Inland Real Estate Income Trust, Inc. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ____________ TO ____________

COMMISSION FILE NUMBER: 000-55146

Inland Real Estate Income Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	45-3079597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2901 Butterfield Road, Oak Brook, Illinois	60523
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 630-218-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 9, 2022, there were 36,149,222 shares of the registrant’s common stock, $.001 par value, outstanding.

INLAND REAL ESTATE INCOME TRUST, INC.

TABLE OF CONTENTS

		Page
	Part I - Financial Information
Item 1.	Financial Statements

	Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	3

	Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2022 and 2021 (unaudited)	4

	Consolidated Statements of Equity for the three months ended June 30, 2022 and 2021 (unaudited)	5

	Consolidated Statements of Equity for the six months ended June 30, 2022 and 2021 (unaudited)	6

	Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	36

	Part II - Other Information
Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

Signatures		40

INLAND REAL ESTATE INCOME TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except per share amounts)

	June 30, 2022 (unaudited)			December 31, 2021
ASSETS
Assets:
Investment properties held and used:
Land	$	330,456		$	267,946
Building and other improvements		1,190,715			993,129
Total		1,521,171			1,261,075
Less accumulated depreciation		(265,802	)		(245,532	)
Net investment properties held and used		1,255,369			1,015,543
Cash and cash equivalents		2,599			8,229
Restricted cash		6,949			5,154
Accounts and rent receivable		17,905			18,560
Acquired lease intangible assets, net		84,985			58,203
Operating lease right-of-use asset, net		14,357			14,570
Other assets		20,856			6,448
Total assets	$	1,403,020		$	1,126,707

LIABILITIES AND EQUITY
Liabilities:
Mortgages and credit facility payable, net	$	856,078		$	595,542
Accounts payable and accrued expenses		11,720			9,089
Operating lease liability		24,585			24,396
Distributions payable		4,898			4,888
Acquired intangible liabilities, net		45,499			37,918
Due to related parties		3,434			2,537
Other liabilities		8,711			14,414
Total liabilities		954,925			688,784

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $.001 par value, 40,000,000 shares authorized, none outstanding		—			—
Common stock, $.001 par value, 1,460,000,000 shares authorized, 36,115,528 and 36,040,928 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		36			36
Additional paid in capital		813,106			811,233
Accumulated distributions and net loss		(379,559	)		(365,877	)
Accumulated other comprehensive income (loss)		14,512			(7,469	)
Total stockholders’ equity		448,095			437,923
Total liabilities and stockholders’ equity	$	1,403,020		$	1,126,707

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE INCOME TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited, dollar amounts in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Income:
Rental income	$	32,101		$	29,372		$	61,214		$	59,372
Other property income		50			62			80			110
Total income		32,151			29,434			61,294			59,482

Expenses:
Property operating expenses		5,745			5,058			11,338			10,777
Real estate tax expense		4,243			3,678			7,973			7,348
General and administrative expenses		1,351			918			2,763			2,231
Business management fee		2,549			2,236			4,793			4,470
Depreciation and amortization		13,789			12,218			25,643			24,673
Total expenses		27,677			24,108			52,510			49,499

Other Income (Expense):
Interest expense		(7,106	)		(5,801	)		(12,673	)		(11,843	)
Interest and other income (expense)		—			29			(1	)		86
Net loss	$	(2,632	)	$	(446	)	$	(3,890	)	$	(1,774	)

Net loss per common share, basic and diluted	$	(0.07	)	$	(0.01	)	$	(0.11	)	$	(0.05	)

Weighted average number of common shares outstanding, basic and diluted		36,115,582			36,022,933			36,100,129			36,022,652

Comprehensive income:
Net loss	$	(2,632	)	$	(446	)	$	(3,890	)	$	(1,774	)
Unrealized gain (loss) on derivatives		7,142			(258	)		19,141			903
Reclassification adjustment for amounts included in net loss		1,372			1,843			2,840			3,707
Comprehensive income	$	5,882		$	1,139		$	18,091		$	2,836

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE INCOME TRUST, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, dollar amounts in thousands)

For the three months ended June 30, 2022
	Number of Shares			Common Stock		Additional Paid in Capital			Accumulated Distributions and Net Loss			Accumulated Other Comprehensive Income		Total
Balance at March 31, 2022		36,079,247		$	36	$	812,177		$	(372,029	)	$	5,998	$	446,182

Distributions declared ($0.135600 per share)		—			—		—			(4,898	)		—		(4,898	)
Proceeds from distribution reinvestment plan		90,178			—		1,822			—			—		1,822
Shares repurchased		(56,368	)		—		(911	)		—			—		(911	)
Unrealized gain on derivatives		—			—		—			—			7,142		7,142
Reclassification adjustment for amounts included in net loss		—			—		—			—			1,372		1,372
Equity-based compensation		2,471			—		18			—			—		18
Net loss		—			—		—			(2,632	)		—		(2,632	)
Balance at June 30, 2022		36,115,528		$	36	$	813,106		$	(379,559	)	$	14,512	$	448,095

For the three months ended June 30, 2021
	Number of Shares		Common Stock		Additional Paid in Capital		Accumulated Distributions and Net Loss			Accumulated Other Comprehensive Income (Loss)			Total
Balance at March 31, 2021		36,022,368	$	36	$	810,228	$	(350,047	)	$	(14,543	)	$	445,674

Distributions declared ($0.135600 per share)		—		—		—		(4,886	)		—			(4,886	)
Unrealized loss on derivatives		—		—		—		—			(258	)		(258	)
Reclassification adjustment for amounts included in net loss		—		—		—		—			1,843			1,843
Equity-based compensation		3,210		—		14		—			—			14
Net loss		—		—		—		(446	)		—			(446	)
Balance at June 30, 2021		36,025,578	$	36	$	810,242	$	(355,379	)	$	(12,958	)	$	441,941

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE INCOME TRUST, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, dollar amounts in thousands)

For the six months ended June 30, 2022
	Number of Shares			Common Stock		Additional Paid in Capital			Accumulated Distributions and Net Loss			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2021		36,040,928		$	36	$	811,233		$	(365,877	)	$	(7,469	)	$	437,923

Distributions declared ($0.271200 per share)		—			—		—			(9,792	)		—			(9,792	)
Proceeds from distribution reinvestment plan		192,419			—		3,671			—			—			3,671
Shares repurchased		(120,290	)		—		(1,835	)		—			—			(1,835	)
Unrealized gain on derivatives		—			—		—			—			19,141			19,141
Reclassification adjustment for amounts included in net loss		—			—		—			—			2,840			2,840
Equity-based compensation		2,471			—		37			—			—			37
Net loss		—			—		—			(3,890	)		—			(3,890	)
Balance at June 30, 2022		36,115,528		$	36	$	813,106		$	(379,559	)	$	14,512		$	448,095

For the six months ended June 30, 2021
	Number of Shares		Common Stock		Additional Paid in Capital		Accumulated Distributions and Net Loss			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2020		36,022,368	$	36	$	810,210	$	(348,719	)	$	(17,568	)	$	443,959

Distributions declared ($0.135600 per share)		—		—		—		(4,886	)		—			(4,886	)
Unrealized gain on derivatives		—		—		—		—			903			903
Reclassification adjustment for amounts included in net loss		—		—		—		—			3,707			3,707
Equity-based compensation		3,210		—		32		—			—			32
Net loss		—		—		—		(1,774	)		—			(1,774	)
Balance at June 30, 2021		36,025,578	$	36	$	810,242	$	(355,379	)	$	(12,958	)	$	441,941

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE INCOME TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, dollar amounts in thousands)

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(3,890	)	$	(1,774	)

Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		25,643			24,673
Amortization of debt issuance costs and mortgage premiums, net		752			342
Amortization of acquired market leases, net		(529	)		(334	)
Amortization of equity-based compensation		37			32
Reduction in the carrying amount of the right-of-use-asset		213			224
Straight-line income, net		(128	)		(266	)
Other non-cash adjustments		55			49
Changes in assets and liabilities:
Accounts payable and accrued expenses		2,617			(317	)
Accounts and rent receivable		783			3,006
Due to related parties		884			(2,373	)
Operating lease liability		189			178
Other liabilities		1,236			(59	)
Other assets		(434	)		317
Net cash flows provided by operating activities		27,428			23,698

Cash flows from investing activities:
Purchase of investment properties		(277,772	)		—
Capital expenditures		(4,087	)		(2,317	)
Other assets		(221	)		—
Net cash flows used in investing activities		(282,080	)		(2,317	)

Cash flows from financing activities:
Payment of credit facility		(21,000	)		(8,097	)
Proceeds from credit facility		375,000			52,097
Payment of mortgages payable		(88,303	)		(63,806	)
Payment of debt issuance costs		(5,913	)		—
Proceeds from the distribution reinvestment plan		3,671			—
Shares repurchased		(1,835	)		—
Distributions paid		(9,782	)		—
Early termination of interest rate swap agreements		(1,021	)		—
Net cash flows provided by (used in) financing activities		250,817			(19,806	)

Net (decrease) increase in cash, cash equivalents and restricted cash		(3,835	)		1,575
Cash, cash equivalents and restricted cash, at beginning of the period		13,383			13,985
Cash, cash equivalents and restricted cash, at end of period	$	9,548		$	15,560

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE INCOME TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited, dollar amounts in thousands)

	Six Months Ended June 30,
	2022			2021
Supplemental disclosure of cash flow information:
In conjunction with the purchase of investment property, the Company acquired assets and assumed liabilities as follows:
Land	$	62,510		$	—
Building and improvements		192,613			—
Acquired lease intangible assets		33,285			—
Acquired intangible liabilities		(9,654	)		—
Assumed liabilities, net		(982	)		—
Purchase of investment properties	$	277,772		$	—

Cash paid for interest	$	10,027		$	11,523

Supplemental schedule of non-cash investing and financing activities:

Accrued capital expenditures	$	969		$	132

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE INCOME TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited, dollar amounts in thousands, except per share amounts)

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Readers of this Quarterly Report should refer to the audited consolidated financial statements of Inland Real Estate Income Trust, Inc. (which may be referred to herein as the “Company,” “we,” “us,” or “our”) for the year ended December 31, 2021, which are included in the Company’s 2021 Annual Report on Form 10-K, as certain footnote disclosures contained in such audited consolidated financial statements have been omitted from this Quarterly Report.

NOTE 1 – ORGANIZATION

The Company was formed on August 24, 2011 to acquire and manage a portfolio of commercial real estate investments located in the United States. The Company is primarily focused on acquiring and owning retail properties and targets a portfolio substantially comprised of grocery-anchored properties. The Company has invested in joint ventures and may continue to invest in additional joint ventures or acquire other real estate assets if its management believes the expected returns from those investments exceed that of retail properties. The Company also may invest in real estate-related equity securities of both publicly traded and private real estate companies, as well as commercial mortgage-backed securities.

The Company has no employees. The Company is managed by IREIT Business Manager & Advisor, Inc. (the “Business Manager”), an indirect wholly owned subsidiary of Inland Real Estate Investment Corporation (the “Sponsor”), pursuant to a Business Management Agreement with the Business Manager.

The Business Management Agreement with the Business Manager was amended and restated on February 11, 2019 to, among other things, eliminate all future acquisition and disposition fees.

On March 4, 2022, as reported in the Company’s Form 8-K filed with the Securities and Exchange Commission on the same date and the Company’s Form 8-K/A filed on March 7, 2022, the Company announced that the Company’s board of directors unanimously approved: (i) an Estimated Per Share NAV as of December 31, 2021, which serves as the per share purchase price for shares issued under the Company’s distribution reinvestment plan (as amended, the “DRP”) beginning with the first distribution payment to stockholders upon resumption of distributions and the DRP until the Company announces a new Estimated Per Share NAV, and (ii) that, in accordance with the share repurchase program (as amended, the “SRP”) as further described below in Note 3 – “Equity,”, beginning with repurchases in April 2022 and until the Company announces a new Estimated Per Share NAV, any shares accepted for ordinary repurchases and “exceptional repurchases” will be repurchased at 80% of the Estimated Per Share NAV.

Due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, such as debt payments, the Company stopped paying distributions in the second quarter of 2020 and suspended its DRP and SRP. The suspension of the DRP was effective on June 6, 2020 and the suspension of the SRP was effective on June 26, 2020.

On June 29, 2021, the Company announced the lifting of the suspension of its DRP and started to pay distributions again. The effective date of the DRP reinstatement was July 22, 2021. The Company also announced the lifting of the suspension of the SRP and its adoption of the fourth amendment and restatement of the SRP, with the first repurchase having occurred on August 16, 2021. See Note 3 – “Equity” for additional details.

At June 30, 2022, the Company owned 52 retail properties, totaling 7,167,822 square feet. The properties are located in 24 states. At June 30, 2022, the portfolio had a weighted average physical occupancy of 92.8% and economic occupancy of 93.0%.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Disclosures discussing all significant accounting policies are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 16, 2022, under the heading Note 2 – “Summary of Significant Accounting Policies.” There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2022, except as noted below.

General

The consolidated financial statements have been prepared in accordance with U.S. GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In the opinion of management, all adjustments necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods are presented. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

Significant Risks and Uncertainties related to COVID-19 Pandemic

Currently, one of the most significant risks and uncertainties is the potential further adverse effect of the current pandemic of the novel coronavirus, or COVID-19. A number of our tenants had temporarily closed their stores during 2020 and requested rent deferral or rent abatement during this pandemic. The Company’s deferred rent balance is $95 at June 30, 2022, which decreased from the deferred rent balance of $399 at December 31, 2021 and $4,457 at December 31, 2020, due to collections of such rent.

However, the extent to which the COVID-19 pandemic further impacts the Company’s operations and those of our tenants will depend on future developments, including the impact of the Delta, Omicron or other variants of COVID-19 in the U.S. The impact cannot be predicted with confidence, including the scope, severity and duration of the pandemic’s variants, the actions taken to contain the pandemic’s variants or mitigate their impact, and the direct and indirect economic effects of the pandemic’s variants and containment measures, among others.

Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of the effectiveness for future London Interbank Offered Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A grants relief to entities, allowing them an election to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Topic 842, Leases. An entity that makes this election can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election. The Company has elected to apply such relief and avail itself of the election to avoid performing a lease by lease analysis.

Restricted Cash

Amounts included in restricted cash represent those required to be set aside by lenders for real estate taxes, insurance, capital expenditures and tenant improvements on our existing properties. These amounts also include post close escrows for tenant improvements, leasing commissions, master lease, general repairs and maintenance, and are classified as restricted cash on the Company’s consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company’s consolidated balance sheets to such amounts shown in the Company’s consolidated statements of cash flows:

	June 30,
	2022		2021
Cash and cash equivalents	$	2,599	$	11,290
Restricted cash		6,949		4,270
Total cash, cash equivalents, and restricted cash	$	9,548	$	15,560

NOTE 3 – EQUITY

The Company commenced an initial public “best efforts” offering (the “Offering”) on October 18, 2012, which concluded on October 16, 2015. The Company sold 33,534,022 shares of common stock generating gross proceeds of $834,399 from the Offering. As of June 30, 2022, there were 36,115,528 shares of common stock outstanding including 5,974,008 shares issued through the DRP, net of 3,404,947 shares repurchased through the SRP.

The Company provides the following programs to facilitate additional investment in the Company’s shares and to provide limited liquidity for stockholders.

Distribution Reinvestment Plan

Through the DRP, the Company provides stockholders with the option to purchase additional shares from the Company by automatically reinvesting cash distributions, subject to certain share ownership restrictions. The Company does not pay any selling commissions or a marketing contribution and due diligence expense allowance in connection with the DRP. Pursuant to the DRP, the price per share for shares of common stock purchased under the DRP is equal to the estimated value of a share, as determined by the Company’s board of directors and reported by the Company from time to time, until the shares become listed for trading, if a listing occurs, assuming that the DRP has not been terminated or suspended in connection with such listing.

There were $1,822 and $3,671 distributions reinvested through the DRP during the three and six months ended June 30, 2022. There were no distributions reinvested through the DRP during the three and six months ended June 30, 2021. See Note 1 – “Organization” for discussion on the suspension during 2020 and resumption of the DRP during 2021.

Share Repurchase Program

The Company adopted the SRP effective October 18, 2012, under which the Company is authorized to purchase shares from stockholders who purchased their shares from the Company or received their shares through a non-cash transfer and who have held their shares for at least one year. Purchases are in the Company’s sole discretion. In the case of repurchases made upon the death of a stockholder or qualifying disability (“Exceptional Repurchases”), as defined in the SRP, the one year holding period does not apply. On March 3, 2020 the Company’s board of directors adopted the Third Amended and Restated Share Repurchase Program (“Third SRP”). Under the Third SRP, the Company is authorized to make ordinary repurchases and Exceptional Repurchases at a price equal to 80.0% of the “share price,” which is defined in the Third SRP as an amount equal to the lesser of: (A) $25, as adjusted under certain circumstances, including, among other things, if the applicable shares were purchased from the Company at a discounted price; of (B) the most recently disclosed estimated value per share. Prior to the amendment, the Company was authorized to make Exceptional Repurchases at a price equal to 100% of the “share price.”

The Third SRP provides the Company’s board of directors with the discretion to set the funding limit for share repurchases. The Third SRP limits the dollar amount for any repurchases made by the Company each calendar quarter to an amount equal to a percentage determined in the sole discretion of the board on a quarterly basis that will not be less than 50% of the net proceeds from the DRP during the applicable quarter. The Company continues to limit the number of shares repurchased during any calendar year to 5% of the number of shares outstanding on December 31st of the previous calendar year, as adjusted for any stock splits or other combinations. The Company’s board of directors suspended the SRP effective June 26, 2020.

On June 29, 2021, the Company announced the lifting of the suspension of its share repurchase program and its adoption of the fourth amendment and restatement of the program. The effective date of the SRP reinstatement and the Fourth Amended and Restated Share Repurchase Program (the “Fourth SRP”) was August 12, 2021.

Pursuant to the Fourth SRP, any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2019 and May 31, 2020 (inclusive) was timely if received by the Company no later than January 31, 2022, and any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2020 and July 31, 2021, (inclusive) will be timely received if received by the Company no later than July 31, 2022.

If either or both of the aforementioned funding or repurchase limitations prevent the Company from repurchasing all of the shares offered for repurchase during a calendar quarter, the Company will repurchase shares on a pro rata basis within each of the following categories up to the repurchase limitations in the following order: (a) first, all Exceptional Repurchases and (b) second, all ordinary repurchases. The SRP will immediately terminate if the Company’s shares become listed for trading on a national securities exchange. In addition, the Company’s board of directors, in its sole discretion, may, at any time, amend, suspend or terminate the SRP.

Repurchases through the SRP were $911 and $1,835 for the three and six months ended June 30, 2022, respectively. There were no repurchases through the SRP for the three and six months ended June 30, 2021. There was zero liability related to the SRP at June 30, 2022 and December 31, 2021. See Note 1 – “Organization” for further discussion on the suspension of the SRP during 2020 and resumption during 2021.

NOTE 4 – ACQUISITIONS

2022 Acquisitions

On May 17, 2022, the Company acquired a portfolio of eight properties (the “IRPF Properties”) from certain subsidiaries of Inland Retail Property Fund, LP (the “Seller”). The acquisition of the IRPF Properties is referred to herein as the “Transaction.” The IRPF Properties are leased primarily to grocery, retail and restaurant tenants. More specifically, seven of the IRPF Properties are grocery-anchored. The IRPF Properties are located across seven states and aggregate approximately 686,851 square feet. The Seller, Inland Retail Property Fund, LP, is a fund managed by an affiliate of the Company’s sponsor and business manager. Because the Transaction was a related party transaction, it was approved by all of the Company’s independent directors.

The following table provides further details of the properties acquired during the six months ended June 30, 2022:

Date

Acquired

Property Name

Number of Transactions

Number of Properties

Square

Footage

Purchase

Price (a)

5/17/2022

IRPF Properties

686,851

278,153

686,851

278,153

(a)Contractual purchase price excluding closing credits.

The above acquisition was accounted for as an asset acquisition. For the three and six months ended June 30, 2022, the Company incurred $718 of total acquisition costs, of which $117 are accrued as of June 30, 2022. All of the acquisition costs are capitalized in the accompanying consolidated balance sheets. These costs include third party due diligence costs such as appraisals, environmental studies, and legal fees as well as time and travel expense reimbursements to the Sponsor and its affiliates.

For properties acquired during the six months ended June 30, 2022, the Company recorded total income of $2,811 and property net income of $1,863.

The following table presents certain additional information regarding the Company’s acquisitions during the six months ended June 30, 2022. The amounts recognized for major assets acquired and liabilities assumed as of the acquisition date are as follows:

	Six Months Ended June 30,
	2022
Land	$	62,510
Building and improvements		192,730
Acquired lease intangible assets		33,285
Acquired intangible liabilities		(9,654	)
Assumed liabilities, net		(982	)
Total	$	277,889

NOTE 5 – LEASES

The Company is lessor under approximately 820 retail operating leases. The remaining lease terms for the Company’s leases range from less than one year to 15 years. The Company considers the date on which it makes a leased space available to a lessee as the commencement date of the lease. At commencement, the Company determines the lease classification utilizing the classification tests under ASC 842. Options to extend a lease are included in the lease term when it is reasonably certain that the tenant will exercise its option to extend. Termination penalties are included in income when there is a termination agreement, all the conditions of the agreement have been met and amounts due are considered collectible. Such termination fees are recognized on a straight-line basis over the remaining lease term in rental income. If an operating lease is modified and the modification is not accounted for as a separate contract, the Company accounts for the modification as if it were a termination of the existing lease and the creation of a new lease. The Company considers any prepaid or accrued rentals relating to the original lease as part of the lease payments for the modified lease.

Most of the revenue from the Company’s properties consists of rents received under long-term operating leases. Most leases require the tenant to pay fixed base rent paid monthly in advance, and to reimburse the Company for the tenant’s pro rata share of certain operating expenses including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees, and certain building repairs paid by the Company and recoverable under the terms of the lease. Under these leases, the Company pays all expenses and is reimbursed by the tenant for the tenant’s pro rata share of recoverable expenses paid.

Certain other tenants are subject to net leases which provide that the tenant is responsible for fixed base rent as well as all costs and expenses associated with occupancy. Under net leases where all expenses are paid directly by the tenant rather than the landlord, such expenses are not included in the consolidated statements of operations and comprehensive income (loss). Under leases where all expenses are paid by the Company, subject to reimbursement by the tenant, the expenses are included within property operating expenses. As of January 1, 2019, the date on which the Company adopted the new leasing standard, reimbursements for common area maintenance are considered non-lease components that are permitted to be combined with rental income. The combined lease component and reimbursements for insurance and taxes are reported as rental income on the consolidated statements of operations and comprehensive income (loss).

Rental income related to the Company's operating leases is comprised of the following:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Rental income - fixed payments	$	26,037	$	23,432	$	49,569	$	47,321
Rental income - variable payments (a)		5,701		5,776		11,116		11,717
Amortization of acquired market leases, net		363		164		529		334
Rental income	$	32,101	$	29,372	$	61,214	$	59,372

(a)	Primarily includes tenant recovery income for real estate taxes, common area maintenance and insurance.

The Company continues to monitor the impact of the COVID-19 pandemic on the collectability of lease obligations. As of June 30, 2022, the Company’s accounts and rent receivable, net balance was $17,905, which was net of an allowance for bad debts of $1,505 and included $95 of deferred rent receivable related to COVID-19 agreements negotiated with tenants. As of December 31, 2021, the Company’s accounts and rent receivable, net balance was $18,560, which was net of an allowance for bad debts of $1,259 and included $399 of deferred rent receivable related to COVID-19 agreements negotiated with tenants. Such agreements generally allow tenants to defer the payment of a portion of rent with no substantive changes to the consideration in the original lease. Consistent with the guidance in the Lease Modification Q&A issued by the FASB, such deferrals affect the timing, but not the amount, of the lease obligations. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its rent receivable as tenant obligations accrue and continues to recognize rental income.

NOTE 6 – ACQUIRED INTANGIBLE ASSETS AND LIABILITIES

The following table summarizes the Company’s identified intangible assets and liabilities as of June 30, 2022 and December 31, 2021:

	June 30, 2022			December 31, 2021
Intangible assets:
Acquired in-place lease value	$	183,305		$	156,918
Acquired above market lease value		52,640			45,742
Accumulated amortization		(150,960	)		(144,457	)
Acquired lease intangibles, net	$	84,985		$	58,203
Intangible liabilities:
Acquired below market lease value	$	79,914		$	70,260
Accumulated amortization		(34,415	)		(32,342	)
Acquired below market lease intangibles, net	$	45,499		$	37,918

The portion of the purchase price allocated to acquired above market lease value and acquired below market lease value is amortized on a straight-line basis over the term of the related lease as an adjustment to rental income. For below market lease values, the amortization period includes any renewal periods with fixed rate renewals. The portion of the purchase price allocated to acquired in-place lease value is amortized on a straight-line basis over the acquired leases’ weighted average remaining term.

Amortization pertaining to acquired in-place lease value, above market lease value and below market lease value is summarized below:

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Amortization recorded as amortization expense:
Acquired in-place lease value	$	2,790		$	2,650		$	4,959		$	5,402
Amortization recorded as a (reduction) increase to rental income:
Acquired above market leases	$	(833	)	$	(736	)	$	(1,544	)	$	(1,474	)
Acquired below market leases		1,196			900			2,073			1,808
Net rental income increase	$	363		$	164		$	529		$	334

Estimated amortization of the respective intangible lease assets and liabilities as of June 30, 2022 for each of the five succeeding years and thereafter is as follows:

	Acquired In-Place Leases		Above Market Leases		Below Market Leases
2022 (remainder of year)	$	5,984	$	1,849	$	1,953
2023		10,960		3,570		3,723
2024		9,301		3,332		3,536
2025		6,887		2,941		3,290
2026		5,126		2,509		3,143
Thereafter		20,513		12,013		29,854
Total	$	58,771	$	26,214	$	45,499

NOTE 7 – DEBT AND DERIVATIVE INSTRUMENTS

As of June 30, 2022 and December 31, 2021, the Company had the following mortgages and credit facility payable:

	June 30, 2022						December 31, 2021
Type of Debt	Principal Amount			Weighted Average Interest Rate			Principal Amount			Weighted Average Interest Rate
Fixed rate mortgages payable	$	112,503			3.84	%	$	118,463			3.88	%
Variable rate mortgages payable with swap agreements		117,137			3.47	%		198,796			3.42	%
Variable rate mortgages payable without swap agreements		—			0.00	%		684			1.70	%
Mortgages payable	$	229,640			3.65	%	$	317,943			3.59	%
Credit facility payable		633,000			3.53	%		279,000			3.03	%
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps	$	862,640			3.56	%	$	596,943			3.33	%
Add: Unamortized mortgage premiums		—						17
Less: Unamortized debt issuance costs		(6,562	)					(1,418	)
Total debt	$	856,078					$	595,542

The Company estimates the fair value of its total debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by the Company’s lenders using Level 3 inputs. The carrying value of the Company’s debt excluding mortgage premium and unamortized debt issuance costs was $862,640 and $596,943 as of June 30, 2022 and December 31, 2021, respectively, and its estimated fair value was $855,857 and $591,089 as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, scheduled principal payments and maturities on the Company’s debt were as follows:

	June 30, 2022
Scheduled Principal Payments and Maturities by Year:	Scheduled Principal Payments		Maturities of Mortgage Loans		Maturity of Credit Facility		Total
2022 (remainder of the year)	$	158	$	13,700	$	—	$	13,858
2023		326		77,437		—		77,763
2024		341		—		—		341
2025		295		92,656		—		92,951
2026		—		44,727		58,000		102,727
Thereafter		—		—		575,000		575,000
Total	$	1,120	$	228,520	$	633,000	$	862,640

Credit Facility

On February 3, 2022, the Company entered into a second amended and restated credit agreement (the “Credit Agreement”) with KeyBank National Association, individually and as administrative agent, KeyBanc Capital Markets Inc., PNC Capital Markets LLC and BofA Securities, Inc., as joint lead arrangers, and other lenders from time to time parties to the Credit Agreement (the “Credit Facility”). Pursuant to the Credit Agreement, the aggregate total commitments under the Credit Facility were increased from $350,000 to $475,000. The Credit Facility consists of the “Revolving Credit Facility” providing revolving credit commitments in an aggregate amount of $200,000 and a term loan facility (the term loans funded under such commitments, the “Term Loan”) providing term loan commitments in an aggregate amount of $275,000 (increased from $150,000). On May 17, 2022, the Company entered into a First Amendment to Credit Agreement Regarding Incremental Term Loans (the “First Amendment”), amending the terms of the Credit Agreement primarily to draw an additional $300,000 to fund the acquisition of investment properties during May 2022 discussed in “Note 4 – Acquisitions.” The Credit Agreement provides the Company with the ability from time to time to increase the size of the Credit Facility up to a total of $1,200,000, subject to certain conditions.

The Revolving Credit Facility matures on February 3, 2026, and the Company has the option to extend the maturity date for one additional year subject to the payment of an extension fee and certain other conditions. The Term Loan matures on February 3, 2027. Borrowings under the Credit Facility bear interest equal to one-month Term Secured Overnight Financing Rate (“SOFR”) plus a margin, the amount of which depends on the Company’s leverage ratio.

At June 30, 2022, the Company had $58,000 outstanding under the Revolving Credit Facility and $575,000 outstanding under the Term Loan. At June 30, 2022, the interest rates on the Revolving Credit Facility and the Term Loan were 2.65% and 3.62%, respectively. As of June 30, 2022, the Company had a maximum amount of $142,000 available for borrowing under the Revolving Credit Facility, subject to the terms and conditions of the Credit Agreement that governs the Credit Facility, including compliance with the covenants which could further limit the amount available. Although all of the amount available under the Revolving Credit Facility is available to pay off existing mortgages, due to the covenant limitations, the Company expects to have substantially less than all $142,000 available to draw or otherwise undertake as additional debt as a result of, among other things, completing the aforementioned Transaction and increasing the amount of the Term Loan.

The Company’s performance of the obligations under the Credit Facility, including the payment of any outstanding indebtedness under the Credit Facility, is guaranteed by certain subsidiaries of the Company, including each of the subsidiaries of the Company which owns or leases any of the properties included in the pool of unencumbered properties comprising the borrowing base. Additional properties will be added to and removed from the pool from time to time to support amounts borrowed under the Credit Facility so long as at any time there are at least fifteen unencumbered properties with an unencumbered pool value of $300,000 or more. At June 30, 2022, there were 45 properties included in the pool of unencumbered properties.

The Credit Facility requires compliance with certain covenants, including a minimum tangible net worth requirement, a limitation on the use of leverage, a distribution limitation, restrictions on indebtedness and investment restrictions. It also contains customary default provisions including the failure to comply with the Company's covenants and the failure to pay when amounts outstanding under the Credit Facility become due. As of June 30, 2022, the Company is in compliance with all financial covenants related to the Credit Facility as amended.

Mortgages Payable

The Company’s mortgage loans require compliance with certain covenants, such as debt service ratios, investment restrictions and distribution limitations. As of June 30, 2022, the Company was current on all of its debt service payments and in compliance with all financial covenants except for one mortgage loan with a covenant violation which only required that the Company establish a cash maintenance account for the impacted property. All of the Company’s mortgage loans are secured by first mortgages on the respective real estate assets. As of June 30, 2022, the weighted average years to maturity for the Company’s mortgages payable was 2.7 years. For mortgage loans maturing in the next twelve months, the Company intends to repay amounts due with cash flows from operating activities, cash on hand or proceeds available under the Revolving Credit Facility.

Interest Rate Swap Agreements

The Company entered into interest rate swaps to fix certain of its floating LIBOR and SOFR based debt under variable rate loans to a fixed rate to manage its risk exposure to interest rate fluctuations. The Company will generally match the maturity of the underlying variable rate debt with the maturity date on the interest swap. See Note 14 – "Fair Value Measurements" for further information.

The following table summarizes the Company’s interest rate swap contracts outstanding as of June 30, 2022.

Date Entered	Effective Date	Maturity Date	Receive Floating Rate Index (a)	Pay Fixed Rate			Notional Amount		Fair Value at June 30, 2022
Assets
September 17, 2015	September 17, 2015	September 17, 2022	1-month LIBOR		1.90	%		13,700		6
December 23, 2015	December 23, 2015	January 2, 2026	1-month LIBOR		2.30	%		26,000		544
June 7, 2016	July 1, 2016	July 1, 2023	1-month LIBOR		1.42	%		41,348		698
July 21, 2016	August 1, 2016	August 1, 2023	1-month LIBOR		1.30	%		36,089		717
February 3, 2022	March 1, 2022	February 3, 2027	1-month Term SOFR		1.69	%		90,000		4,169
February 3, 2022	March 1, 2022	February 3, 2027	1-month Term SOFR		1.85	%		100,000		3,945
February 3, 2022	March 1, 2022	February 3, 2027	1-month Term SOFR		1.72	%		85,000		3,877
May 17, 2022	June 1, 2022	February 3, 2027	1-month Term SOFR		2.71	%		60,000		197
May 17, 2022	June 1, 2022	February 3, 2027	1-month Term SOFR		2.71	%		60,000		191
May 17, 2022	June 1, 2022	February 3, 2027	1-month Term SOFR		2.71	%		75,000		243
May 17, 2022	June 1, 2022	February 3, 2027	1-month Term SOFR		2.77	%		55,000		60
							$	642,137	$	14,647

(a) At June 30, 2022, the one-month LIBOR and the one-month term SOFR were 1.79% and 1.69%, respectively.

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021.

	Three Months Ended June 30,					Six Months Ended June 30,
Derivatives in Cash Flow Hedging Relationships	2022		2021			2022		2021
Effective portion of derivatives	$	7,142	$	(258	)	$	19,141	$	903
Reclassification adjustment for amounts included in net gain or loss (effective portion)	$	1,372	$	1,843		$	2,840	$	3,707

The total amount of interest expense presented on the consolidated statements of operations and comprehensive income (loss) was $7,106 and $5,801, for the three months ended June 30, 2022 and 2021, respectively. The total amount of interest expense presented on the consolidated statements of operations and comprehensive income (loss) was $12,673 and $11,843 for the six months ended June 30, 2022 and 2021, respectively. The location of the net gain or loss reclassified into income from accumulated other comprehensive income (loss) is reported in interest expense on the consolidated statements of operations and comprehensive income (loss). The amount that is expected to be reclassified from accumulated other comprehensive income (loss) into income in the next twelve months is $3,420.

NOTE 8 – DISTRIBUTIONS

In 2020, due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, during the second quarter the Company’s board of directors rescinded the distribution that was declared in the first quarter of 2020, and the Company did not resume declaring distributions until June 29, 2021.

The table below presents the distributions paid and declared during the three and six months ended June 30, 2022 and 2021.

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Distributions paid	$	4,894	$	—	$	9,782	$	—
Distributions declared	$	4,898	$	4,886	$	9,792	$	4,886

NOTE 9 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the “common shares”). Diluted EPS is computed by dividing net income (loss) by the common shares plus common share equivalents. The Company excludes antidilutive restricted shares and units from the calculation of weighted-average shares for diluted EPS. As a result of a net loss in the three and six months ended June 30, 2022, 4,965 shares and 4,337 shares, respectively, were excluded from the computation of diluted EPS, because they would have been antidilutive. As a result of a net less in the three and six months ended June 30, 2021, 4,791 shares and 4,303 shares, respectively, were excluded from the computation of diluted EPS, because they would have been antidilutive.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company may be subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material adverse effect on the consolidated financial statements of the Company.

NOTE 11 – EQUITY-BASED COMPENSATION

Under the Company’s Employee and Director Restricted Share Plan (“RSP”), restricted shares and restricted share units generally vest over a one to three year vesting period from the date of the grant, subject to the specific terms of the grant. In accordance with the RSP, restricted shares and restricted share units are issued to non-employee directors as compensation. Each restricted share and restricted share unit entitles the holder to receive one common share when it vests. Restricted shares are included in common stock outstanding on the date of vesting. Restricted share units are included in common stock outstanding on the date they are transferred to the non-employee director or their beneficiary. The grant-date value of the restricted shares and restricted share units is amortized over the vesting period representing the requisite service period. Compensation expense associated with the restricted shares and restricted share units issued to the non-employee directors was $18 and $37, in the aggregate, for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, the Company had $60 of unrecognized compensation expense related to the unvested restricted shares and restricted share units, in the aggregate. The weighted average remaining period that compensation expense related to unvested restricted shares and restricted share units will be recognized is 1.5 years. The total fair value at the vesting date for restricted shares and restricted share units that vested during both the three and six months ended June 30, 2022 was $47. The total fair value at the vesting date for restricted shares and restricted share units that vested during both the three and six months ended June 30, 2021 was $54.

A summary table of the status of the restricted shares and restricted share units is presented below:

	Restricted Shares			Restricted Share Units
Outstanding at December 31, 2021		8,108			252
Granted		—			4
Vested		(2,214	)		(256	)
Outstanding at June 30, 2022		5,894			—

NOTE 12 – SEGMENT REPORTING

The Company has one reportable segment as defined by U.S. GAAP, retail real estate, for the six months ended June 30, 2022 and 2021.

NOTE 13 – TRANSACTIONS WITH RELATED PARTIES

On May 17, 2022, the Company acquired the IRPF Properties from the Seller, a fund managed by an affiliate of the Company’s sponsor and business manager. See Note 4 – "Acquisitions" for further information.

The following table summarizes the Company’s related party transactions for the three and six months ended June 30, 2022. Certain compensation and fees payable to the Business Manager for services provided to the Company are limited to maximum amounts.

		Three Months Ended June 30,				Six Months Ended June 30,				Unpaid amounts as of
		2022		2021		2022		2021		June 30, 2022		December 31, 2021
General and administrative reimbursements	(a)	$	406	$	403	$	803	$	712	$	248	$	209
Loan costs	(b)	$	10	$	—	$	42	$	—	$	—	$	—
Acquisition related costs	(c)	$	19	$	—	$	19	$	—	$	—	$	—

Real estate management fees		$	1,233	$	1,153	$	2,360	$	2,389	$	431	$	—
Property operating expenses			356		322		679		672		15		—
Construction management fees			15		5		15		5		14
Leasing fees			120		68		205		129		177		87
Total real estate management related costs	(d)	$	1,724	$	1,548	$	3,259	$	3,195	637		$	87

Business management fees	(e)	$	2,549	$	2,236	$	4,793	$	4,470	$	2,549	$	2,241

(a)

The Business Manager and its related parties are entitled to reimbursement for certain general and administrative expenses incurred by the Business Manager or its related parties relating to the Company’s administration. Such costs are included in general and administrative expenses in the consolidated statements of operations and comprehensive income. Unpaid amounts are included in due to related parties in the consolidated balance sheets.

(b)

The Business Manager and its related parties are entitled to reimbursement for certain legal costs related to securing financing for the Company. Such costs are capitalized as debt issuance costs on the consolidated balance sheets and amortized into interest expense on the consolidated statements of operations and comprehensive income over the term of the related financing. Unpaid amounts are included in due to related parties in the consolidated balance sheets.

(c)

The Business Manager and its related parties are reimbursed for acquisition and transaction related costs of the Business Manager and its related parties relating to the Company’s acquisition activities, regardless of whether the Company acquires the real estate assets. All of the $19 related party acquisition costs incurred during the six months ended June 30, 2022 are capitalized as the acquisition of net investment properties in the consolidated balance sheets. See Note 4 – "Acquisitions" for further information.

(d)

For each property that is managed by Inland Commercial Real Estate Services LLC (the “Real Estate Manager”) (and its predecessor), the Company pays a monthly real estate management fee of up to 1.9% of the gross income from any single-tenant, net-leased property, and up to 3.9% of the gross income from any other property type. The Real Estate Manager determines, in its sole discretion, the amount of the fee with respect to a particular property, subject to the limitations. For each property that is managed directly by the Real Estate Manager or its affiliates, the Company pays the Real Estate Manager a separate leasing fee. Further, in the event that the Company engages its Real Estate Manager to provide construction management services for a property, the Company pays a separate construction management fee. Leasing fees are included in deferred costs, net and construction management fees are included in building and other improvements in the consolidated balance sheets. The Company also reimburses the Real Estate Manager and its affiliates for property-level expenses that they pay or incur on the Company’s behalf, including the salaries, bonuses and benefits of persons performing services for the Real Estate Manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as an executive officer of the Real Estate Manager or the Company. Real estate management fees and reimbursable expenses are included in property operating expenses in the consolidated statements of operations and comprehensive income.

(e)

The Company pays the Business Manager an annual business management fee equal to 0.65% of its “average invested assets.” The fee is payable quarterly in an amount equal to 0.1625% of its average invested assets as of the last day of the immediately preceding quarter. “Average invested assets” means, for any period, the average of the aggregate book value of the Company’s assets, including all intangibles and goodwill, invested, directly or indirectly, in equity interests in, and loans secured by, properties, as well as amounts invested in securities and consolidated and unconsolidated joint ventures or other partnerships, before reserves for amortization and depreciation or bad debts, impairments or other similar non-cash reserves, computed by taking the average of these values at the end of each month during the relevant calendar quarter. Unpaid amounts are included in due to related parties on the consolidated balance sheets.

NOTE 14 – FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

The Company defines fair value based on the price that it believes would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:

Level 1 −		Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2 −		Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 −		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes.

Recurring Fair Value Measurements

For assets and liabilities measured at fair value on a recurring basis, the table below presents the fair value of the Company’s cash flow hedges as well as their classification on the consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively.

	Fair Value
	Level 1		Level 2		Level 3		Total
June 30, 2022
Interest rate swap agreements - Other assets	$	—	$	14,647	$	—	$	14,647
Interest rate swap agreements - Other liabilities	$	—	$	—	$	—	$	—
December 31, 2021
Interest rate swap agreements - Other assets	$	—	$	—	$	—	$	—
Interest rate swap agreements - Other liabilities	$	—	$	7,469	$	—	$	7,469

The fair value of derivative instruments was estimated based on data observed in the forward yield curve which is widely observed in the marketplace. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the counterparty's nonperformance risk in the fair value measurements which utilize Level 3 inputs, such as estimates of current credit spreads. The Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative interest rate swap agreements and therefore has classified these in Level 2 of the hierarchy.

NOTE 15 – SUBSEQUENT EVENTS

In connection with the preparation of its financial statements, the Company has evaluated events that occurred subsequent to June 30, 2022 through the date on which these financial statements were issued to determine whether any of these events required disclosure in the financial statements.

There were no reportable subsequent events or transactions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words such as “may,” “could,” “should,” “expect,” “intend,” “plan,” “goal,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “variables,” “potential,” “continue,” “expand,” “maintain,” “create,” “strategies,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions, are intended to identify forward-looking statements.

These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of the management of Inland Real Estate Income Trust, Inc. (which we refer to herein as the “Company,” “we,” “our” or “us”) based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described under “Risk Factors” in this Quarterly Report on Form 10-Q, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on May 11, 2022 and in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 16, 2022, some of which are summarized below:

•

We are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the ongoing global COVID-19 pandemic, including negative impacts on our tenants and their respective businesses, and we agreed in 2020 and 2021 to defer a significant amount of rent owed to us, which tenants were obligated to pay over time in addition to their regular rent. If there is a resurgence of COVID-19, we may agree again to defer rent owed to us, and our tenants may not be able or willing to pay the deferred amounts on top of their regular rent, particularly if their results of operations or future prospects have been materially adversely affected by the COVID-19 pandemic or become so affected;

•

Market disruptions resulting from the economic effects of the COVID-19 pandemic have adversely impacted many aspects of our operating results and financial condition, and ongoing or future disruptions from the pandemic, the war in Ukraine, increases in interest rates and supply chain shortage or otherwise may again adversely impact our results and financial condition, including our ability to service our debt obligations, borrow additional monies or pay distributions;

•

We have incurred net losses on a U.S. generally accepted accounting principles (“U.S. GAAP”) basis for the three and six months ended June 30, 2022 and 2021 and for the year ended December 31, 2021;

•

There is no established public trading market for our shares, our stockholders cannot currently sell their shares under our share repurchase program (as amended, “SRP”), which was suspended during the COVID-19 pandemic and may be suspended again, amended or terminated in our sole discretion, and even when repurchases are made pursuant to the SRP, the SRP is subject to limits, and stockholders may not be able to sell all of the shares they would like to sell;

•

Even if our stockholders are able to sell their shares under the SRP, or otherwise, they may not be able to recover the amount of their investment in our shares;

•

There is no assurance our board of directors will pursue a listing or other liquidity event at any time in the future, particularly in light of the COVID-19 pandemic;

•

Inland Real Estate Investment Corporation (our “Sponsor”) may face a conflict of interest in allocating personnel and resources between its affiliates, our Business Manager (as defined below) and Inland Commercial Real Estate Services LLC, referred to herein as our “Real Estate Manager”;

•

We do not have arm’s-length agreements with our Business Manager, our Real Estate Manager or any other affiliates of our Sponsor;

•

We pay fees, which may be significant, to our Business Manager, Real Estate Manager and other affiliates of our Sponsor;

•

Our Business Manager and its affiliates face conflicts of interest caused by, among other things, their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders;

•

Our properties may compete with the properties owned by other programs sponsored by our Sponsor or Inland Private Capital Corporation or other affiliates for, among other things, tenants;

•

Our Business Manager is under no obligation, and may not agree, to forgo or defer its business management fee;

•

If we fail to continue to qualify as a REIT, our operations and distributions to stockholders, if any, will be adversely affected; and

•

The Company’s strategic plan may continue to evolve or change over time, and there is no assurance we will be able to successfully achieve our board’s objectives under the strategic plan, including making strategic sales or purchases of properties, redeveloping properties or listing our common stock, within the timeframe we expect or would prefer or at all;

•

We may pursue redevelopment activities, which are subject to a number of risks, including, but not limited to: expending resources to determine the feasibility of the project or projects that are then not pursued or completed; construction delays or cost overruns; failure to meet anticipated occupancy or rent levels within the projected time frame, if at all; exposure to fluctuations in the general economy due to the significant time lag between commencing and completing the project; and reduced rental income during the period of time we are redeveloping an asset or assets;

•

The use of the internet by consumers to shop is expected to continue to expand, and this expansion has likely been accelerated by the effects of the COVID-19 pandemic, which could result in a further downturn in the business of our current tenants in their “brick and mortar” locations and could affect their ability to pay rent and their demand for space at our retail properties; and

•

We are subject to risks associated with any dislocations or liquidity disruptions that may exist or occur in credit markets of the United States from time to time, including disruptions and dislocations caused by the ongoing COVID-19 pandemic.

Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Quarterly Report, and may ultimately prove to be incorrect or false. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.

The following discussion and analysis relates to the three and six months ended June 30, 2022 and 2021 and as of June 30, 2022 and December 31, 2021. You should read the following discussion and analysis along with our consolidated financial statements and the related notes included in this report.

We routinely post important information about us and our business, including financial and other information for investors, on our website. We encourage investors to visit our website at inland-investments.com/inland-income-trust from time to time, as information is updated and new information is posted.

Overview

We were formed as a Maryland corporation on August 24, 2011 and elected to be taxed as a real estate investment trust for U.S. federal income tax purposes (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the year ended December 31, 2013. We have no employees. We are managed by our business manager, IREIT Business Manager & Advisor, Inc., referred to herein as our “Business Manager.”

We are primarily focused on acquiring and owning retail properties and intend to target a portfolio substantially comprised of grocery-anchored properties as described below. We have invested in joint ventures and may continue to invest in additional joint ventures or acquire other real estate assets such as office and medical office buildings, multi-family properties and industrial/distribution and warehouse facilities if management believes the expected returns from those investments exceed that of retail properties. We also may invest in real estate-related equity securities of both publicly traded and private real estate companies, as well as commercial mortgage-backed securities.

On March 4, 2022, our board of directors determined an estimated per share net asset value of our common stock of $20.20 as of December 31, 2021, compared to the previous estimated value of $18.08 as of December 31, 2020. At June 30, 2022, we had total assets of $1.4 billion on our balance sheet and owned 52 properties located in 24 states containing 7.2 million square feet. On May 17, 2022, we acquired eight retail shopping center properties (the “IRPF Properties”) from certain subsidiaries of Inland Retail Property Fund, LP. The IRPF Properties are located across seven states and aggregate approximately 686,851 square feet. As seven of the eight properties are grocery-anchored, this acquisition increases our portfolio of grocery-anchored properties, which is our focus as described above. We acquired the IRPF Properties for an aggregate purchase price of $278 million, excluding closing costs. A majority of our properties are multi-tenant, necessity-based retail shopping centers primarily located in major regional markets and growing secondary markets throughout the United States. As of June 30, 2022, 88% of our annualized base rental income was generated from grocery-anchored or grocery shadow-anchored shopping centers. A grocery shadow-anchored shopping center is a shopping center which we own that is located near a grocery store that we do not own but that we believe generates traffic for our shopping center. The portfolio properties have staggered lease maturity dates. Grocery tenants accounted for 17% of our annualized base rent (“ABR”) as of June 30, 2022.

COVID-19 Pandemic

We continue to monitor the impact of the novel coronavirus (“COVID-19”) pandemic on all aspects of our business and locations, including how it is impacting our tenants and vendors. The Company’s deferrals, modifications and rent abatements have proven effective helping our tenants endure the economic impacts of the pandemic. As of June 30, 2022, our deferred rent balance was $0.1 million, down from $0.4 million at December 31, 2021 and $4.5 million at December 31, 2020, due primarily to collections of such rent. As of June 30, 2022, except for one 1,144 square foot tenant, we have not received any notice of, and are not otherwise aware of any of our tenants being in bankruptcy, voluntarily or otherwise. Tenants with which we have agreed to defer rent have generally been paying both their regular rental obligations as well as the amounts of deferred rent during the three and six months ended June 30, 2022. See Note 5 – “Leases” for additional information.

However, we are unable to predict with certainty the future impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties, including the effects of the Omicron variant or of the emergence and potential and actual spreading of any other variant of COVID-19 in the U.S. or any place from which our tenants may receive goods or services.

We rely on the Business Manager to manage our day-to-day operations. Though many people have been able to work remotely effectively, the business and operations of our Business Manager and its affiliates may also be adversely impacted by further coronavirus outbreaks, including illness or quarantine of members of its workforce, which may negatively impact on its ability to provide us services to the same degree as it had prior to the outbreak.

Inflation and Interest Rates

Inflationary pressures and rising interest rates could result in reductions in consumer spending and retailer profitability which could impact the Company’s ability to grow rents and tenant demand for new and existing store locations. Regardless of accelerating inflation levels, base rent under most of the Company’s long-term anchor leases will remain constant (subject to tenants’ exercise of renewal options at pre-negotiated rent increases) until the expiration of their lease terms. While many of these leases require tenants to pay their share of shopping center operating expenses (including common area maintenance, real estate tax and insurance expenses), the Company’s ability to collect the passed-through expense increases to tenants is dependent on their ability to absorb and pay these increases. Inflation may also impact other aspects of the Company’s operating costs, including fees paid to service providers, the cost to complete redevelopments and build-outs of recently leased vacancies and interest rate costs relating to variable rate loans and refinancing of lower fixed-rate indebtedness. While the Company has not been significantly impacted by any of these items to date, no assurances can be provided that these inflationary pressures will not have a material adverse effect on the Company’s business in the future.

Company Update – Strategic Plan

The Company has a strategic plan that includes the goals of providing a future liquidity event to investors and creating long-term stockholder value. The strategic plan centers around owning a portfolio of grocery-anchored properties with lower exposure to big box retailers. As part of this strategy, our management team continually evaluates possibilities for the opportunistic sale of certain assets with the goal of redeploying capital into the acquisition of strategically located grocery-anchored centers. Of the Company’s 948 leasable spaces, there are 118 occupied non-grocery big box (anchor spaces of at least 10,000 square feet) and five vacant big box spaces in the portfolio as of July 31, 2022. As part of the strategic plan, we sold three properties in the first quarter of 2020. We used the proceeds to pay down the Revolving Credit Facility. We are not actively marketing any properties as of the date of this quarterly report on Form 10-Q. We believe increasing the size and profitability of the Company would enhance our ability to complete a successful liquidity event, and to that end we seek and evaluate potential acquisitions and may, for example, opportunistically acquire a portfolio of retail properties that we believe complements our existing portfolio in terms of relevant characteristics such as tenant mix, demographics and geography and is consistent with our plan to own a portfolio substantially all of which is comprised of grocery-anchored or shadow-anchored properties. On May 17, 2022, the Company acquired, in the aggregate, the IRPF Properties from certain subsidiaries of Inland Retail Property Fund, LP, for approximately $278 million. We may also consider other transactions, such as redeveloping certain of our properties or portions of certain of our properties, for example, big-box spaces, to repurpose them for alternative commercial or multifamily residential uses. We expect to consider liquidity events, including listing our common stock on a national securities exchange, but given our intention to opportunistically grow the portfolio, execute redevelopment opportunities, and execute strategic sales and acquisitions all in the context of (i) changes in retail market conditions resulting from the effects of the COVID-19 pandemic and other complex factors such as (ii) competition for our tenants from evolving internet businesses, (iii) the state of the commercial real estate market and financial markets, (iv) our ability to raise capital or borrow on terms that are acceptable to the Company in light of the use of the proceeds and (v) general economic conditions, among other factors, we do not know when we will complete a liquidity event. The timing of the completion of the strategic plan has already extended beyond our original expectations and cannot be predicted with certainty. There is no assurance that the Company will be able

to successfully implement its strategic plan, for example by making strategic sales or purchases of properties or listing the Company’s common stock, within the timeframe we would prefer or at all.

SELECT PROPERTY INFORMATION (All dollar amounts in thousands, except per square foot amounts)

Investment Properties

	As of June 30, 2022
Number of properties	52
Purchase price	$	1,624,667
Total square footage		7,167,822
Weighted average physical occupancy		92.8	%
Weighted average economic occupancy		93.0	%
Weighted average remaining lease term (years)		4.7

The table below presents information for each of our investment properties as of June 30, 2022.

Property	Location	Square Footage		Physical Occupancy			Economic Occupancy			Mortgage Balance		Interest Rate (b)
Newington Fair (a)	Newington, CT		186,205		100.0	%		100.0	%		—		—
Wedgewood Commons (a)	Olive Branch, MS		169,558		97.9	%		100.0	%		—		—
Park Avenue (a)	Little Rock, AR		79,131		66.7	%		66.7	%		—		—
North Hills Square (a)	Coral Springs, FL		63,829		97.5	%		97.5	%		—		—
Mansfield Shopping Center (a)	Mansfield, TX		148,529		95.0	%		95.0	%		—		—
Lakeside Crossing (a)	Lynchburg, VA		67,034		97.8	%		97.8	%		—		—
MidTowne Shopping Center (a)	Little Rock, AR		126,288		70.3	%		70.3	%		—		—
Dogwood Festival (a)	Flowood, MS		187,468		81.7	%		81.7	%		—		—
Pick N Save Center (a)	West Bend, WI		94,446		98.9	%		98.9	%		—		—
Harris Plaza (a)	Layton, UT		125,965		75.1	%		75.1	%		—		—
Dixie Valley (a)	Louisville, KY		119,981		76.8	%		76.8	%		—		—
The Landings at Ocean Isle (a)	Ocean Isle, NC		53,203		94.9	%		94.9	%		—		—
Shoppes at Prairie Ridge (a)	Pleasant Prairie, WI		232,606		98.8	%		98.8	%		—		—
Harvest Square (a)	Harvest, AL		70,590		92.1	%		92.1	%		—		—
Heritage Square (a)	Conyers, GA		22,510		95.8	%		95.8	%		—		—
The Shoppes at Branson Hills (a)	Branson, MO		256,244		95.5	%		95.5	%		—		—
Branson Hills Plaza (a)	Branson, MO		210,201		100.0	%		100.0	%		—		—
Copps Grocery Store (a)	Stevens Point, WI		69,911		100.0	%		100.0	%		—		—
Fox Point Plaza (a)	Neenah, WI		171,121		100.0	%		100.0	%		—		—
Shoppes at Lake Park (a)	W. Valley City, UT		52,997		90.6	%		90.6	%		—		—
Plaza at Prairie Ridge (a)	Pleasant Prairie,WI		9,035		100.0	%		100.0	%		—		—
Green Tree Shopping Center (a)	Katy, TX		147,621		98.3	%		98.3	%		—		—
Eastside Junction (a)	Athens, AL		79,675		91.0	%		91.0	%		—		—
Fairgrounds Crossing (a)	Hot Springs, AR		155,127		100.0	%		100.0	%		—		—
Prattville Town Center (a)	Prattville, AL		168,842		100.0	%		100.0	%		—		—
Regal Court	Shreveport, LA		363,061		96.2	%		96.2	%		26,000		4.50	%
Shops at Hawk Ridge (a)	St. Louis, MO		75,951		100.0	%		100.0	%		—		—
Walgreens Plaza (a)	Jacksonville, NC		42,219		79.0	%		79.0	%		—		—
Frisco Marketplace (a)	Frisco, TX		112,024		89.7	%		89.7	%		—		—
White City (a)	Shrewsbury, MA		256,974		94.7	%		94.7	%		—		—
Yorkville Marketplace (a)	Yorkville, IL		111,591		94.7	%		94.7	%		—		—
Shoppes at Market Pointe	Papillion, NE		253,903		95.6	%		95.6	%		13,700		3.30	%
Marketplace at El Paseo (a)	Fresno, CA		224,683		95.1	%		95.9	%		—		—
The Village at Burlington Creek	Kansas City, MO		157,937		88.9	%		88.9	%		17,244		4.25	%
Milford Marketplace	Milford, CT		111,959		89.2	%		89.2	%		18,727		4.02	%
Settlers Ridge	Pittsburgh, PA		473,763		91.2	%		91.2	%		76,532		3.70	%
Blossom Valley Plaza (a)	Turlock, CA		111,435		100.0	%		100.0	%		—		—
Oquirrh Mountain Marketplace (a)	South Jordan, UT		75,950		97.2	%		97.2	%		—		—
Marketplace at Tech Center	Newport News, VA		210,505		74.9	%		79.9	%		36,089		3.15	%
Coastal North Town Center	Myrtle Beach, SC		304,662		95.3	%		95.3	%		41,348		3.17	%
Oquirrh Mountain Marketplace II (a)	South Jordan, UT		10,150		100.0	%		100.0	%		—		—
Wilson Marketplace (a)	Wilson, NC		311,030		100.0	%		100.0	%		—		—
Pentucket Shopping Center (a)	Plaistow, NH		198,469		98.0	%		98.0	%		—		—
Hickory Tavern (a)	Myrtle Beach, SC		6,588		100.0	%		100.0	%		—		—
New Town (a)	Owings Mill, MD		117,593		45.7	%		45.7	%		—		—
Olde Ivy Village (a)	Smyrna, GA		46,500		93.7	%		93.7	%		—		—
Northpark Village Square (a)	Santa Clarita, CA		87,103		97.2	%		97.2	%		—		—
Lower Makefield Shopping Center (a)	Lower Makefield, PA		74,953		94.9	%		94.9	%		—		—
Denton Village (a)	Denton, TX		48,280		100.0	%		100.0	%		—		—
Rusty Leaf Plaza (a)	Orange, CA		59,188		95.7	%		97.0	%		—		—
Northville Park Place (a)	Northville, MI		78,421		100.0	%		100.0	%		—		—
CityPlace (a)	Woodbury, MN		174,813		95.1	%		95.1	%		—		—
Portfolio total			7,167,822		92.8	%		93.0	%	$	229,640		3.65	%

(a)

Property is included in the pool of unencumbered properties under our Credit Facility.

(b)

Portfolio total is equal to the weighted average interest rate.

Tenancy Highlights

The following table presents information regarding the top ten tenants in our portfolio based on annualized base rent for leases in-place as of June 30, 2022.

Tenant Name	Number of Leases		Annualized Base Rent		Percent of Total Portfolio Annualized Base Rent			Annualized Base Rent Per Square Foot		Square Footage		Percent of Total Portfolio Square Footage
The Kroger Co		5	$	4,735		4.3	%	$	15.99		296,150		4.1	%
The TJX Companies, Inc.		13		3,730		3.4	%		11.34		329,067		4.6	%
Albertsons/Jewel/Shaw's		2		2,436		2.2	%		19.05		127,892		1.8	%
Ulta Salon, Cosmetics & Fragrance Inc.		11		2,428		2.2	%		21.88		110,958		1.5	%
Amazon/Whole Foods Market Group, Inc.		3		2,340		2.1	%		20.27		115,410		1.6	%
Ross Dress for Less, Inc.		10		2,340		2.1	%		8.93		262,080		3.7	%
Sprouts Farmers Market, LLC		4		2,159		2.0	%		19.09		113,092		1.6	%
PetSmart		7		2,032		1.9	%		14.67		138,578		1.9	%
Dicks Sporting Goods, Inc.		4		2,012		1.8	%		11.13		180,766		2.5	%
LA Fitness (Fitness International)		2		1,966		1.8	%		21.94		89,600		1.3	%
Top ten tenants		61	$	26,178		23.8	%	$	14.84		1,763,593		24.6	%

The following table sets forth a summary of our tenant diversity for our entire portfolio and is based on leases in-place at June 30, 2022.

Tenant Type	Gross Leasable Area – Square Footage		Percent of Total Gross Leasable Area			Percent of Total Annualized Base Rent
Discount and Department Stores		1,359,536		20.4	%		10.2	%
Grocery		1,331,589		20.0	%		17.4	%
Home Goods		925,070		13.9	%		7.4	%
Lifestyle, Health Clubs, Books & Phones		813,192		12.2	%		15.3	%
Restaurant		641,990		9.6	%		18.4	%
Apparel & Accessories		424,407		6.3	%		8.3	%
Consumer Services, Salons, Cleaners, Banks		345,783		5.2	%		9.2	%
Pet Supplies		258,889		3.9	%		4.0	%
Sporting Goods		219,387		3.3	%		2.6	%
Health, Doctors & Health Foods		212,900		3.2	%		5.4	%
Other		136,740		2.0	%		1.8	%
Total		6,669,483		100.0	%		100.0	%

The following table sets forth a summary, as of June 30, 2022, of the percent of total annualized base rent and the weighted average lease expiration by size of tenant.

Size of Tenant	Description - Square Footage	Percent of Total Annualized Base Rent			Weighted Average Lease Expiration – Years
Anchor	10,000 and over		50	%		5.6
Junior Box	5,000-9,999		13	%		4.5
Small Shop	Less than 5,000		37	%		3.7
Total			100	%		4.7

Lease Expirations

The following table sets forth a summary, as of June 30, 2022, of lease expirations scheduled to occur during the remainder of 2022 and each of the calendar years from 2023 to 2031 and thereafter, assuming no exercise of renewal options or early termination rights for leases commenced on or prior to June 30, 2022. Annualized base rent represents the rent in-place of the applicable property at June 30, 2022. The table below includes ground leases. If ground leases are excluded, annualized base rent would equal $100,040 or $19.19 per square foot for total expiring leases.

Lease Expiration Year	Number of Expiring Leases		Gross Leasable Area of Expiring Leases - Square Footage		Percent of Total Gross Leasable Area of Expiring Leases			Total Annualized Base Rent of Expiring Leases		Percent of Total Annualized Base Rent of Expiring Leases			Annualized Base Rent per Leased Square Foot
2022 (including month-to-month)		73		270,246		4.0	%	$	4,663		4.3	%	$	17.26
2023		119		814,583		12.2	%		12,212		11.1	%		14.99
2024		128		874,428		13.1	%		16,055		14.6	%		18.36
2025		135		854,267		12.8	%		16,997		15.5	%		19.90
2026		107		595,905		8.9	%		10,985		10.0	%		18.43
2027		105		838,729		12.6	%		15,161		13.8	%		18.08
2028		45		758,961		11.4	%		8,502		7.7	%		11.20
2029		22		210,161		3.2	%		3,410		3.1	%		16.23
2030		23		230,283		3.5	%		4,366		4.0	%		18.96
2031		20		191,813		2.9	%		3,662		3.3	%		19.09
Thereafter		47		1,030,107		15.4	%		13,803		12.6	%		13.40
Leased Total		824		6,669,483		100.0	%	$	109,816		100.0	%	$	16.47

Liquidity and Capital Resources

General

Our primary uses and sources of cash are as follows:

Uses		Sources
•	Interest and principal payments on mortgage loans and Credit Facility	•	Cash receipts from our tenants
•	Property operating expenses	•	Sale of shares through the DRP
•	General and administrative expenses	•	Proceeds from new or refinanced mortgage loans
•	Distributions to stockholders	•	Borrowing on our Credit Facility
•	Fees payable to our Business Manager and Real Estate Manager	•	Proceeds from sales of real estate (if any)*
•	Repurchases of shares under the SRP	•	Proceeds from issuance of securities (if any) other than through the DRP*
•	Acquisitions of real estate directly or through joint ventures*
•	Capital expenditures, tenant improvements and leasing commissions
•	Redevelopments of entire properties or certain spaces within our properties*

*We cannot provide any assurance that we will be able to sell properties or issue new securities to raise capital when we would like, for example, to increase the proportion of grocery-anchored or shadow-anchored properties or increase the size of our portfolio of properties, or under terms that would be acceptable to us considering factors such as the anticipated use of the proceeds. Because the Company’s common stock is not listed on a securities exchange, its ability to access the public or private securities markets is likely to be very limited, particularly for equity capital.

We are not currently actively marketing any properties.

At June 30, 2022, we had $58 million outstanding under the Revolving Credit Facility and $575 million outstanding under the Term Loan. At June 30, 2022 the interest rates on the Revolving Credit Facility and the Term Loan were 2.65% and 3.62%, respectively. On February 3, 2022, we extended the Revolving Credit Facility maturity date to February 3, 2026 plus a twelve month extension, at the Company’s option. We also increased the Term Loan outstanding balance to $275 million which now matures on February 3, 2027. On May 17, 2022, we amended our Credit Agreement to increase the size of the Term Loan by $300 million to $575 million and modify several covenants in each case to fund our acquisition of a portfolio of eight retail shopping center properties from Inland Retail Property Fund, LP, a Delaware limited partnership. As of August 10, 2022, we had $138 million available for borrowing under the Revolving Credit Facility, subject to the terms and conditions, including compliance with the covenants, of the Credit Agreement that governs the Credit Facility. Although $138 million is the maximum available, covenant limitations affect what we can actually draw, and we expect to have substantially less than $138 million actually available to draw or otherwise undertake as additional debt as a result of, among other things, completing the aforementioned acquisition of the eight properties and increasing the amount of the Term Loan. By “additional debt,” we mean debt in addition to existing debt such as existing mortgages. The properties comprising the borrowing base for the Credit Facility are not available to be used as collateral for other debt unless removed from the borrowing base, which would shrink availability under the Credit Facility.

As of June 30, 2022, we had total debt outstanding of $862.6 million, excluding mortgage premiums and unamortized debt issuance costs, which bore interest at a weighted average interest rate of 3.56% per annum. As of June 30, 2022, the weighted average years to maturity for our debt was 4.2 years. As of June 30, 2022 and December 31, 2021, our borrowings were 53% and 44%, respectively, of the purchase price of our investment properties. At June 30, 2022 our cash and cash equivalents balance was $2.6 million.

As of August 10, 2022, in the next twelve months, we have three mortgage loans maturing with an aggregate principal balance of $91.1 million, which we intend to repay with cash flows from operating activities or by drawing on the Revolving Credit Facility.

To preserve cash for the payment of operating and other expenses, such as debt payments, during the second quarter of 2020 our board of directors rescinded the distribution that was declared in the first quarter of 2020, and we did not declare another distribution until June 29, 2021. We also suspended our DRP and SRP. The suspension of the DRP was effective on June 6, 2020 and the suspension of the SRP was effective on June 26, 2020. On June 29, 2021, we reinstated the DRP and the SRP. The effective date of the DRP reinstatement was July 22, 2021. During the six months ended June 30, 2022, we repurchased $1.8 million of shares of common stock.

We have delayed making non-essential capital improvements and other non-essential capital expenditures at our properties since the onset of the pandemic in 2020, where possible, to preserve cash and expect to continue to delay non-essential capital expenditures until they become essential or until the risk of adverse effects of the COVID-19 pandemic on our tenants subsides and there is clarity on our tenants’ ability and willingness to pay rent and meet other lease obligations and, ultimately, on the performance of our shopping centers. As we have seen rent collections increasing during 2021 and into 2022, we have been funding capital expenditures at our properties, and we do not expect the prior delay in making these capital expenditures to have any material effect on our tenants or our ability to lease space. In the six months ended June 30, 2022, we spent $1.8 million (76%) more on capital expenditures than we did in the six months ended June 30, 2021. Additionally, we do not anticipate a material effect on our liquidity from returning to pre-pandemic levels of capital expenditures, assuming the businesses of our tenants negatively affected by the COVID-19 pandemic continue to improve or they otherwise pay their rent.

As of June 30, 2022, we have paid all interest and principal amounts when due, and are in compliance with all financial covenants under the Credit Facility as amended.

Cash Flow Analysis

	Six Months Ended June 30,						Change
	2022			2021			2022 vs. 2021
	(Dollar amounts in thousands)
Net cash flows provided by operating activities	$	27,428		$	23,698		$	3,730
Net cash flows used in investing activities	$	(282,080	)	$	(2,317	)	$	(279,763	)
Net cash flows provided by (used in) financing activities	$	250,817		$	(19,806	)	$	270,623

Operating activities

The increase in cash from operating activities during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to the fact that during the six months ended June 30, 2021, we paid amounts due to the business manager for Q3 2020 business management fees that had been deferred by the business manager offset partially by reduced collections of deferred rent from our tenants during the six months ended June 30, 2022 as the vast majority of outstanding deferred rent was collected by the end of 2021.

Investing activities

	Six Months Ended June 30,						Change
	2022			2021			2022 vs. 2021
	(Dollar amounts in thousands)
Purchase of investment properties	$	(277,772	)	$	—		$	(277,772	)
Capital expenditures		(4,087	)		(2,317	)		(1,770	)
Other assets		(221	)		—			(221	)
Net cash used in investing activities	$	(282,080	)	$	(2,317	)	$	(279,763	)

The increase in cash used for investing activities during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to the acquisition of the IRPF Properties.

Financing activities

	Six Months Ended June 30,						Change
	2022			2021			2022 vs. 2021
	(Dollar amounts in thousands)
Total changes related to debt	$	259,784		$	(19,806	)	$	279,590
Proceeds from the distribution reinvestment plan, net of shares repurchased		1,836			—			1,836
Distributions paid		(9,782	)		—			(9,782	)
Early termination of interest rate swap agreements		(1,021	)		—			(1,021	)
Net cash provided by (used in) financing activities	$	250,817		$	(19,806	)	$	270,623

During the six months ended June 30, 2022, changes in total debt increased $279.6 million from the six months ended June 30, 2021 primarily due to an increase of $300 million under our term loan that is part of our credit facility and the use of proceeds from the term loan for the acquisition of the IRPF Properties. During the six months ended June 30, 2022, we generated proceeds from the sale of shares pursuant to the DRP of $3.6 million. For the six months ended June 30, 2022, share repurchases were $1.8 million. During the six months ended June 30, 2022, we paid $9.8 million in distributions. The DRP and the SRP were both reinstated during the second half of 2021.

Distributions

Distributions when declared are paid quarterly in arrears. A summary of the distributions declared, distributions paid and cash flows provided by operations for the six months ended June 30, 2022 and 2021 follows (Dollar amounts in thousands except per share amounts):

					Distributions Paid (1)
Six Months Ended June 30,	Distributions Declared		Distributions Declared Per Share		Cash		Reinvested via DRP		Total		Cash Flows From Operations
2022	$	9,792	$	0.271200	$	6,111	$	3,671	$	9,782	$	27,428
2021	$	4,886	$	0.135600	$	—	$	—	$	—	$	23,698

(1)

Distributions were funded by cash flow from operating activities and cash on hand during the six months ended June 30, 2022.

Due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, such as debt payments, we had not paid any distributions since the first quarter of 2020. On or about July 26, 2021, we resumed paying distributions on our common stock with this first distribution in the amount of $0.135600 per share to stockholders of record as of June 30, 2021.

Results of Operations

The following discussions are based on our consolidated financial statements for the six months ended June 30, 2022 and 2021. Dollar amounts are stated in thousands.

This section describes and compares our results of operations for the three and six months ended June 30, 2022 and 2021. We generate primarily all of our net operating income from property operations. In order to evaluate our overall portfolio, management analyzes the net operating income of properties that we have owned and operated for both periods presented. A total of 44 investment properties that were acquired on or before January 1, 2021 represent our “same store” properties during the three and six months ended June 30, 2022 and 2021. “Non-same store,” as reflected in the table below, consists of properties acquired after January 1, 2021. For the three and six months ended June 30, 2022, eight properties that were acquired on May 17, 2022 constituted non-same store properties.

Net operating income is a supplemental non-GAAP performance measure that we believe is useful to investors in measuring the operating performance of our property portfolio because our primary business is the ownership of real estate, and net operating income excludes various items included in GAAP net income that do not relate to, or are not indicative of, our property operating performance, such as depreciation and amortization and parent-level corporate expenses (including general and administrative expenses). Same store net operating income is useful because it eliminates differences in net operating income resulting from the acquisition or disposition of properties during the periods presented and therefore provides a better comparison of the operating performance of our properties between periods.

The following tables present the property net operating income prior to straight-line income (expense), net, amortization of intangibles, interest, and depreciation and amortization for the three and six months ended June 30, 2022 and 2021, along with a reconciliation to net loss, calculated in accordance with U.S. GAAP.

Comparison of the three months ended June 30, 2022 and June 30, 2021

	Total									Same Store							Non-Same Store
	Three Months Ended June 30,									Three Months Ended June 30,							Three Months Ended June 30,
	2022			2021			Change			2022		2021		Change			2022		2021		Change
Rental income	$	31,587		$	29,147		$	2,440		$	28,793	$	29,147	$	(354	)	$	2,794	$	—	$	2,794
Other property income		51			62			(11	)		34		62		(28	)		17		—		17
Total income	$	31,638		$	29,209		$	2,429		$	28,827	$	29,209	$	(382	)	$	2,811	$	—	$	2,811

Property operating expenses	$	5,545		$	4,857		$	688		$	5,197	$	4,857	$	340		$	348	$	—	$	348
Real estate tax expense		4,243			3,678			565			3,643		3,678		(35	)		600		—		600
Total property operating expenses	$	9,788		$	8,535		$	1,253		$	8,840	$	8,535	$	305		$	948	$	—	$	948

Property net operating income	$	21,850		$	20,674		$	1,176		$	19,987	$	20,674	$	(687	)	$	1,863	$	—	$	1,863

Straight-line income (expense), net	$	(23	)	$	(115	)	$	92
Amortization of intangibles and lease incentives		336			139			197
General and administrative expenses		(1,351	)		(918	)		(433	)
Business management fee		(2,549	)		(2,236	)		(313	)
Depreciation and amortization		(13,789	)		(12,218	)		(1,571	)
Interest expense		(7,106	)		(5,801	)		(1,305	)
Interest and other (expense) income		—			29			(29	)
Net loss	$	(2,632	)	$	(446	)	$	(2,186	)

Net loss. Net loss was $2,632 and $446 for the three months ended June 30, 2022 and 2021, respectively.

Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties owned during the three months ended June 30, 2022 with the results of the same investment properties owned during the three months ended June 30, 2021, property net operating income decreased $687, total property income decreased $382, and total property operating expenses including real estate tax expense increased $305.

The decrease in “same store” total property income is primarily due to a decrease in recovery income due to a lower recovery percentage during the three months ended June 30, 2022.

“Non-same store” total property net operating income increased $1,863 during the three months ended June 30, 2022 as compared to 2021. The increase is a result of acquiring eight properties on May 17, 2022. On a “non-same store” basis, total property income increased $2,811 and total property operating expenses increased $948 during the three months ended June 30, 2022 as compared to 2021 as a result of these acquisitions.

Straight-line income (expense), net. Straight-line income (expense), net decreased $92 in 2022 compared to 2021. This decrease is primarily due to lower rent abatements during the three months ended June 30, 2022 partially offset by the acquisition of eight properties on May 17, 2022.

Amortization of intangibles and lease incentives. Income from the amortization of intangibles and lease incentives increased $197 in 2022 compared to 2021. The increase is primarily due to the acquisition of IRPF Properties.

General and administrative expenses. General and administrative expenses increased $433 in 2022 compared to 2021. The increase is primarily due to higher legal and professional fees during the three months ended June 30, 2022.

Business management fee. Business management fees increased $313 in 2022 compared to 2021. The increase is primarily due to the acquisition of IRPF Properties.

Depreciation and amortization. Depreciation and amortization increased $1,571 in 2022 compared to 2021. The increase is primarily due to the acquisition of eight properties on May 17, 2022, partially offset by fully amortized assets in 2022 compared to 2021.

Interest expense. Interest expense increased $1,305 in 2022 compared to 2021. The increase is primarily due to an increase in average debt outstanding driven by the acquisition of IRPF Properties.

Interest and other income. Interest and other income decreased $29 in 2022 compared to 2021.

Comparison of the six months ended June 30, 2022 and June 30, 2021

	Total									Same Store							Non-Same Store
	Six Months Ended June 30,									Six Months Ended June 30,							Six Months Ended June 30,
	2022			2021			Change			2022		2021		Change			2022		2021		Change
Rental income	$	60,612		$	58,821		$	1,791		$	57,818	$	58,821	$	(1,003	)	$	2,794	$	—	$	2,794
Other property income		80			110			(30	)		63		110		(47	)		17		—		17
Total income	$	60,692		$	58,931		$	1,761		$	57,881	$	58,931	$	(1,050	)	$	2,811	$	—	$	2,811

Property operating expenses	$	10,936		$	10,375		$	561		$	10,588	$	10,375	$	213		$	348		—	$	348
Real estate tax expense		7,973			7,348			625			7,373		7,348		25			600		—		600
Total property operating expenses	$	18,909		$	17,723		$	1,186		$	17,961	$	17,723	$	238		$	948	$	—	$	948

Property net operating income	$	41,783		$	41,208		$	575		$	39,920	$	41,208	$	(1,288	)	$	1,863	$	—	$	1,863

Straight-line income (expense), net	$	(274	)	$	(136	)	$	(138	)
Intangible amortization and inducement		474			285			189
General and administrative expenses		(2,763	)		(2,231	)		(532	)
Business management fee		(4,793	)		(4,470	)		(323	)
Depreciation and amortization		(25,643	)		(24,673	)		(970	)
Interest expense		(12,673	)		(11,843	)		(830	)
Interest and other income		(1	)		86			(87	)
Net loss	$	(3,890	)	$	(1,774	)	$	(2,116	)

Net loss. Net loss was $3,890 and $1,774 for the six months ended June 30, 2022 and 2021, respectively.

Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties during the full six months ended June 30, 2022 with the results of the same investment properties owned during the full six months ended June 30, 2021 property net operating income decreased $1,288, total property income decreased $1,050, and total property operating expenses including real estate tax expense increased $238.

The decrease in “same store” total property income is primarily due to a decrease in recovery income due to a lower recovery percentage during the six months ended June 30, 2022.

“Non-same store” total property net operating income increased $1,863 during 2022 as compared to 2021. The increase is a result of acquiring eight retail properties on May 17, 2022. On a “non-same store” basis, total property income increased $2,811 and total property operating expenses increased $948 during the six months ended June 30, 2022 as compared to 2021 as a result of these acquisitions.

Straight-line income (expense), net. Straight-line income (expense), net increased $138 in 2022 compared to 2021. This increase is primarily due to the acquisition of eight properties on May 17, 2022, partially offset by lower rent abatements during the six months ended June 30, 2022.

Amortization of intangibles and lease incentives. Income from the amortization of intangibles and lease incentives increased $189 in 2022 compared to 2021. The increase is primarily due to the acquisition of IRPF Properties.

General and administrative expenses. General and administrative expenses increased $532 in 2022 compared to 2021. The increase is primarily due to higher legal and professional fees during the six months ended June 30, 2022.

Business management fee. Business management fees increased $323 in 2022 compared to 2021. The increase is primarily due to the acquisition of IRPF Properties.

Depreciation and amortization. Depreciation and amortization increased $970 in 2022 compared to 2021. The decrease is primarily due to the acquisition of eight properties on May 17, 2022, partially offset by fully amortized assets in 2022 compared to 2021.

Interest expense. Interest expense increased $830 in 2022 compared to 2021. The increase is primarily due to an increase in average debt outstanding driven by the acquisition of IRPF Properties.

Interest and other income. Interest and other income decreased $87 in 2022 compared to 2021.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Leasing Activity

The following table sets forth leasing activity during the six months ended June 30, 2022. Leases with terms of less than 12 months have been excluded from the table.

	Number of Leases Signed		Gross Leasable Area		New Contractual Rent per Square Foot		Prior Contractual Rent per Square Foot		% Change over Prior Annualized Base Rent			Weighted Average Lease Term		Tenant Allowances per Square Foot
Comparable Renewal Leases		49		293,310	$	17.88	$	17.00		5.2	%		5.1	$	1.46
Comparable New Leases		4		6,031	$	29.59	$	25.86		14.4	%		6.3	$	22.41
Non-Comparable New and Renewal Leases (a)		33		119,390	$	16.68	N/A		N/A				7.1	$	13.80
Total		86		418,731

(a)	Includes leases signed on units that were vacant for over 12 months, leases signed without fixed rent amounts and leases signed where the previous and current lease do not have similar lease structures.

Non-GAAP Financial Measures

Accounting for real estate assets in accordance with U.S. GAAP assumes the value of real estate assets is reduced over time due primarily to non-cash depreciation and amortization expense. Because real estate values may rise and fall with market conditions, operating results from real estate companies that use U.S. GAAP accounting may not present a complete view of their performance. We use Funds from Operations, or “FFO”, a widely accepted metric to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or “NAREIT”, has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. On November 7, 2018, NAREIT’s Executive Board approved the White Paper restatement, effective December 15, 2018. The purpose of the restatement was not to change the fundamental definition of FFO but to clarify existing guidance. The restated definition of FFO by NAREIT is net income (loss) computed in accordance with U.S. GAAP, excluding depreciation and amortization related to real estate, excluding gains (or losses) from sales of certain real estate assets, excluding impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate and excluding gains and losses from change in control. We have adopted the restated NAREIT definition for computing FFO. Previously presented periods were not impacted.

Under U.S. GAAP, acquisition related costs are treated differently if the acquisition is a business combination or an asset acquisition. An acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and acquisition related costs will be capitalized rather than expensed when incurred. Publicly registered, non-listed REITs typically engage in a significant amount of acquisition activity in the early years of their operations, and thus incur significant acquisition related costs, during these initial years. Although other start up entities may engage in significant acquisition activity during their initial years,

publicly registered, non-listed REITs are unique in that they typically have a limited timeframe during which they acquire a significant number of properties and thus incur significant acquisition related costs. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Institute for Portfolio Alternatives, or “IPA”, an industry trade group, published a standardized measure known as Modified Funds from Operations, or “MFFO”, which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year, both before and after we have deployed all of our Offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

MFFO excludes expensed costs associated with investing activities, some of which are acquisition related costs that affect our operations only in periods in which properties are acquired, and other non-operating items that are included in FFO, such as straight-lining of rents as required by U.S. GAAP. By excluding costs that we consider more reflective of acquisition activities and other non-operating items, the use of MFFO provides another measure of our operating performance once our portfolio is stabilized. Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under U.S. GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of properties. MFFO should only be used as a measurement of our operating performance while we are acquiring a significant amount of properties because it excludes, among other things, acquisition costs incurred during the periods in which properties were acquired.

We believe our definition of MFFO, a non-U.S. GAAP measure, is consistent with the IPA's Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the “Practice Guideline,” issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of U.S. GAAP net income: acquisition fees and expenses; amounts relating to straight-line rents and amortization of above and below market lease assets and liabilities, accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.

Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by U.S. GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.

Our FFO and MFFO for the six months ended June 30, 2022 and 2021 are calculated as follows:

		Six Months Ended June 30,
		2022			2021
		(Dollar amounts in thousands)
	Net loss	$	(3,890	)	$	(1,774	)
Add:	Depreciation and amortization related to investment properties		25,643			24,673
	Funds from operations (FFO)		21,753			22,899

Less:	Amortization of acquired market lease intangibles, net		(529	)		(334	)
	Straight-line income (expense), net		274			136
	Modified funds from operations (MFFO)	$	21,498		$	22,701

Subsequent Events

For information related to subsequent events, reference is made to Note 15 – “Subsequent Events” which is included in our June 30, 2022 Notes to Consolidated Financial Statements in Item 1.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

We are exposed to various market risks, including those caused by changes in interest rates and commodity prices. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and commodity prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We have entered into, and may continue to enter into, financial instruments to manage and reduce the impact of changes in interest rates. The counterparties are, and are expected to continue to be, major financial institutions.

Interest Rate Risk

We are exposed to interest rate changes primarily as a result of long-term debt used to purchase properties or other real estate assets and to fund capital expenditures.

As of June 30, 2022, we had outstanding debt of $862.6 million, excluding mortgage premium and unamortized debt issuance costs, bearing interest rates ranging from 2.65% to 4.50% per annum. The weighted average interest rate was 3.56%, which includes the effect of interest rate swaps. As of June 30, 2022, the weighted average years to maturity for our mortgages and credit facility payable was 4.2 years.

As of June 30, 2022, our fixed-rate debt consisted of secured mortgage financings with a carrying value of $112.5 million and a fair value of $105.1 million. Changes in interest rates do not affect interest expense incurred on our fixed-rate debt until their maturity or earlier repayment, but interest rates do affect the fair value of our fixed rate debt obligations. If market interest rates were to increase by 1% (100 basis points), the fair market value of our fixed-rate debt would decrease by $3.3 million at June 30, 2022. If market interest rates were to decrease by 1% (100 basis points), the fair market value of our fixed-rate debt would increase by $3.4 million at June 30, 2022.

As of June 30, 2022, we had $108 million of debt or 12.5% of our total debt, excluding mortgage premium and unamortized debt issuance costs, bearing interest at variable rates with a weighted average interest rate equal to 2.65% per annum. We had variable rate debt subject to swap agreements of $642.1 million, or 74.4% of our total debt, excluding mortgage premium and unamortized debt issuance costs, at June 30, 2022.

If interest rates on all debt which bears interest at variable rates as of June 30, 2022 increased by 1% (100 basis points), the increase in interest expense on all debt would decrease earnings and cash flows by $1.1 million annually. If interest rates on all debt which bears interest at variable rates as of June 30, 2022 decreased by 1% (100 basis points), interest expense would increase earnings and cash flows by the same amount.

With regard to variable rate financing, our Business Manager assesses our interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. Our Business Manager maintains risk management control systems to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions.

We use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions are determined in light of the facts and circumstances existing at the time of the hedge. We have used derivative financial instruments, specifically interest rate swap contracts, to hedge against interest rate fluctuations on variable rate debt, which exposes us to both credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us because the counterparty may not perform. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We seek to manage the market risk associated with interest-rate contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. There is no assurance we will be successful.

In July 2017, the Financial Conduct Authority, the authority which regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the SOFR as its preferred alternative to LIBOR in derivatives and other financial contracts. Subsequently, in November 2020, the Intercontinental Exchange (“ICE”) Benchmark Administration Limited (“IBA”), the administrator of LIBOR, announced that it would consult on its intention to cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021 and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. We are not able to predict when LIBOR may be limited or discontinued or when there will be sufficient liquidity in the SOFR market. We are monitoring and evaluating the risks related to potential changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and paid on interest rate swaps. In addition, the value of

debt or derivative instruments tied to LIBOR could also be impacted when LIBOR is limited or discontinued, and contracts must be transitioned to a new alternative rate. In some instances, transitioning to an alternative rate may require negotiation with lenders and other counterparties and could present challenges. The consequences of these developments cannot be entirely predicted and could include an increase in the cost of our variable rate debt.

On February 3, 2022, we refinanced our Credit Facility, and the interest rate benchmark used in this agreement has changed from LIBOR to SOFR.

While we expect the tenors of LIBOR that are relevant to the Company to be available in substantially its current form through June 30 2023, it is possible that one or more of such LIBOR tenors will become unavailable prior to that time. This could occur, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate would be accelerated or magnified. Any of these events, as well as the other uncertainty surrounding the transition to LIBOR, could adversely affect us.

Derivatives

For information related to our derivatives, reference is made to Note 7 – “Debt and Derivative Instruments” which is included in our June 30, 2022 Notes to Consolidated Financial Statements in Item 1.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management has evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

We are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors

The following risk factors amend and supplement the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021.

We have a classified board, which may discourage a third party from acquiring us and result in our stockholders not receiving the premium price for their stock that is typically paid in connection with a change in control.

Our board of directors is divided into three classes of directors. At each annual meeting, directors of one class are elected to serve until the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualify. The classification of our board of directors may have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any transaction that could result from such offers, even if the acquisition would be in our stockholders’ best interests, and may therefore prevent a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that typically would result in stockholders receiving a premium price for their stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Equity Securities

During the period covered by this quarterly report, we did not sell any equity securities that were not registered under the Securities Act.

Share Repurchase Program

Our board of directors, in its sole discretion, may amend, suspend (in whole or in part), or terminate our SRP. In the event that we amend, suspend or terminate the SRP, however, we will send stockholders notice of the change at least thirty days prior to the change, and we will disclose the change in a report filed with the Securities and Exchange Commission on either Form 8-K, Form 10-Q or Form 10-K, as appropriate. Further, our board reserves the right in its sole discretion, at any time, and from time to time to reject any requests for repurchases.

Due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, such as debt payments, our board of directors suspended our SRP effective on June 26, 2020. No shares were repurchased during the period covered by this quarterly report. Any unfulfilled repurchase requests will automatically roll over for processing under the terms and conditions of the SRP when we restart the plan, unless a stockholder withdraws the request for repurchase.

On June 29, 2021, we announced the lifting of the suspension of our share repurchase program and adoption of the fourth amendment and restatement of the program. The effective date of the SRP reinstatement and the Fourth Amended and Restated Share Repurchase Program (the “Fourth SRP”) was August 12, 2021.

Our board of directors has amended and restated the SRP primarily to accommodate requests for Exceptional Repurchases the deadline for which overlapped with the aforementioned suspension of the SRP. Pursuant to the Fourth SRP, any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2019 and May 31, 2020 (inclusive) was timely received by us if received by January 31, 2022, and any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2020 and July 31, 2021, (inclusive) will be timely received if received by us no later than July 31, 2022.

The table below sets forth the number of shares we repurchased pursuant to our SRP during the three months ended June 30, 2022.

Period	Total Shares Requested to be Repurchased		Total Number of Shares Repurchased		Average Price Paid per Share		Amount of Shares Repurchased		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs(1)		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
April 2022		1,838,886		56,368		16.16		911		56,368		1,681,756
May 2022		—		—		—		—		—		1,681,756
June 2022		—		—		—		—		—		1,681,756
Total		1,838,886		56,368	$	16.16	$	911		56,368

(1)Our SRP was announced on October 18, 2012.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

Item 6. Exhibits

The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto and are incorporated herein by reference.

Exhibit Index

Exhibit No.		Description

3.1		Third Articles of Amendment and Restatement of Inland Real Estate Income Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on January 10, 2022 (file number 000-55146))

3.2		Third Amended and Restated Bylaws of Inland Real Estate Income Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on April 29, 2022 (file number 000-55146))

3.3		Articles Supplementary relating to the Company’s election to be subject to Section 3-803 of the MGCL (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on July 28, 2022 (file number 000-55146))

10.1		Purchase and Sale Agreement, dated as of May 5, 2022, by and between the Sellers identified therein and Inland Real Estate Income Trust, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on May 10, 2022 (file number 000-55146))

10.2		First Amendment, dated as of May 17, 2022, to Second Amended and Restated Credit Agreement, dated as of February 3, 2022, by and among Inland Real Estate Income Trust, Inc., as borrower, KeyBank National Association, individually and as administrative agent, KeyBanc Capital Markets Inc., PNC Capital Markets LLC and BofA Securities, Inc., as joint lead arrangers, and other lender parties thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the Securities and Exchange Commission on May 20, 2022 (file number 000-55146))

31.1*		Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INLAND REAL ESTATE INCOME TRUST, INC.

		/s/ Mitchell A. Sabshon
	By:	Mitchell A. Sabshon
		President and Chief Executive Officer (principal executive officer)
	Date:	August 10, 2022

		/s/ Catherine L. Lynch
	By:	Catherine L. Lynch
		Chief Financial Officer and Treasurer (principal financial officer)
	Date:	August 10, 2022