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DEBT | 6 Months Ended
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Jun. 30, 2023
Debt Disclosure [Abstract] |
DEBT | DEBT The breakdown of debt as of June 30, 2023 and December 31, 2022 is as follows:
|  | June 30, 2023 |  | December 31, 2022
Mortgage notes payable, net |  | $ | 44,243,807 |  |  | $ | 44,435,556 |
Credit facility: |  |  |  |
Revolver |  | — |  |  | 3,000,000 |
Term loan, net |  | 248,263,340 |  |  | 148,018,164 |
Total |  | $ | 292,507,147 |  |  | $ | 195,453,720 |
Mortgage Notes Payable, Net As of June 30, 2023 and December 31, 2022, the Company’s mortgage notes payable consisted of the following:
Collateral |  | 2023 Principal Amount |  | 2022 Principal Amount |  | Contractual Interest Rate (1) |  | Effective Interest Rate (2) |  | Loan Maturity
Costco property |  | $ | 18,850,000 |  |  | $ | 18,850,000 |  |  | 4.85% |  | 4.85% |  | 1/01/2030
Taylor Fresh Foods property |  | 12,350,000 |  |  | 12,350,000 |  |  | 3.85% |  | 3.85% |  | 11/01/2029
OES property |  | 13,161,357 |  |  | 13,315,009 |  |  | 4.50% |  | 4.50% |  | 3/09/2024
Total mortgage notes payable |  | 44,361,357 |  |  | 44,515,009 |  |  |  |  |  |  |
Plus unamortized mortgage premium, net (3) |  | 66,679 |  |  | 119,245 |  |  |  |  |  |  |
Less unamortized deferred financing costs |  | (184,229) |  |  | (198,698) |  |  |  |  |  |  |
Mortgage notes payable, net |  | $ | 44,243,807 |  |  | $ | 44,435,556 |  |  |  |  |  |  |
(1)Contractual interest rate represents the interest rate in effect under the mortgage note payable as of June 30, 2023 for the three mortgages that were not refinanced through a drawdown from the Credit Facility (defined and discussed below) with KeyBank National Association (“KeyBank”) in January 2022 given their prepayment penalties. (2)Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2023 and December 31, 2022 consisting of the contractual interest rate. (3)Represents unamortized net mortgage premium acquired through the merger with Rich Uncles Real Estate Investment Trust I on December 31, 2019. The following summarizes the face value, carrying amount and fair value of the Company’s mortgage notes payable (Level 3 measurement) as of June 30, 2023 and December 31, 2022:
|  | June 30, 2023 |  | December 31, 2022
|  | Face Value |  | Carrying Value |  | Fair Value |  | Face value |  | Carrying Value |  | Fair Value
Mortgage notes payable |  | $ | 44,361,357 |  |  | $ | 44,243,807 |  |  | $ | 41,039,641 |  |  | $ | 44,515,009 |  |  | $ | 44,435,556 |  |  | $ | 41,293,644 |
Credit Facility, Net On January 18, 2022, the Company's Operating Partnership entered into a $250,000,000 credit agreement (‘‘Credit Agreement’’) providing for a $100,000,000 four-year revolving line of credit, which may be extended by up to 12 months subject to certain conditions (the ‘‘Revolver’’), and a $150,000,000 five-year term loan (the ‘‘Term Loan’’ and together with the ‘‘Revolver,’’ the ‘‘Credit Facility’’) with KeyBank and the other lending institutions party thereto (collectively, the ‘‘Lenders’’), including KeyBank as Agent for the Lenders (in such capacity, the ‘‘Agent’’), BMO Capital Markets, Truist Bank and The Huntington National Bank as Co-Syndication Agents (the “Co-Syndication Agents”) and KeyBanc Capital Markets Inc., BMO Capital Markets, Inc., Truist Securities, Inc. and The Huntington National Bank as Joint-Lead Arrangers (the “Lead Arrangers”). The Credit Facility is available for general corporate purposes, including, but not limited to, acquisitions, repayment of existing indebtedness and capital expenditures. On October 21, 2022, the Company exercised the accordion feature of its Credit Facility and increased the Credit Facility to $400,000,000, comprised of a $150,000,000 Revolver and a $250,000,000 Term Loan. The Credit Facility includes an updated accordion option that allows the Company to request additional Revolver and Term Loan lender commitments up to a total of $750,000,000 subject to customary conditions, including the receipt of new commitments from the Lenders. On December 20, 2022, the Credit Agreement was amended to allow the Company to draw on the additional $100,000,000 Term Loan commitment up to five times between December 20, 2022 and April 19, 2023 in exchange for a quarterly unused fee, which amounted to $8,612 and $101,181 during the three and six months ended June 30, 2023, respectively. The Company drew $20,000,000 and the remaining $80,000,000 of the delayed draw Term Loan during the first and second quarters of 2023, respectively. The maturities for the Company's Revolver and Term Loan remain unchanged with the Revolver’s maturity in January 2026 with options to extend for a total of 12 months, and the Term Loan’s maturity in January 2027. The Credit Facility is priced on a leverage-based grid that fluctuates based on the Company's actual leverage ratio at the end of the prior quarter. With the Company's leverage ratio at 40% as of March 31, 2023, the spread over the Secured Overnight Financing Rate (‘‘SOFR’’), including a 10-basis point credit adjustment, is 165 basis points for the Revolver and the interest rate on the Revolver was 6.7125% on June 30, 2023; however, there was no outstanding balance on the Revolver. The Company also pays an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment, and incurred total unused fees of $94,791 and $50,047 for the three months ended June 30, 2023 and 2022, respectively, and $188,458 and $72,280 for the six months ended June 30, 2023 and 2022, respectively. On May 10, 2022, the Company entered into a swap agreement, effective May 31, 2022, to fix SOFR at 2.258% with respect to its original $150,000,000 Term Loan as described in Note 7, which results in a fixed interest rate of 4.058% on the Term Loan based on the Company's leverage ratio of 47% as of June 30, 2023. On October 26, 2022, the Company entered into a swap agreement, effective November 30, 2022, to fix SOFR at 3.44% with respect to its expanded Term Loan as described in Note 7, which results in a fixed interest rate of 5.240% on the additional $100,000,000 to be borrowed under the Term Loan based on the Company's leverage ratio of 47% as of June 30, 2023. The Credit Facility includes customary representations, warranties and covenants, including covenants regarding minimum fixed charge coverage of 1.50x, minimum tangible net worth of $208,629,727 plus 85% of net offering proceeds after January 18, 2022, and maximum consolidated leverage of 60%. The Credit Facility is secured by a pledge of all of the Operating Partnership’s equity interests in certain of the single-purpose, property-owning entities (the ‘‘Subsidiary Guarantors’’) that are indirectly owned by the Company, and various cash collateral owned by the Operating Partnership and the Subsidiary Guarantors. In connection with the Credit Facility, the Company and each of the Subsidiary Guarantors entered into an Unconditional Guaranty of Payment and Performance in favor of the Agent, pursuant to which the Company and each of the Subsidiary Guarantors agreed to guarantee the full and prompt payment of the Operating Partnership’s obligations under the Credit Agreement. While the Credit Facility allows for borrowings up to 60% of the Company's borrowing base, the Company is targeting leverage of 40% or lower over the long-term once it achieves scale; however, the Company currently has, and may continue to have, higher leverage in the near-term if it identifies attractive acquisition opportunities in advance of completing dispositions or raising additional equity. Credit Facility Repayments and Drawdowns On January 5, 2023, the Company repaid $3,000,000 of the outstanding balance on its Revolver with available cash on hand to reduce interest expense. On January 25, 2023, the Company borrowed $10,000,000 under its additional $100,000,000 Term Loan commitment in advance of acquiring a property located in Princeton, Minnesota leased to Plastic Products Company, Inc. On March 29, 2023, the Company again borrowed $10,000,000 under its Term Loan commitment in advance of acquiring a property located in Savage, Minnesota leased to Stealth Manufacturing. In April 2023, additional draws aggregating $80,000,000 were made on the additional Term Loan. See Note 13 for a discussion of draws on the Revolver after June 30, 2023. Compliance with All Debt Agreements Pursuant to the terms of mortgage notes payable on certain of the Company’s properties and the Credit Facility, the Company and/or the subsidiary borrowers are subject to certain financial loan covenants. The Company and/or the subsidiary borrowers were in compliance with such financial loan covenants as of June 30, 2023. Future Principal Payments The following summarizes the future principal repayments of the Company’s mortgage notes payable and Credit Facility as of June 30, 2023:
|  | Mortgage Notes |  | Credit Facility |  |
|  | Payable |  | Revolver |  | Term Loan |  | Total
July through December 2023 |  | $ | 160,349 |  |  | $ | — |  |  | $ | — |  |  | $ | 160,349 |
2024 |  | 13,270,624 |  |  | — |  |  | — |  |  | 13,270,624 |
2025 |  | 543,886 |  |  | — |  |  | — |  |  | 543,886 |
2026 |  | 568,369 |  |  | — |  |  | — |  |  | 568,369 |
2027 |  | 593,972 |  |  | — |  |  | 250,000,000 |  |  | 250,593,972 |
Thereafter |  | 29,224,157 |  |  | — |  |  | — |  |  | 29,224,157 |
Total principal |  | 44,361,357 |  |  | — |  |  | 250,000,000 |  |  | 294,361,357 |
Plus unamortized mortgage premium, net |  | 66,679 |  |  | — |  |  | — |  |  | 66,679 |
Less deferred financing costs |  | (184,229) |  |  | — |  |  | (1,736,660) |  |  | (1,920,889) |
Net principal |  | $ | 44,243,807 |  |  | $ | — |  |  | $ | 248,263,340 |  |  | $ | 292,507,147 |
Interest Expense, Net of Derivative Settlements and Unrealized Gain on Interest Rate Swaps The following is a reconciliation of the components of interest expense, net of derivative settlements and unrealized gain on interest rate swaps for the three and six months ended June 30, 2023 and 2022:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Mortgage notes payable: |  |  |  |  |  |  |  |
Interest expense |  | $ | 471,092 |  |  | $ | 460,886 |  |  | $ | 943,032 |  |  | $ | 1,273,605 |
Amortization of deferred financing costs |  | 7,235 |  |  | 7,235 |  |  | 14,470 |  |  | 14,459 |
Credit facility: |  |  |  |  |  |  |  |
Interest expense |  | 3,997,972 |  |  | 1,098,435 |  |  | 6,386,908 |  |  | 1,666,432 |
Unused commitment fees |  | 103,403 |  |  | — |  |  | 289,639 |  |  | 22,233 |
Derivative cash settlements (1) |  | (1,401,716) |  |  | — |  |  | (2,475,801) |  |  | — |
Amortization of deferred financing costs |  | 214,261 |  |  | 120,830 |  |  | 428,522 |  |  | 221,520 |
Unrealized gain on interest rate swap valuation for first swap (2) |  | (1,639,768) |  |  | (589,997) |  |  | (495,750) |  |  | (589,997) |
Amortization of interest rate swap valuation (2) |  | (253,092) |  |  | — |  |  | (503,403) |  |  | — |
Unrealized gain on interest rate swap valuation for second swap (3) |  | (1,815,737) |  |  | — |  |  | (987,262) |  |  | — |
Other |  | 136,419 |  |  | 99,765 |  |  | 238,506 |  |  | 157,077 |
Interest expense, net |  | $ | (179,931) |  |  | $ | 1,197,154 |  |  | $ | 3,838,861 |  |  | $ | 2,765,329 |
(1) The Company entered into two swap transaction instruments for (i) its original $150,000,000 Credit Facility Term Loan (first swap) effective May 31, 2022 and (ii) its additional $100,000,000 Term Loan commitment (second swap) effective November 30, 2022, as described in detail in Note 7. (2) Due to the Company's $150,000,000 derivative instrument's failure to qualify as a cash flow hedge because it was deemed ineffective for the three and six months ended June 30, 2023 as described in Note 7, the $1,639,768 and $495,750 changes in the swap valuation for the three and six months ended June 30, 2023, respectively, are recognized as decreases in interest expense and the unrealized gain on interest rate swap derivative previously recorded in accumulated other comprehensive income and noncontrolling interest in operating partnership is being amortized on a straight-line basis as a reduction to interest expense through the maturity date of the loan agreement (see Note 7 for more details). (3) The Company's $100,000,000 derivative instrument was not designated as a cash flow hedge and, therefore, the $1,815,737 and $987,262 changes in the valuation of this swap for the three and six months ended June 30, 2023, respectively, are reflected as decreases in interest expense (see Note 7 for more details)

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//470/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1E -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I + Details
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