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DEBT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
DEBT DEBT
The breakdown of debt as of September 30, 2023 and December 31, 2022 is as follows:
September 30,
2023		December 31,
2022
Mortgage notes payable, net$34,118,748 $44,435,556 
Credit facility:
Revolver— 3,000,000 
Term loan, net248,385,927 148,018,164 
Total$282,504,675 $195,453,720 
Mortgage Notes Payable, Net
As of September 30, 2023 and December 31, 2022, the Company’s mortgage notes payable consisted of the following:
Collateral2023 Principal
Amount		2022 Principal
Amount
Interest Rate (1)
Loan
Maturity
Costco property$18,850,000 $18,850,000 4.85%1/01/2030
Taylor Fresh Foods property12,350,000 12,350,000 3.85%11/01/2029
OES property (2)
3,084,849 13,315,009 4.50%3/09/2024
Total mortgage notes payable34,284,849 44,515,009 
Plus unamortized mortgage premium, net (3)
10,893 119,245 
Less unamortized deferred financing costs(176,994)(198,698)
Mortgage notes payable, net$34,118,748 $44,435,556 
(1)Represents the contractual interest rate in effect under the mortgage note payable as of September 30, 2023 for the three mortgages that were not refinanced through a drawdown from the Credit Facility (defined and discussed below) with KeyBank National Association (“KeyBank”) in January 2022 given their prepayment penalties.
(2)During August and September 2023, the Company prepaid an aggregate of $10,000,000 principal amount of the mortgage on the OES property following the dispositions completed in August 2023. The Company intends to pay the remainder on or before the loan maturity date.
(3)Represents unamortized net mortgage premium acquired through the merger with Rich Uncles Real Estate Investment Trust I on December 31, 2019.
The following summarizes the face value, carrying amount and fair value of the Company’s mortgage notes payable (Level 3 measurement) as of September 30, 2023 and December 31, 2022:
September 30, 2023December 31, 2022
Face ValueCarrying
Value		Fair ValueFace valueCarrying
Value		Fair Value
Mortgage notes payable$34,284,849 $34,118,748 $30,736,613 $44,515,009 $44,435,556 $41,293,644 
Credit Facility, Net
On January 18, 2022, the Company's Operating Partnership entered into a $250,000,000 credit agreement (‘‘Credit Agreement’’) providing for a $100,000,000 four-year revolving line of credit, which may be extended by up to 12 months subject to certain conditions (the ‘‘Revolver’’), and a $150,000,000 five-year term loan (the ‘‘Term Loan’’ and together with the ‘‘Revolver,’’ the ‘‘Credit Facility’’) with KeyBank and the other lending institutions party thereto (collectively, the ‘‘Lenders’’), including KeyBank as Agent for the Lenders (in such capacity, the ‘‘Agent’’), BMO Capital Markets, Truist Bank and The Huntington National Bank as Co-Syndication Agents (the “Co-Syndication Agents”) and KeyBanc Capital Markets Inc., BMO Capital Markets, Inc., Truist Securities, Inc. and The Huntington National Bank as Joint-Lead Arrangers (the “Lead Arrangers”). The Credit Facility is available for general corporate purposes, including, but not limited to, acquisitions, repayment of existing indebtedness and capital expenditures.
On October 21, 2022, the Company exercised the accordion feature of its Credit Facility and increased the Credit Facility to $400,000,000, comprised of a $150,000,000 Revolver and a $250,000,000 Term Loan. The Credit Facility includes an updated accordion option that allows the Company to request additional Revolver and Term Loan lender commitments up to a total of $750,000,000 subject to customary conditions, including the receipt of new commitments from the Lenders. On December 20, 2022, the Credit Agreement was amended to allow the Company to draw on the additional $100,000,000 Term Loan commitment up to five times between December 20, 2022 and April 19, 2023 in exchange for a quarterly unused fee, which amounted to zero and $92,569 during the three and nine months ended September 30, 2023, respectively. The Company drew $20,000,000 and the remaining $80,000,000 of the delayed draw Term Loan during the first and second quarters of 2023, respectively. The maturities for the Company's Revolver and Term Loan remain unchanged with the Revolver’s maturity in January 2026 with options to extend for a total of 12 months, and the Term Loan’s maturity in January 2027.
The Credit Facility is priced on a leverage-based grid that fluctuates based on the Company's actual leverage ratio at the end of the prior quarter. With the Company's leverage ratio at 47% as of June 30, 2023, the spread over the Secured Overnight Financing Rate (‘‘SOFR’’), including a 10-basis point credit adjustment, is 185 basis points for the Revolver and the interest rate on the Revolver was 7.1625% on September 30, 2023; however, there was no outstanding balance on the Revolver. The Company also pays an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment, and incurred total unused fees of $94,525 and $47,543 for the three months ended September 30, 2023 and 2022, respectively, and $384,164 and $119,823 for the nine months ended September 30, 2023 and 2022, respectively.
On May 10, 2022, the Company entered into a swap agreement, effective May 31, 2022, to fix SOFR at 2.258% with respect to its original $150,000,000 Term Loan as described in Note 8, which results in a fixed interest rate of 4.058% on the Term Loan based on the Company's leverage ratio of 48% as of September 30, 2023.
On October 26, 2022, the Company entered into a swap agreement, effective November 30, 2022, to fix SOFR at 3.44% with respect to its expanded Term Loan as described in Note 8, which results in a fixed interest rate of 5.240% on the additional $100,000,000 to be borrowed under the Term Loan based on the Company's leverage ratio of 48% as of September 30, 2023.
The Credit Facility includes customary representations, warranties and covenants, including covenants regarding minimum fixed charge coverage of 1.50x, minimum tangible net worth of $208,629,727 plus 85% of net offering proceeds after January 18, 2022, and maximum consolidated leverage of 60%. The Credit Facility is secured by a pledge of all of the Operating Partnership’s equity interests in certain of the single-purpose, property-owning entities (the ‘‘Subsidiary Guarantors’’) that are indirectly owned by the Company, and various cash collateral owned by the Operating Partnership and the Subsidiary Guarantors. In connection with the Credit Facility, the Company and each of the Subsidiary Guarantors entered into an Unconditional Guaranty of Payment and Performance in favor of the Agent, pursuant to which the Company and each of the Subsidiary Guarantors agreed to guarantee the full and prompt payment of the Operating Partnership’s obligations under the Credit Agreement.
While the Credit Facility allows for borrowings up to 60% of the Company's borrowing base, the Company is targeting leverage of 40% or lower over the long-term once it achieves scale; however, the Company currently has, and may continue to have, higher leverage in the near-term if it identifies attractive acquisition opportunities in advance of completing dispositions or raising additional equity.
Credit Facility Repayments and Drawdowns
On January 5, 2023, the Company repaid $3,000,000 of the outstanding balance on its Revolver with available cash on hand to reduce interest expense.
On January 25, 2023, the Company borrowed $10,000,000 under its additional $100,000,000 Term Loan commitment in advance of acquiring a property located in Princeton, Minnesota leased to Plastic Products Company, Inc. On March 29, 2023, the Company again borrowed $10,000,000 under its Term Loan commitment in advance of acquiring a property located in Savage, Minnesota leased to Stealth Manufacturing. In April 2023, additional draws aggregating $80,000,000 were made on the additional Term Loan.
In July 2023, the Company borrowed $21,000,000 under its Revolver commitment in advance of acquiring a property in Piqua, Ohio leased to NVH Acquisition Holdings, LLC (dba Vistech) and a property in Andrews, South Carolina leased to SixAxis, LLC. In August 2023, the Company repaid the $21,000,000 outstanding balance on its Revolver with proceeds from the GIPR disposition described in Note 3.
Compliance with All Debt Agreements
Pursuant to the terms of mortgage notes payable on certain of the Company’s properties and the Credit Facility, the Company and/or the subsidiary borrowers are subject to certain financial loan covenants. The Company and/or the subsidiary borrowers were in compliance with such financial loan covenants as of September 30, 2023.
Future Principal Payments
The following summarizes the future principal repayments of the Company’s mortgage notes payable and Credit Facility as of September 30, 2023:
Mortgage NotesCredit Facility
PayableRevolverTerm LoanTotal
October through December 2023
$179,918 $— $— $179,918 
20243,174,547 — — 3,174,547 
2025543,886 — — 543,886 
2026568,369 — — 568,369 
2027593,972 — 250,000,000 250,593,972 
Thereafter29,224,157 — — 29,224,157 
Total principal34,284,849 — 250,000,000 284,284,849 
Plus unamortized mortgage premium, net10,893 — — 10,893 
Less deferred financing costs(176,994)— (1,614,073)(1,791,067)
Net principal$34,118,748 $— $248,385,927 $282,504,675 
Interest Expense, Net of Derivative Settlements and Unrealized Gain on Interest Rate Swaps
The following is a reconciliation of the components of interest expense, net of derivative settlements and unrealized gain on interest rate swaps for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Mortgage notes payable:
Interest expense$411,610 $488,773 $1,354,642 $1,762,378 
Amortization of deferred financing costs7,235 7,235 21,705 21,694 
Credit facility:
Interest expense4,509,026 1,636,414 10,895,933 3,083,299 
Unused commitment fees94,525 47,543 384,164 119,823 
Amortization of deferred financing costs214,261 120,829 642,783 342,349 
Swap derivatives:
Derivative cash settlements (1)(1,586,641)99,942 (4,062,442)269,442 
Unrealized loss (gain) on interest rate swap valuation for first swap (2)
167,926 — (327,824)(589,997)
Amortization of interest rate swap valuation (2)(253,092)59,000 (756,495)59,000 
Unrealized gain on interest rate swap valuation for second swap (3)
(710,258)— (1,697,519)— 
Other68,326 55,102 306,832 212,179 
Interest expense, net$2,922,918 $2,514,838 $6,761,779 $5,280,167 
(1)    The Company entered into two swap transaction instruments for (i) its original $150,000,000 Credit Facility Term Loan (first swap) effective May 31, 2022 and (ii) its additional $100,000,000 Term Loan commitment (second swap) effective November 30, 2022, as described in detail in Note 8.
(2)    Due to the Company's $150,000,000 derivative instrument's failure to qualify as a cash flow hedge because it was deemed ineffective for the three and nine months ended September 30, 2023 as described in Note 8, the $167,926 loss and $327,824 gain in the swap valuation for the three and nine months ended September 30, 2023, respectively, are recognized as an increase and a decrease in interest expense, respectively, and the unrealized gain on interest rate swap derivative previously recorded in accumulated other comprehensive income and noncontrolling interest in operating partnership is being amortized on a straight-line basis as a reduction to interest expense through the maturity date of the loan agreement (see Note 8 for more details).
(3)    The Company's $100,000,000 derivative instrument was not designated as a cash flow hedge and, therefore, the $710,258 and $1,697,519 gains in the valuation of this swap for the three and nine months ended September 30, 2023, respectively, are reflected as reductions in interest expense (see Note 8 for more details)