Ares Industrial Real Estate Income Trust Inc.

11/12/2026 | Press release | Distributed by Public on 11/12/2026 16:30

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the terms "we," "our," or "us" refer to Ares Industrial Real Estate Income Trust Inc. and its consolidated subsidiaries. The following discussion and analysis should be read together with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes certain statements that may be deemed 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"). Such forward-looking statements relate to, without limitation, our ability to raise capital and effectively and timely deploy the net proceeds from our securities offerings, the expected use of net proceeds from our securities offerings, our reliance on Ares Commercial Real Estate Management LLC (the "Advisor") and Ares real estate (the "Sponsor" or "AREG") of Ares Management Corporation ("Ares"), our understanding of our competition and our ability to compete effectively, our financing needs, our expected leverage, the effects of our current strategies, rent and occupancy growth, general conditions in the geographic area where we will operate, our future debt and financial position, our future capital expenditures, future distributions and acquisitions (including the amount and nature thereof), other developments and trends of the real estate industry, investment strategies and the expansion and growth of our operations. Forward-looking statements are generally identifiable by the use of the words "may," "will," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "project," or the negative of these words or other comparable terminology. These statements are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict.
The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions, and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, present and future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:
•Our ability to raise capital and effectively deploy the net proceeds raised in our securities offerings in accordance with our investment strategy and objectives;
•The failure of properties to perform as we expect;
•Risks associated with acquisitions, dispositions and development of properties;
•Our failure to successfully integrate acquired properties and operations;
•Unexpected delays or increased costs associated with any development projects;
•The availability of cash flows from operating activities for distributions and capital expenditures;
•Defaults on or non-renewal of leases by customers, lease renewals at lower than expected rent, or failure to lease properties at all or on favorable rents and terms;
•Difficulties in economic conditions generally and the real estate, debt, and securities markets specifically, including the impact of inflation, changes in interest rates, developments related to tariffs and trade policies and the resulting impacts on market volatility and global trade and the conflicts in Ukraine and in the Middle East;
•Legislative or regulatory changes, including changes to the laws governing the taxation of real estate investment trusts ("REITs");
•Our failure to obtain, renew, or extend necessary financing or access the debt or equity markets;
•Conflicts of interest arising out of our relationships with the Sponsor, the Advisor, and their affiliates;
•Risks associated with using debt to fund our business activities, including re-financing and interest rate risks;
•Changes in interest rates, operating costs, or greater than expected capital expenditures;
•Changes to U.S. generally accepted accounting principles ("GAAP"); and
•Our ability to continue to qualify as a REIT.
Any of the assumptions underlying forward-looking statements could prove to be inaccurate. Our stockholders are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report on Form 10-Q. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report on Form 10-Q will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, changed circumstances, or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report on Form 10-Q, including, without limitation, the risks described under "Risk Factors," the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report on Form 10-Q will be achieved.
OVERVIEW
General
AIREIT is a Maryland corporation formed on August 12, 2014 to make investments in income-producing real estate assets consisting primarily of high-quality distribution warehouses and other industrial properties that are leased to creditworthy corporate customers. While we have and will continue to focus our investment activities primarily on building a national industrial warehouse operating company, we may in the future invest outside the U.S. or in other types of commercial real property or real estate debt investments. We currently operate as a REIT for U.S. federal income tax purposes, and elected to be treated as a REIT beginning with our taxable year ended December 31, 2017. We utilize an Umbrella Partnership Real Estate Investment Trust ("UPREIT") organizational structure to hold all or substantially all of our assets through the Operating Partnership.
We intend to offer shares of our common stock on a continuous basis, subject to continued compliance with the rules and regulations of the SEC and applicable state laws. We also intend to conduct an ongoing distribution reinvestment plan offering for our stockholders to reinvest distributions in our shares. During the nine months ended September 30, 2026, we raised gross proceeds of $223 million from the sale of 17 million shares of our common stock, including shares issued pursuant to our DRIP. See "Note 8 to the Condensed Consolidated Financial Statements" for information concerning our securities offerings.
Additionally, we have a program to raise capital through private placement offerings by selling DST Interests. During the nine months ended September 30, 2026, we sold $573 million of gross interests related to the DST Program, $80 million of which were financed by DST Program Loans. See "Note 6 to the Condensed Consolidated Financial Statements" for additional detail regarding the DST Program.
As of September 30, 2026, we directly owned and managed a real estate portfolio that included 270 industrial buildings totaling 54 million square feet located in 31 markets throughout the U.S., with 448 customers, and was 90% occupied (91% leased) with a weighted-average remaining lease term (based on square feet) of approximately 3.4 years. The occupied rate reflects the square footage with a paying customer in place. The leased rate includes the occupied square footage and additional square footage with leases in place that have not yet commenced. Industrial market fundamentals remain favorable and we continue to evaluate acquisition opportunities within the industrial market to effectively execute our business strategy. As of September 30, 2026, our real estate portfolio included:
•268 industrial buildings totaling 54 million square feet comprised our operating portfolio, which includes stabilized properties, and was 91% occupied (91% leased) with a weighted-average remaining lease term (based on square feet) of approximately 3.5 years; and
•Two industrial buildings totaling 200 thousand square feet comprised our value-add portfolio, which includes buildings acquired with the intention to reposition or redevelop, or buildings recently completed which have not yet reached stabilization. We generally consider a building to be stabilized on the earlier to occur of the first anniversary of a building's shell completion or a building achieving 90% occupancy.
As of September 30, 2026, we had a $474 million investment in three unconsolidated joint venture partnerships. Unless otherwise noted, these buildings are excluded from the presentation of our portfolio data herein.
As of September 30, 2026, we had seven debt security investments designated as available-for-sale debt securities with a fair value of $65 million and a cumulative unrealized gain of $189 thousand from the acquisition dates. The weighted-average remaining term of our debt securities, which is based on the fully extended maturity date of the instruments, was approximately 2.5 years as of September 30, 2026.
As of September 30, 2026, we had seven debt-related investments comprised of floating-rate senior and mezzanine loans with an aggregate current commitment of $683 million, with a weighted-average remaining term of 1.1 years and a weighted-average interest rate of 7.8%, calculated based on Term SOFR plus a margin. As of September 30, 2026, the outstanding principal amount and fair value were both $578 million.
We have used, and intend to continue to use, the net proceeds from our offerings primarily to make investments in real estate assets. We may use the net proceeds from our offerings to make other real estate-related investments and debt investments and to pay distributions. The number and type of properties we may acquire and debt and other investments we may make will depend upon real estate market conditions, the amount of proceeds we raise in our offerings, and other circumstances existing at the time we make our investments.
Our primary investment objectives include the following:
•preserving and protecting our stockholders' capital contributions;
•providing current income to our stockholders in the form of regular distributions; and
•realizing capital appreciation in our NAV from active investment management and asset management.
There is no assurance that we will attain our investment objectives. Our charter places numerous limitations on us with respect to the manner in which we may invest our funds. In most cases these limitations cannot be changed unless our charter is amended, which may require the approval of our stockholders.
We may acquire assets free and clear of mortgage or other indebtedness by paying the entire purchase price in cash or equity securities, or a combination thereof, and we may selectively encumber all or only certain assets with debt. The proceeds from our borrowings may be used to fund investments, make capital expenditures, pay distributions, and for general corporate purposes.
We expect to manage our corporate financing strategy under the current mortgage lending and corporate financing environment by considering various lending sources, which may include long-term fixed-rate mortgage loans, floating-rate mortgage notes, unsecured or secured lines of credit or term loans, private placement or public bond issuances, and the assumption of existing loans in connection with certain property acquisitions, or any combination of the foregoing.
Net Asset Value
Our board of directors, including a majority of our independent directors, has adopted valuation procedures, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our NAV. With the approval of our board of directors, including a majority of our independent directors, we have engaged Altus Group U.S. Inc., a third-party valuation firm, to serve as our independent valuation advisor ("Altus Group" or the "Independent Valuation Advisor") with respect to helping us administer the valuation and review process for the real properties in our portfolio, providing monthly real property appraisals and valuations for certain of our debt-related assets, reviewing annual third-party real property appraisals, reviewing the internal valuations of DST Program Loans and debt-related liabilities performed by our Advisor, providing quarterly valuations of our properties subject to master lease obligations associated with the DST Program, and assisting in the development and review of our valuation procedures. See Exhibit 99.2 of this Quarterly Report on Form 10-Q for a more detailed description of our valuation procedures, including important disclosure regarding real property valuations provided by the Independent Valuation Advisor.
Our valuation procedures, which address specifically each category of our assets and liabilities and are applied separately from the preparation of our financial statements in accordance with GAAP, involve adjustments from historical cost. There are certain factors which cause NAV to be different from total equity or stockholders' equity on a GAAP basis. Most significantly, the valuation of our real assets, which is the largest component of our NAV calculation, is provided to us by the Independent Valuation Advisor. For GAAP purposes, these assets are generally recorded at depreciated or amortized cost. Another example that will cause our NAV to differ from our GAAP total equity or stockholders' equity is the straight-lining of rent, which results in a receivable for GAAP purposes that is not included in the determination of our NAV. The fair values of our assets and certain liabilities are determined using widely accepted methodologies and, as appropriate, the GAAP principles within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") under Topic 820, Fair Value Measurements and Disclosures and are used by ALPS in calculating our NAV per share. However, our valuation procedures and our NAV are not subject to GAAP and will not be subject to independent audit. We did not develop our valuation procedures with the intention of complying with fair value concepts under GAAP and, therefore, there could be differences between our fair values and the fair values derived from the principal market or most advantageous market concepts of establishing fair value under GAAP. The aggregate real property valuation of $9.2 billion
compares to a GAAP basis of real properties (net of intangible lease liabilities and before accumulated amortization and depreciation) of $7.7 billion, representing a difference of approximately $1.5 billion, or 20%.
As used below, "Fund Interests" means our outstanding shares of common stock, along with OP Units, which may be or were held directly or indirectly by the Advisor, affiliates of the Sponsor and the Advisor and third parties, and "Aggregate Fund NAV" means the NAV of all the Fund Interests.
The following table sets forth the components of Aggregate Fund NAV as of September 30, 2026 and December 31, 2025:
As of
(in thousands) September 30, 2026 December 31, 2025
Investments in industrial properties $ 9,195,750 $ 9,573,550
Investments in unconsolidated joint venture partnerships 467,609 14,265
Investments in real estate debt and securities 642,715 693,861
DST Program Loans 108,154 30,372
Total investments 10,414,228 10,312,048
Cash and cash equivalents 24,293 63,037
Restricted cash 12,160 13,281
Other assets 96,728 87,902
Line of credit, term loans and mortgage notes (3,962,534) (4,751,552)
Secured financings on investments in real estate debt securities (45,128) (72,584)
Related party note payable (164,163) -
Financing obligations associated with our DST Program (1,078,087) (494,109)
Other liabilities (169,135) (141,279)
Accrued performance participation allocation (20,327) -
Accrued fixed component of advisory fee (6,443) (5,746)
Aggregate Fund NAV $ 5,101,592 $ 5,010,998
Total Fund Interests outstanding 380,735 381,727
The following table sets forth the NAV per Fund Interest as of September 30, 2026:
(in thousands, except per Fund Class T-R Class D-R Class I-R Class S-PR Class D-PR Class I-PR
Interest data) Total Shares Shares Shares (1) Shares Shares Shares OP Units
As of September 30, 2026
Monthly NAV $ 5,101,592 $ 853,113 $ 229,333 $ 2,196,440 $ 255,350 $ 2,795 $ 209,889 $ 1,354,672
Fund Interests outstanding 380,735 63,668 17,115 163,922 19,057 209 15,664 101,100
NAV Per Fund Interest $ 13.3993 $ 13.3993 $ 13.3993 $ 13.3993 $ 13.3993 $ 13.3993 $ 13.3993 $ 13.3993
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(1) Total Class I-R Fund Interests outstanding include vested stock grants only for NAV calculation purposes.
Under GAAP, we record liabilities for ongoing distribution fees that we estimate we may pay in future periods for the Fund Interests. As of September 30, 2026, we estimated approximately $138 million of ongoing distribution fees were potentially payable. We do not deduct the liability for estimated future distribution fees in our calculation of NAV since we intend for our NAV to reflect our estimated value on the date that we determine our NAV. Accordingly, our estimated NAV at any given time does not include consideration of any estimated future distribution fees that may become payable after such date.
Financing obligations associated with our DST Program, as reflected in our NAV table above, represent outstanding proceeds raised from our private placements under the DST Program due to the fact that we have an option (which may or may not be exercised) to purchase the interests in the DSTs and thereby acquire the real property owned by the trusts. We may acquire these properties using OP Units, cash, or a combination of both. See "Note 6 to the Condensed Consolidated Financial Statements" for additional details regarding our DST Program. We may use proceeds raised from our DST
Program for the repayment of debt, acquisition of properties and other investments, distributions to our stockholders, payments under our debt obligations and master lease agreements related to properties in our DST Program, redemption payments, capital expenditures, and other general corporate purposes. We pay our Advisor an annual, fixed component of our advisory fee of 1.25% of the consideration received for selling interests in DST Properties to third-party investors, net of upfront fees and expense reimbursements payable out of gross proceeds from the sale of such interests and DST Interests financed through DST Program Loans.
We include no discounts to our NAV for the illiquid nature of our shares, including the limitations on our stockholders' ability to redeem shares under our share redemption program and our ability to make exceptions to, modify or suspend our share redemption program at any time. Our NAV generally does not reflect the potential impact of exit costs (e.g. selling costs and commissions related to the sale of a property) that would likely be incurred if our assets and liabilities were liquidated or sold today. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges.
Our NAV is not a representation, warranty or guarantee that: (i) we would fully realize our NAV upon a sale of our assets; (ii) shares of our common stock would trade at our per share NAV on a national securities exchange; and (iii) a stockholder would be able to realize the per share NAV if such stockholder attempted to sell his or her shares to a third party.
The valuations of our real properties as of September 30, 2026, excluding certain newly acquired properties that are currently held at cost, which we believe reflects the fair value of such properties, were provided by the Independent Valuation Advisor in accordance with our valuation procedures. Certain key assumptions that were used by the Independent Valuation Advisor in the discounted cash flow analysis are set forth in the following table:
Weighted-
Average Basis
Exit capitalization rate 5.7 %
Discount rate / internal rate of return 7.3 %
Average holding period (years) 10.1
A change in the exit capitalization and discount rates used would impact the calculation of the value of our real property. For example, assuming all other factors remain constant, the changes listed below would result in the following effects on the value of our real properties, excluding certain newly acquired properties that are currently held at cost which we believe reflects the fair value of such properties:
Increase
(Decrease) to
Hypothetical the Fair Value of
Input Change Real Properties
Exit capitalization rate (weighted-average) 0.25 % decrease 3.0 %
0.25 % increase (2.8) %
Discount rate (weighted-average) 0.25 % decrease 2.0 %
0.25 % increase (2.0) %
Prior to January 31, 2020, we valued our real estate-related liabilities generally in accordance with fair value standards under GAAP. Beginning with our valuation for February 29, 2020, our property-level mortgages, corporate-level credit facilities, and other secured and unsecured debt that are intended to be held to maturity (which for fixed rate debt not subject to interest rate hedges may be the date near maturity at which time the debt will be eligible for prepayment at par for purposes herein), including those subject to interest rate hedges, were valued at par (i.e. at their respective outstanding balances). In addition, because we utilize interest rate hedges to stabilize interest payments (i.e. to fix all-in interest rates through interest rate swaps or to limit interest rate exposure through interest rate caps) on individual loans, each loan and associated interest rate hedge is treated as one financial instrument which is valued at par if intended to be held to maturity. This policy of valuing at par applies regardless of whether any given interest rate hedge is considered as an asset or liability for GAAP purposes. Notwithstanding, if we acquire an investment and assume associated in-place debt from the seller that is above- or below-market, then consistent with how we recognize assumed debt for GAAP purposes when acquiring an asset with pre-existing debt in place, the liabilities used in the determination of our NAV will include the market value of such debt based on market value as of the closing date. The associated premium or discount on such debt as of closing that is reflected in our liabilities will then be amortized through loan maturity. Per our valuation policy, the corresponding
investment is valued on an unlevered basis for purposes of determining NAV. Accordingly, all else equal, we would not recognize an immediate gain or loss to our NAV upon acquisition of an investment whereby we assume associated pre-existing debt that is above- or below-market. As of September 30, 2026, we classified all of our debt as intended to be held to maturity, and our liabilities included mark-to-market adjustments for pre-existing debt that we assumed upon acquisition. We currently estimate the fair value of our debt (inclusive of associated interest rate hedges) that was intended to be held to maturity as of September 30, 2026 was $56 million lower than the carrying value used for purposes of calculating our NAV (as described above) for such debt in aggregate; meaning that if we used the fair value of our debt rather than the carrying value used for purposes of calculating our NAV (and treated the associated hedge as part of the same financial instrument), our NAV would have been higher by approximately $56 million, or $0.15 per share, not taking into account all of the other items that impact our monthly NAV, as of September 30, 2026.
Reconciliation of Stockholders' Equity and Noncontrolling Interests to NAV
The following table reconciles stockholders' equity and noncontrolling interests per our condensed consolidated balance sheet to our NAV as of September 30, 2026:
(in thousands) As of
September 30, 2026
Total stockholders' equity
$ 1,605,253
Noncontrolling interests 535,396
Total equity under GAAP 2,140,649
Adjustments:
Accrued distribution fee (1) 138,365
Redeemable noncontrolling interests (2) 103,839
Unrealized net appreciation (depreciation) on real estate and financial assets and liabilities (3) 1,506,417
Unrealized gain (loss) on investments in unconsolidated joint venture partnerships (4) (6,707)
Accumulated depreciation and amortization (5) 1,320,551
Other adjustments (6) (101,522)
Aggregate Fund NAV $ 5,101,592
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(1)Accrued distribution fee represents the accrual for the full cost of the distribution fee for Class T-R shares, Class D-R shares, Class S-PR shares, Class D-PR shares and OP Units. Under GAAP, we accrued the full cost of the distribution fee payable over the life of each share (assuming such share remains outstanding the length of time required to pay the maximum distribution fee) as an offering cost at the time we sold the Class T-R shares, Class D-R shares, Class S-PR shares, Class D-PR shares and OP Units. Similarly, we accrued a liability for future distribution fees we expect will be paid based on our estimate of how long the Class T-R shares, Class D-R shares, Class S-PR shares, Class D-PR shares and OP Units will be outstanding, also as an offering cost. For purposes of calculating the NAV, we recognize the distribution fee as a reduction of NAV on a monthly basis when such fee is paid and do not deduct the liability for estimated future distribution fees that may become payable after the date as of which our NAV is calculated.
(2)Redeemable noncontrolling interests are related to our OP Units, and are included in our determination of NAV but not included in total equity under GAAP.
(3)Our investments in real estate and certain of our financial assets and liabilities, including our debt, certain of our financing obligations, and certain of our DST Program Loans, are presented at their carrying value in our condensed consolidated financial statements. As such, any increases or decreases in the fair market value of our investments in real estate and certain of our financial assets and liabilities are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate, investments in real estate debt and securities, financing obligations, and DST Program Loans are recorded at fair value. Notwithstanding, our property-level mortgages, corporate-level credit facilities and other secured and unsecured debt that are intended to be held to maturity are valued at par (i.e., at their respective outstanding balances).
(4)Our investments in our unconsolidated joint venture partnerships are presented using the equity method of accounting in our condensed consolidated financial statements. As such, certain increases or decreases in the fair market value of the underlying investments or debt instruments associated with the investments in our unconsolidated joint venture partnerships are not included in our GAAP results. For purposes of determining our NAV, the investments in the
underlying real estate and certain of the underlying debt instruments are recorded at fair value and reflected in our NAV at our proportional ownership interest.
(5)We depreciate our investments in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of determining our NAV.
(6)Includes (i) straight-line rent receivables, which are recorded in accordance with GAAP but not recorded for purposes of determining our NAV, (ii) certain interest rate hedges, which are recorded at fair value in accordance with GAAP but are not included for purposes of determining our NAV if intended to be held to maturity, and (iii) other minor adjustments.
Performance
Our NAV increased from $13.13 per share as of December 31, 2025 to $13.40 per share as of September 30, 2026. The increase in NAV was primarily driven by the performance of our real estate portfolio with strong leasing, continued rent growth and stabilizing capital markets.
As noted above, effective February 29, 2020, our board of directors approved amendments to our valuation procedures which revised the way we value property-level mortgages, corporate-level credit facilities, other secured and unsecured debt and associated interest rate hedges when loans, including associated interest rate hedges, are intended to be held to maturity, effectively eliminating all mark-to-market adjustments for such loans and hedges from the calculation of our NAV. The following table summarizes the impact of interest rate movements on our returns assuming we continued to include the mark-to-market adjustments for all borrowing-related interest rate hedge and debt instruments beginning with the February 29, 2020 NAV:
One-Year
Trailing (Trailing Three-Year Five-Year Since Inception
As of September 30, 2026 Three-Months (1) Year-to-Date (1) 12-Months) (1) Annualized (1) Annualized (1) Annualized (1)(2)(3)
Class T-R Share Total Return (with Sales Charge) (3) (2.87) % 0.47 % 2.09 % 1.61 % 5.83 % 6.96 %
Adjusted Class T-R Share Total Return (with Sales Charge) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) (2.91) % 1.25 % 2.74 % 0.57 % 6.01 % 7.03 %
Difference 0.04 % (0.78) % (0.65) % 1.04 % (0.18) % (0.07) %
Class T-R Share Total Return (without Sales Charge) (3) 1.70 % 5.20 % 6.90 % 3.18 % 6.81 % 7.51 %
Adjusted Class T-R Share Total Return (without Sales Charge) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) 1.67 % 6.02 % 7.58 % 2.12 % 6.99 % 7.58 %
Difference 0.03 % (0.82) % (0.68) % 1.06 % (0.18) % (0.07) %
Class D-R Share Total Return (3) 1.84 % 5.63 % 7.49 % 3.76 % 7.40 % 8.30 %
Adjusted Class D-R Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) 1.81 % 6.45 % 8.17 % 2.69 % 7.58 % 8.38 %
Difference 0.03 % (0.82) % (0.68) % 1.07 % (0.18) % (0.08) %
Class I-R Share Total Return (3) 1.90 % 5.81 % 7.73 % 4.00 % 7.66 % 8.45 %
Adjusted Class I-R Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) 1.86 % 6.63 % 8.41 % 2.93 % 7.84 % 8.52 %
Difference 0.04 % (0.82) % (0.68) % 1.07 % (0.18) % (0.07) %
Class S-PR Share Total Return (with Sales Charge) (3) (2.89) % 0.41 % 2.01 % n/a n/a 4.74 %
Adjusted Class S-PR Share Total Return (with Sales Charge) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) (2.93) % 1.19 % 2.66 % n/a n/a 4.29 %
Difference 0.04 % (0.78) % (0.65) % n/a n/a 0.45 %
One-Year
Trailing (Trailing Three-Year Five-Year Since Inception
As of September 30, 2026 Three-Months (1) Year-to-Date (1) 12-Months) (1) Annualized (1) Annualized (1) Annualized (1)(2)(3)
Class S-PR Share Total Return (without Sales Charge) (3) 1.68 % 5.14 % 6.82 % n/a n/a 7.09 %
Adjusted Class S-PR Share Total Return (without Sales Charge) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) 1.65 % 5.96 % 7.50 % n/a n/a 6.63 %
Difference 0.03 % (0.82) % (0.68) % n/a n/a 0.46 %
Class D-PR Share Total Return (with Sales Charge) (3) 0.31 % 4.03 % 5.85 % n/a n/a 6.91 %
Adjusted Class D-PR Share Total Return (with Sales Charge) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) 0.27 % 4.84 % 6.52 % n/a n/a 6.41 %
Difference 0.04 % (0.81) % (0.67) % n/a n/a 0.50 %
Class D-PR Share Total Return (without Sales Charge) (3) 1.84 % 5.61 % 7.46 % n/a n/a 7.84 %
Adjusted Class D-PR Share Total Return (without Sales Charge) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) 1.80 % 6.43 % 8.14 % n/a n/a 7.34 %
Difference 0.04 % (0.82) % (0.68) % n/a n/a 0.50 %
Class I-PR Share Total Return (3) 1.90 % 5.81 % 7.73 % n/a n/a 8.01 %
Adjusted Class I-PR Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4) 1.86 % 6.63 % 8.41 % n/a n/a 7.54 %
Difference 0.04 % (0.82) % (0.68) % n/a n/a 0.47 %
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(1)Performance is measured by total return, which includes income and appreciation (i.e., distributions and changes in NAV) and reinvestment of all distributions ("Total Return") for the respective time period. Partial period returns are not calculated. Past performance is not a guarantee of future results. Performance data quoted above is historical. Current performance may be higher or lower than the performance data quoted. Actual individual stockholder returns will vary. The returns have been prepared using unaudited data and valuations of the underlying investments in our portfolio, which are estimates of fair value and form the basis for our NAV. Valuations based upon unaudited or estimated reports from the underlying investments may be subject to later adjustments or revisions, may not correspond to realized value and may not accurately reflect the price at which assets could be liquidated on any given day.
(2)The inception date for Class I-R shares and Class T-R shares (formerly designated as Class I shares and Class T shares, respectively) was November 1, 2017, which is when Class I-R and Class T-R shares of our common stock were first issued to third-party investors. The inception date for Class D-R shares (formerly designated as Class D shares) was July 2, 2018, which is when Class D-R shares of our common stock were first issued to third-party investors. The inception date for Class I-PR shares and Class S-PR shares was September 3, 2024, which is when Class I-PR shares and Class S-PR shares of our common stock were first issued to third-party investors. The inception date for Class D-PR shares was January 2, 2025, which is when Class D-PR shares of our common stock were first issued to third-party investors.
(3)The Total Returns presented are based on the actual NAVs at which stockholders transacted, calculated pursuant to our valuation procedures. With respect to the "Class T-R Share Total Return (with Sales Charge)," "Class S-PR Share Total Return (with Sales Charge)," and "Class D-PR Share Total Return (with Sales Charge)," the Total Returns are calculated assuming the stockholder also paid the maximum upfront selling commission, dealer manager fee and ongoing distribution fees in effect during the time period indicated. With respect to "Class T-R Share Total Return (without Sales Charge)", "Class S-PR Share Total Return (without Sales Charge)," and "Class D-PR Share Total Return (without Sales Charge)," the Total Returns are calculated assuming the stockholder did not pay any upfront selling commission or dealer manager fee, but did pay the maximum ongoing distribution fees in effect during the time period indicated. From NAV inception to January 31, 2020, these NAVs reflected mark-to-market adjustments on our borrowing-related debt instruments and our borrowing-related interest rate hedge positions.
(4)The Adjusted Total Returns presented are based on adjusted NAVs calculated as if we had continued to mark our borrowing-related hedge and debt instruments to market following a policy change to largely exclude borrowing-related interest rate hedge and debt marks to market from our NAV calculations (except in certain circumstances pursuant to our valuation procedures), beginning with our NAV calculated as of February 29, 2020. Therefore, the NAVs used in the calculation of Adjusted Total Returns were calculated in the same manner as the NAVs used in the calculation of the unadjusted total return for periods through January 31, 2020. The Adjusted Total Returns include the incremental impact of the adjusted NAVs on advisory fees and performance fees; however, they do not include the incremental impact that the adjusted NAVs would have had on any expense support from our Advisor, or the prices at which shares were purchased in our securities offerings or pursuant to our share redemption program. For calculation purposes, transactions in our common stock were assumed to occur at the adjusted NAVs.
Trends Affecting Our Business
Our results of operations are affected by a variety of factors, including conditions in both the U.S. and global financial markets as well as economic and political environments.
During the third quarter of 2026, the U.S. economy continued to expand, supported by resilient consumer spending and low levels of unemployment despite heightened geopolitical tensions and increased inflation measures. Against this backdrop, the Federal Reserve adopted a more restrictive monetary policy, raising the federal funds rate by 25 basis points in September 2026 and signaling the potential for additional future rate increases. Uncertainty remains regarding the timing, magnitude and pace of future monetary policy adjustments.
Amid evolving central bank policy, persistent inflation and continued economic expansion, market interest rates moved higher during the third quarter of 2026, with the 10-Year U.S. Treasury yield increasing by more than 80 basis points. The resulting increase in borrowing costs moderated commercial real estate transaction activity. Property valuations in the third quarter of 2026, however, remain relatively stable, supported by limited new supply and new construction starts at or near 10-year lows. Specifically, industrial property demand is reaccelerating with net absorption tracking to be the highest since 2023.
Rising operating costs continue to place pressure on cash flow performance across many real estate property types. Triple net leases within the industrial sector help offset some of these effects. Additionally, the sector experienced significant new supply coming out of the pandemic which has caused vacancy rates to rise off historical lows and rent growth to moderate. Offsetting new deliveries has been a significant decline in new industrial construction starts driven by higher interest rates. Ultimately, this lack of new future inventory may result in a shortage of contemporary, in-demand properties in the years to come, furthering the disparity between supply and demand dynamics. In addition, there is a significant amount of unspent capital targeting commercial real estate properties that could support values and elevate transaction activities. Property valuations and capitalization rates remained steady and we believe certain of these market trends will be offset by continued strong operating fundamentals of industrial real estate, such as positive rent growth and historically low vacancy rates.
Uncertainty around U.S. economic and foreign policies, international relations and their potential effect on the U.S. economy has increased risk. Should the risks from these factors become more acute, the commercial real estate market may be adversely affected.
We believe our portfolio is well-positioned in this market environment. However, there is no guarantee that our outlook will remain positive for the long-term, especially if leasing fundamentals weaken in the future.
RESULTS OF OPERATIONS
Summary of 2026 Activities
During the nine months ended September 30, 2026, we completed the following activities:
•Our NAV increased to $13.40 per share as of September 30, 2026 from $13.13 per share as of December 31, 2025. See "Item 2. Management's Discussion and Analysis-Performance" above for additional information regarding this increase.
•We raised $223 million of gross equity capital from our securities offerings. Additionally, we raised $573 million of gross capital through private placement offerings by selling DST Interests, $80 million of which were financed
by DST Program Loans. We redeemed 14 million shares of our common stock for an aggregate dollar amount of $187 million. Additionally, we redeemed 4 million OP Units of noncontrolling interests and redeemable noncontrolling interests for an aggregate dollar amount of $50 million.
•We acquired 15 industrial buildings totaling 2 million square feet and one land parcel for an aggregate purchase price of $434 million. We also assumed a fixed-rate mortgage note in connection with one of the acquisitions with a fair value of $11 million and outstanding principal of $11 million as of the acquisition date.
•We sold one industrial building for net proceeds of $18 million and a recorded net gain on sale of $3 million.
•The AIREIT JV IV Partnership was established in which we hold a 51% interest. As part of the formation of the AIREIT JV IV Partnership, we contributed 14 industrial buildings, debt, and related assets and liabilities into the joint venture for net cash proceeds of $66 million and a net gain on sale of $443 million.
•We completed the development of one industrial building totaling 60 thousand square feet.
•We leased 3 million square feet of new and future leases and 4 million square feet of renewals through 75 separate transactions with an average annual base rent of $9.26 per square foot.
•We amended our existing secured floating-rate mortgage note to increase the aggregate term commitments from $209 million to $260 million. The amendment also extended the maturity date of the mortgage note to August 2028, which may be further extended pursuant to three one-year extension options, subject to certain conditions. The effective interest rate for the mortgage note is calculated based on term SOFR plus a margin of 1.50%, depending on our consolidated leverage ratio. We also entered into an associated interest rate swap with a notional amount of $248 million, which effectively fixes term SOFR at 3.00% and results in an all-in interest rate of 4.60% as of September 30, 2026.
Portfolio Information
As of September 30, 2026 and December 31, 2025, our owned and managed portfolio was as follows:
As of
(square feet in thousands) September 30, 2026 December 31, 2025
Portfolio data:
Total buildings 270 269
Total rentable square feet 54,313 57,403
Total number of customers 448 440
Percent occupied of operating portfolio (1) 91 % 91 %
Percent occupied of total portfolio (1) 90 % 91 %
Percent leased of operating portfolio (1) 91 % 91 %
Percent leased of total portfolio (1) 91 % 91 %
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(1)See "Overview-General" above for a description of our operating portfolio and our total portfolio (which includes our operating and value-add portfolios) and for a description of the occupied and leased rates.
Results for the Three and Nine Months Ended September 30, 2026 Compared to Prior Periods
The following table sets forth information regarding our consolidated results of operations for the three months ended September 30, 2026 as compared to the three months ended June 30, 2026, and for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025:
For the Three Months Ended For the Nine Months Ended
(in thousands, except per share data) September 30, 2026 June 30,
2026 		Change September 30, 2026 September 30, 2025 Change
Revenues:
Rental revenues $ 146,167 $ 145,687 $ 480 $ 432,569 $ 405,854 $ 26,715
Debt-related income 13,053 12,786 267 39,167 31,325 7,842
Total revenues 159,220 158,473 747 471,736 437,179 34,557
Operating expenses:
Rental expenses 39,186 38,678 508 115,444 100,240 15,204
Real estate-related depreciation and amortization 77,829 79,022 (1,193) 236,160 224,968 11,192
General and administrative expenses 4,587 4,146 441 13,614 12,690 924
Advisory fees 18,988 18,139 849 54,793 49,939 4,854
Performance participation allocation 8,515 11,812 (3,297) 20,327 - 20,327
Acquisition costs and reimbursements (1,263) 2,070 (3,333) 2,389 1,976 413
Total operating expenses 147,842 153,867 (6,025) 442,727 389,813 52,914
Other income (expenses):
Equity in income from unconsolidated joint venture partnerships 553 16 537 597 41 556
Interest expense (76,379) (74,218) (2,161) (221,108) (206,593) (14,515)
Loss on financing obligations (9,608) (3,858) (5,750) (20,014) (5,025) (14,989)
(Loss) gain on financial assets (824) (103) (721) (954) 769 (1,723)
Gain on extinguishment of debt and financing obligations, net - - - - 40,840 (40,840)
Net gain on sale of real estate property 442,976 2,609 440,367 445,585 - 445,585
Other income and expenses 1,575 1,152 423 3,189 4,132 (943)
Total other income expenses 358,293 (74,402) 432,695 207,295 (165,836) 373,131
Net income (loss) 369,671 (69,796) 439,467 236,304 (118,470) 354,774
Net (income) loss attributable to redeemable noncontrolling interests (7,526) 1,421 (8,947) (4,809) 2,716 (7,525)
Net (income) loss attributable to noncontrolling interests (90,721) 17,467 (108,188) (57,197) 23,590 (80,787)
Net income (loss) attributable to common stockholders $ 271,424 $ (50,908) $ 322,332 $ 174,298 $ (92,164) $ 266,462
Weighted-average shares outstanding-basic 280,146 279,867 279 279,539 272,737 6,802
Weighted-average shares outstanding-diluted 381,550 383,695 (2,145) 382,827 353,729 29,098
Net income (loss) attributable to common stockholders per common share-basic and diluted $ 0.97 $ (0.18) $ 1.15 $ 0.62 $ (0.34) $ 0.96
Total Revenues. In aggregate, total revenues increased by $1 million for the three months ended September 30, 2026, as compared to the previous quarter. Total revenues increased by $35 million for the nine months ended September 30, 2026, as compared to the same period in 2025, primarily due to the factors described below.
Rental Revenues. Rental revenues are comprised of rental income, straight-line rent, and amortization of above- and below-market lease assets and liabilities. Rental revenues increased by $480 thousand for the three months ended September 30, 2026 as compared to the previous quarter.
Rental revenues increased by $27 million for the nine months ended September 30, 2026, as compared to the same period in 2025, driven by increases in non-same store revenues related to growth in our portfolio, as well as increased market rents and recoverable expenses in our same-store portfolio, partially offset by a decrease in occupancy. See "Same Store Portfolio Results of Operations" below for further detail on same store revenues.
Debt-Related Income. Debt-related income is comprised of interest income, origination fees and amortization related to our debt-related investments and debt securities. Total debt-related income remained consistent for the three months ended September 30, 2026 as compared to the previous quarter.
Total debt-related income increased by $8 million for the nine months ended September 30, 2026, as compared to the same period in 2025, driven by the growth in our portfolio of investments in real estate debt since September 30, 2025.
Rental Expenses. Rental expenses include certain property operating expenses typically reimbursed by our customers, such as real estate taxes, property insurance, property management fees, repair and maintenance, and utilities. Leases that are structured on a "triple net basis," in which customers pay their proportionate share of real estate taxes, insurance, common area maintenance, and certain other operating costs, account for 99% of our total leased portfolio, based on number of leases. Total rental expenses increased by $1 million for the three months ended September 30, 2026, as compared to the previous quarter, due to an increase in real estate taxes and certain repair and maintenance expenses in our same store portfolio, offset by decreased expenses in our non-same store portfolio related to the contribution of buildings to an unconsolidated joint venture partnership.
Total rental expenses increased by $15 million for the nine months ended September 30, 2026, as compared to the same period in 2025, due to increased property taxes and certain repair and maintenance expenses in our same store portfolio, as well as the increase in non-same store expenses related to the growth in our portfolio. See "Same Store Portfolio Results of Operations" below for further details of the same store expenses.
Real Estate-Related Depreciation and Amortization. In aggregate, real estate-related depreciation and amortization expense decreased by $1 million for the three months ended September 30, 2026, as compared to the previous quarter, due to the contribution of buildings to an unconsolidated joint venture partnership.
Real estate-related depreciation and amortization expense increased by $11 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to growth in our portfolio and the stabilization of buildings during 2025.
Other Remaining Operating Expenses. In aggregate, the remaining operating expenses decreased by $5 million for the three months ended September 30, 2026, as compared to the previous quarter, primarily due to a decrease in performance participation allocation expense of $3 million and a decrease in acquisition costs and reimbursements of $3 million, partially offset by a $1 million increase in advisory fees.
In aggregate, the remaining operating expenses increased by $27 million for the nine months ended September 30, 2026 as compared to the same period in 2025, primarily due to the performance participation allocation of $20 million, while no performance participation allocation expense was recognized during the same period in 2025, an increase in advisory fees of $5 million, and an increase in general and administrative expenses of $1 million.
Other Income and Expenses. In aggregate, the remaining items that comprise our net income (loss) had a $433 million effect on our net income (loss) for the three months ended September 30, 2026, as compared to the previous quarter, primarily due to the following:
•a $443 million net gain on sale of real estate property related to the formation of the AIREIT JV IV Partnership during the three months ended September 30, 2026.
Partially offset by:
•a loss on financing obligations of $10 million for the three months ended September 30, 2026, compared to a loss on financing obligations of $4 million for the previous quarter; and
•a $2 million increase in interest expense for the three months ended September 30, 2026 driven by increased master lease payments recorded as interest expense associated with our DST Program, partially offset by a decrease in consolidated indebtedness interest expense related to our borrowing and hedging activity.
In aggregate, the remaining items that comprise our net income (loss) had a $373 million effect on our net income (loss) for the nine months ended September 30, 2026, as compared to the same period in 2025, primarily due to the following:
•a $446 million net gain on sale of real estate property for the nine months ended September 30, 2026, while no properties were sold during the same period in 2025.
Partially offset by:
•a $41 million net gain on extinguishment of debt and financing obligations resulting from the exercise of a purchase option for certain properties in our DST Program during the nine months ended September 30, 2025;
•a $20 million loss on financing obligations for the nine months ended September 30, 2026, compared to a loss on financing obligations of $5 million for the same period in 2025; and
•a $15 million increase in interest expense for the nine months ended September 30, 2026 compared to the same period in 2025, driven by an increase in consolidated indebtedness interest expense related to our borrowing and hedging activity.
Property net operating income ("NOI") is a supplemental non-GAAP measure of our property operating results. We define property NOI as rental revenues less operating expenses. While we believe our net income (loss), as defined by GAAP, to be the most appropriate measure to evaluate our overall performance, we consider property NOI to be an appropriate supplemental performance measure. We believe property NOI provides useful information to our investors regarding our results of operations because property NOI reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of properties, such as real estate-related depreciation and amortization, acquisition-related expenses, advisory fees, impairment charges, general and administrative expenses, interest expense, gains on sale of properties, other income and expense and noncontrolling interests. However, property NOI should not be viewed as an alternative measure of our financial performance since it excludes such items, which could materially impact our results of operations. Further, our property NOI may not be comparable to that of other real estate companies as they may use different methodologies for calculating property NOI, therefore our investors should consider net income (loss) as the primary indicator of our overall financial performance.
We evaluate the performance of consolidated operating properties we own and manage using a same store analysis because the population of properties in this analysis is consistent from period to period, thereby eliminating the effects of any material changes in the composition of the aggregate portfolio on performance measures. We have defined the same store portfolio to include consolidated operating properties owned for the entirety of both the current and prior reporting periods for which the operations had been stabilized. Unconsolidated properties are excluded from the same store portfolio because we account for our interests in our joint venture partnerships using the equity method of accounting; therefore, our proportionate share of income and loss is recognized in income (loss) of our unconsolidated joint venture partnerships on the condensed consolidated statements of operations. "Other properties" includes buildings not meeting the same store criteria. Our same store analysis may not be comparable to that of other real estate companies and should not be considered to be more relevant or accurate in evaluating our operating performance than current GAAP methodology.
The same store operating portfolio for the three months ended September 30, 2026 as compared to the three months ended June 30, 2026 presented below included 254 buildings totaling 52 million square feet owned as of January 1, 2026, which represented 97% of total rentable square feet, 89% of total rental revenues, and 89% of net operating income for the three months ended September 30, 2026. The same store operating portfolio for nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 presented below included 237 buildings totaling 49 million square feet owned as of January 1, 2025, which represented 92% of total rentable square feet, 83% of total rental revenues, and 83% of net operating income for the nine months ended September 30, 2026.
The following table reconciles GAAP net income (loss) to same store property NOI for the three months ended September 30, 2026 as compared to the three months ended June 30, 2026, and the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025:
For the Three Months Ended For the Nine Months Ended
(in thousands) September 30, 2026 June 30,
2026 		September 30, 2026 September 30, 2025
Net income (loss) attributable to common stockholders $ 271,424 $ (50,908) $ 174,298 $ (92,164)
Debt-related income (13,053) (12,786) (39,167) (31,325)
Real estate-related depreciation and amortization 77,829 79,022 236,160 224,968
General and administrative expenses 4,587 4,146 13,614 12,690
Advisory fees 18,988 18,139 54,793 49,939
Performance participation allocation 8,515 11,812 20,327 -
Acquisition costs and reimbursements (1,263) 2,070 2,389 1,976
Equity in income from unconsolidated joint venture partnerships (553) (16) (597) (41)
Interest expense 76,379 74,218 221,108 206,593
Loss on financing obligations 9,608 3,858 20,014 5,025
Loss (gain) on financial assets 824 103 954 (769)
Gain on extinguishment of debt and financing obligations, net - - - (40,840)
Net gain on sale of real estate property (442,976) (2,609) (445,585) -
Other income and expenses (1,575) (1,152) (3,189) (4,132)
Net income (loss) attributable to redeemable noncontrolling interests 7,526 (1,421) 4,809 (2,716)
Net income (loss) attributable to noncontrolling interests 90,721 (17,467) 57,197 (23,590)
Property net operating income $ 106,981 $ 107,009 $ 317,125 $ 305,614
Less: Non-same store property NOI 11,613 12,368 53,081 41,664
Same store property NOI $ 95,368 $ 94,641 $ 264,044 $ 263,950
The following table includes a breakout of our results for our same store portfolio for rental revenues, rental expenses and property NOI for the three months ended September 30, 2026 as compared to the three months ended June 30, 2026 and for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025:
For the Three Months Ended For the Nine Months Ended
(in thousands) September 30, 2026 June 30,
2026 		Change September 30, 2026 September 30, 2025 Change
Rental revenues:
Same store operating properties $ 130,632 $ 128,942 $ 1,690 $ 360,454 $ 352,050 $ 8,404
Other properties 15,535 16,745 (1,210) 72,115 53,804 18,311
Total rental revenues 146,167 145,687 480 432,569 405,854 26,715
Rental expenses:
Same store operating properties (35,264) (34,301) (963) (96,410) (88,100) (8,310)
Other properties (3,922) (4,377) 455 (19,034) (12,140) (6,894)
Total rental expenses (39,186) (38,678) (508) (115,444) (100,240) (15,204)
Net operating income:
Same store operating properties 95,368 94,641 727 264,044 263,950 94
Other properties 11,613 12,368 (755) 53,081 41,664 11,417
Total property net operating income $ 106,981 $ 107,009 $ (28) $ 317,125 $ 305,614 $ 11,511
Rental Revenues. Same store rental revenues increased by $2 million for the three months ended September 30, 2026, as compared to the previous quarter, due to an increase in market rents and the receipt of an early termination fee from a customer, partially offset by a decrease in occupancy. Non-same store rental revenues decreased by $1 million for the three months ended September 30, 2026, as compared to the previous quarter, due to the contribution of 14 buildings to an unconsolidated joint venture partnership.
Same store rental revenues increased by $8 million for the nine months ended September 30, 2026 as compared to the same period in 2025, due to a decrease in bad debt and increases in market rents and recovery revenues. Non-same store rental revenues increased by $18 million for the nine months ended September 30, 2026, as compared to the same period in 2025, primarily due to the acquisition or completion of 30 buildings and the stabilization of an additional three buildings since January 1, 2025.
Rental Expenses. Same store rental expenses increased by $1 million for the three months ended September 30, 2026, as compared to the previous quarter, primarily due to increased property taxes. Non-same store rental expenses decreased by $455 thousand for the three months ended September 30, 2026, as compared to the previous quarter, due to the contribution of 14 buildings to an unconsolidated joint venture partnership.
Same store rental expenses increased by $8 million for the nine months ended September 30, 2026, as compared to the same period in 2025, primarily due to increased property taxes and certain nonrecoverable expenses. Non-same store rental expenses increased by $7 million for the nine months ended September 30, 2026, as compared to the same period in 2025, due to the growth in our non-same store portfolio described above.
ADDITIONAL MEASURES OF PERFORMANCE
Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO")
We believe that FFO and AFFO, in addition to net income (loss) and cash flows from operating activities as defined by GAAP, are useful supplemental performance measures that our management uses to evaluate our consolidated operating performance. However, these supplemental, non-GAAP measures should not be considered as alternatives to net income (loss) or to cash flows from operating activities as indications of our performance and are not intended to be used as liquidity measures indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. No single measure can provide users of financial information with sufficient information and only our disclosures read as a whole can be relied upon to adequately portray our financial position, liquidity and results of operations. In addition, other REITs may define FFO, AFFO, and similar measures differently and choose to treat certain accounting line items in a manner different from us due to specific differences in investment and operating strategy or for other reasons.
FFO. As defined by the National Association of Real Estate Investment Trusts ("NAREIT"), FFO is a non-GAAP measure that excludes certain items such as real estate-related depreciation and amortization. We believe FFO is a meaningful supplemental measure of our operating performance that is useful to investors because depreciation and amortization in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. By excluding gains or losses on the sale of assets, we believe FFO provides a helpful additional measure of our consolidated operating performance on a comparative basis. We use FFO as an indication of our consolidated operating performance and as a guide to making decisions about future investments.
AFFO. AFFO further adjusts FFO to reflect the performance of our portfolio by adjusting for items we believe are not directly attributable to our operations. Our adjustments to FFO to arrive at AFFO include removing the impact of (i) our performance-based incentive fee (income) expense, (ii) unrealized (gain) loss from changes in fair value of financial instruments, (iii) increase (decrease) in financing obligation liability appreciation, and (iv) forfeited investment deposits, as applicable.
Although some REITs may present certain performance measures differently, we believe FFO and AFFO generally facilitate a comparison to other REITs that have similar operating characteristics to us. We believe investors are best served if the information that is made available to them allows them to align their analyses and evaluation with the same performance metrics used by management in planning and executing our business strategy. Neither the SEC, NAREIT, nor any regulatory body has passed judgment on the acceptability of the adjustments used to calculate AFFO. In the future, the SEC, NAREIT, or a regulatory body may decide to standardize the allowable adjustments across the non-traded REIT industry at which point we may adjust our calculations and characterizations of AFFO.
The following unaudited table presents a reconciliation of GAAP net income (loss) to FFO and AFFO:
For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in thousands, except per share data) 2026 2025 2026 2025
GAAP net income (loss) $ 369,671 $ (53,559) $ 236,304 $ (118,470)
Weighted-average shares outstanding-diluted 381,550 360,168 382,827 353,729
GAAP net income (loss) per common share-diluted $ 0.97 $ (0.15) $ 0.62 $ (0.34)
Adjustments to arrive at FFO:
Real estate-related depreciation and amortization 77,829 73,862 236,160 224,968
Net gain on sale of real estate property (442,976) - (445,585) -
Our share of adjustments from unconsolidated joint venture partnerships 62 62 187 187
FFO $ 4,586 $ 20,365 $ 27,066 $ 106,685
FFO per common share-diluted $ 0.01 $ 0.06 $ 0.07 $ 0.30
Adjustments to arrive at AFFO:
Performance-based incentive fee expense 8,515 - 20,327 -
Unrealized loss (gain) on financial instruments (1) 10,283 5,365 20,931 (30,344)
Our share of adjustments from unconsolidated joint venture partnerships (381) - (381) -
AFFO $ 23,003 $ 25,730 $ 67,943 $ 76,341
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(1)Unrealized loss (gain) on financial instruments relates to mark-to-market changes on our derivatives not designated as cash flow hedges, mark-to-market changes on our DST Program Loans for which we have elected the fair value option and gains or losses on our financing obligations.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our primary sources of capital for meeting our cash requirements are net proceeds from our securities offerings, including proceeds from the sale of shares offered through our DRIP, debt financings, and cash generated from operating activities. Our principal uses of funds are, and will be, for the acquisition of properties and other investments, capital expenditures, operating expenses, payments under our debt obligations, distributions to our stockholders, redemption payments and payments pursuant to the master lease agreements related to the properties in our DST Program. Over time, we intend to fund a majority of our cash needs for items other than asset acquisitions, including the repayment of debt and capital expenditures, from operating cash flows and refinancings. Our primary material cash requirements for the next 12 months relate to our unfunded commitments on our debt-related investments and unconsolidated joint venture partnerships, our indebtedness, future minimum lease payments associated with our DST Program, redemptions, and the fixed component of the advisory fee. As of September 30, 2026, we had outstanding line of credit, term loan and mortgage note borrowings with varying maturities for an aggregate principal amount of $4.0 billion, with $2.5 billion becoming payable within the next 12 months, excluding extension options. We expect to address these upcoming maturities through refinancing, extensions, or other available sources of liquidity. The term of our $590 million mortgage note that expires in July 2027 may be extended pursuant to two one-year extension options, subject to certain conditions, and the term of our $564 million mortgage note that matures in April 2027 and our $260 million mortgage note with borrowings of $248 million that matures in August 2028 may each be extended pursuant to three one-year extension options, subject to certain conditions. Additionally, the term of our $222 million mortgage note with borrowings of $204 million that matures in May 2027 may be extended pursuant to two one-year extension options, subject to certain conditions. As of September 30, 2026, we had $54 million of future minimum lease payments related to the properties in our DST Program due in the next 12 months. We also had $453 million in unfunded commitments related to our investments in unconsolidated joint venture partnerships and our investments in real estate debt and securities as of September 30, 2026. In addition, we had $19 million of projected development costs to be incurred within the next 12 months. We expect to be able to pay our interest expense and rent obligations over the next 12 months and beyond through operating cash flows and/or borrowings.
During the nine months ended September 30, 2026, we raised $223 million of gross equity capital from our securities offerings and redemptions of common stock amounted to $187 million. As of September 30, 2026, we had cash and cash equivalents of $24 million and leverage of 40%, calculated as outstanding principal balance of our borrowings, including secured financings on investments in real estate debt securities and related party notes payable, less cash and cash
equivalents, divided by the fair value of our real property, net investments in unconsolidated joint venture partnerships and investments in real estate debt and securities not associated with the DST Program, as determined in accordance with our valuation procedures. See "-Capital Resources and Uses of Liquidity-Offering Proceeds" for further information concerning capital raised thus far in 2026. As of September 30, 2026, we owned and managed a real estate portfolio that included 270 industrial buildings totaling 54 million square feet, with a diverse roster of 448 customers, large and small, spanning a multitude of industries and sectors across 31 markets, with a strategic weighting towards top tier markets where we have historically seen the lowest volatility combined with positive returns over time. Our portfolio was 90% occupied (91% leased) with a weighted-average remaining lease term (based on square feet) of 3.4 years.
The Advisor, subject to the oversight of our board of directors and, under certain circumstances, the investment committee or other committees established by our board of directors, will continue to evaluate potential acquisitions and dispositions and will engage in negotiations with sellers and lenders on our behalf. Pending investment in property, debt and other investments, we may decide to temporarily invest any unused proceeds from our securities offerings in certain investments that are expected to yield lower returns than those earned on real estate assets. During these times of economic uncertainty, we have seen and could once again see a slowdown in transaction volume, which would adversely impact our ability to acquire real estate assets, which would cause us to retain more lower yielding investments and hold them for longer periods of time while we seek to acquire additional real estate assets. These lower returns may affect our NAV and our ability to make distributions to our stockholders. Potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of assets, and undistributed funds from operations.
We believe that our cash on-hand, anticipated net offering proceeds, and anticipated financing activities will be sufficient to meet our liquidity needs for the next 12 months and beyond.
Cash Flows. The following table summarizes our cash flows, as determined on a GAAP basis, for the following periods:
For the Nine Months Ended September 30,
(in thousands) 2026 2025 Change
Total cash provided by (used in):
Operating activities $ 94,942 $ 83,051 $ 11,891
Investing activities (319,633) (205,803) (113,830)
Financing activities 184,826 149,820 35,006
Net (decrease) increase in cash, cash equivalents and restricted cash $ (39,865) $ 27,068 $ (66,933)
Net cash provided by operating activities during the nine months ended September 30, 2026 increased by $12 million as compared to the same period in 2025, primarily due to (i) the $12 million increase in property net operating income and (ii) an $8 million increase in debt-related income, offset by a $15 million increase in interest expense.
Net cash used in investing activities increased by $114 million for the nine months ended September 30, 2026 as compared to the same period in 2025, primarily due to (i) a net increase in acquisition activity of $211 million, (ii) a $6 million net decrease in the collection of principal on available-for-sale securities and debt-related investments, and (iii) a net decrease of $2 million in distributions from joint venture partnerships, partially offset by (a) proceeds from the disposition of real estate properties of $84 million, (b) a $12 million net decrease in investments in debt-related investments, and (c) a $9 million net decrease in capital expenditures.
Net cash provided by financing activities increased by $35 million during the nine months ended September 30, 2026, as compared to the same period in 2025, primarily driven by (i) a net increase in proceeds from the issuance of common stock and financing obligations of $296 million, (ii) a $10 million net decrease in interest rate cap and swap premiums and debt issuance costs paid, and (iii) a $4 million decrease in cash payout of DST Interests, partially offset by (a) a $248 million net decrease in borrowings, (b) a net increase in distributions paid to common stockholders, redeemable noncontrolling interest holders and noncontrolling interest holders and distribution fees paid to affiliates of $18 million and (c) a net increase in redemptions of $8 million.
Capital Resources and Uses of Liquidity
In addition to our cash and cash equivalents balances available, our capital resources and uses of liquidity are as follows:
Line of Credit and Term Loans. As of September 30, 2026, we had an aggregate of $2.2 billion of commitments under our credit agreements, including $1.0 billion under our line of credit and $1.2 billion under our two term loans. As of that date, we had $153 million outstanding under our line of credit with an effective interest rate of 3.32%, which includes the effect of interest rate cap agreements. Additionally, as of September 30, 2026, we had $1.2 billion outstanding under our term loans with an effective interest rate of 3.61%, which includes the effect of the interest rate swap agreements and interest rate cap agreements. The unused and available portions under our line of credit were both $847 million as of September 30, 2026. Our $1.0 billion line of credit matures in March 2029 and may be extended pursuant to a one-year extension option, subject to continuing compliance with certain financial covenants and other customary conditions. Our $550 million term loan matures in March 2027. Our $600 million term loan matures in March 2028, and may be extended pursuant to two one-year extension options, subject to continuing compliance with certain financial covenants and other customary conditions. Our line of credit and term loan borrowings are available for general corporate purposes including, but not limited to, the acquisition and operation of permitted investments by us. Refer to "Note 5 to the Condensed Consolidated Financial Statements" for additional information regarding our line of credit and term loans.
Mortgage Notes. As of September 30, 2026, we had property-level borrowings of $2.7 billion of principal outstanding with a weighted-average remaining term of 1.4 years, excluding any extension options on certain of our mortgage notes. These borrowings are secured by mortgages or deeds of trust and related assignments and security interests in the collateralized properties, and had a weighted-average interest rate of 4.85%. Refer to "Note 5 to the Condensed Consolidated Financial Statements" for additional information regarding the mortgage notes.
Debt Covenants. Our line of credit, term loan and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, the agreements governing our line of credit and term loans contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth thresholds. These covenants may limit our ability to incur additional debt, to make borrowings under our line of credit, or to pay distributions. We were in compliance with all of our debt covenants as of September 30, 2026.
Leverage. We use financial leverage to provide additional funds to support our investment activities. We may finance a portion of the purchase price of any real estate asset that we acquire with borrowings on short or long-term basis from banks, institutional investors and other lenders. We calculate our leverage for reporting purposes as outstanding principal balance of our borrowings, including secured financings on investments in real estate debt securities and related party notes payable, less cash and cash equivalents, divided by the fair value of our real property, net investments in unconsolidated joint venture partnerships and investments in real estate debt and securities not associated with the DST Program, as determined in accordance with our valuation procedures. We had leverage of 40% as of September 30, 2026. Our management expects that as we deploy capital going forward, our leverage will near approximately 50%. Due to changes in interest rates and increased market volatility, the cost of financing or refinancing our purchase of assets may affect returns generated by our investments. Additionally, these factors may cause our borrowing capacity to be reduced, which could similarly delay or reduce benefits to our stockholders.
Future Minimum Lease Payments Related to the DST Program. As of September 30, 2026, we had $1.0 billion of future minimum lease payments related to the DST Program. The underlying interests of each property that is sold to investors pursuant to the DST Program are leased back by an indirect wholly-owned subsidiary of the Operating Partnership on a long-term basis of up to 29 years.
Offering Proceeds. For the nine months ended September 30, 2026, aggregate gross proceeds raised from our securities offerings, including proceeds raised through our DRIP, were $223 million ($218 million net of direct selling costs).
Distributions. We intend to continue to accrue and make distributions on a regular basis. Some or all of our future distributions may be paid from sources other than cash flows from operating activities, such as cash flows from financing activities, which include borrowings (including borrowings secured by our assets), proceeds from the issuance of shares pursuant to our DRIP, proceeds from sales of assets, the net proceeds from shares sold in our securities offerings and from our sale of DST Interests. We have not established a cap on the amount of our distributions that may be paid from any of these sources. The amount of any distributions will be determined by our board of directors, and will depend on, among other things, current and projected cash requirements, tax considerations and other factors deemed relevant by our board.
For the fourth quarter of 2026, our board of directors authorized monthly distributions to all common stockholders of record as of the close of business on the last business day of each month, or October 30, 2026, November 30, 2026 and December 31, 2026 (each a "Distribution Record Date"). The distributions were authorized at a monthly rate of $0.05500
per share for each class of our common stock, less the respective distribution fees that are payable monthly with respect to Class T-R shares, Class D-R shares, Class S-PR shares and Class D-PR shares. Distributions for each month of the fourth quarter of 2026 have been or will be paid in cash or reinvested in shares of our common stock for those electing to participate in our DRIP following the close of business on the respective Distribution Record Date applicable to such monthly distributions.
There can be no assurances that the current distribution rate or amount per share will be maintained. In the near-term, we expect that we may need to continue to rely on sources other than cash flows from operations, as determined on a GAAP basis, to pay distributions, which, if insufficient, could negatively impact our ability to pay such distributions. In certain years and certain individual quarters, total distributions were not fully funded by cash flows from operations. In such cases, the shortfalls were funded from DRIP or other sources.
The following table outlines sources used, as determined on a GAAP basis, to pay total gross distributions (which are paid in cash or reinvested in shares of our common stock through our DRIP) for the periods indicated below:
For the Nine Months Ended For the Nine Months Ended
September 30, 2026 September 30, 2025
($ in thousands) Amount Percentage Amount Percentage
Distributions
Paid in cash (1) $ 112,004 61 % $ 96,083 59 %
Reinvested in shares 70,808 39 65,785 41
Total $ 182,812 100 % $ 161,868 100 %
Sources of Distributions
Cash flows from operating activities $ 94,942 52 % $ 83,051 51 %
Other sources (2) 17,062 9 13,032 8
DRIP (3) 70,808 39 65,785 41
Total $ 182,812 100 % $ 161,868 100 %
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(1)Includes (i) distributions paid to noncontrolling interest holders and (ii) ongoing distribution fees relating to Class T-R shares, Class D-R shares, Class S-PR shares, Class D-PR shares and OP Units.
(2)Other sources may include cash flows from investing activities, such as proceeds from the sale of assets and repayments from debt investments, or cash flows from financing activities, such as proceeds raised from our offerings, including our DST Program, and proceeds from our debt financings.
(3)Stockholders may elect to have their distributions reinvested in shares of our common stock through our DRIP.
For the nine months ended September 30, 2026 and 2025, our FFO was $27 million and $107 million, respectively, compared to total gross distributions of $183 million and $162 million, respectively. FFO is a non-GAAP operating metric and should not be used as a liquidity measure. However, management believes the relationship between FFO and distributions may be meaningful for investors to better understand the sustainability of our operating performance compared to distributions made. Refer to "Additional Measures of Performance" above for the definition of FFO, as well as a detailed reconciliation of our GAAP net income (loss) to FFO.
Refer to "Note 8 to the Condensed Consolidated Financial Statements" for further detail on our distributions.
Redemptions. Below is a summary of redemptions pursuant to our share redemption program for the nine months ended September 30, 2026 and 2025. All eligible redemption requests were fulfilled for the periods presented. Eligible redemption requests are requests submitted in good order by the request submission deadline set forth in the share redemption program. Our board of directors may make exceptions to, modify or suspend our current share redemption program if it deems such action to be in the best interest of our stockholders. See Part II, Item 2. "Unregistered Sales of Equity Securities and Use of Proceeds-Share Redemption Program," for detail regarding our share redemption program.
For the Nine Months Ended
September 30,
(in thousands, except per share data) 2026 2025
Number of shares redeemed 14,140 15,841
Aggregate dollar amount of shares redeemed $ 187,081 $ 203,532
Average redemption price per share $ 13.23 $ 12.85
For purposes of the share redemption program, redemption requests received in a month are included on the last day of such month because that is the last day the stockholders have rights in the Company. We record these redemptions in our financial statements as having occurred on the first day of the next month following receipt of the redemption request because shares redeemed in a given month are considered outstanding through the last day of the month.
CRITICAL ACCOUNTING ESTIMATES
Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our unaudited condensed consolidated financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our condensed consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. For a detailed description of our critical accounting estimates, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Form 10-K. As of September 30, 2026, our critical accounting estimates have not changed from those described in our 2025 Form 10-K.
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