of each taxable year, and these capital shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (in each case, other than the first such year for which a REIT election is made). Our declaration of trust includes certain restrictions regarding transfers of our capital shares and ownership limits.

In order to protect against the loss of our REIT status, among other things, actual or constructive ownership of our capital shares in violation of the restrictions contained in our declaration of trust or in excess of 9.8% in value of our outstanding equity shares, defined as our common shares, or preferred shares, subject to certain exceptions, would cause the violative transfer or ownership to be void or cause the shares to be transferred to a charitable trust and then sold to a person or entity who can own the shares without violating these limits. As a result, if a violative transfer were made, the recipient of the shares would not acquire any economic or voting rights attributable to the transferred shares. Additionally, the constructive ownership rules for these limits are complex, and groups of related individuals or entities may be deemed a single owner and consequently in violation of the share ownership limits.

However, these restrictions and limits may not be adequate in all cases to prevent the transfer of our capital shares in violation of the ownership limitations.

Legal and Regulatory Risks

We face possible liability relating to environmental matters.

Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real property, our property owner subsidiaries may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under the properties in which we have an interest as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances. This liability may be imposed on our property owner subsidiaries in connection with the activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or property damages, and our liability therefore, could be significant and could exceed the value of the property and/or our aggregate assets. In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect a property owner subsidiary's ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would reduce our revenues and ability to satisfy our debt service obligations and to pay dividends.

A property can also be adversely affected either through physical contamination or by virtue of an adverse effect upon value attributable to the migration of hazardous or toxic substances, or other contaminants that have or may have emanated from other properties. Although the tenants of the properties in which we have an interest are primarily responsible for any environmental damages and claims related to the leased premises, in the event of the bankruptcy or inability of any of the tenants of the properties in which we have an interest to satisfy any obligations with respect to the property leased to that tenant, our property owner subsidiary may be required to satisfy such obligations. In addition, we may be held directly liable for any such damages or claims irrespective of the provisions of any lease and, in certain cases, we have provided lenders with environmental indemnities.

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From time to time, in connection with the conduct of our business, our property owner subsidiaries authorize the preparation of Phase I environmental reports and, when recommended, Phase II environmental reports, with respect to their properties. There can be no assurance that these environmental reports will reveal all environmental conditions at the properties in which we have an interest. We are also subject to exposure to material liability from the discovery of previously unknown environmental conditions; changes in law; activities of tenants; or activities relating to properties in the vicinity of the properties in which we have an interest.

Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of the properties in which we have an interest, which could adversely affect our financial condition or results of operations.

Costs of complying with changes in governmental laws and regulations may adversely affect our results of operations.

We cannot predict what laws or regulations may be enacted, repealed or modified in the future, how future laws or regulations will be administered or interpreted, or how future laws or regulations will affect our properties. Compliance with new or modified laws or regulations, or stricter interpretation of existing laws, may require us or our tenants to incur significant expenditures, impose significant liability, restrict or prohibit business activities and could cause a material adverse effect on our results of operations.

Legislation such as the Americans with Disabilities Act may require us to modify our properties at substantial costs and noncompliance could result in the imposition of fines or an award of damages to private litigants. Future legislation may impose additional requirements. We may incur additional costs to comply with any future requirements.

Risks Related to Our REIT Status

There can be no assurance that we will remain qualified as a REIT for federal income tax purposes.

We believe that LXP has met the requirements for qualification as a REIT for federal income tax purposes beginning with its taxable year ended December 31, 1993, and we intend for LXP to continue to meet these requirements in the future. However, qualification as a REIT involves the application of highly technical and complex provisions of the Code, for which there are only limited judicial or administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect LXP's ability to continue to qualify as a REIT. No assurance can be given that LXP has qualified or will remain qualified as a REIT. In addition, no assurance can be given that legislation, regulations, administrative interpretations or court decisions will not significantly change the requirements for qualification as a REIT or the federal income tax consequences of such qualification. If LXP does not qualify as a REIT, LXP would not be allowed a deduction for dividends paid to shareholders in computing its net taxable income and LXP would not be required to continue making distributions. In addition, LXP's income would be subject to tax at the regular corporate rates. LXP also could be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. Cash required to be used to pay taxes would not be available to satisfy LXP's debt service obligations and to make distributions to its shareholders. Although we currently intend for LXP to continue to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause LXP, without the consent of the shareholders, to revoke the REIT election or to otherwise take action that would result in disqualification.

We may be subject to the REIT prohibited transactions tax, which could result in significant U.S. federal income tax liability to us.

A REIT will incur a 100% tax on the net income from a prohibited transaction. Generally, a prohibited transaction includes a sale or disposition of property held primarily for sale to customers in the ordinary course of business. While we believe that the dispositions of our assets pursuant to our investment strategy should not be treated as prohibited transactions, whether a particular sale will be treated as a prohibited transaction depends on the underlying facts and circumstances. We have not sought and do not intend to seek a ruling from the Internal Revenue Service regarding any dispositions. Accordingly, there can be no assurance that our dispositions of such assets will not be subject to the prohibited transactions tax. If all or a significant portion of those dispositions were treated as prohibited transactions, we would incur a significant U.S. federal income tax liability, which could have a material adverse effect on our financial position.

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Distribution requirements imposed by law limit our flexibility.

To maintain LXP's status as a REIT for federal income tax purposes, LXP is generally required to distribute to its shareholders at least 90% of its taxable income for that calendar year. LXP's taxable income is determined without regard to any deduction for dividends paid and by excluding net capital gains. To the extent that LXP satisfies the distribution requirement but distributes less than 100% of its taxable income, LXP will be subject to federal corporate income tax on its undistributed income. In addition, LXP will incur a 4% nondeductible excise tax on the amount by which its distributions in any year are less than the sum of (i) 85% of its ordinary income for that year, (ii) 95% of its capital gain net income for that year and (iii) 100% of its undistributed taxable income from prior years. We intend for LXP to continue to make distributions to its shareholders to comply with the distribution requirements of the Code and to reduce exposure to federal taxes. Differences in timing between the receipt of income and the payment of expenses in determining its taxable income and the effect of required debt amortization payments could require LXP to borrow funds on a short-term basis in order to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.

Legislative or regulatory tax changes could have an adverse effect on us.

At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or you as a debt or equity security holder.

Effective July 4, 2025, certain changes to U.S. tax law were approved that impact us and our shareholders. Among other changes, this legislation (i) permanently extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers under Section 199A of the Code, (ii) increased the percentage limit under the REIT asset test applicable to TRSs from 20% to 25% for taxable years beginning after December 31, 2025, and (iii) increases the based on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization and depletion from the definition of “adjusted taxable income” (i.e. based on EBITDA rather than EBIT) for taxable years beginning after December 31, 2024.

General Risk Factors

A downgrade in our credit ratings could have a material adverse effect on our business and financial condition.

The credit ratings assigned to us and our debt could change based upon, among other things, our results of operations and financial condition or the real estate industry generally. These ratings are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any rating will not be changed or withdrawn by a rating agency in the future if, in the applicable rating agency's judgment, circumstances warrant. Moreover, these credit ratings do not apply to our common and preferred shares and are not recommendations to buy, sell or hold any other securities. Any downgrade of us or our debt could have a material adverse effect on the market price of our debt securities and our common and preferred shares. If any credit rating agency that has rated us or our debt downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could also have a material adverse effect on our costs and availability of capital, which could, in turn, have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations and to make dividends and distributions on our common shares and preferred shares.

We are dependent upon our key personnel.

We are dependent upon key personnel, particularly certain of our executive officers. We do not have employment agreements with our executive officers, but we have entered into severance arrangements with our executive officers that provide certain payments upon specified termination events.

Our inability to retain the services of any of our key personnel, an unplanned loss of any of their services or our inability to replace them upon termination as needed, could adversely impact our operations. We do not have key person life insurance coverage on our executive officers.

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

In this discussion, we have included statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These statements may relate to our future plans and objectives, among other things. By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Important factors that could cause our results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed above in “Risk Factors” in Part I, Item 1A of this Annual Report and “Cautionary Statements Concerning Forward-Looking Statements” in the beginning of this Annual Report.

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Introduction

The following is a discussion and analysis of the consolidated financial condition and results of operations of LXP Industrial Trust for the years ended December 31, 2025 and 2024, and significant factors that could affect our prospective financial condition and results of operations. This discussion should be read together with our accompanying consolidated financial statements included herein and notes thereto.

Summary of 2025 Transactions

The following summarizes certain of our transactions during 2025.

Leasing Activity.

• Entered into new leases and lease extensions encompassing 4.9 million square feet. The average fixed rent on new and extended leases was $5.99 per square foot, compared to the average fixed rent on these leases before extension of $5.23 per square foot. The weighted-average cost of tenant improvements and lease commissions was $1.22 per square foot for new and extended leases.

• Increased stabilized portfolio occupancy to 97.1%.

Investments.

• Acquired one warehouse facility located in the Atlanta, Georgia market for $30.0 million totaling 0.2 million square feet with a weighted-average lease term of 3.9 years.

• Commenced redevelopment of two warehouse facilities located in the Central Florida and Richmond, Virginia markets totaling 0.6 million square feet.

Capital R ecycling .

• Sold our interests in 11 warehouse facilities for gross proceeds of $389.1 million. Two of the facilities sold were vacant development projects totaling 2.1 million square feet, located in Ocala, Florida and Indianapolis, Indiana markets for a gross aggregate price of $174.6 million.

Debt .

• Repaid $50.0 million of the $300.0 million term loan.

• Repurchased $28.1 million of the Company's Trust Preferred Securities at a 5.0% discount to par value.

• Completed a cash tender offer and repurchased $140.0 million of the 6.750% Unsecured Senior Notes due 2028.

Equity .

• Completed the Reverse Split.

• Repurchased and retired 0.1 million common shares for an average price of $49.04 per common share.

Investment Trends

General. We focus our investment activity primarily on income producing single-tenant warehouse and distribution assets and build-to-suit and speculative development of warehouse and distribution assets.

In 2025, we acquired a $30.0 million warehouse facility, which is a decrease of $520.5 million compared to 2024 investment activity of $550.5 million. The decrease was primarily due to our prioritizing deleveraging over reinvestment of capital recycling proceeds.

In addition, we may continue to selectively recycle capital out of our non-target markets over time and, as opportunities arise, use the proceeds to reduce indebtedness and invest in our target markets, primarily through our development activities. We do not expect capital recycling to have a material dilutive impact on earnings.

The main drivers of growth in the industrial real estate market have been e-commerce and nearshoring. In addition, certain of our target markets are benefiting from advanced manufacturing investments and business-friendly local and state governments.

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There continues to be competition for the acquisition of industrial properties, specifically warehouse and distribution facilities. While we believe the industrial market will continue to grow, increased costs from international trade policy may continue to cause some tenants to reevaluate expansion and growth plans. As construction starts were reduced in recent years and supply in our markets has decreased, we expect to prioritize development activities, including build-to-suit projects, over acquisitions of leased properties due to the relatively higher yield that development activities generally provide.

Lease Term. As of December 31, 2025, our leases have a weighted average lease term of 4.8 years. We believe we are well positioned to take advantage of market rental growth in our target markets which continue to outperform the coastal industrial real estate markets.

Our industrial investment underwriting focuses more on real estate characteristics such as location and related demographic and local economic trends than it does on tenant credit. This has allowed us to selectively acquire certain short-term leased or vacant warehouse and distribution facilities, which may be acquired with greater total return potential than long-term leased warehouse and distribution facilities and allow for a value-add strategy through the lease renewal, lease up or a multi-tenanting process.

Development . Our development activities have been focused on build-to-suit projects, speculative development and purchasing newly-developed properties with vacancy. In 2026, we expect to continue to focus our development activities on build-to-suit projects and selective speculative development in markets with favorable industrial real estate fundamentals. Due to low construction starts in our target markets in recent years, we believe supply has decreased and demand is increasing, which may provide opportunity for more development investment.

Leasing

General . Re-leasing properties that are currently vacant or become vacant as leases expire at favorable effective rates is a primary area of focus for our asset management strategy. Renewals of industrial leases, particularly for warehouse and distribution facilities, are generally dependent on location and occupancy alternatives for our tenants. Uncertainty from international trade policy has caused some tenants to reevaluate their space needs and consolidate into other spaces or move to facilities with lower rental rates.

If a property cannot be re-let to a single user and the property can be adapted to multi-tenant use, we determine whether the costs of adapting the property to multi-tenant use outweigh the benefit of funding operating costs while searching for a single-tenant and whether selling a vacant property, which limits operating costs and allows us to redeploy capital, is in the best interest of our shareholders.

A majority of our leases require tenants to pay operating expenses, including maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses. However, certain of our leases provide for some level of landlord responsibility for capital repairs and replacements, the cost of which is generally factored into the rental rate and our underwriting. Our motivation to release vacant space requires us to meet market demands with respect to rental rates, tenant concessions and landlord responsibilities. Developers may be similarly motivated when signing leases with tenants due to the significant competition in the industrial space. As a result, the obligations of our property owner subsidiaries on new leases and newly renewed or extended leases may increase to include, among other items, some form of responsibility for operating expenses and/or capital repairs and replacements.

During the year ended December 31, 2025, we completed 4.9 million square feet of new leases and extended leases, raising base and cash base rents by 29.7% and 27.7%, respectively, excluding two fixed-rate renewals, an additional two-year extension to 2030 at a 0.6 million square foot facility completed in the first quarter of 2025 and a first-generation lease at a 1.1 million square foot facility completed in the second quarter of 2025.

Inherent Growth. As of December 31, 2025, 99.3% of our leases had scheduled rent increases. The average escalation rate of these leases based on the next rent step was 2.8% as of December 31, 2025.

As of December 31, 2025, we had 1.5 million square feet of vacancy in the consolidated portfolio, which upon lease up is expected to add revenue to the portfolio and decrease operating expenses. In addition, as of December 31, 2025, approximately 73.8% of our ABR was from leases scheduled to expire during 2026 through 2031. We believe a portion of these leases have below-market rents and we expect to mark the expiring rents to market, which should further increase our revenues.

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Tenant Credit. We continue to monitor the credit of tenants of properties in which we have an interest by (1) subscribing to rating agency information, so that we can monitor changes in the ratings of our rated tenants, (2) reviewing financial statements that are publicly available or that are required to be delivered to us under the applicable lease, (3) monitoring news reports regarding our tenants and their respective businesses, (4) monitoring the timeliness of rent collections and (5) meeting with our tenants and observing their use of our facilities.

Impairment Charges

We did not incur any impairment charges during the years ended December 31, 2025 and 2024.

Critical Accounting Estimates

In preparing the consolidated financial statements we have made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Accounting estimates are deemed critical if they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Below is a summary of the critical accounting estimates used in the preparation of our consolidated financial statements. A summary of our significant accounting policies which are important to the portrayal of our financial condition and results of operations is set forth in Note 2 to the Consolidated Financial Statements, which are included in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.

Acquisition and Development of Real Estate . Substantially all of our acquisitions of real estate assets and liabilities are accounted for as asset acquisitions. As such, the purchase prices of acquired tangible and intangible assets and liabilities are recorded and allocated at fair value on a relative basis. The recorded allocations of tangible assets are based on the “as-if-vacant” value using estimated cash flow projections of the properties acquired which incorporates discount, capitalization and interest rates as well as available comparable market information. Allocations of intangible assets includes management’s estimates of current market rents and leasing costs.

We use considerable judgment in our estimates of cash flow projections, discount, capitalization and interest rates, fair market lease rates, carrying costs during hypothetical expected lease-up periods and costs to execute similar leases. While our methodology for purchase price allocation did not change during the year ended December 31, 2025, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of acquisition. Significant increases or decreases in these key estimates, particularly with regards to cash flow projections and discount and capitalization rates, would result in a significantly lower or higher fair value measurement of the real estate assets being acquired.

For properties under development, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other costs associated with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities. The internal costs are allocated to specific development projects based on development activities.

Revenue Recognition . We enter into agreements with tenants that convey the right to control the use of identified space at our properties in exchange for rental revenue. These agreements meet the criteria for recognition as leases under Accounting Standards Codification (“ASC”) 842, Leases . Lease classification tests require significant estimates and judgments by management in its application. Upon lease commencement or lease modification, we assess the lease classification to determine whether the lease should be classified as a direct financing, sales-type or operating lease. The determination of lease classification requires the calculation of the rate implicit in the lease, which is driven by significant estimates, including the estimation of both the value assigned to the property components on the lease commencement date or upon acquisition and the estimation of the unguaranteed residual value of such components at the end of the lease term. The determination of the lease term also requires judgment because the probability of purchase options and renewals have to be analyzed to conclude if they are reasonably certain of being exercised. If the lease component is determined to be a direct financing or sales-type lease, revenue is recognized over the life of the lease using the rate implicit in the lease.

Most of our leases are operating leases. We recognize operating lease revenue on a straight-line basis over the term of the lease when it is probable that the lease revenue is collectible over the remaining term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. We commence revenue recognition when possession or control of the space is turned over to the tenant.

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Impairment of Real Estate . We record impairments of our real estate assets classified as held for use when triggering events dictate that an asset may be impaired. An impairment is recorded when the carrying amount of the asset exceeds the sum of its undiscounted future operating and residual cash flows. The impairment is the difference between the estimated fair value of the asset and the carrying amount. We record impairments of our real estate assets classified as held for sale at the lower of the carrying amount or estimated fair value using the estimated or contracted sales price less costs to sell. Any real estate assets recorded at fair value on a non-recurring basis as a result of our impairment analysis are valued using unobservable local and national industry market data such as comparable sales, appraisals, brokers’ opinions of value and/or terms of definitive sales contracts. Additionally, the analysis includes considerable judgment in our estimates of hold periods, projected cash flows and discount and capitalization rates. Significant increases or decreases in any of these inputs, particularly with regards to cash flow projections and discount and capitalization rates, would result in a significantly lower or higher fair value measurement of the real estate assets being assessed.

We will record an impairment charge related to our investments in non-consolidated entities if we determine the fair value of the investments are less than their carrying value and such impairment is other-than-temporary. We evaluate whether events or changes in circumstances indicate that the carrying amount of our investments may not be recoverable. Our evaluation of changes in economic or operating conditions and whether an impairment is other-than-temporary may include developing estimates of fair value, forecasted cash flows or operating income before depreciation and amortization. We estimate undiscounted cash flows and fair value using observable and unobservable data such as operating income, hold periods, estimated capitalization and discount rates, or relevant market multiples, leasing prospects and local market information and whether certain impairments are other-than-temporary.

New Accounting Pronouncements

For a discussion of new accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this report.

Liquidity and Capital Resources

Overview :

Our principal sources of liquidity have been (1) undistributed cash flows generated from our investments, (2) proceeds from the sales of our investments, (3) the public and private equity and debt markets, (4) corporate level borrowings, (5) property specific debt, and (6) commitments from co-investment partners.

Our ability to incur additional debt to fund acquisitions and the cost of any such debt is dependent upon our existing leverage, the value of the assets we are attempting to leverage, our revenues and general economic and credit market conditions, which may be outside of management's control or influence.

Cash Flows:

We believe that cash flows from operations will continue to provide adequate capital to fund our operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with applicable REIT requirements in both the short-term and long-term. However, our cash flow from operations may be negatively affected in the near term if we experience tenant defaults. In addition, we anticipate that cash on hand, borrowings under our unsecured revolving credit facility, capital recycling proceeds, issuances of equity, mortgage proceeds and other debt, as well as other available alternatives, will provide the necessary capital required by our business.

Cash flows from operations as reported on the Consolidated Statements of Cash Flows totaled $188.7 million for 2025 and $211.2 million for 2024. The decrease was related primarily to a decrease in cash flow due to property sales and vacancies, partially offset by rental revenue related to acquired properties, lease extensions and placing development properties into service during 2024 and the receipt of a lease termination fee. The underlying drivers that impact our working capital, and therefore cash flows from operations, are the timing of collection of rents, including reimbursements from tenants, payment of interest on debt and payment of operating and general and administrative costs. We believe the net-lease structure of the leases encumbering a majority of the properties in which we have an interest mitigates the risks of the timing of cash flows from operations since the payment and timing of operating costs related to the properties are generally borne directly by the tenant. The collection and timing of tenant rents are closely monitored by management as part of our cash management program.

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Net cash provided by investing activities totaled $298.2 million in 2025 and $86.4 million in 2024. Cash provided by investing activities in 2025 related primarily to proceeds from property sales, receipt of insurance proceeds and distributions from non-consolidated entities, offset by acquisitions of real estate, investments in real estate under construction, capital expenditures, lease costs, investments in non-consolidated entities and changes in real estate deposits, net. Cash provided by investing activities in 2024 related primarily to net proceeds received from the disposition of real estate, realization of the net investment in a sales-type lease, distributions from non-consolidated entities, and redeeming investments in held-to-maturity securities offset by acquisitions of real estate, investments in real estate under construction, capital expenditures, lease costs, and investments in non-consolidated entities.

Net cash used in financing activities totaled $418.3 million in 2025 and $395.0 million in 2024. Cash used in financing activities in 2025 was related primarily to the partial repayment of the Term Loan, repurchase of the Trust Preferred Securities, a partial repurchase of the 6.750% Senior Notes due 2028, repurchase of common shares, distributions to noncontrolling interests, dividends, and debt service payments, offset by contributions from noncontrolling interests. Cash used in financing activities in 2024 was related primarily to the repayment of the 2024 Senior Notes, the purchase of a noncontrolling interest and dividend and debt service payments, offset by contributions from noncontrolling interests.

Public and Private Equity and Debt Markets

We access the public and private equity and debt markets on an opportunistic basis when we (1) believe conditions are favorable and (2) have a compelling use of proceeds.

We expect to continue to access debt and equity markets in the future to implement our business strategy and to fund future growth when market conditions are favorable. However, the volatility in the capital markets primarily resulting from the effects of higher interest rates and inflation have negatively affected our ability to access these capital markets.

Equity:

At-The-Market Offering Program. We maintain an At-The-Market offering program, or ATM program, under which we can issue common shares, including through forward contracts.

We may, from time to time, sell up to $350.0 million of common shares over the term of the ATM program. During the years ended December 31, 2025 and 2024, we did not sell shares under the ATM program.

Underwritten Equity Offerings. We maintain a universal shelf-registration statement, which allows us to issue equity in a variety of offerings, including in an underwritten offering. We did not issue common shares as part of an underwritten offering in 2025 and 2024.

Direct Share Purchase Plan . We maintain a direct share purchase plan, which has two components, (i) a dividend reinvestment component and (ii) a direct share purchase component. Under the dividend reinvestment component, common shareholders may elect to automatically reinvest their dividends to purchase our common shares. Under the direct share purchase component, our current investors and new investors can make optional cash purchases of our common shares. The administrator of the plan, Computershare Trust Company, N.A., purchases common shares for the accounts of the participants under the plan, at our discretion, either directly from us, on the open market or through a combination of those two options. No shares were purchased from us under the plan in 2025 and 2024.

Share Repurchase Program. During the year ended December 31, 2025, we repurchased 0.1 million common shares at an average share price of $49.04 per common share, pursuant to a share repurchase authorization of 2.0 million common shares by our Board of Trustees, which has no expiration date. As of December 31, 2025, 0.2 million common shares were subject to repurchase contracts and settled in January 2026. No common shares were repurchased during 2024. As of December 31, 2025, 1.3 million common shares remain available for repurchase under this authorization.

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Financings: The following presents our outstanding unsecured debt obligations as of December 31, 2025:

Issue Date

Face Amount (millions)

Interest Rate

Maturity Date

Issue Price

Term Loan

SOFR + 1.10%

January 2027

Senior Notes due 2028

November 2028

Senior Notes due 2030

September 2030

Senior Notes due 2031

October 2031

Trust Preferred Securities

Three Month SOFR + 1.96%

April 2037

Total unsecured debt

(1) Spread includes a 0.10% daily SOFR adjustment.

(2) We repaid $50.0 million of the Term Loan in January 2025, resulting in a loss on debt satisfaction of $0.4 million. The SOFR portion of the interest rate was swapped to an average interest rate of 3.21% per annum until January 31, 2027 and the all-in interest rate following the January 2026 refinancing including the margin is 4.06% per annum until January 31, 2027.

(3) We completed a cash tender offer to repurchase $140.0 million of the principal amount on our 6.750% Senior Notes due 2028, resulting in a loss on debt satisfaction of $12.6 million.

(4) Interest rate spread contains a 0.26% SOFR adjustment plus a spread of 1.70% through maturity. $82.5 million is swapped at an average interest rate including the spread of 5.20% from October 30, 2024 to October 30, 2027. As of December 31, 2025, the weighted average interest rate of the Trust Preferred Securities was 5.31%, which includes the effect of the interest rate swaps.

(5) We repurchased $28.1 million of the Trust Preferred Securities for a cash payment of $26.9 million, including accrued interest of $0.2 million, which resulted in a gain on debt satisfaction, net of $1.1 million including a write off of $0.3 million in deferred financing costs. The Trust Preferred Securities are classified as debt.

The Senior Notes are unsecured and pay interest semi-annually in arrears. We may redeem the Senior Notes at our option at any time prior to maturity in whole or in part by paying the principal amount of the Senior Notes being redeemed plus a make-whole premium.

From time to time, we may repurchase certain of our outstanding debt securities, including our Trust Preferred Securities, in negotiated and/or market transactions. During the year ended December 31, 2025, we repurchased $28.1 million of our Trust Preferred Securities at a 5.0% discount to par value. Additionally, we completed a cash tender offer and repurchased $140.0 million aggregate principal balance of the Unsecured Senior Notes due 2028.

As of December 31, 2025, we had an unsecured credit agreement with KeyBank National Association, as agent, and the financial institutions from time to time party thereto as lenders, for a revolving credit facility of up to $600.0 million, which is subject to compliance with certain financial maintenance covenants. The revolving credit facility had a maturity date in July 2026 and could be extended up to July 2027, subject to certain conditions. The interest rate ranged from SOFR (plus a 0.10% index adjustment) plus an interest rate spread ranging from 0.725% to 1.400%, based on our senior unsecured long-term credit rating. We had no borrowings under the $600.0 million revolving credit facility as of December 31, 2025.

Subsequent to December 31, 2025, we amended and restated our existing credit agreement with KeyBank National Association as agent, and the financial institutions party thereto as lenders, to provide an unsecured revolving credit facility of up to $600.0 million which matures on January 31, 2030 with one or more options to extend up to January 31, 2031 at our discretion, subject to conditions. The rate of interest payable under the revolving credit facility is equal to, at our option, a rate per annum of (i) the base rate plus a margin of 0.00% to 0.40% or (ii) the daily SOFR or a term SOFR plus a margin of 0.725% to 1.40% (without any SOFR index adjustment). The applicable margin is determined with respect to our consolidated leverage ratio and senior unsecured long-term debt rating. Based on the current consolidated leverage ratio and investment grade credit ratings, for SOFR borrowings, the applicable margin for the revolving credit facility equals 0.775%. The revolving credit facility is also subject to a facility fee equal to 0.125% to 0.300%, depending on the Trust's credit ratings and consolidated leverage ratio, of the total commitments under the revolving credit facility. The facility fee is currently 0.15%.

As part of this amendment and restatement, the maturity date of the Term Loan was extended to January 31, 2029 with two one-year extension options at our discretion, subject to certain conditions. The rate of interest payable under the Term Loan is now equal to, at our option, a rate per annum of (i) the base rate plus a margin of 0.00% to 0.60% or (ii) the daily SOFR or a term SOFR plus a margin of 0.80% to 1.60%. There is no credit adjustment for SOFR. Based on the current consolidated leverage ratio and investment grade credit ratings, the applicable margin for the Term Loan is 0.85%.

As of December 31, 2025, we were in compliance with the financial covenants contained in our corporate level debt agreements.

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Property Specific Debt . As of December 31, 2025, the principal balance of our secured debt decreased to approximately $49.9 million compared to $55.5 million at December 31, 2024. Our property owner subsidiaries do not have mortgage maturities with balloon payments due until 2031. With respect to mortgages encumbering properties where the expected lease rental revenues are sufficient to provide an estimated property value in excess of the mortgage balance, we believe our property owner subsidiaries have sufficient sources of liquidity to meet these obligations through future cash flows from operations, the credit markets and, if determined appropriate by us, a capital contribution from us from either cash on hand ($170.4 million at December 31, 2025), property sale proceeds or borrowing capacity on our primary credit facility ($600.0 million as of December 31, 2025, subject to covenant compliance).

We may continue to use property specific, non-recourse mortgages in certain situations as we believe that by properly matching a debt obligation, including the balloon maturity risk, with the terms of a lease, our cash-on-cash returns increase and the exposure to residual valuation risk is reduced. In addition, we may procure credit tenant lease financing in certain situations where we are able to monetize all or a significant portion of the rental revenues of a property at an attractive rate.

Institutional Fund Management:

We have entered into co-investment programs and joint ventures with institutional investors to mitigate our risk in certain assets and increase our return on equity to the extent we earn management or other fees. However, investments in certain co-investment programs and joint ventures limit our ability to make investment decisions unilaterally relating to the assets and limit our ability to deploy capital.

The real estate investments owned by our institutional joint ventures are generally financed with non-recourse debt. Non-recourse debt is generally defined as debt whereby the lenders' sole recourse with respect to borrower defaults is limited to the value of the assets collateralized by the debt. The lender generally does not have recourse against any other assets owned by the borrower or any of the members or partners of the borrower, except for certain specified exceptions listed in the particular loan documents. These exceptions generally relate to “bad boy” acts, including fraud, prohibited transfers and breaches of material representations, and environmental matters. We have guaranteed such obligations for certain of our non-consolidated entities with respect to $478.8 million of such non-recourse debt. We believe the likelihood of making any payments under such guaranties is remote and we generally have an agreement from each partner to reimburse us for its proportionate share of any liability related to a guarantee trigger unless such trigger is caused solely by us.

Capital Recycling:

Part of our strategy to effectively manage our balance sheet involves pursuing and executing well on property dispositions and recycling of capital from our older industrial assets and/or those outside our target markets. We believe capital recycling (1) provides cost effective and timely capital to deleverage and to support our investment activities and (2) allows us to maintain line capacity and cash in advance of our development commitments.

During 2025, we sold our interests in 11 industrial facilities for an aggregate gross disposition price of $389.1 million. Two of the facilities sold were vacant development projects totaling 2.1 million square feet, located in the Ocala, Florida and Indianapolis, Indiana markets for a gross aggregate price of $174.6 million. The sale proceeds received were primarily used to (1) reduce outstanding debt obligations (2) fund the development and redevelopment pipeline and (3) make an investment in an industrial property in one of our target markets.

Liquidity Needs:

Our principal liquidity needs are debt maturities, interest payment obligations, the payment of dividends to our shareholders and funding our development and redevelopment projects.

As of December 31, 2025, we had approximately $1.4 billion of indebtedness, consisting of mortgages and notes payable outstanding, a term loan, Senior Notes and Trust Preferred Securities, with a weighted-average interest rate of approximately 3.6%.

We expect to pay our non-maturity debt service obligations from cash flow from operations. The ability of a property owner subsidiary to make debt service payments on its mortgage depends upon the rental revenues of its property and its ability to refinance the mortgage, sell the related property, or access capital from us or other sources. A property owner subsidiary's ability to accomplish such goals will be affected by numerous economic factors affecting the real estate industry, including the risks described under “Risk Factors” in Part I, Item 1A of this Annual Report.

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If we are unable to satisfy our contractual obligations and other operating costs with our cash flow from operations, we intend to use borrowings and proceeds from issuances of equity or debt securities. If a property owner subsidiary is unable to satisfy its contractual obligations and other operating costs, it may default on its obligations and lose its assets in foreclosure or through bankruptcy proceedings.

In connection with our intention to continue to qualify as a REIT for federal income tax purposes, we expect to continue paying regular dividends to our shareholders. These dividends are expected to be paid from operating cash flows and/or from other sources.

We paid approximately $164.3 million in cash dividends to our common and preferred shareholders in 2025. Although our property owner subsidiaries receive the majority of our base rental payments on a monthly basis, we intend to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution are invested by us in short-term money market or other suitable instruments.

As of December 31, 2025, we expect to incur approximately $18.3 million of costs, excluding noncontrolling interests' share and potential developer fees or partner buyouts, redevelopment projects and infrastructure work for our consolidated and non-consolidated land parcels held for development. We are unable to estimate (1) the timing of any required fundings for leasing costs until leases are executed and (2) the timing or amount of any additional costs related to the development of our land parcels until we commit to such additional costs.

Non-Development Capital Expenditures:

General . Due to the net-lease structure of a majority of our investments, our property owner subsidiaries historically have not incurred significant expenditures in the ordinary course of business to maintain the properties in which we have an interest. As leases expire, we expect our property owner subsidiaries to incur costs in extending the existing tenant leases, re-tenanting the properties with a single-tenant, or converting the property to multi-tenant use. The amounts of these expenditures can vary significantly depending on tenant negotiations, market conditions, rental rates and property type.

Single-Tenant Properties. We do not anticipate significant capital expenditures at the single-tenant properties in which we have an interest that are subject to net or similar leases since the tenants at these properties generally bear all or substantially all of the cost of property operations, maintenance and repairs. However, at certain properties subject to net leases, our property owner subsidiaries are responsible for replacement and/or repair of certain capital items, which may or may not be reimbursed. In addition, at certain single-tenant properties that are not subject to a net lease, our property owner subsidiaries have a level of property operating expense responsibility, which may or may not be reimbursed.

Multi-Tenant Properties . We have interests in a limited number of multi-tenant properties in our consolidated portfolio. While tenants of these properties are generally responsible for operating expenses in their spaces, our property owner subsidiaries are responsible for all expenses related to vacant space and certain non-reimbursable building expenses, at these properties.

Vacant Properties . To the extent there is a vacancy in a property, our property owner subsidiary would be obligated for all operating expenses, including capital expenditures, real estate taxes and insurance. When a property is vacant, our property owner subsidiary may incur substantial capital expenditure and releasing costs to re-tenant the property.

Property Expansions . Under certain leases, tenants have the right to expand the facility located on a property in which we have an interest. We expect our property owner subsidiaries may fund these property expansions with either additional secured borrowings, the repayment of which will be funded out of rental increases under the leases covering the expanded properties, or capital contributions from us.

Ground Leases . The tenants of properties in which we have an interest generally pay the rental obligations on ground leases either directly to the fee holder or to our property owner subsidiary as increased rent. However, our property owner subsidiaries are responsible for these payments (1) under certain leases without reimbursement and (2) at vacant properties.

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Environmental Matters. Based upon management's ongoing review of the properties in which we have an interest, management is not aware of any environmental condition with respect to any of these properties that would be reasonably likely to have a material adverse effect on us. There can be no assurance, however, that (1) the discovery of environmental conditions, which were previously unknown, (2) changes in law, (3) the conduct of tenants or (4) activities relating to properties in the vicinity of the properties in which we have an interest, will not expose us to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of properties in which we have an interest.

Results of Operations

Year ended December 31, 2025 compared with December 31, 2024. The increase in net income attributable to common shareholders of $68.6 million was primarily due to the items discussed below.

The decrease in total gross revenues of $8.2 million was primarily due to an aggregate decrease of $37.1 million primarily due to a decrease in additional $22.0 million of rental revenue related to a tenant exercising a purchase option in a sales-type lease during 2024 and $15.1 million due to property sales and vacancies, partially offset by an increase in rental revenue of $28.9 million due to properties placed in service, acquisitions and leasing.

The increase in depreciation and amortization expense of $3.8 million was primarily due to properties acquired and/or completed and placed in service during 2024.

The increase in property operating expense of $3.9 million was primarily due to an increase in operating expense responsibilities at certain properties and carrying costs for vacant development facilities placed into service for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The decrease in non-operating income of $4.9 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to lower interest income earned from short-term investments that matured in June 2024.

The decrease in interest and amortization expense of $3.6 million was primarily due to a $4.4 million decrease in interest expense related to the Senior Notes due 2024 that were repaid in full during the year ended December 31, 2024 and a decrease in mortgage interest expense. During the year ended December 31, 2025, $140.0 million of the aggregate principal balance of the 6.750% Senior Notes due 2028 were repurchased, resulting in a $1.8 million decrease in interest expense. Additionally, interest rate swaps on a portion of the Trust Preferred Securities and a partial repurchase of these securities resulted in a $2.9 million decrease in interest expense during the year ended December 31, 2025. These amounts were partially offset by a $2.0 million increase in interest expense related to the Term Loan and mortgages and a $3.5 million decrease in capitalized interest due to properties placed in service subsequent to December 31, 2024.

The increase in debt satisfaction losses, net of $11.8 million was primarily due to the repurchase of a portion of the Senior Notes due 2028 for a debt satisfaction cost of $11.3 million, the write off of deferred financing costs of $1.9 million related to the repurchase of the Trust Preferred Securities, the partial repayment of the Term Loan, and the partial repurchase of the Senior Notes due 2028, offset by a gain on repurchase of a portion of the Trust Preferred Securities at a 5% discount to par value of $1.4 million.

The increase in gain on sale, or disposal of, and recovery on real estate, net of $105.8 million was due to the higher gains on the dispositions of eleven properties and $2.0 million of insurance recovery on real estate during the year ended December 31, 2025 compared to the six dispositions during the year ended December 31, 2024.

The decrease in benefit (provision) for income taxes of $0.8 million is primarily attributable to the receipt of tax refunds during year ended December 31, 2024 with no comparable refunds during the year ended December 31, 2025.

The decrease in equity in earnings (losses) of non-consolidated entities of $1.2 million was primarily due to recognizing our share of additional interest expense due to an increase in mortgages and notes payable and write off of deferred financing costs related to refinancing of debt within our non-consolidated entities during the year ended December 31, 2025 compared to the year ended December 31, 2024. Additionally, there was one property sale within our non-consolidated entities during the year ended December 31, 2024 with no comparable sales during the year ended December 31, 2025.

The increase in net (income) loss attributable to noncontrolling interest holders of $6.1 million was primarily related to the recognition of the noncontrolling interests' share of gains on the sale of real estate of two vacant development properties in 2025.

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The increase in net income or decrease in net loss in future periods will be closely tied to the level of acquisitions made by us. Without acquisitions, the sources of growth in net income are limited to fixed rent adjustments and index adjustments (such as the consumer price index), reduced interest expense on amortizing mortgages and variable rate indebtedness and by controlling other variable overhead costs. However, there are many factors beyond management's control that could offset these items including, without limitation, changes in economic conditions such as the recent economic uncertainty increased interest rates and tenant monetary defaults and the other risks described in this Annual Report.

The analysis of the results of operations for the year ended December 31, 2024 compared with the year ended December 31, 2023 is included in our 2024 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, on February 13, 2025.

Same-Store Results

Same-store net operating income, or NOI, which is a non-GAAP measure, represents the NOI for consolidated properties that were owned, stabilized and included in our portfolio for the entirety of the period commencing January 1, 2024 and through the end of the current reporting period. We define NOI as operating revenues (rental income (less GAAP rent adjustments, non-cash income related to sales-type leases and lease termination income, net, and other property income) less property operating expenses. Other REITs may use different methodologies for calculating same-store NOI, and accordingly same-store NOI may not be comparable to other REITs. Management believes that same-store NOI is a useful supplemental measure of our operating performance because same-store NOI excludes the change in NOI from acquired, expanded and disposed of properties and it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. However, same-store NOI should not be viewed as an alternative measure of our financial performance since it does not reflect the operations of our entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. We believe that net income is the most directly comparable GAAP measure to same-store NOI.

The following presents our consolidated same-store NOI, for the years ended December 31, 2025 and 2024 ($000s):

Years Ended December 31,

Total cash base rent

Tenant reimbursements

Property operating expenses

Same-store NOI

Our same-store NOI increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 by 2.9% primarily due to an increase in cash base rents partially offset by lower occupancy. As of December 31, 2025 and 2024, our historical same-store square footage leased was 97.3% and 99.5%, respectively.

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Below is a reconciliation of net income to same-store NOI for periods presented ($000s):

Years ended December 31,

Net income

Interest and amortization expense

Provision (benefit) for income taxes

Depreciation and amortization

General and administrative

Transaction costs

Non-operating/advisory fee income

Gain on sale or disposal of, and recovery on, real estate, net

Sales-type lease income attributable to the exercise of a purchase option

Gain on change in control of a subsidiary

Loss on debt satisfaction, net

Equity in losses of non-consolidated entities

Lease termination income, net

Straight-line adjustments

Lease incentives

Amortization of above/below market leases

Sales-type lease adjustments

NOI

Less NOI:

Acquisitions, expansions, development and dispositions

Same-Store NOI

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Funds From Operations

We believe that Funds from Operations, or FFO, which is a non-GAAP measure, is a widely recognized and appropriate measure of the performance of an equity REIT. We believe FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not necessarily be apparent from net income.

The National Association of Real Estate Investment Trusts, or Nareit, defines FFO as “net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sales of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO.” FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs.

We present FFO available to common shareholders - basic and also present FFO available to all equityholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into our common shares, are converted at the beginning of the period. We also present Adjusted Company FFO available to all equityholders - diluted, which adjusts FFO available to all equityholders - diluted for certain items which we believe are not indicative of the operating results of our real estate portfolio and not comparable from period to period. We believe this is an appropriate presentation as it is frequently requested by securities analysts, investors and other interested parties. Since others do not calculate these measures in a similar fashion, these measures may not be comparable to similarly titled measures as reported by others. These measures should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of liquidity.

Adjusted Company FFO, NOI and the other non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income or loss as determined in accordance with GAAP. FFO, Adjusted Company FFO and NOI, and GAAP net income (loss) differ because FFO, Adjusted Company FFO and NOI exclude many items that are factored into GAAP net income or loss.

Because of the differences between FFO, Adjusted Company FFO, NOI and GAAP net income or loss, FFO, Adjusted Company FFO and NOI may not be accurate indicators of our operating performance, especially during periods in which we are acquiring and selling properties. In addition, FFO, Adjusted Company FFO and NOI are not necessarily indicative of cash flow available to fund cash needs and investors should not consider FFO, Adjusted Company FFO or NOI as alternatives to cash flows from operations, as an indication of our liquidity or as indicative of funds available to fund our cash needs, including our ability to make distributions to our shareholders.

Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO, Adjusted Company FFO and NOI. Also, because not all companies calculate FFO, Adjusted Company FFO and NOI the same way, comparisons with other companies’ measures with similar titles may not be meaningful.

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The following presents a reconciliation of net income attributable to common shareholders to FFO available to common shareholders and Adjusted Company FFO available to all equityholders for 2025 and 2024 (dollars in thousands, except share and per share amounts):

Years Ended December 31,

FUNDS FROM OPERATIONS:

Basic and Diluted:

Net income attributable to common shareholders

Adjustments:

Depreciation and amortization related to real estate

Impairment charges - real estate, including our share of non-consolidated entities

Amortization of leasing commissions

Joint venture and noncontrolling interest adjustment

Gain on sale or disposal of, and recovery on, real estate, net

Gain on change in control of a subsidiary

FFO available to common shareholders - basic

Preferred dividends

Amount allocated to participating securities

FFO available to all equityholders - diluted

Sales-type lease income attributable to the exercise of a purchase option

Allowance for credit losses

Transaction costs, including our share of non-consolidated entities (1)

Loss (gain) on debt satisfaction, net, including our share of non-consolidated entities

Non-recurring costs (2)

Noncontrolling interest adjustments

Adjusted Company FFO available to all equityholders - diluted

Per Common Share Amounts (3)

Basic:

FFO

Diluted:

FFO

Adjusted Company FFO

Weighted-Average Common Shares (3) :

Basic:

Weighted-average common shares outstanding - basic EPS

Weighted-average common shares outstanding - basic FFO

Diluted:

Weighted-average common shares outstanding - diluted EPS

Preferred shares - Series C

Weighted-average common shares outstanding - diluted FFO

(1)    Transaction costs include costs associated with terminated investments and the Reverse Split, such as non-refundable deposits and legal fees.

(2)    Includes non-recurring expenses for severance expense.

(3)    Share and per share data have been adjusted for all periods presented to reflect the Reverse Split effective November 10, 2025.

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