Inland Real Estate Income Trust (INRE) swings to Q2 2026 profit after asset sale
Inland Real Estate Income Trust, Inc., a non-traded REIT focused on grocery-anchored retail centers, reported Q2 2026 net income of $1,067 (thousands) compared with a $2,156 loss a year earlier, aided by a $4,985 gain on the sale of The Village at Burlington Creek. For the first six months of 2026 it recorded a net loss of $1,182 on $76,751 of total income, narrowing the loss versus 2025.
The portfolio comprised 51 properties totaling 7.0 million sq ft across 24 states, with physical and economic occupancy of 92.9% and 93.1%. Annualized base rent was $112,406 (thousands), or $17.21 per sq ft including ground leases. As of June 30, 2026, total assets were $1,207,302 (thousands) and stockholders’ equity was $318,472 (thousands).
Debt consisted of $810,000 (thousands) outstanding under an unsecured credit facility maturing April 1, 2029, with a weighted average interest rate of 4.62% and $525,000 hedged via interest rate swaps. Operating cash flow of $24,543 (thousands) covered $9,798 of distributions and $1,001 of share repurchases, while sale proceeds helped reduce credit facility borrowings. The board chose not to pursue a sale or stock-exchange listing and reinstated the DRP and SRP at prices tied to estimated NAV.
Positive
- None.
Negative
- None.
Filing Explained
At June 30, 2026, $810 million of debt and $50 million of borrowing capacity leave liquidity dependent on operating cash and secured credit access.
As a Form 10-Q, this filing provides unaudited interim financial statements and liquidity updates; at
The borrowing capacity was backed by all of the company’s properties, and the company said it had paid amounts when due and complied with its credit-facility covenants as of
Beginning in February 2026, the Business Manager directly compensates the chief executive officer, so the company pays the Business Manager its full contractual management fee rather than reducing that fee for the CEO’s compensation.
The Business Management Agreement is scheduled to terminate on
Key Figures
Key Terms
Distribution Reinvestment Plan financial
Share Repurchase Program financial
annualized base rent financial
interest rate swap financial
cash flow hedges financial
real estate investment trust financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Inland Real Estate Income Trust (INRE) perform financially in Q2 2026?
What is INRE’s portfolio size and occupancy as of June 30, 2026?
How leveraged is Inland Real Estate Income Trust (INRE) and when does its debt mature?
What distributions did INRE pay in the first half of 2026 and were they covered by cash flow?
What major capital actions did INRE take during the first half of 2026?
What are INRE’s current liquidity options and strategic plans?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
Former name, former address and former fiscal year, if changed since last report: Not Applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
None |
|
None |
|
None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
☒ |
|
Smaller reporting company |
||
Emerging growth company |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
As of August 4, 2026, there were
INLAND REAL ESTATE INCOME TRUST, INC.
TABLE OF CONTENTS
|
|
|
Page |
|
|
|
Part I - Financial Information |
|
|
Item 1. |
|
Financial Statements |
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025 |
3 |
|
|
|
|
|
|
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2026 and 2025 (unaudited) |
4 |
|
|
|
|
|
|
|
|
Consolidated Statements of Equity for the three months ended June 30, 2026 and 2025 (unaudited) |
5 |
|
|
|
|
|
|
|
|
Consolidated Statements of Equity for the six months ended June 30, 2026 and 2025 (unaudited) |
6 |
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (unaudited) |
7 |
|
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements (unaudited) |
8 |
|
|
|
|
|
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
|
|
|
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
32 |
|
|
|
|
|
|
Item 4. |
|
Controls and Procedures |
33 |
|
|
|
|
|
|
|
|
Part II - Other Information |
|
|
Item 1. |
|
Legal Proceedings |
33 |
|
|
|
|
|
|
Item 1A. |
|
Risk Factors |
33 |
|
|
|
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Repurchases of Securities |
34 |
|
|
|
|
|
|
Item 3. |
|
Defaults Upon Senior Securities |
35 |
|
|
|
|
|
|
Item 4. |
|
Mine Safety Disclosures |
35 |
|
|
|
|
|
|
Item 5. |
|
Other Information |
35 |
|
|
|
|
|
|
Item 6. |
|
Exhibits |
35 |
|
|
|
|
|
|
Signatures |
36 |
|||
2
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share amounts)
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
ASSETS |
|
|
|
|
|
|
||
Assets: |
|
|
|
|
|
|
||
Investment properties held and used: |
|
|
|
|
|
|
||
Land |
|
$ |
|
|
$ |
|
||
Building and other improvements |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Net investment properties held and used |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Accounts and rent receivable |
|
|
|
|
|
|
||
Acquired lease intangible assets, net |
|
|
|
|
|
|
||
Operating lease right-of-use asset, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
||
Mortgages and credit facility payable, net |
|
$ |
|
|
$ |
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
|
|
|
||
Distributions payable |
|
|
|
|
|
|
||
Acquired intangible liabilities, net |
|
|
|
|
|
|
||
Due to related parties |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
— |
|
|
|
— |
|
Common stock, $ |
|
|
|
|
|
|
||
Additional paid in capital |
|
|
|
|
|
|
||
Accumulated distributions and net loss |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive income |
|
|
|
|
|
|
||
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
See accompanying notes to consolidated financial statements.
3
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited, dollar amounts in thousands, except per share amounts)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other property income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Property operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Real estate tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Business management fee |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gain on sale of investment property |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per common share, basic and diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of common shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Unrealized gain (loss) on derivatives |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Reclassification adjustment for amounts included in net income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Comprehensive income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
See accompanying notes to consolidated financial statements.
4
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, dollar amounts in thousands, except per share amounts)
For the Three Months Ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Number |
|
Common |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total |
|
||||||
Balance at March 31, 2026 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Distributions declared ($ |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Proceeds from distribution reinvestment plan |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Shares repurchased |
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Unrealized gain on derivatives |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Reclassification adjustment for amounts |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Equity-based compensation |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Net income |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Balance at June 30, 2026 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
For the Three Months Ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Number |
|
Common |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total |
|
||||||
Balance at March 31, 2025 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Distributions declared ($ |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Unrealized loss on derivatives |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Reclassification adjustment for amounts |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Equity-based compensation |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Balance at June 30, 2025 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
See accompanying notes to consolidated financial statements.
5
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, dollar amounts in thousands, except per share amounts)
For the Six Months Ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|||||||||
|
Number |
|
Common |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total |
|
||||||
Balance at December 31, 2025 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Distributions declared ($ |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Proceeds from distribution reinvestment plan |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Shares repurchased |
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Unrealized gain on derivatives |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Reclassification adjustment for amounts |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Equity-based compensation |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Balance at June 30, 2026 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
For the Six Months Ended June 30, 2025 |
|
|
|
|
|
|
|
|||||||||||
|
Number |
|
Common |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total |
|
||||||
Balance at December 31, 2024 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Distributions declared ($ |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Unrealized loss on derivatives |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Reclassification adjustment for amounts |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Equity-based compensation |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Balance at June 30, 2025 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
See accompanying notes to consolidated financial statements.
6
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollar amounts in thousands)
|
|
Six Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Gain on sale of investment property |
|
|
( |
) |
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Amortization of acquired market leases, net |
|
|
( |
) |
|
|
( |
) |
Amortization of equity-based compensation |
|
|
|
|
|
|
||
Reduction in the carrying amount of the right-of-use-asset |
|
|
|
|
|
|
||
Straight-line income, net |
|
|
( |
) |
|
|
( |
) |
Other non-cash adjustments |
|
|
|
|
|
|
||
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Accounts and rent receivable |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
( |
) |
|
Due to related parties |
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
|
|
|
||
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash flows provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of investment property |
|
|
|
|
|
|
||
Net cash flows provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Payment of credit facility |
|
|
( |
) |
|
|
( |
) |
Proceeds from credit facility |
|
|
|
|
|
|
||
Payment of mortgages payable |
|
|
( |
) |
|
|
( |
) |
Proceeds from distribution reinvestment plan |
|
|
|
|
|
|
||
Shares repurchased |
|
|
( |
) |
|
|
|
|
Distributions paid |
|
|
( |
) |
|
|
( |
) |
Net cash flows used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, at beginning of the period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accrued capital expenditures |
|
$ |
|
|
$ |
|
||
See accompanying notes to consolidated financial statements.
7
INLAND REAL ESTATE INCOME TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to the audited consolidated financial statements of Inland Real Estate Income Trust, Inc. (which may be referred to herein as the “Company,” “we,” “us,” or “our”) for the year ended December 31, 2025, which are included in the Company’s 2025 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2026, as certain footnote disclosures contained in such audited consolidated financial statements have been omitted from this Quarterly Report on Form 10-Q.
NOTE 1 – ORGANIZATION
The Company was formed on August 24, 2011 to acquire and manage a portfolio of commercial real estate investments located in the United States. The Company focuses primarily on acquiring and owning a portfolio substantially all of which is comprised of grocery-anchored properties. As of June 30, 2026, the Company owned
The Company has no employees. The Company is managed by IREIT Business Manager & Advisor, Inc. (the “Business Manager”), an indirect wholly-owned subsidiary of Inland Real Estate Investment Corporation (the “Sponsor”). Various affiliates of the Sponsor provide services to the Company through the Business Manager, which is responsible for overseeing and managing the Company’s day-to-day operations. The Company’s relationship with the Business Manager is governed by the Fourth Amended and Restated Business Management Agreement (the “Business Management Agreement”) that the Company has entered into with the Business Manager. Under the Business Management Agreement, the Company pays the Business Manager a fee for the services it provides to the Company and reimburses the Business Manager for certain expenses that the Business Manager incurs on the Company’s behalf. The Company is entitled to reduce the fee payable to the Business Manager for any amounts that the Company pays to the person serving as its president and chief executive officer. The Company’s properties are managed by Inland Commercial Real Estate Services LLC, referred to herein as the “Real Estate Manager,” an indirect wholly-owned subsidiary of the Sponsor.
On December 8, 2025, as reported in the Company’s Form 8-K filed with the SEC on December 9, 2025, the Company announced that the Company’s board of directors (the “board”) had approved: (i) an estimated per share net asset value (the “Estimated Per Share NAV”) of the Company’s common stock as of September 30, 2025; and (ii) the reinstatement of the Company’s distribution reinvestment plan (as amended, the “DRP”) and share repurchase program (as amended, the “SRP”) effective February 1, 2026, following the suspension of both programs on October 1, 2024. On December 17, 2025, as reported in the Company’s Form 8-K filed with the SEC on December 22, 2025, the Company announced that the board amended and restated the SRP to provide that shares accepted for “ordinary repurchases” will be repurchased at
There is no established trading market for the Company’s common stock.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Disclosures discussing all significant accounting policies are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 11, 2026, under the heading Note 2 – “Summary of Significant Accounting Policies.” There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2026, except as noted below.
General
The consolidated financial statements have been prepared in accordance with GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In the opinion of management, all adjustments necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods are presented. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.
8
Restricted Cash
Amounts included in restricted cash represent those required to be set aside by lenders for real estate taxes, insurance, capital expenditures and tenant improvements on the Company's existing properties. These amounts also include post close escrows for tenant improvements, leasing commissions, master lease, general repairs and maintenance, and are classified as restricted cash on the Company’s consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company’s consolidated balance sheets to such amounts shown on the Company’s consolidated statements of cash flows:
|
|
June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents, and restricted cash |
|
$ |
|
|
$ |
|
||
Accounting Pronouncements Recently Issued but Not Yet Effective
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, and in January 2025, the FASB issued ASU 2025-01, Clarifying the Effective Date, which revised the effective date of ASU 2024-03 for interim periods. ASU 2024-03 requires disclosures in the notes to the financial statements on specified information about certain costs and expenses that are included on the face of the income statement for each interim and annual reporting period. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of ASU 2024-03 and ASU 2025-01 on the Company’s consolidated financial statements.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements, which clarifies guidance for hedge accounting, including grouping forecasted transactions by similar risk, hedging choose-your-rate debt, expanding eligibility for nonfinancial components, eliminating certain net written option tests, and addressing dual hedges. ASU 2025-09 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-09 on the Company’s consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim reporting guidance, defines applicability to entities presenting full GAAP interim financial statements, provides form and content requirements for condensed statements, and introduces a principle requiring disclosure of material events occurring after the prior annual period. ASU 2025-11 does not change existing disclosure requirements. ASU 2025-11 is effective for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-11 on the Company’s interim reporting.
NOTE 3 – EQUITY
The Company commenced an initial public “best efforts” offering (the “Offering”) on October 18, 2012, which concluded on October 16, 2015. The Company sold
The Company provides the following programs to facilitate additional investment in the Company’s shares and to provide limited liquidity for stockholders.
Distribution Reinvestment Plan
The Company, through the DRP, provides stockholders with the option to purchase additional shares from the Company by reinvesting cash distributions, subject to certain share ownership restrictions. The shares are purchased at a price equal to the Estimated Per Share NAV at the time the distributions are reinvested. There are no selling commissions or other fees such as marketing contribution or due diligence expense reimbursements paid in connection with any purchases under the DRP.
9
The DRP was suspended effective October 1, 2024 and was reinstated effective February 1, 2026. While the DRP was suspended, stockholders that previously participated in the DRP were not permitted to reinvest distributions paid by the Company in additional shares. Any prior reinvested distributions were not impacted. Although the Company continued paying distributions during the suspension of the DRP, the DRP was not a source of capital while it remained suspended.
During the three and six months ended June 30, 2026, distributions totaling $
Share Repurchase Program
The SRP is governed by the terms of the Sixth Amended and Restated Share Repurchase Program (the “Sixth SRP”) adopted by the board on December 17, 2025, effective on February 1, 2026. Under the Sixth SRP, the repurchase price will be equal to the then-current Estimated Per Share NAV for the Exceptional Repurchases and equal to
The SRP contains numerous restrictions that limit the stockholders’ ability to sell their shares. The board, in its sole discretion, may amend or terminate the SRP. The SRP will immediately terminate if the Company’s shares become listed for trading on a national securities exchange.
There were $
NOTE 4 – DISPOSITIONS
On March 12, 2026, the Company entered into a purchase and sale agreement for the sale of The Village at Burlington Creek property for a purchase price of $
NOTE 5 – LEASES
The Company is lessor under approximately
Most of the revenue from the Company’s properties consists of rents received under long-term operating leases. Most leases require the tenant to pay monthly fixed base rent in advance, and to reimburse the Company for the tenant’s pro rata share of certain operating expenses including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees, and certain building repairs paid by the Company and recoverable under the terms of the lease. Under these leases, the Company pays all expenses and is reimbursed by the tenant for the tenant’s pro rata share of recoverable expenses paid.
10
Certain other tenants are subject to net leases which provide that the tenant is responsible for fixed base rent as well as costs and expenses associated with occupancy. Under net leases where expenses are paid directly by the tenant rather than the landlord, such expenses are not included on the consolidated statements of operations and comprehensive income (loss). Under leases where expenses are paid by the Company, subject to reimbursement by the tenant, the expenses are included within property operating expenses. Reimbursements for common area maintenance are considered non-lease components that are permitted to be combined with rental income. The combined lease component and reimbursements for insurance and taxes are reported as rental income on the consolidated statements of operations and comprehensive income (loss).
Rental income related to the Company’s operating leases is comprised of the following:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Rental income - fixed payments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Rental income - variable payments (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of acquired lease intangibles, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(a)
As of June 30, 2026, the Company’s accounts and rent receivable, net balance was $
NOTE 6 – ACQUIRED INTANGIBLE ASSETS AND LIABILITIES
The following table summarizes the Company’s identified intangible assets and liabilities as of June 30, 2026 and December 31, 2025:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Intangible assets: |
|
|
|
|
|
|
||
Acquired in-place lease value |
|
$ |
|
|
$ |
|
||
Acquired above market lease value |
|
|
|
|
|
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Acquired lease intangibles, net |
|
$ |
|
|
$ |
|
||
Intangible liabilities: |
|
|
|
|
|
|
||
Acquired below market lease value |
|
$ |
|
|
$ |
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Acquired below market lease intangibles, net |
|
$ |
|
|
$ |
|
||
The portion of the purchase price allocated to acquired above market lease value and acquired below market lease value is amortized on a straight-line basis over the term of the related lease as an adjustment to rental income. For below market lease values, the amortization period includes any renewal periods with fixed rate renewals. The portion of the purchase price allocated to acquired in-place lease value is amortized on a straight-line basis over the acquired leases’ weighted average remaining term.
Amortization pertaining to acquired in-place lease value, above market lease value and below market lease value is summarized below:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Amortization recorded as amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
||||
Acquired in-place lease value |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization recorded as a (reduction) increase to rental income: |
|
|
|
|
|
|
|
|
|
|
|
||||
Acquired above market leases |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Acquired below market leases |
|
|
|
|
|
|
|
|
|
|
|
||||
Net rental income increase |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
11
Estimated amortization of the respective intangible lease assets and liabilities as of June 30, 2026 for each of the five succeeding years and thereafter is as follows:
|
|
Acquired |
|
|
Above Market Leases |
|
|
Below |
|
|||
2026 (remainder of year) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
2028 |
|
|
|
|
|
|
|
|
|
|||
2029 |
|
|
|
|
|
|
|
|
|
|||
2030 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
NOTE 7 – DEBT AND DERIVATIVE INSTRUMENTS
As of June 30, 2026 and December 31, 2025, the Company had the following mortgage and credit facility payable:
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||
Type of Debt |
Principal Amount |
|
|
Weighted |
|
|
Principal |
|
|
Weighted |
|
||||
Fixed rate mortgage payable |
$ |
— |
|
|
|
— |
|
|
$ |
|
|
|
% |
||
Credit facility payable |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total debt before unamortized debt issuance costs including impact of interest rate swaps |
|
|
|
|
% |
|
|
|
|
|
% |
||||
(Less): Unamortized debt issuance costs |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Total debt |
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
The Company’s indebtedness bore interest at a weighted average interest rate of
As of June 30, 2026, maturities on the Company’s debt were as follows:
|
|
June 30, 2026 |
|
|
Maturities by Year: |
|
Maturity of Credit Facility |
|
|
2026 (remainder of the year) |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Credit Facility Payable
On November 13, 2025, the Company entered into a third amended and restated credit agreement (the “Credit Agreement”) with KeyBank National Association (“KeyBank”), individually and as administrative agent, KeyBanc Capital Markets Inc., PNC Capital Markets LLC and BofA Securities, Inc., as joint lead arrangers, and other lenders from time to time parties to the Credit Agreement (the “Credit Facility”). Pursuant to the Credit Agreement, the aggregate total commitments under the Credit Facility were increased from $
12
aggregate amount of $
As of June 30, 2026, the Company had $
As of June 30, 2026, the Company had a maximum amount of $
The Company’s performance of the obligations under the Credit Facility, including the payment of any outstanding indebtedness under the Credit Facility, is guaranteed by certain subsidiaries of the Company, including each of the subsidiaries of the Company which owns or leases any of the properties included in the pool of unencumbered properties comprising the borrowing base. Additional properties will be added to and removed from the pool from time to time to support amounts borrowed under the Credit Facility so long as at any time there are at least
The Credit Facility requires compliance with certain covenants, including a minimum tangible net worth requirement, a limitation on the use of leverage, a distribution limitation, restrictions on indebtedness and investment restrictions, as defined. It also contains customary default provisions including the failure to comply with the Company's covenants and the failure to pay when amounts outstanding under the Credit Facility become due. As of June 30, 2026,
Interest Rate Swap Agreements
The Company entered into interest rate swaps to fix certain of its floating SOFR based debt under variable rate loans to a fixed rate to manage its risk exposure to interest rate fluctuations. The Company will generally match the maturity of the underlying variable rate debt with the maturity date on the interest swap. See Note 14 – “Fair Value Measurements” for further information.
13
As of June 30, 2026, the Company had hedged $
Date |
Effective |
Maturity |
Receive Floating Rate Index (a) |
Pay |
|
Notional |
|
Fair Value |
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
% |
|
|
|
|
|||||||
|
|
|
|
|
|
$ |
|
$ |
|
|||
The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Derivatives in Cash Flow Hedging Relationships |
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Effective portion of derivatives |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Reclassification adjustment for amounts included in net income (loss) (effective portion) |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The total amount of interest expense presented on the consolidated statements of operations and comprehensive income (loss) was $
14
interest expense on the consolidated statements of operations and comprehensive income (loss). The amount that is expected to be reclassified from accumulated other comprehensive income into income (loss) in the next 12 months is $
NOTE 8 – DISTRIBUTIONS
The table below presents the distributions paid and declared during the three and six months ended June 30, 2026 and 2025.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Distributions paid |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Distributions declared |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 9 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the “common shares”). Diluted EPS is computed by dividing net income (loss) by the common shares plus common share equivalents. The Company excludes antidilutive restricted shares from the calculation of weighted-average shares for diluted EPS. For the three months ended June 30, 2026,
NOTE 10 – COMMITMENTS AND CONTINGENCIES
The Company may be subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material adverse effect on the consolidated financial statements of the Company.
NOTE 11 – EQUITY-BASED COMPENSATION
Under the Company’s Employee and Director Restricted Share Plan (“RSP”), restricted shares generally vest over a one to
A summary table of the status of the restricted shares is presented below:
|
|
Restricted Shares |
|
|
Outstanding at December 31, 2025 |
|
|
|
|
Granted |
|
|
— |
|
Vested |
|
|
— |
|
Outstanding at June 30, 2026 |
|
|
|
|
NOTE 12 – SEGMENT REPORTING
The Company has
15
NOTE 13 – TRANSACTIONS WITH RELATED PARTIES
The following table summarizes the Company’s related party transactions for the three and six months ended June 30, 2026 and 2025. Certain compensation and fees payable to the Business Manager for services provided to the Company are limited to maximum amounts.
|
|
Three Months Ended |
|
Six Months Ended |
|
Unpaid amounts as of |
|
||||||||||||
|
|
2026 |
|
2025 |
|
2026 |
|
2025 |
|
June 30, 2026 |
|
December 31, 2025 |
|
||||||
General and administrative reimbursements |
(a) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Real estate management fees |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
— |
|
$ |
— |
|
||||
Property operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Construction management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Leasing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total real estate management related costs |
(b) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Business management fees |
(c) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||
On January 19, 2024, the Company entered into the Business Management Agreement with the Business Manager, effective February 1, 2024, to, among other things, (i) provide the Company with the authority to engage a person not affiliated with or employed by the
16
Business Manager to serve as president and chief executive officer of the Company and (ii) to reduce the business management fee payable to the Business Manager by the amount of any payment made to any third-party person as compensation for services as the Company’s president and chief executive officer. In connection with an agreement entered into with Mark Zalatoris, the Company’s then-president and chief executive officer, referred to herein as the “CEO Agreement,” the Business Management Fee was reduced by the amount of any payments made to Mr. Zalatoris under the CEO Agreement. Mr. Zalatoris resigned from his positions as president and chief executive officer of the Company effective February 2, 2026. Effective as of the same date, Bernard Michael was appointed as the Company’s president and chief executive officer. As a result of this transition, the Business Manager now directly compensates Mr. Michael. Accordingly, beginning in February 2026, the Company pays the Business Manager the full fee it is entitled to under the Business Management Agreement. During the three and six months ended June 30, 2026, total costs incurred under the CEO Agreement were
NOTE 14 – FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
The Company defines fair value based on the price that it believes would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:
Level 1 − |
|
Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. |
|
|
|
Level 2 − |
|
Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|
|
|
Level 3 − |
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes.
Recurring Fair Value Measurements
For assets and liabilities measured at fair value on a recurring basis, the table below presents the fair value of the Company’s cash flow hedges as well as their classification on the consolidated balance sheets as of June 30, 2026 and December 31, 2025.
|
Fair Value |
|
|||||||||||||
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap agreements - Other assets |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Interest rate swap agreements - Other liabilities |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap agreements - Other assets |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Interest rate swap agreements - Other liabilities |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
The fair value of derivative instruments was estimated based on data observed in the forward yield curve which is widely observed in the marketplace. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the counterparty's nonperformance risk in the fair value measurements which utilize Level 3 inputs, such as estimates of current credit spreads. The Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative interest rate swap agreements and therefore has classified these in Level 2 of the hierarchy.
17
NOTE 15 – SUBSEQUENT EVENTS
In connection with the preparation of its consolidated financial statements, the Company has evaluated events that occurred subsequent to June 30, 2026 through the date on which these consolidated financial statements were issued to determine whether any of these events required disclosure in the consolidated financial statements.
There were no reportable subsequent events or transactions.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words such as “may,” “could,” “should,” “expect,” “intend,” “plan,” “goal,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “variables,” “potential,” “continue,” “expand,” “maintain,” “create,” “strategies,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions, are intended to identify forward-looking statements.
These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of the management of Inland Real Estate Income Trust, Inc. (which we refer to herein as the “Company,” “we,” “our” or “us”) based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described under “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on March 11, 2026, some of which are summarized below:
Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Quarterly Report, and may ultimately prove to be incorrect or false. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.
19
The following discussion and analysis relates to the three and six months ended June 30, 2026 and 2025 and as of June 30, 2026 and December 31, 2025. Our stockholders should read the following discussion and analysis along with our consolidated financial statements and the related notes included in this Quarterly Report on Form 10-Q.
We routinely post important information about us and our business, including financial and other information for investors, on our website. We encourage investors to visit our website at inland-investments.com/inland-income-trust from time to time, as information is updated and new information is posted.
Overview
We were formed as a Maryland corporation on August 24, 2011 to acquire and manage a portfolio of commercial real estate investments located in the United States. We elected to be taxed as a real estate investment trust for U.S. federal income tax purposes (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the tax year ended December 31, 2013. Our business plan focuses primarily on acquiring and owning a portfolio substantially all of which is comprised of grocery-anchored properties. The Business Manager continues to evaluate our business plan and strategy, including considering and presenting alternatives and enhancements for board review with a view towards being able to increase the Company’s assets and cash flow on an accretive basis as well as to enhance the Company’s capital (primarily equity). The board decided not to pursue a sale of the Company or a listing of its common stock on a national securities exchange at this time. In the future, the Company may pursue other alternatives to raise capital, including but not limited to, for example, a joint venture with a third party.
We raised equity capital through a “best efforts” offering that commenced on October 18, 2012 and concluded on October 16, 2015. We sold 33,534,022 shares of common stock in the offering generating gross proceeds of $834.4 million. We have not raised any further equity capital on an underwritten or best-efforts basis since the offering was completed. We have also generated equity capital through the sale of shares through our DRP. As noted herein, the DRP was suspended effective October 1, 2024 and reinstated effective February 1, 2026. From inception through June 30, 2026, we had issued a total of 6,761,869 shares through the DRP generating aggregate proceeds of $148.2 million. Although the DRP was recently reinstated, there is no assurance that stockholders will continue to participate at the level before suspension. We have also used, and may continue to use, various sources of debt capital to fund acquisitions and other capital and operating needs as further described.
As of June 30, 2026, we owned 51 retail properties, totaling 7.0 million square feet located in 24 states. A majority of our properties are multi-tenant, necessity-based retail shopping centers located primarily in major regional markets and growing secondary markets throughout the United States. As of June 30, 2026, grocery-anchored or grocery shadow-anchored shopping center properties represented 87% of our annualized base rent. A grocery shadow-anchored shopping center is a shopping center near a grocery store that we do not own and is not a part of our shopping center but that we believe generates traffic for our shopping center. As of June 30, 2026, our portfolio had physical and economic occupancy of 92.9% and 93.1%, respectively. Physical and economic occupancy both increased approximately 0.5% compared to March 31, 2026, and has increased compared to physical and economic occupancy of 92.0% and 92.2%, respectively, as of December 31, 2025. As of June 30, 2026, annualized base rent (“ABR”) per square foot averaged $20.17 for all owned properties. ABR is calculated by annualizing the monthly base rent for leases in-place as of the applicable date, excluding ground leases. ABR including ground leases averaged $17.21 as of June 30, 2026.
There were no acquisitions during the three and six months ended June 30, 2026.
On March 12, 2026, we entered into a purchase and sale agreement for the sale of The Village at Burlington Creek property for a purchase price of $34.0 million. On June 25, 2026, we completed the sale of the property generating net proceeds of $30.3 million after transaction costs and $2.8 million of escrow credits provided to the buyer related to roof replacement. We recognized a gain of $5.0 million on the transaction. On June 26, 2026, we repaid $30 million of outstanding borrowings under the Credit Facility using the net proceeds from the transaction.
We have no employees and are externally managed and advised by IREIT Business Manager & Advisor, Inc. (the “Business Manager”), an indirect wholly-owned subsidiary of Inland Real Estate Investment Corporation, referred to herein as our “Sponsor” pursuant to an agreement that expires on March 31, 2027. Either party may terminate the agreement upon giving 60 days’ prior notice. Currently, we pay fees to and reimburse certain expenses incurred by the Business Manager for the services provided to us. This fee was reduced dollar-for-dollar for amounts we paid to Mark Zalatoris during the time he served as the Company’s president and chief executive officer. Mr. Zalatoris resigned from his positions as president and chief executive officer effective February 2, 2026. Effective as of the same date, Bernard Michael was appointed as the Company’s president and chief executive officer. As a result of this transition, the Business Manager now directly compensates Mr. Michael. Accordingly, beginning in February 2026, we pay the Business Manager the full fee it is entitled to under our agreement with the Business Manager. We do not reimburse the Business Manager for any compensation it pays to any person serving as one of our executive officers. Our properties are managed by Inland Commercial Real Estate Services LLC, also an indirect wholly-owned subsidiary of our Sponsor. The agreement governing these services expires on
20
December 31, 2026 but will automatically renew for another one year term unless either party provides notice of intent to terminate not less than 60 days prior to the expiration date.
Inflation and Interest Rates
Inflationary pressures, volatility in interest rates, and the imposition of new duties, tariffs, trade barriers and retaliatory countermeasures by the U.S. and other governments, could all reduce consumer spending and adversely impact retailer profitability, particularly if rates rise which may impact our ability to increase rents as well as tenant demand for new and existing store locations. Regardless of inflation levels, base rent under most of our long-term anchor leases remains constant (subject to tenants’ exercise of renewal options at pre-negotiated rent increases) until the expiration of their lease terms, regardless of the inflation rate for any period. While many of our leases require tenants to pay their share of shopping center operating expenses (including common area maintenance, real estate tax and insurance expenses), our ability to collect the expense increases passed through to tenants is dependent on their ability to absorb and pay these increases. Inflation may also impact other aspects of our operating costs, including fees paid to service providers, the cost to complete redevelopments and build-outs of recently leased vacancies and interest rate costs relating to variable rate loans and refinancing of lower fixed-rate indebtedness. While we have not been significantly impacted by any of these items to date, no assurances can be provided that these inflationary pressures will not have a material adverse effect on our business in the future.
SELECT PROPERTY INFORMATION (All dollar amounts in thousands, except per square foot amounts)
Investment Properties
|
|
As of June 30, 2026 |
|
|
Number of properties |
|
51 |
|
|
Purchase price |
|
$ |
1,589,300 |
|
Total square footage |
|
|
7,013,213 |
|
Physical occupancy |
|
|
92.9 |
% |
Economic occupancy |
|
|
93.1 |
% |
Weighted average remaining lease term (years) (a) |
|
|
4.5 |
|
21
The table below presents information for each of our investment properties as of June 30, 2026.
Property (a) |
Location |
Square |
|
Physical |
|
Economic |
|
|||
Newington Fair |
Newington, CT |
|
186,205 |
|
|
100.0 |
% |
|
100.0 |
% |
Wedgewood Commons |
Olive Branch, MS |
|
169,558 |
|
|
93.2 |
% |
|
93.2 |
% |
Park Avenue |
Little Rock, AR |
|
78,702 |
|
|
90.7 |
% |
|
90.7 |
% |
North Hills Square |
Coral Springs, FL |
|
63,829 |
|
|
96.6 |
% |
|
100.0 |
% |
Mansfield Shopping Center |
Mansfield, TX |
|
148,529 |
|
|
59.3 |
% |
|
59.3 |
% |
Lakeside Crossing |
Lynchburg, VA |
|
67,034 |
|
|
97.8 |
% |
|
97.8 |
% |
MidTowne Shopping Center |
Little Rock, AR |
|
126,288 |
|
|
73.2 |
% |
|
73.2 |
% |
Dogwood Festival |
Flowood, MS |
|
188,770 |
|
|
90.7 |
% |
|
90.7 |
% |
Pick N Save Center |
West Bend, WI |
|
94,446 |
|
|
98.9 |
% |
|
98.9 |
% |
Harris Plaza |
Layton, UT |
|
126,311 |
|
|
77.6 |
% |
|
77.6 |
% |
Dixie Valley |
Louisville, KY |
|
119,911 |
|
|
90.1 |
% |
|
90.1 |
% |
The Landings at Ocean Isle |
Ocean Isle, NC |
|
53,203 |
|
|
100.0 |
% |
|
100.0 |
% |
Shoppes at Prairie Ridge |
Pleasant Prairie, WI |
|
232,606 |
|
|
98.0 |
% |
|
99.3 |
% |
Harvest Square |
Harvest, AL |
|
70,590 |
|
|
100.0 |
% |
|
100.0 |
% |
Heritage Square |
Conyers, GA |
|
22,510 |
|
|
93.8 |
% |
|
93.8 |
% |
The Shoppes at Branson Hills |
Branson, MO |
|
256,244 |
|
|
94.7 |
% |
|
94.7 |
% |
Branson Hills Plaza |
Branson, MO |
|
210,201 |
|
|
98.0 |
% |
|
100.0 |
% |
Copps Grocery Store |
Stevens Point, WI |
|
69,911 |
|
|
100.0 |
% |
|
100.0 |
% |
Fox Point Plaza |
Neenah, WI |
|
171,121 |
|
|
99.1 |
% |
|
99.1 |
% |
Shoppes at Lake Park |
W. Valley City, UT |
|
52,903 |
|
|
85.1 |
% |
|
85.1 |
% |
Plaza at Prairie Ridge |
Pleasant Prairie, WI |
|
9,035 |
|
|
100.0 |
% |
|
100.0 |
% |
Green Tree Shopping Center |
Katy, TX |
|
147,621 |
|
|
100.0 |
% |
|
100.0 |
% |
Eastside Junction |
Athens, AL |
|
79,675 |
|
|
98.4 |
% |
|
98.4 |
% |
Fairgrounds Crossing |
Hot Springs, AR |
|
155,127 |
|
|
98.9 |
% |
|
98.9 |
% |
Prattville Town Center |
Prattville, AL |
|
168,842 |
|
|
96.9 |
% |
|
96.9 |
% |
Regal Court |
Shreveport, LA |
|
363,061 |
|
|
92.5 |
% |
|
92.5 |
% |
Shops at Hawk Ridge |
St. Louis, MO |
|
75,951 |
|
|
100.0 |
% |
|
100.0 |
% |
Walgreens Plaza |
Jacksonville, NC |
|
42,219 |
|
|
52.8 |
% |
|
52.8 |
% |
Frisco Marketplace |
Frisco, TX |
|
112,024 |
|
|
93.0 |
% |
|
93.0 |
% |
White City |
Shrewsbury, MA |
|
257,128 |
|
|
89.6 |
% |
|
89.6 |
% |
Yorkville Marketplace |
Yorkville, IL |
|
111,591 |
|
|
94.8 |
% |
|
94.8 |
% |
Shoppes at Market Pointe |
Papillion, NE |
|
253,793 |
|
|
98.5 |
% |
|
98.5 |
% |
Marketplace at El Paseo |
Fresno, CA |
|
224,683 |
|
|
98.8 |
% |
|
98.8 |
% |
Milford Marketplace |
Milford, CT |
|
111,911 |
|
|
97.5 |
% |
|
100.0 |
% |
Settlers Ridge |
Pittsburgh, PA |
|
473,871 |
|
|
90.0 |
% |
|
90.0 |
% |
Blossom Valley Plaza |
Turlock, CA |
|
111,475 |
|
|
97.2 |
% |
|
97.2 |
% |
Oquirrh Mountain Marketplace |
South Jordan, UT |
|
75,950 |
|
|
97.1 |
% |
|
97.1 |
% |
Marketplace at Tech Center |
Newport News, VA |
|
210,648 |
|
|
91.2 |
% |
|
91.2 |
% |
Coastal North Town Center |
Myrtle Beach, SC |
|
304,662 |
|
|
97.8 |
% |
|
97.8 |
% |
Oquirrh Mountain Marketplace II |
South Jordan, UT |
|
10,150 |
|
|
84.7 |
% |
|
84.7 |
% |
Wilson Marketplace |
Wilson, NC |
|
311,030 |
|
|
100.0 |
% |
|
100.0 |
% |
Pentucket Shopping Center |
Plaistow, NH |
|
199,454 |
|
|
97.4 |
% |
|
97.4 |
% |
Hickory Tavern |
Myrtle Beach, SC |
|
6,588 |
|
|
100.0 |
% |
|
100.0 |
% |
New Town |
Owings Mill, MD |
|
117,593 |
|
|
45.1 |
% |
|
45.1 |
% |
Olde Ivy Village |
Smyrna, GA |
|
46,500 |
|
|
79.5 |
% |
|
87.7 |
% |
Northpark Village Square |
Santa Clarita, CA |
|
87,103 |
|
|
100.0 |
% |
|
100.0 |
% |
Lower Makefield Shopping Center |
Lower Makefield, PA |
|
75,979 |
|
|
84.4 |
% |
|
84.4 |
% |
Denton Village |
Denton, TX |
|
48,280 |
|
|
96.9 |
% |
|
96.9 |
% |
Rusty Leaf Plaza |
Orange, CA |
|
59,188 |
|
|
95.3 |
% |
|
95.3 |
% |
Northville Park Place |
Northville, MI |
|
78,421 |
|
|
92.6 |
% |
|
92.6 |
% |
CityPlace |
Woodbury, MN |
|
174,788 |
|
|
98.4 |
% |
|
98.4 |
% |
Portfolio total |
|
|
7,013,213 |
|
|
92.9 |
% |
|
93.1 |
% |
22
Tenancy Highlights
The following table presents information regarding the top ten tenants in our portfolio based on annualized base rent for leases in-place as of June 30, 2026.
Tenant Name |
|
Number |
|
|
Annualized |
|
|
Percent of |
|
|
Annualized |
|
|
Square |
|
|
Percent of |
|
||||||
The Kroger Co. |
|
|
5 |
|
|
$ |
4,899 |
|
|
|
4.4 |
% |
|
$ |
16.54 |
|
|
|
296,150 |
|
|
|
4.2 |
% |
The TJX Companies, Inc. |
|
|
14 |
|
|
|
3,864 |
|
|
|
3.4 |
% |
|
|
10.91 |
|
|
|
354,070 |
|
|
|
5.0 |
% |
Ulta Salon, Cosmetics & Fragrance Inc. |
|
|
13 |
|
|
|
2,985 |
|
|
|
2.7 |
% |
|
|
22.43 |
|
|
|
133,076 |
|
|
|
1.9 |
% |
Ross Dress for Less, Inc. |
|
|
10 |
|
|
|
2,853 |
|
|
|
2.5 |
% |
|
|
10.88 |
|
|
|
262,080 |
|
|
|
3.7 |
% |
Amazon/Whole Foods Market Group, Inc. |
|
|
3 |
|
|
|
2,447 |
|
|
|
2.2 |
% |
|
|
21.21 |
|
|
|
115,396 |
|
|
|
1.6 |
% |
Planet Fitness |
|
|
6 |
|
|
|
2,190 |
|
|
|
1.9 |
% |
|
|
17.74 |
|
|
|
123,486 |
|
|
|
1.8 |
% |
Dick’s Sporting Goods, Inc. |
|
|
4 |
|
|
|
2,158 |
|
|
|
1.9 |
% |
|
|
11.94 |
|
|
|
180,766 |
|
|
|
2.6 |
% |
PetSmart |
|
|
7 |
|
|
|
2,129 |
|
|
|
1.9 |
% |
|
|
15.36 |
|
|
|
138,578 |
|
|
|
2.0 |
% |
Albertsons/Jewel/Shaw’s |
|
|
2 |
|
|
|
2,090 |
|
|
|
1.9 |
% |
|
|
16.34 |
|
|
|
127,892 |
|
|
|
1.9 |
% |
Five Below |
|
|
12 |
|
|
|
2,004 |
|
|
|
1.8 |
% |
|
|
17.52 |
|
|
|
114,369 |
|
|
|
1.6 |
% |
Top Ten Tenants |
|
|
76 |
|
|
$ |
27,619 |
|
|
|
24.6 |
% |
|
$ |
14.96 |
|
|
|
1,845,863 |
|
|
|
26.3 |
% |
The following table sets forth a summary of our tenant diversity for our entire portfolio and is based on leases in-place as of June 30, 2026.
Tenant Type |
Gross Leasable |
|
|
Percent of |
|
|
Percent of |
|
|||
Discount and Department Stores |
|
1,428,396 |
|
|
|
21.9 |
% |
|
|
10.9 |
% |
Grocery |
|
1,303,566 |
|
|
|
20.0 |
% |
|
|
16.5 |
% |
Lifestyle, Health Clubs, Books & Phones |
|
932,800 |
|
|
|
14.3 |
% |
|
|
16.7 |
% |
Home Goods |
|
758,776 |
|
|
|
11.6 |
% |
|
|
6.0 |
% |
Restaurant |
|
617,388 |
|
|
|
9.5 |
% |
|
|
18.8 |
% |
Apparel & Accessories |
|
461,554 |
|
|
|
7.1 |
% |
|
|
9.5 |
% |
Consumer Services, Salons, Cleaners, Banks |
|
319,843 |
|
|
|
4.9 |
% |
|
|
9.2 |
% |
Pet Supplies |
|
258,136 |
|
|
|
4.0 |
% |
|
|
4.0 |
% |
Sporting Goods |
|
200,227 |
|
|
|
3.1 |
% |
|
|
2.3 |
% |
Health, Doctors & Health Foods |
|
198,642 |
|
|
|
3.0 |
% |
|
|
5.3 |
% |
Other |
|
52,885 |
|
|
|
0.6 |
% |
|
|
0.8 |
% |
Total |
|
6,532,213 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
The following table sets forth a summary, as of June 30, 2026, of the percent of total annualized base rent and the weighted average lease expiration by size of tenant.
Size of Tenant |
|
Description – |
|
Percent of Total Annualized Base Rent |
|
|
Weighted Average Lease Expiration – Years |
|
||
Anchor |
|
10,000 and over |
|
|
49 |
% |
|
|
5.4 |
|
Junior Box |
|
5,000-9,999 |
|
|
13 |
% |
|
|
3.8 |
|
Small Shop |
|
Less than 5,000 |
|
|
38 |
% |
|
|
3.6 |
|
Total |
|
|
|
|
100 |
% |
|
|
4.5 |
|
American Freight, which leased space at one of our properties, filed for bankruptcy in November 2024. American Freight closed this location, and the lease was rejected in December 2024. We are marketing the space.
23
Party City, which leased space at four of our properties, filed for bankruptcy protection in December 2024. All four stores were closed as of March 31, 2025. Party City rejected its leases at all four of our locations and we currently have possession of these spaces. We have executed new leases with replacement tenants for two of these spaces. We are marketing the remaining two spaces.
Rite Aid, which leased space at one of our properties, filed for bankruptcy in May 2025. Rite Aid closed this location, and the lease was rejected at the end of August 2025. We are marketing the space.
Painted Tree, which leased space at one of our properties, closed its location and filed for bankruptcy in April 2026. We have executed a replacement lease to backfill the space.
Lease Expirations
The following table sets forth a summary, as of June 30, 2026, of lease expirations scheduled to occur during the remainder of 2026 and each of the calendar years from 2027 to 2035 and thereafter, assuming no exercise of renewal options or early termination rights for leases commenced on or prior to June 30, 2026. Annualized base rent represents the rent in-place for the applicable property as of June 30, 2026. The table below includes ground leases. If ground leases are excluded, annualized base rent would equal $102,624 or $20.17 per square foot for total expiring leases.
Lease Expiration Year |
|
Number of |
|
|
Gross Leasable Area of Expiring Leases – Square Footage |
|
|
Percent of |
|
|
Total |
|
|
Percent of |
|
|
Annualized Base Rent per Leased Square Foot |
|
||||||
2026 (including month-to-month) |
|
|
50 |
|
|
|
132,293 |
|
|
|
2.0 |
% |
|
$ |
3,915 |
|
|
|
3.5 |
% |
|
$ |
29.59 |
|
2027 |
|
|
112 |
|
|
|
684,313 |
|
|
|
10.5 |
% |
|
|
12,463 |
|
|
|
11.1 |
% |
|
|
18.21 |
|
2028 |
|
|
147 |
|
|
|
1,354,229 |
|
|
|
20.7 |
% |
|
|
18,237 |
|
|
|
16.2 |
% |
|
|
13.47 |
|
2029 |
|
|
127 |
|
|
|
865,101 |
|
|
|
13.2 |
% |
|
|
16,362 |
|
|
|
14.6 |
% |
|
|
18.91 |
|
2030 |
|
|
128 |
|
|
|
835,499 |
|
|
|
12.8 |
% |
|
|
18,121 |
|
|
|
16.1 |
% |
|
|
21.69 |
|
2031 |
|
|
83 |
|
|
|
514,144 |
|
|
|
7.9 |
% |
|
|
10,991 |
|
|
|
9.8 |
% |
|
|
21.38 |
|
2032 |
|
|
39 |
|
|
|
340,173 |
|
|
|
5.2 |
% |
|
|
6,433 |
|
|
|
5.7 |
% |
|
|
18.91 |
|
2033 |
|
|
26 |
|
|
|
195,792 |
|
|
|
3.0 |
% |
|
|
3,642 |
|
|
|
3.2 |
% |
|
|
18.60 |
|
2034 |
|
|
25 |
|
|
|
463,065 |
|
|
|
7.1 |
% |
|
|
5,579 |
|
|
|
5.0 |
% |
|
|
12.05 |
|
2035 |
|
|
26 |
|
|
|
420,770 |
|
|
|
6.4 |
% |
|
|
6,729 |
|
|
|
6.0 |
% |
|
|
15.99 |
|
Thereafter |
|
|
26 |
|
|
|
726,834 |
|
|
|
11.2 |
% |
|
|
9,934 |
|
|
|
8.8 |
% |
|
|
13.67 |
|
Leased Total |
|
|
789 |
|
|
|
6,532,213 |
|
|
|
100.0 |
% |
|
$ |
112,406 |
|
|
|
100.0 |
% |
|
$ |
17.21 |
|
Refer to “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Leasing Activity” for details regarding the leasing activity during the six months ended June 30, 2026.
24
Liquidity and Capital Resources
General
Our primary uses and sources of cash are as follows:
Uses |
|
Sources |
||
• |
Interest and principal payments on Credit Facility |
|
• |
Cash receipts from our tenants |
• |
Property operating expenses |
|
• |
Sale of shares through the DRP |
• |
General and administrative expenses |
|
• |
Proceeds from new mortgage loans (if any) |
• |
Distributions to stockholders |
|
• |
Borrowing on our Credit Facility |
• |
Fees payable to our Business Manager and Real Estate |
|
• |
Proceeds from sales of real estate (if any) |
• |
Repurchases of shares under the SRP |
|
• |
Proceeds from issuance of securities (if any) other than through the DRP |
• |
Capital expenditures, tenant improvements and leasing commissions |
|
|
|
• |
Acquisitions of real estate directly or through joint ventures |
|
|
|
• |
Redevelopments of entire properties or certain spaces within our properties |
|
|
|
We have funded our capital needs primarily through cash flow from operations and through draws on the Credit Facility, if needed.
As of June 30, 2026, we had total debt outstanding of $810 million, excluding unamortized debt issuance costs, which bore interest at a weighted average interest rate of 4.62% per annum. As of June 30, 2026, the weighted average years to maturity for our debt was 2.8 years, not taking into account any extension options that may be exercised at our option. As of June 30, 2026 and December 31, 2025, our borrowings were 51% and 52%, respectively, of the purchase price of our investment properties. As of June 30, 2026, our cash and cash equivalents balance was $11 million.
As of June 30, 2026, we had $235 million outstanding under the Revolving Credit Facility and $575 million outstanding under the Term Loan. As of June 30, 2026, the interest rates on the Revolving Credit Facility and the Term Loan were 5.55% per annum and 4.23% per annum, respectively. As of June 30, 2025, the interest rates on the Revolving Credit Facility and the Term Loan were 6.32% per annum and 4.30% per annum, respectively. As of June 30, 2026, we have hedged $525 million of the Term Loan using interest rate swap contracts that mature on February 3, 2027. We have entered into forward-starting interest rate swap contracts with an aggregate notional amount of $525 million that become effective on February 3, 2027 and mature on April 1, 2029. The fixed rates payable under the forward-starting swaps are higher than those payable under the current swaps. Refer to Note 7–“Debt and Derivative Instruments,” which is included in our June 30, 2026 Notes to Consolidated Financial Statements in Item 1, for additional information on these interest rate swap contracts. Each of the Revolving Credit Facility and the Term Loan matures on April 1, 2029, subject to a twelve month extension at our option. As of both August 5, 2026 and June 30, 2026, we had $50 million available for borrowing under the Revolving Credit Facility, subject to various terms and conditions, including compliance with the covenants which could further limit the amount available of the credit agreement that governs the Credit Facility. See “Risk Factors—The financial covenants under our credit agreement may restrict our ability to make distributions and our operating and acquisition activities. If we breach the financial covenants we could be held in default under the credit agreement, which could accelerate our repayment date and materially adversely affect our liquidity and financial condition” in our Annual Report on Form 10-K for the year ended December 31, 2025 for further information.
On January 30, 2026, we drew $19 million on the Revolving Credit Facility to repay indebtedness secured by a mortgage on the Milford Marketplace property, which had an outstanding principal balance of $18.7 million and was repaid in full on January 30, 2026. Subsequent to the payoff, the property was added to the borrowing base for the Credit Facility.
As of both August 5, 2026 and June 30, 2026, all of our properties comprised the borrowing base for the Credit Facility. We may not use any property to secure debt on any particular property without removing the property from the borrowing base. Doing so would, however, reduce the amount that we may draw under the Credit Facility. As of June 30, 2026, we have paid all interest and principal amounts when due, and were in compliance with all financial covenants under the Credit Facility, as amended.
During the six months ended June 30, 2026, we used $9.5 million to invest in capital expenditures and tenant improvements, which was approximately $1.5 million more than we invested during the six months ended June 30, 2025. For the remainder of 2026, we anticipate investing approximately $9.1 million for capital expenditures and tenant improvements. Capital expenditures and tenant improvements are funded by cash flows generated from operations during current or prior periods.
25
Cash Flow Analysis
|
|
Six Months Ended |
|
|
Change |
|
||||||
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|||
|
|
(Dollar amounts in thousands) |
|
|||||||||
Net cash flows provided by operating activities |
|
$ |
24,543 |
|
|
$ |
26,598 |
|
|
$ |
(2,055 |
) |
Net cash flows provided by (used in) investing activities |
|
$ |
20,787 |
|
|
$ |
(8,079 |
) |
|
$ |
28,866 |
|
Net cash flows used in financing activities |
|
$ |
(42,506 |
) |
|
$ |
(12,972 |
) |
|
$ |
(29,534 |
) |
Operating activities
The decrease in cash from operating activities during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to timing of receipts from tenants.
Investing activities
|
|
Six Months Ended |
|
|
Change |
|
||||||
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|||
|
|
(Dollar amounts in thousands) |
|
|||||||||
Capital expenditures |
|
$ |
(9,540 |
) |
|
$ |
(8,079 |
) |
|
$ |
(1,461 |
) |
Proceeds from sale of investment property |
|
|
30,327 |
|
|
|
— |
|
|
|
30,327 |
|
Net cash flows provided by (used in) investing activities |
|
$ |
20,787 |
|
|
$ |
(8,079 |
) |
|
$ |
28,866 |
|
The increase in cash provided by investing activities during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to the sale of the Village at Burlington Creek property.
Financing activities
|
|
Six Months Ended |
|
|
Change |
|
||||||
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|||
|
|
(Dollar amounts in thousands) |
|
|||||||||
Total net changes related to debt |
|
$ |
(31,727 |
) |
|
$ |
(3,176 |
) |
|
$ |
(28,551 |
) |
Proceeds from DRP |
|
|
20 |
|
|
|
— |
|
|
|
20 |
|
Shares repurchased |
|
|
(1,001 |
) |
|
|
— |
|
|
|
(1,001 |
) |
Distributions paid |
|
|
(9,798 |
) |
|
|
(9,796 |
) |
|
|
(2 |
) |
Net cash flows used in financing activities |
|
$ |
(42,506 |
) |
|
$ |
(12,972 |
) |
|
$ |
(29,534 |
) |
During the six months ended June 30, 2026, cash used related to debt increased $28.6 million from the six months ended June 30, 2025 primarily due to a $32 million paydown on the credit facility. During the six months ended June 30, 2026, share repurchases were $1.0 million. During the six months ended June 30, 2026, we paid $9.8 million in distributions on our common stock. As noted herein, in connection with the board’s review of strategic alternatives, the DRP and SRP were both suspended effective October 1, 2024 and have been reinstated effective February 1, 2026.
Although the DRP was reinstated effective February 1, 2026, stockholders were required to affirmatively elect reinvestment of any future distributions we may pay through the DRP. Since the reinstatement of the DRP, we have generated significantly lower proceeds than we generated prior to its suspension. There can be no assurance that future proceeds will be comparable to those generated before the suspension. In addition, the terms of the SRP were recently revised. Although shares were previously repurchased at a discount to the then-current Estimated Per Share NAV at the time of repurchase, under the Sixth SRP, to the extent the board authorizes repurchases during any particular period, the repurchase price will be equal to the then-current Estimated Per Share NAV for “Exceptional Repurchases” and equal to 80% of the then-current Estimated Per Share NAV for “Ordinary Repurchases” as those terms are defined in the SRP.
26
Distributions
Distributions when declared are paid quarterly in arrears. A summary of the distributions declared, distributions paid and cash flows provided by operations for the six months ended June 30, 2026 and 2025 follows (Dollar amounts in thousands except per share amounts):
|
|
|
|
|
|
|
|
Distributions Paid (1) |
|
|
|
|
||||||||||||
Six Months Ended |
|
Distributions |
|
|
Distributions |
|
|
Cash |
|
|
Reinvested |
|
|
Total |
|
|
Cash Flows |
|
||||||
2026 |
|
$ |
9,790 |
|
|
$ |
0.271200 |
|
|
$ |
9,778 |
|
|
$ |
20 |
|
|
$ |
9,798 |
|
|
$ |
24,543 |
|
2025 |
|
$ |
9,796 |
|
|
$ |
0.271200 |
|
|
$ |
9,796 |
|
|
$ |
— |
|
|
$ |
9,796 |
|
|
$ |
26,598 |
|
Results of Operations
This section describes and compares our results of operations for the three and six months ended June 30, 2026 and 2025. Dollar amounts are stated in thousands.
We generate our net operating income from property operations. A total of 51 investment properties that were acquired on or before January 1, 2025 represent our “same store” properties during the three and six months ended June 30, 2026 and 2025. “Non-same store,” as reflected in the tables below, consists of a property that was sold after April 1, 2026. For the three and six months ended June 30, 2026 and 2025, one property that was sold constituted our non-same store property.
Net operating income is a supplemental non-GAAP performance measure that we believe is useful to investors in measuring the operating performance of our property portfolio because our primary business is the ownership of real estate, and net operating income excludes various items included in GAAP net income that do not relate to, or are not indicative of, our property operating performance, such as depreciation and amortization and parent-level corporate expenses (including general and administrative expenses).
The following tables present the property net operating income prior to straight-line income (expense), net, amortization of intangibles, interest, and depreciation and amortization for the three and six months ended June 30, 2026 and 2025, along with a reconciliation to net income (loss), calculated in accordance with GAAP.
27
Comparison of the three months ended June 30, 2026 and 2025
|
Total |
|
|
Same Store |
|
|
Non-Same Store |
|
|||||||||||||||||||||
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|||||||||||||||||||||
|
2026 |
|
2025 |
|
Change |
|
|
2026 |
|
2025 |
|
Change |
|
|
2026 |
|
2025 |
|
Change |
|
|||||||||
|
(Dollar amounts in thousands) |
|
|||||||||||||||||||||||||||
Rental income |
$ |
37,899 |
|
$ |
37,384 |
|
$ |
515 |
|
|
$ |
37,135 |
|
$ |
36,473 |
|
$ |
662 |
|
|
$ |
764 |
|
$ |
911 |
|
$ |
(147 |
) |
Other property income |
|
58 |
|
|
87 |
|
|
(29 |
) |
|
|
58 |
|
|
87 |
|
|
(29 |
) |
|
|
— |
|
|
— |
|
|
— |
|
Total income |
|
37,957 |
|
|
37,471 |
|
|
486 |
|
|
|
37,193 |
|
|
36,560 |
|
|
633 |
|
|
|
764 |
|
|
911 |
|
|
(147 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Property operating expenses |
|
7,738 |
|
|
7,856 |
|
|
(118 |
) |
|
|
7,440 |
|
|
7,582 |
|
|
(142 |
) |
|
|
298 |
|
|
274 |
|
|
24 |
|
Real estate tax expense |
|
4,688 |
|
|
4,604 |
|
|
84 |
|
|
|
4,574 |
|
|
4,493 |
|
|
81 |
|
|
|
114 |
|
|
111 |
|
|
3 |
|
Total property operating expenses |
|
12,426 |
|
|
12,460 |
|
|
(34 |
) |
|
|
12,014 |
|
|
12,075 |
|
|
(61 |
) |
|
|
412 |
|
|
385 |
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Property net operating income |
|
25,531 |
|
|
25,011 |
|
|
520 |
|
|
$ |
25,179 |
|
$ |
24,485 |
|
$ |
694 |
|
|
$ |
352 |
|
$ |
526 |
|
$ |
(174 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Straight-line (expense) income, net |
|
(312 |
) |
|
332 |
|
|
(644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of intangibles and lease incentives |
|
26 |
|
|
152 |
|
|
(126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
(1,427 |
) |
|
(1,397 |
) |
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Business management fee |
|
(2,343 |
) |
|
(2,245 |
) |
|
(98 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization |
|
(15,397 |
) |
|
(14,272 |
) |
|
(1,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
(10,036 |
) |
|
(9,792 |
) |
|
(244 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gain on sale of investment property |
|
4,985 |
|
|
— |
|
|
4,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest and other income |
|
40 |
|
|
55 |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) |
$ |
1,067 |
|
$ |
(2,156 |
) |
$ |
3,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss). Net income (loss) was $1,067 and $(2,156) for the three months ended June 30, 2026 and 2025, respectively.
Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties owned during the three months ended June 30, 2026 with the results of the same investment properties owned during the three months ended June 30, 2025, property net operating income increased $694, total property income increased $633, and total property operating expenses including real estate tax expense decreased $61.
The increase in “same store” total property income is primarily due to an increase in base rent in new leases and step-up rent on existing leases and an increase in percentage rent. The decrease in property operating expenses is primarily due to decreases in the following: (i) $173 in direct recovery expense (ii) $87 of non-recoverable expense and (iii) $74 in management fee and payroll expense, partially offset by increases in the following: (i) $130 in repairs and maintenance expense due to the timing of projects, (ii) $68 in landscaping expense and (iii) $45 in insurance expense.
“Non-same store” total property net operating income decreased $174 during the three months ended June 30, 2026 as compared to the same period in 2025. On a “non-same store” basis, total property income decreased $147 and total property operating expenses increased $27 during the three months ended June 30, 2026 as compared to the same period in 2025.
The decrease in “non-same store” total property income is primarily due to an increase in bad debt expense. The increase in property operating expenses is primarily due to an increase in repairs and maintenance expense.
Straight-line (expense) income, net. Straight-line (expense) income, net increased $644 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write-offs due to early tenant move-outs in 2026.
Amortization of intangibles and lease incentives. Income from the amortization of intangibles and lease incentives decreased $126 in 2026 compared to the same period in 2025. The decrease is primarily due to fully amortized acquired above market leases.
28
General and administrative expenses. General and administrative expenses increased $30 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in state tax estimates.
Business management fee. Business management fees increased $98 in 2026 compared to the same period in 2025. The increase is primarily due to a reduction in amounts paid to Mr. Zalatoris in 2026 under the CEO Agreement as a result of Mr. Zalatoris’ resignation from his positions as president and chief executive officer of the Company effective February 2, 2026, which amounts had previously reduced our payment under the Business Management Agreement on a dollar-for-dollar basis. Because we do not reimburse the Business Manager for any amounts it pays to Mr. Michael, our newly elected president and chief executive officer, effective February 2, 2026, the fee that we pay to the Business Manager is no longer reduced, resulting in increased fees in 2026.
Depreciation and amortization. Depreciation and amortization increased $1,125 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write offs.
Interest expense. Interest expense increased $244 in 2026 compared to the same period in 2025. The increase is primarily due to higher average borrowings and higher average interest rate.
Gain on sale of investment property. Gain on sale of investment property increased $4,985 in 2026 compared to the same period in 2025. The increase is due to the sale of the Village at Burlington Creek property.
Interest and other income. Interest and other income decreased $15 in 2026 compared to the same period in 2025.
Comparison of the six months ended June 30, 2026 and 2025
|
Total |
|
|
Same Store |
|
|
Non-Same Store |
|
|||||||||||||||||||||
|
Six Months Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
|||||||||||||||||||||
|
2026 |
|
2025 |
|
Change |
|
|
2026 |
|
2025 |
|
Change |
|
|
2026 |
|
2025 |
|
Change |
|
|||||||||
|
(Dollar amounts in thousands) |
|
|||||||||||||||||||||||||||
Rental income |
$ |
76,190 |
|
$ |
75,636 |
|
$ |
554 |
|
|
$ |
74,392 |
|
$ |
73,736 |
|
$ |
656 |
|
|
$ |
1,798 |
|
$ |
1,900 |
|
$ |
(102 |
) |
Other property income |
|
235 |
|
|
136 |
|
|
99 |
|
|
|
235 |
|
|
136 |
|
|
99 |
|
|
|
— |
|
|
— |
|
|
— |
|
Total income |
|
76,425 |
|
|
75,772 |
|
|
653 |
|
|
|
74,627 |
|
|
73,872 |
|
|
755 |
|
|
|
1,798 |
|
|
1,900 |
|
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Property operating expenses |
|
16,215 |
|
|
16,270 |
|
|
(55 |
) |
|
|
15,538 |
|
|
15,708 |
|
|
(170 |
) |
|
|
677 |
|
|
562 |
|
|
115 |
|
Real estate tax expense |
|
9,399 |
|
|
9,108 |
|
|
291 |
|
|
|
9,162 |
|
|
8,868 |
|
|
294 |
|
|
|
237 |
|
|
240 |
|
|
(3 |
) |
Total property operating expenses |
|
25,614 |
|
|
25,378 |
|
|
236 |
|
|
|
24,700 |
|
|
24,576 |
|
|
124 |
|
|
|
914 |
|
|
802 |
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Property net operating income |
|
50,811 |
|
|
50,394 |
|
|
417 |
|
|
$ |
49,927 |
|
$ |
49,296 |
|
$ |
631 |
|
|
$ |
884 |
|
$ |
1,098 |
|
$ |
(214 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Straight-line (expense) income, net |
|
(49 |
) |
|
682 |
|
|
(731 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of intangibles and lease incentives |
|
35 |
|
|
136 |
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
(2,751 |
) |
|
(3,321 |
) |
|
570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Business management fee |
|
(4,670 |
) |
|
(4,487 |
) |
|
(183 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization |
|
(29,691 |
) |
|
(28,737 |
) |
|
(954 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
(19,930 |
) |
|
(19,519 |
) |
|
(411 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gain on sale of investment property |
|
4,985 |
|
|
— |
|
|
4,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest and other income |
|
78 |
|
|
95 |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss |
$ |
(1,182 |
) |
$ |
(4,757 |
) |
$ |
3,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss. Net loss was $1,182 and $4,757 for the six months ended June 30, 2026 and 2025, respectively.
Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties owned during the six months ended June 30, 2026 with the results of the same investment properties owned during the full six months ended
29
June 30, 2025, property net operating income increased $631, total property income increased $755, and total property operating expenses including real estate tax expense increased $124.
The increase in “same store” total property income is primarily due to an increase in base rent in new leases and step-up rent on existing leases and an increase in percentage rent. The decrease in property operating expenses is primarily due to a decrease of $522 in non-recoverable expenses due to lower legal costs and landlord work in 2026 and a $129 decrease in direct recovery expenses, partially offset by increases in the following: (i) $251 in repairs and maintenance due to timing of projects, (ii) $152 in landscaping expenses due to additional landscape projects and (iii) $103 in insurance expense.
“Non-same store” total property net operating income decreased $214 during 2026 as compared to the same period in 2025. On a “non-same store” basis, total property income decreased $102 and total property operating expenses increased $112 during the six months ended June 30, 2026 as compared to the same period in 2025.
The decrease in “non-same store” total property income is primarily due to an increase in bad debt expense. The increase in property operating expenses is primarily due to an increase in repairs and maintenance expense.
Straight-line (expense) income, net. Straight-line (expense) income, net increased $731 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write-offs due to early tenant move-outs in 2026.
Amortization of intangibles and lease incentives. Income from intangibles and lease incentives decreased $101 in 2026 compared to the same period in 2025. The decrease is primarily due to fully amortized acquired above market leases.
General and administrative expenses. General and administrative expenses decreased $570 in 2026 compared to the same period in 2025. The decrease is primarily due to professional fees incurred in connection with the review of strategic alternatives in 2025 that did not recur in 2026.
Business management fee. Business management fees increased $183 in 2026 compared to the same period in 2025. The increase is primarily due to a reduction in amounts paid to Mr. Zalatoris in 2026 under the CEO Agreement as a result of Mr. Zalatoris’ resignation from his positions as president and chief executive officer of the Company effective February 2, 2026, which amounts had previously reduced our payment under the Business Management Agreement on a dollar-for-dollar basis. Because we do not reimburse the Business Manager for any amounts it pays to Mr. Michael, our newly elected president and chief executive officer, effective February 2, 2026, the fee that we pay to the Business Manager is no longer reduced, resulting in increased fees in 2026.
Depreciation and amortization. Depreciation and amortization increased $954 in 2026 compared to the same period in 2025. The increase is primarily due to an increase in write-offs.
Interest expense. Interest expense increased $411 in 2026 compared to the same period in 2025. The increase is primarily due to higher average borrowings and higher average interest rate.
Gain on sale of investment property. Gain on sale of investment property increased $4,985 in 2026 compared to the same period in 2025. The increase is due to the sale of the Village at Burlington Creek property.
Interest and other income. Interest and other income decreased $17 in 2026 compared to the same period in 2025.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Estimates
“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 11, 2026, contains a description of our critical accounting estimates. There have been no changes to our critical accounting estimates during the six months ended June 30, 2026.
30
Leasing Activity
The following table sets forth leasing activity during the six months ended June 30, 2026. Leases with terms of less than 12 months have been excluded from the table.
|
|
Number of Leases Signed |
|
|
Gross Leasable Area |
|
|
New Contractual Rent per Square Foot |
|
|
Prior Contractual Rent per Square Foot |
|
|
% Change over Prior Annualized Base Rent |
|
|
Weighted Average Lease Term |
|
|
Tenant Allowances per Square Foot |
|
|||||||
Comparable Renewal Leases |
|
|
49 |
|
|
|
490,944 |
|
|
$ |
15.85 |
|
|
$ |
14.87 |
|
|
|
6.6 |
% |
|
|
4.1 |
|
|
$ |
— |
|
Comparable New Leases |
|
|
8 |
|
|
|
59,054 |
|
|
$ |
21.53 |
|
|
$ |
20.21 |
|
|
|
6.5 |
% |
|
|
5.8 |
|
|
$ |
9.05 |
|
Non-Comparable New and Renewal Leases (a) |
|
|
12 |
|
|
|
57,102 |
|
|
$ |
13.01 |
|
|
N/A |
|
|
N/A |
|
|
|
3.6 |
|
|
$ |
6.56 |
|
||
Total |
|
|
69 |
|
|
|
607,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-GAAP Financial Measures
Accounting for real estate assets in accordance with GAAP assumes the value of real estate assets is reduced over time due primarily to non-cash depreciation and amortization expense. Because real estate values may rise and fall with market conditions, operating results from real estate companies that use GAAP accounting may not present a complete view of their performance. We use Funds from Operations, or “FFO”, a widely accepted metric to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or “NAREIT”, has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. On November 7, 2018, NAREIT’s Executive Board approved the White Paper restatement, effective December 15, 2018. The purpose of the restatement was not to change the fundamental definition of FFO but to clarify existing guidance. The restated definition of FFO by NAREIT is net income (loss) computed in accordance with GAAP, excluding depreciation and amortization related to real estate, excluding gains (or losses) from sales of certain real estate assets, excluding 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 and excluding gains and losses from change in control. We have adopted the restated NAREIT definition for computing FFO. Previously presented periods were not impacted.
Under GAAP, acquisition related costs are treated differently if the acquisition is a business combination or an asset acquisition. An acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and acquisition related costs will be capitalized rather than expensed when incurred. Publicly registered, non-listed REITs typically engage in a significant amount of acquisition activity in the early years of their operations, and thus incur significant acquisition related costs, during these initial years. Although other start up entities may engage in significant acquisition activity during their initial years, publicly registered, non-listed REITs are unique in that they typically have a limited timeframe during which they acquire a significant number of properties and thus incur significant acquisition related costs. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Institute for Portfolio Alternatives, or “IPA”, an industry trade group, published a standardized measure known as Modified Funds from Operations, or “MFFO”, which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
MFFO excludes expensed costs associated with investing activities, some of which are acquisition related costs that affect our operations only in periods in which properties are acquired, and other non-operating items that are included in FFO, such as straight-lining of rents as required by GAAP. By excluding costs that we consider more reflective of acquisition activities and other non-operating items, the use of MFFO provides another measure of our operating performance once our portfolio is stabilized. Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of properties. MFFO should only be used as a measurement of our operating performance while we are acquiring a significant amount of properties because it excludes, among other things, acquisition costs incurred during the periods in which properties were acquired.
31
We believe our definition of MFFO, a non-GAAP measure, is consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the “Practice Guideline,” issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to straight-line rents and amortization of above and below market lease assets and liabilities, accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.
Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.
Our FFO and MFFO for the six months ended June 30, 2026 and 2025 are calculated as follows:
|
|
|
|
Six Months Ended |
|
|||||
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
(Dollar amounts in thousands) |
|
|||||
|
|
Net loss |
|
$ |
(1,182 |
) |
|
$ |
(4,757 |
) |
Add: |
|
Depreciation and amortization related to investment properties |
|
|
29,691 |
|
|
|
28,737 |
|
Less: |
|
Gain on sale of investment property |
|
|
(4,985 |
) |
|
|
— |
|
|
|
Funds from operations (FFO) |
|
|
23,524 |
|
|
|
23,980 |
|
|
|
|
|
|
|
|
|
|
||
Less: |
|
Amortization of acquired lease intangibles, net |
|
|
(158 |
) |
|
|
(233 |
) |
|
|
Straight-line expense (income), net |
|
|
49 |
|
|
|
(682 |
) |
|
|
Modified funds from operations (MFFO) |
|
$ |
23,415 |
|
|
$ |
23,065 |
|
Subsequent Events
For information related to subsequent events, reference is made to Note 15 – “Subsequent Events” which is included in our June 30, 2026 Notes to Consolidated Financial Statements in Item 1.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
We are exposed to various market risks, including those caused by changes in interest rates and commodity prices. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and commodity prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We have entered into, and may continue to enter into, financial instruments to manage and reduce the impact of changes in interest rates. The counterparties are, and are expected to continue to be, major financial institutions.
Interest Rate Risk
We are exposed to interest rate changes primarily as a result of long-term debt and the Revolving Credit Facility used to purchase properties or other real estate assets and to fund capital expenditures.
As of June 30, 2026, we had outstanding debt of $810 million, excluding unamortized debt issuance costs, bearing interest rates ranging from 4.23% to 5.55% per annum. The weighted average interest rate was 4.62% per annum, which includes the effect of interest rate swaps. As of June 30, 2026, the weighted average years to maturity for our Credit Facility payable was 2.8 years.
As of June 30, 2026, we had $285 million of debt or 35% of our total debt, excluding unamortized debt issuance costs, bearing interest at variable rates with a weighted average interest rate equal to 5.53% per annum. We had additional variable rate debt subject to swap agreements of $525 million, or 65% of our total debt, excluding unamortized debt issuance costs, as of June 30, 2026.
32
If interest rates on all debt which bears interest at variable rates as of June 30, 2026 increased by 1% (100 basis points), the increase in interest expense would decrease earnings and cash flows by $2.9 million annually. If interest rates on all debt which bears interest at variable rates as of June 30, 2026 decreased by 1% (100 basis points), the decrease in interest expense would increase earnings and cash flows by $2.9 million annually.
Regarding variable rate financing, our management assesses our interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We utilize risk management control systems implemented by our Business Manager to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions.
We use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions are determined considering the facts and circumstances existing at the time of the hedge. We have used derivative financial instruments, specifically interest rate swap contracts, to hedge against interest rate fluctuations on variable rate debt, which exposes us to both credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us because the counterparty may not perform. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We seek to manage the market risk associated with interest-rate contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. There is no assurance we will be successful.
Derivatives
For information related to derivatives, reference is made to Note 7–“Debt and Derivative Instruments” which is included in our June 30, 2026 Notes to Consolidated Financial Statements in Item 1.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management has evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
We are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors
The following risk factors amend and supplement, and should be read in conjunction with, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2025:
We may be unable to retain key personnel if we were to internalize our management functions.
We are externally managed but, in certain circumstances, such as in connection with a listing of our common stock, our board may decide to internalize our management functions. Doing so would expose us to the risk of being unable to hire certain key employees of the Business Manager and its affiliates, including as a result of the non-solicitation provisions contained in the Business Management Agreement. Subject to certain exceptions, during the term of the Business Management Agreement and for one year following its termination, we may not, without the Business Manager’s prior written consent, solicit or hire employees of the Business Manager or its affiliates. The Business Management Agreement also restricts our ability to hire certain persons who cease to be employed by the Business Manager or its affiliates during or shortly following the term of the agreement. These restrictions could make it more difficult or costly for us to retain personnel familiar with our business and operations and could delay or impede an internalization of our
33
management functions. Failure to hire or retain key personnel could result in increased costs and deficiencies in our disclosure controls and procedures or our internal control over financial reporting. These deficiencies could cause us to incur additional costs and divert management’s attention from most effectively managing our investments, which could result in us being sued and incurring litigation-associated costs in connection with the internalization transaction. In addition, the costs that we would incur to internalize our management functions may be substantial including amounts due the Business Manager if the Business Management Agreement is terminated including a fee in one lump sum for the remainder of the term ending on March 31, 2027, plus any incentive fee to which the Business Manager might be entitled in the event of “Qualifying Internalization” as defined in the Business Management Agreement. We would also lose the benefit of the experience of our Business Manager.
Further, if we seek to internalize the functions performed for us by our Real Estate Manager, the purchase price will be separately negotiated by our independent directors, or a committee thereof, and will not be subject to the transition procedures described in our Business Management Agreement.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Repurchases of Securities
Recent Sales of Unregistered Equity Securities
During the quarter covered by this report, we did not sell any equity securities that were not registered under the Securities Act.
Share Repurchase Program
We are authorized, through the SRP, to repurchase shares from stockholders who purchased their shares from us as opposed to another stockholder or received their shares through a non-cash transfer and have held their shares for at least one year. Repurchases are governed by the terms of the Sixth Amended and Restated Share Repurchase Program (the “Sixth SRP”) adopted by the board on December 17, 2025, effective on February 1, 2026. Repurchases are made in our sole discretion. In the case of repurchases made upon the death of a stockholder or qualifying disability (“Exceptional Repurchases”), as defined in the SRP, the one year holding period does not apply. Under the Sixth SRP, the repurchase price will be equal to the then-current Estimated Per Share NAV for the Exceptional Repurchases and equal to 80 percent of the then-current Estimated Per Share NAV for “ordinary repurchases.” Under the Sixth SRP, the board has the discretion to establish the proceeds available to fund repurchases each quarter and can use proceeds from all sources available to us, in the board’s sole discretion. The board also has the discretion to determine the amount of repurchases, if any, to be made each quarter based on its evaluation of our business, cash needs and any other requirements of applicable law. The entirety of the Sixth SRP is available on our website. The SRP was suspended effective as of October 1, 2024 but reinstated effective as of February 1, 2026. The SRP will immediately terminate if our shares are listed for trading on a national securities exchange. In addition, our board, in its sole discretion, may amend, suspend (in whole or in part), or terminate our SRP. We will send stockholders notice of any change at least thirty days prior to the change becoming effective and will disclose the change in a report filed with the SEC on either Form 8-K, Form 10-Q or Form 10-K, as appropriate. Further, our board reserves the right in its sole discretion, at any time, and from time to time to reject any requests for repurchases. We did not repurchase any shares during the time the SRP was suspended.
The table below sets forth the number of shares we repurchased pursuant to our SRP during the three months ended June 30, 2026 (Dollar amounts in thousands except per share amounts):
Period |
Total Shares |
|
|
Total Number |
|
|
Average |
|
|
Amount of Shares Repurchased |
|
|
Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs(1) |
|
|
Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs |
|
||||||
April 1, 2026 – April 30, 2026 |
|
2,897,969 |
|
|
|
59,238 |
|
|
$ |
16.89 |
|
|
$ |
1,001 |
|
|
|
59,238 |
|
|
|
1,746,267 |
|
May 1, 2026 – May 31, 2026 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,746,267 |
|
June 1, 2026 -June 30, 2026 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,746,267 |
|
Total |
|
2,897,969 |
|
|
|
59,238 |
|
|
$ |
16.89 |
|
|
$ |
1,001 |
|
|
|
59,238 |
|
|
|
|
|
34
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Trading Arrangements
During the three months ended June 30, 2026, none of the Company’s directors or executive officers
Item 6. Exhibits
The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto and are incorporated herein by reference.
Exhibit Index
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
Third Articles of Amendment and Restatement of Inland Real Estate Income Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on January 10, 2022 (file number 000-55146)) |
|
|
|
3.2 |
|
Articles Supplementary relating to the Company’s election to be subject to Section 3-803 of the MGCL (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on July 28, 2022 (file number 000-55146)) |
|
|
|
3.3 |
|
Fourth Amended and Restated Bylaws of Inland Real Estate Income Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on March 6, 2023 (file number 000-55146)) |
|
|
|
31.1* |
|
Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2* |
|
Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1* |
|
Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.2* |
|
Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema with Embedded Linkbases Document |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
INLAND REAL ESTATE INCOME TRUST, INC. |
|
|
|
|
|
|
/s/ Bernard J. Michael |
|
By: |
Bernard J. Michael |
|
|
President and Chief Executive Officer (principal executive officer) |
|
Date: |
August 5, 2026 |
|
|
|
|
|
/s/ Jerry Kyriazis |
|
By: |
Jerry Kyriazis |
|
|
Chief Financial Officer and Treasurer (principal financial officer) |
|
Date: |
August 5, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36