MONMOUTH REAL ESTATE INVESTMENT CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Form 10-Q)

Forward-looking statements

This quarterly report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements provide our current expectations or forecasts of future events.
Forward-looking statements include statements about our expectations, beliefs,
intentions, plans, objectives, goals, strategies, future events, performance and
underlying assumptions and other statements that are not historical facts.
Forward-looking statements can be identified by their use of forward-looking
words, such as "may," "will," "anticipate," "expect," "believe," "intend,"
"plan," "should," "seek" or comparable terms, or the negative use of those
words, but the absence of these words does not necessarily mean that a statement
is not forward-looking.



The forward-looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account all information
currently available to us. Forward-looking statements are not predictions of
future events. These beliefs, assumptions and expectations can change as a
result of many possible events or factors, not all of which are known to us.
Some of these factors are described below and are described under the above
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations" above and the headings "Business," "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2021. These and other risks, uncertainties and factors could cause
our actual results to differ materially from those included in any
forward-looking statements we make. Any forward-looking statement speaks only as
of the date on which it is made. New risks and uncertainties arise over time,
and it is not possible for us to predict those events or how they may affect us.
Except as required by law, we are not obligated to, and do not intend to, update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Important factors that could cause
actual results to differ materially from our expectations include, among others:

? the ability of our tenants to make payments under their respective leases;

? our dependence on certain major tenants;

? our ability to re-let properties that are currently vacant or that become

   vacant;

? our ability to find suitable tenants for our properties;

? changes in real estate market conditions, economic conditions in the industrial sector

sector, the markets in which our properties are located and the general economy

   conditions;

? the inherent risks associated with owning real estate, including premises

real estate market conditions, applicable laws and regulations and illiquidity of

   real estate investments;




 ? our ability to acquire, finance and sell properties on attractive terms;

? our ability to repay our debt financing obligations;

? our ability to refinance amounts outstanding on our debt obligations to

maturity on terms favorable to us, or not at all;

? the loss of any member of our management team;

? our ability to comply with covenants;

? our ability to integrate acquired properties and operations into the

   operations;

? the continued availability of proceeds from our debt or equity issues

   securities;

? the availability of other debt and equity financing solutions;

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? changes in interest rates, including replacement of the LIBOR benchmark

variable rate, under our current credit facility and under any other variable rate

debt agreements we may enter into in the future;

? our ability to successfully implement our selective acquisition strategy;

? our ability to maintain internal controls and procedures to ensure

transactions are properly accounted for, all relevant disclosures and documents

are carried out in a timely manner in accordance with all rules and regulations, and with any

fraud or embezzlement is thwarted or detected;

? changes in federal or state tax rules or regulations that could adversely affect

   tax consequences;

? declines in the market prices of our investment securities;

 ? the effect of COVID-19 on our business and general economic conditions;

? our ability to qualify as a REIT for federal income tax purposes;

? the inability to carry out the proposed merger with ILPT because, among other things

reasons, one or more conditions at the closing of the contemplated transaction may

not being satisfied or given up;

? uncertainty as to the timing of the completion of the proposed merger;

? any adverse effects or changes in relations with our tenants,

employees, service providers or other parties doing business with us

   resulting from the announcement or completion of the proposed merger;

? the outcome of legal proceedings that may be brought against the parties

and others related to the merger agreement;

? any disruptions to the proposed merger that could harm our business,

including current plans and operations;

? any unforeseen costs, charges or expenses resulting from the proposed merger; and

? the possibility that the expected benefits of the proposed merger will not be

   be realized or will not be realized within the expected time period.

You should not place undue reliance on these forward-looking statements, as
events described or implied in such statements may not occur. Although we have
entered into the merger agreement with ILPT, there can be no assurance that the
merger and other transactions contemplated by the merger agreement will be
completed.

We undertake no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise.

Merger agreement with Industrial Logistics Properties Trust

As previously announced, on November 5, 2021, we entered into an Agreement and
Plan of Merger (the "Merger Agreement") with ILPT and Maple Delaware Merger Sub
LLC, a Delaware limited liability company and a wholly owned subsidiary of ILPT
("Merger Sub"). Pursuant to the Merger Agreement, subject to the terms and
conditions set forth in the Merger Agreement, we would be acquired by ILPT in an
all-cash transaction for $21.00 per common share, representing an aggregate
equity value of approximately $2.1 billion. The Merger Agreement provides, among
other things, that we will be merged with and into Merger Sub (the "Merger"),
with Merger Sub continuing as the surviving entity and as a wholly owned
subsidiary of ILPT. Following the Merger, our common stock would no longer be
traded on the New York Stock Exchange.



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The Merger Agreement provides that each share of our common stock, par value
$0.01 per share ("Common Stock") outstanding immediately prior to the effective
time of the Merger (the "Effective Time") (other than shares of Common Stock
owned by ILPT, Merger Sub or any wholly owned subsidiary of us or ILPT) will, at
the Effective Time, be converted into the right to receive $21.00 in cash (the
"Common Stock Merger Consideration"), without interest and subject to applicable
withholding taxes. Pursuant to the Merger Agreement, as of the Effective Time,
(i) each outstanding stock option issued pursuant to our equity incentive plan,
whether vested or unvested, will be cancelled and the holder will be entitled to
receive an amount in cash equal to the product of (A) the excess, if any, of the
Common Stock Merger Consideration over the applicable exercise price of such
option, multiplied by (B) the number of shares subject to such option, subject
to applicable withholding taxes, and (ii) each unvested restricted stock award
issued pursuant to our equity incentive plan that is outstanding immediately
prior to the Effective Time will be cancelled and the holder will be entitled to
receive the Common Stock Merger Consideration in respect of each underlying
share of Common Stock, subject to applicable withholding taxes. Upon closing of
the merger with ILPT, holders of our outstanding 6.125% Series C Preferred Stock
will receive $25.00 in cash per share plus any accumulated and unpaid dividends
to, but not including, the date the merger is completed. The Merger Agreement
permits us to, and we plan to, continue to pay our regular quarterly common
stock dividend and our Series C Preferred Stock dividend for each full quarterly
dividend period completed prior to the closing of the transaction, in amounts
not exceeding $0.18 per share for our common stock and equal to $0.3828125 per
share for our 6.125% Series C Preferred Stock.



The obligation of the parties to complete the Merger is subject to customary
closing conditions, including (i) the approval of the Merger by holders of at
least two-thirds of our outstanding shares of Common Stock entitled to vote
thereon (the "Company Stockholder Approval"), the special meeting of
shareholders for which is scheduled to take place on February 17, 2022 (ii) the
absence of any law, regulation, order or injunction of a court or governmental
entity of competent jurisdiction making illegal or prohibiting the consummation
of the Merger, (iii) the accuracy of the other party's representations and
warranties contained in the Merger Agreement (subject to certain
qualifications), (iv) the other party's performance in all material respects of
its obligations under the Merger Agreement that are required to be performed
prior to the closing of the Merger and (v) in the case of ILPT, the receipt of
customary tax opinion from our tax counsel.



We have made customary representations, warranties and covenants in the Merger
Agreement, including, among others, covenants (i) to use our commercially
reasonable efforts to conduct our business in all material respects in the
ordinary course consistent with past practice during the period between the
execution of the Merger Agreement and the closing of the Merger, and not to
engage in specified types of transactions during this period, subject to certain
exceptions and (ii) to convene a meeting of our shareholders for the purpose of
obtaining the requisite approval of our common shareholders of the Merger. The
Merger Agreement contains customary no-shop restrictions that limit our and our
representatives' ability to solicit alternative acquisition proposals from third
parties, subject to customary "fiduciary out" provisions.



Our Merger Agreement with ILPT represents the culmination of the publicly
announced comprehensive strategic alternatives review processes conducted during
2021 by our Board of Directors. Our Board re-initiated its strategic
alternatives review process in September 2021 after a previous agreement for a
stock-for-stock merger that we entered into with another party, following a
strategic alternatives review process in the first half of calendar year 2021,
did not receive the requisite approval of our shareholders and was terminated.

Overview and recent activity

The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements and notes thereto provided elsewhere herein and our Annual
Report on Form 10-K for the fiscal year ended September 30, 2021.



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We operate as a Real Estate Investment Trust (REIT). We seek to invest in modern, well-located, single-tenant industrial properties leased primarily to high-quality tenants or their affiliates on long-term net leases. We were founded in 1968 and are one of the oldest public equity REITs in the world.

During the three months ended December 31, 2021, we purchased one new
built-to-suit, net-leased, industrial property, located in the Birmingham, AL
Metropolitan Statistical Area (MSA) with approximately 291,000 square feet, for
$30.2 million. The building is 100% net-leased to FedEx Ground Package System,
Inc. for 15 years through July 2036. Annual rental revenue over the remaining
term of the lease averages $1.7 million. As of December 31, 2021, we owned 123
properties with total square footage of 25.2 million. These properties are
located in 32 states. As of December 31, 2021, our weighted average lease term
was 7.1 years, our occupancy rate was 99.7%, and our annualized average base
rent per occupied square foot was $6.69. As of December 31, 2021, the weighted
average building age, based on the square footage of our buildings, was 10.2
years. In addition, total gross real estate investments, excluding marketable
REIT securities investments of $160.3 million, were $2.3 billion as of December
31, 2021.



Subsequent to quarter end, on January 28, 2022, we purchased a newly constructed
530,000 square foot industrial building, situated on 53.5 acres, located in the
Birmingham, AL Metropolitan Statistical Area (MSA). The building is 100%
net-leased to Mercedes Benz US International, Inc. for 10 years through November
2031. The property was acquired for a purchase price of $51.7 million. Annual
rental revenue over the remaining term of the lease averages $3.3 million. With
the addition of this new acquisition, we currently have 124 properties
consisting of 25.7 million rentable square feet which are located in 32 states
with a weighted average lease term of 7.2 years and an annualized average base
rent per occupied square foot of $6.69.



See PART I, Item 1 - Business in our Annual Report on Form 10-K for the fiscal
year ended September 30, 2021 for a more complete discussion of the economic and
industry-wide factors relevant to us and the opportunities, challenges, and
risks on which we are focused.



Our portfolio of modern, net-leased industrial properties continues to provide
shareholders with reliable and predictable income streams. Our resilient
occupancy rates and rent collection results highlight the mission-critical
nature of our assets and underscore the essential need for our tenants'
operations. Furthermore, because our weighted average lease term is 7.1 years
and our weighted average fixed rate mortgage debt maturity is 10.7 years, we
expect our cash flow to remain resilient over long periods of time. Our overall
occupancy rate has been over 99% throughout the COVID-19 Pandemic and is 99.7%.
as of the quarter end. Our base rent collections remained strong, averaging
99.9% throughout the COVID-19 Pandemic and we expect future months to be
consistent with this trend.



US industrial real estate market conditions are as strong as they have ever been
with record high asking rents, a robust development pipeline, and an all-time
high occupancy rate of 97%. Companies are leasing space at record levels to
handle the large increase in ecommerce sales as well as the need for safety
stock to counter supply chain disruptions. Construction costs are rising
dramatically due to the long lead times for sourcing materials. The amount of
new construction for US industrial real estate has been increasing for several
years as more industrial space is needed to handle direct-to-consumer
distribution. It is estimated that ecommerce sales require three times the
amount of warehouse space relative to brick and mortar retail sales. These new
buildings are often highly automated and have much larger truck courts and
parking requirements. Because modern industrial buildings are built to handle
both wholesale distribution as well as direct to consumer distribution, they are
known as omni-channel facilities. The West coast ports are continuing to
experience severe bottlenecks in processing imports and therefor, container
traffic is being diverted towards the Gulf and East coast ports. The West coast
ports are continuing to experience severe bottlenecks in processing imports and
as a result much container traffic is being diverted towards the Gulf and East
coast ports. Given our geographic footprint, this trend is a very favorable

one
for us.



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We evaluate our financial performance using Net Operating Income (NOI) from
property operations, which we believe is a useful indicator of our operating
performance. NOI is a non-GAAP financial measure that we define as Net Income
Attributable to Common Shareholders plus Preferred Dividend Expense, General and
Administrative Expenses, Non-recurring Strategic Alternatives & Proxy Costs,
Depreciation, Amortization of Capitalized Lease Costs and Intangible Assets,
Interest Expense, including Amortization of Financing Costs, Unrealized Holding
Gains Arising During the Periods, less Dividend Income and Lease Termination
Income. The components of NOI are recurring Rental and Reimbursement Revenue,
less Real Estate Taxes and Operating Expenses, such as insurance, utilities, and
repairs and maintenance. Other REITs may use different methodologies to
calculate NOI and, accordingly, our NOI may not be comparable to all other
REITs.



The following is a reconciliation of our Net Income Attributable to Common
Shareholders to our NOI for the three months ended December 31, 2021 and 2020
(in thousands):



                                                          Three Months Ended
                                                      12/31/2021         12/31/2020

Net income attributable to common shareholders $11,417 $

25,746

Plus: Preferred Dividend Expense                            8,416          

8,170

Plus: General & Administrative Expenses                     2,442          

2,272

Plus: Non-recurring Strategic Alternatives &
Proxy Costs                                                12,274          

-0-

Plus: Depreciation                                         13,728          

12,078

Plus: Amortization of Capitalized Lease Costs
and
Intangible Assets                                             894          

809

Plus: Interest Expense, including Amortization
of
Financing Costs                                             9,822          

9,159

Less/Plus: Unrealized Holding Gains Arising
During the Periods                                        (16,508 )          (19,721 )
Less: Dividend Income                                      (1,729 )           (1,607 )
Less: Lease Termination Income                                -0-          

    (377 )
Net Operating Income- NOI                          $       40,756     $       36,529

The components of our NOI for the three months ended December 31, 2021 and 2020 are as follows (in thousands):

                                              Three Months Ended
                                           12/31/2021       12/31/2020
Rental Revenue                           $     40,999     $     36,846
Reimbursement Revenue                           7,475            6,737
Total Rental and Reimbursement Revenue         48,474           43,583
Real Estate Taxes                              (5,956 )         (5,318 )
Operating Expenses                             (1,762 )         (1,736 )
Net Operating Income- NOI                $     40,756     $     36,529

NOI from property operations increased $4.2 million, or 12%, for the three
months ended December 31, 2021 as compared to the three months ended December
31, 2020. This increase was due to the acquisition of four new built-to-suit,
net-leased, industrial properties, totaling approximately 1.6 million square
feet purchased during fiscal 2021 and the acquisition of one new built-to-suit,
net-leased, industrial property with approximately 291,000 square feet purchased
during fiscal 2022.



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Acquisitions



On October 27, 2021, we purchased a newly constructed 291,000 square foot
industrial building, situated on 46.0 acres, located in the Birmingham, AL MSA.
The building is 100% net-leased to FedEx Ground Package System, Inc. for 15
years through July 2036. The property was acquired for a purchase price of $30.2
million. Annual rental revenue over the remaining term of the lease averages
$1.7 million.

FedEx Ground Package System, Inc. Ultimate parent company, FedEx Corporation is a publicly traded company and financial information relating to this entity is available on the DRY website, www.sec.gov. References in this report to the DRY are not intended to and do not include, or incorporate by reference in this report, the information at www.sec.gov.

Subsequent to quarter end, on January 28, 2022, we purchased a newly constructed
530,000 square foot industrial building, situated on 53.5 acres, located in the
Birmingham, AL MSA. The building is 100% net-leased to Mercedes Benz US
International, Inc. for 10 years through November 2031. The property was
acquired for a purchase price of $51.7 million. Annual rental revenue over the
remaining term of the lease averages $3.3 million.



Expansions



During fiscal 2021, we completed the first phase of a two-phase parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Olathe (Kansas City), KS. The first phase of this parking expansion project
was completed for a total cost of $3.4 million, resulting in an initial increase
in annual rent effective November 5, 2020 of approximately $340,000 from
approximately $2.14 million, or $6.83 per square foot, to approximately $2.48
million, or $7.91 per square foot. Furthermore, annual rent increased by 2.1% on
June 1, 2021 and was to continue to increase 2.1% every five years, resulting in
an annualized rent of $2.56 million, or $8.15 per square foot, from November 5,
2020 through May 2031, the remaining term of the lease. During the three months
ended December 31, 2021, we completed the second phase of this parking expansion
project at this location for a total cost of $2.3 million, resulting in an
initial increase in annual rent effective November 19, 2021 of approximately
$185,000 from approximately $2.53 million, or $8.08 per square foot, to
approximately $2.72 million, or $8.67 per square foot. In addition, the
expansion resulted in a new 14.5 year lease which extended the prior lease
expiration date from May 2031 to May 2036. Furthermore, annual rent will
increase by 1.9% on June 1, 2026 resulting in an annualized rent of
approximately $2.76 million, or $8.78 per square foot from November 19, 2021
through the remaining term of the lease.



During the three months ended December 31, 2021, we completed a parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Wheeling, IL for a total cost of $1.0 million, resulting in an initial
increase in annual rent effective October 28, 2021 of approximately $105,000
from approximately $1.27 million, or $10.34 per square foot, to approximately
$1.38 million, or $11.19 per square foot. In addition, the expansion resulted in
a new 9.8 year lease which extended the prior lease expiration date from May
2027 to August 2031.



During the three months ended December 31, 2021, we completed a parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Sauget (St. Louis, MO), IL for a total cost of $3.8 million, resulting in an
initial increase in annual rent effective November 10, 2021 of approximately
$346,000 from approximately $1.04 million, or $5.21 per square foot, to
approximately $1.38 million, or $6.95 per square foot. In addition, the
expansion resulted in a new 13.8 year lease which extended the prior lease
expiration date from May 2029 to August 2035. Furthermore, annual rent will
increase by 3.7% on June 1, 2029 resulting in an annualized rent from November
10, 2021 through the remaining term of the lease of approximately $1.40 million,
or $7.07 per square foot.



During the three months ended December 31, 2021, we completed a parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Orion, MI for a total cost of $6.5 million, resulting in an initial increase
in annual rent effective November 24, 2021 of approximately $651,000 from
approximately $1.91 million, or $7.77 per square foot, to approximately $2.56
million, or $10.42 per square foot. In addition, the expansion resulted in a new
9.9 year lease which extended the prior lease expiration date from June 2023 to
October 2031.



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The four parking lot expansions completed this quarter, as described above, totaled
$13.7 million and resulted in a total rent increase of $1.3 million and a weighted average lease extension of 6.7 years.

Commitments



In addition to the property purchased subsequent to the quarter end, we have
entered into agreements to purchase two, new build-to-suit, industrial buildings
that are currently being developed in Georgia and Texas, totaling 563,000 square
feet. Both of these future acquisitions have net-leased terms of 15 years. The
total purchase price for these two properties is $78.8 million. Both of these
properties are leased to FedEx Ground Package System, Inc. Subject to
satisfactory due diligence and other customary closing conditions and
requirements, we anticipate closing both of these transactions during fiscal
2022. FedEx Ground Package System, Inc.'s ultimate parent, FedEx Corporation is
a publicly-listed company and financial information related to this entity is
available at the SEC's website, www.sec.gov. The references in this report to
the SEC's website are not intended to and do not include, or incorporate by
reference into this report, the information on the www.sec.gov website.



In addition to the four parking expansions completed this quarter, we have
several FedEx Ground parking expansion projects in progress with more under
discussion. Currently there are six parking expansion projects underway, which
we expect to cost approximately $31.4 million. These parking expansion projects
will enable us to capture additional rent while lengthening the terms of these
leases. We are also in discussions to expand the parking at seven additional
locations bringing the total recently completed and likely future parking lot
expansion projects to 18 currently.



Due to the proliferation of ecommerce sales and last mile deliveries, it is
important to take into account the large amounts of real estate utilized for
trailer, van, and car parking at many of our properties in determining how our
in-place rental rates compare to market rental rates for properties being used
in a similar manner. Rents per square foot on properties that may be nearby, but
have only limited acreage devoted to parking, are poor comparisons as they
cannot accommodate the same tenant needs.

Significant Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
are based upon our Consolidated Financial Statements, which have been prepared
in accordance with Accounting Principles Generally Accepted in the United States
of America (U.S. GAAP). The preparation of these Consolidated Financial
Statements requires us to make estimates and judgments that affect the reported
amounts of assets and liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities at the date of our Consolidated Financial
Statements. Actual results may differ from these estimates under different
assumptions or conditions.



On a regular basis, we evaluate our assumptions, judgments and estimates. We
believe that there have been no material changes to the items that we disclosed
as our significant accounting policies and estimates under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," in
our Annual Report on Form 10-K for fiscal year ended September 30, 2021.

Changes in operating results

As of December 31, 2021, we owned 123 properties with total square footage of
25.2 million, as compared to 121 properties with total square footage of 24.5
million, as of December 31, 2020, representing an increase in square footage of
2.7%. At quarter end, the Company's weighted average lease term was
approximately 7.1 years, as compared to 7.5 years at the end of the prior year
period. Our occupancy rate has remained steady at 99.7% for the quarters ended
December 31, 2021 and December 31, 2020. Our weighted average building age was
10.2 years as of December 31, 2021, as compared to 9.5 years as of December

31,
2020.



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Fiscal 2022 Renewals



In fiscal 2022, approximately 5% of our gross leasable area, representing seven
leases totaling 1.2 million square feet, are scheduled to expire. Three of these
seven leases were renewed thus far, for a weighted average term of 6.7 years, at
a rental rate decrease of 3.1% on a GAAP basis and at a rental rate decrease of
7.2% on a cash basis. These three lease renewals represent 277,113 square feet,
or 24% of the square footage scheduled to expire in fiscal 2022.



We have incurred or we expect to incur leasing commission costs of $361,000 in
connection with two of the three lease renewals and we have incurred or we
expect to incur tenant improvement costs of $50,000 in connection with one of
the lease renewals. The table below summarizes the terms of the three leases
that were renewed. In addition, the table below includes both the tenant
improvement costs and the leasing commission costs, which are presented on a per
square foot (PSF) basis averaged annually over the renewal terms.



                                                                                                                                                                                                          Leasing
                                                                                                                                                                                         Tenant         Commission
                                                                                                                                          Renewal                                      Improvement       Cost PSF
                                                                  Former U.S. GAAP       Former         Former     Renewal U.S GAAP       Initial        Renewal                      Cost PSF over        over
                                                                  

Straight- Line      Cash Rent        Lease       Straight- Line       Cash Rent        Lease      Renewal Term     Renewal Term        Renewal
      Property                 Tenant            Square Feet          Rent PSF            PSF         Expiration       Rent PSF             PSF         Expiration     (years)             (1)           Term (1)

Houston, TX            National Oilwell Varco          91,925     $           8.26     $     8.44      9/30/22     $           8.88     $      8.44      9/30/29              7.0     $         -0-     $      0.34

Burr Ridge, IL         Sherwin-Williams                12,500                12.80          12.94      10/31/21               12.99           12.94      10/31/26             5.0              0.80             -0-
Livonia, MI            FedEx Ground                   172,688                 6.91           6.91      3/31/22                 6.17            6.03      10/31/28             6.6               -0-            0.12
                               Total                  277,113

Weighted Average                                                  $           7.62     $     7.69                  $           7.38     $      7.14                           6.7     $        0.03     $      0.20

(1) Amount calculated based on total cost divided by square feet, divided

     by the renewal term.




Our 105,000 square foot facility located in Cheektowaga (Buffalo), NY was leased
to Sonwil Distribution Center, Inc. through January 31, 2022. This tenant
informed us that they will not be renewing their lease. We recently entered into
a new seven-year lease agreement for this facility with UPS which became
effective February 1, 2022 through January 31, 2029. The lease with UPS provides
for initial annual rent of $683,000, representing $6.50 per square foot with
2.0% annual increases thereafter, resulting in a U.S. GAAP straight-line
annualized rent of $725,000, representing $6.91 per square foot over the life of
the lease. This compares to the former U.S. GAAP straight-line rent and former
cash rent of $6.00 per square foot, resulting in an increase in the average
lease rate of 15.0% on a U.S. GAAP straight-line basis and an increase of 8.3%
on a cash basis.



The lease to UPS, along with the three lease renewals in the table above,
results in a weighted average lease term of 6.7 years, at a rental rate increase
of 1.0% on a GAAP basis and a decrease of 3.7% on a cash basis. These four
leases represent 382,000 square feet, or 33% of the expiring square footage

for
fiscal 2022.



Also not included in the table above is our 185,000 square foot facility located
in Granite City (St. Louis, MO), IL that was leased to Anheuser-Busch through
November 30, 2021. Anheuser-Busch renewed for only four months, until March 31,
2022, after which it is expected that they will be moving out. The four-month
extension provides for rent at an annualized rate of 150% of its former rent,
resulting in an annualized rent of $1.3 million, representing $7.04 per square
foot. This compares to the former U.S. GAAP straight-line rent of $4.36 and
former cash rent of $4.70 per square foot.



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Our 368,000 square foot factory located in Streetsboro (Cleveland), OH was leased to Best Buy Warehousing Logistics, Inc. through January 31, 2022. This tenant has informed us that he will not be renewing his lease and we are in discussions with several potential tenants for this space.

Rental Revenue increased $4.2 million, or 11%, for the three months ended
December 31, 2021 as compared to the three months ended December 31, 2020. This
increase was due to the acquisition of one new built-to-suit, net-leased,
industrial property located in the Birmingham, AL MSA with approximately 291,000
square feet during the three months ended December 31, 2021 and the fiscal 2021
acquisitions of four new built-to-suit, net-leased, industrial properties,
located in the Columbus, OH, Atlanta, GA, Burlington, VT and Knoxville, TN MSAs
totaling approximately 1.6 million square feet.



Our single-tenant properties are subject to net-leases, which require the
tenants to reimburse us for the cost of Real Estate Taxes as well as certain
Operating Expenses such as insurance and the majority of repairs and
maintenance. Reimbursement Revenue increased $738,000, or 11%, Real Estate Tax
Expense increased $638,000, or 12%, and Operating Expenses increased $26,000, or
1% for the three months ended December 31, 2021 as compared to the three months
ended December 31, 2020. Reimbursement Revenue as a percentage of Real Estate
Taxes and Operating Expenses for the three months ended December 31, 2021 was
97% compared to 95% for the three months ended December 31, 2020.



General and Administrative Expenses increased $170,000, or 7%, for the three
months ended December 31, 2021 as compared to the three months ended December
31, 2020. General and Administrative Expenses, as a percentage of gross revenue
(which includes Rental Revenue, Reimbursement Revenue and Dividend Income) was
4.9% for the three months ended December 31, 2021 as compared to 5.0% for the
three months ended December 31, 2020. Annualized General and Administrative
Expenses, as a percentage of undepreciated assets (which is our total assets
excluding accumulated depreciation) was 38 basis points for the three months
ended December 31, 2021 as compared to 37 basis points for the three months
ended December 31, 2020.



During the three months ended December 31, 2021, we incurred Non-recurring
Strategic Alternatives & Proxy Costs of $12.3 million related to the evaluation
of strategic alternatives approved by our Board of Directors and the related
proxy process.



Depreciation increased $1.7 million, or 14%, for the three months ended December
31, 2021 as compared to the three months ended December 31, 2020. Amortization
of Capitalized Lease Costs and Intangible Assets increased $85,000, or 11%, for
the three months ended December 31, 2021 as compared to the three months ended
December 31, 2020. This increase was primarily due to the acquisition of one
industrial property purchased during the first three months of fiscal 2022 and
four industrial properties purchased during fiscal 2021. In addition, the
increases in depreciation and amortization expenses were also the result of the
expansions, capital improvements and leasing costs incurred over the last four
quarters.



The recognition of Unrealized Holding Gains (Losses) Arising During the Periods
is due to the adoption of ASU 2016-01, "Financial Instruments - Overall:
Recognition and Measurement of Financial Assets and Financial Liabilities,"
whereby the changes in net unrealized holding gains and losses are recognized
through net income. Therefore, the implementation of this accounting rule has
resulted in increased volatility in our reported earnings and some of our key
performance metrics. Net Unrealized Holding Gains arising during the three
months ended December 31, 2021 and 2020 were $16.5 million and $19.7 million,
respectively.



We recognized dividend income on our investments in securities of $1.7 million
and $1.6 million for the three months ended December 31, 2021 and 2020,
respectively, representing a $122,000 increase. The REIT securities portfolio's
weighted average yield for the three months ended December 31, 2021 was
approximately 4.6% as compared to 5.0% for the three months ended December 31,
2020. We held $160.3 million in marketable REIT securities as of December 31,
2021, representing 6.2% of our undepreciated assets.



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Interest Expense, including Amortization of Financing Costs, increased by
$663,000, or 7%, for the three months ended December 31, 2021 as compared to the
three months ended December 31, 2020. The increase in Interest Expense,
including Amortization of Financing Costs, was mostly due to an increase in
Loans Payable of $225.0 million partially offset with a decrease in our Fixed
Rate Mortgages Notes Payable, Net of Unamortized Debt Issuance Costs of $79.5
million.

Changes in financial situation

We have generated Net cash operating activities of $8.4 million and $29.7 million for the three months ended December 31, 2021 and 2020, respectively.

Real Estate Investments increased by $24.6 million from September 30, 2021 to
December 31, 2021. This increase was mainly due to the purchase of one
net-leased industrial property, located in the Birmingham, AL MSA, totaling
approximately 291,000 square feet, for $30.2 million. The increase was partially
offset by Depreciation Expense on Real Estate Investments for the three months
ended December 31, 2021 of $13.7 million.



Securities Available for Sale increased by $16.8 million from September 30, 2021
to December 31, 2021. The increase was primarily due to net Unrealized Holding
Gains of $16.5 million for the three months ended December 31, 2021.



Fixed Rate Mortgage Notes Payable, net of Unamortized Debt Issuance Costs
(Mortgage Notes Payable), decreased by $23.5 million from September 30, 2021 to
December 31, 2021. The decrease was mainly due to scheduled payments of
principal of $16.4 million. Additionally, on November 1, 2021, we fully repaid
$7.3 million mortgage loan for our property located in Streetsboro (Cleveland),
OH. The loan had an interest rate of 5.5%.

Excluding loan issue costs, the weighted average interest rate on fixed rate mortgage notes payable decreased by 3 basis points compared to the prior year quarter, from 3.88% to December 31, 2020 at 3.85% at December 31, 2021.

We are scheduled to repay a total of $74.5 million in mortgage principal
payments over the next 12 months. We may make these principal payments from
funds generated from operations, draws on our unsecured line of credit facility
and term loan, cash on hand, sales of marketable securities, other bank
borrowings, proceeds from the DRIP, proceeds from the sale of common stock in a
possible future at-the-market public offering and proceeds from private
placements and other public offerings of additional common or preferred stock or
other securities.

Cash and capital resources

Net Cash Provided by Operating Activities was $8.4 million and $29.7 million for
the three months ended December 31, 2021 and 2020, respectively. Dividends paid
on common stock for the three months ended December 31, 2021 and 2020 were $17.7
million and $16.7 million, respectively (of which $-0- and $1.0 million,
respectively, were reinvested). We pay dividends from cash generated from
operations.



As of December 31, 2021, we held $160.3 million in marketable REIT securities,
representing 6.2% of our undepreciated assets, which we define as total assets
excluding accumulated depreciation. Total assets excluding accumulated
depreciation were $2.6 billion as of December 31, 2021. In general, we may
borrow up to 50% of the value of the marketable securities. The interest rate
charged on the margin loan is the bank's margin rate and was 0.75% as of
December 31, 2021. At December 31, 2021, there was no amount drawn down under
the margin loan. As of December 31, 2021, we had net Unrealized Holding Losses
on our portfolio of $60.1 million as compared to net Unrealized Holding Losses
of $76.6 million as of September 30, 2021, representing net Unrealized Holding
Gains of $16.5 million for the three months ended December 31, 2021. There have
been no open market purchases or sales of securities during the three months
ended December 31, 2021. We recognized dividend income on our investments in
securities of $1.7 million for the three months ended December 31, 2021.



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On December 15, 2021, we entered into a New Term Loan Agreement (the "New Term
Loan"), that provides for a $175.0 million, unsecured, delayed-draw term loan
facility. The interest rate for borrowings under the New Term Loan will at our
election, either i) bear interest at LIBOR plus 130 basis points to 200 basis
points, depending on our leverage ratio, or (ii) bear interest at the Federal
Reserve Board's Prime Rate plus 30 basis points to 100 basis points, depending
on our leverage ratio. The New Term Loan matures on June 15, 2022 with two
options to extend for additional three-month periods. Availability under the New
Term Loan is limited to 60% of the value of the unencumbered real estate
properties. The value of the borrowing base properties is determined by applying
a capitalization rate to the NOI generated by our unencumbered, wholly-owned
industrial properties. Under the New Term Loan the capitalization rate applied
to our NOI generated by our unencumbered, wholly-owned industrial properties is
6.25%. Currently, our borrowings bear interest at LIBOR plus 140 basis points,
which results in an interest rate of 1.51%. As of the quarter end, we did not
have any amounts drawn down under our New Term Loan. Subsequent to the quarter
end, on January 28, 2022 we drew down $60.0 million, resulting in $115.0 million
being currently available.



Our existing line of credit facility (the "Facility"), entered into on November
15, 2019, consists of a $225.0 million unsecured line of credit facility (the
"Revolver") and a $75.0 million unsecured term loan (the "Term Loan"), resulting
in the total potential availability under both the Revolver and the Term Loan of
$300.0 million. In addition, the Revolver includes an accordion feature that
will allow the total potential availability under the Facility to further
increase to $400.0 million, under certain conditions. The $225.0 million
Revolver matures in January 2024 with two options to extend for additional
six-month periods. Availability under the Facility is limited to 60% of the
value of the borrowing base properties. The value of the borrowing base
properties is determined by applying a capitalization rate to the NOI generated
by our unencumbered, wholly-owned industrial properties. Under the Facility the
capitalization rate applied to our NOI generated by our unencumbered,
wholly-owned industrial properties is 6.25%. In addition, borrowings under the
Revolver will, at our election, either i) bear interest at LIBOR plus 135 basis
points to 205 basis points, depending on our leverage ratio, or ii) bear
interest at Bank of Montreal's (BMO) prime lending rate plus 35 basis points to
105 basis points, depending on our leverage ratio. Currently, our borrowings
bear interest under the Revolver at LIBOR plus 145 basis points, which results
in an interest rate of 1.54%. As of the quarter end and currently, we have the
full $225.0 million drawn down under our Revolver. The $75.0 million Term Loan
matures January 2025. The borrowings under the Term Loan will at our election,
either i) bear interest at LIBOR plus 130 basis points to 200 basis points,
depending on our leverage ratio, or ii) bear interest at BMO's prime lending
rate plus 30 basis points to 100 basis points, depending on our leverage ratio.
To reduce floating interest rate exposure under the Term Loan, we also entered
into an interest rate swap agreement to fix LIBOR on the entire $75.0 million
for the full duration of the Term Loan resulting in an all-in rate of 2.92%.



From time to time we may use a margin loan for temporary funding of acquisitions
and for working capital purposes. This loan is due on demand and is
collateralized by our securities portfolio. We must maintain a coverage ratio of
approximately 50%. The interest rate charged on the margin loan is the bank's
margin rate and was 0.75% as of December 31, 2021 and 2020. At December 31, 2021
and 2020, there were no amounts drawn down under the margin loan.



In the absence of waivers or consents from holders of our indebtedness, which
we, in consultation with ILPT, are currently seeking, the consummation of our
merger with ILPT and resulting "change of control" is expected to result in a
default or similar event under substantially all of our outstanding
indebtedness, permitting the holders of such indebtedness to accelerate such
indebtedness and demand immediate repayment at par, together with the applicable
'make-whole' premium, if any, following the merger.



As of December 31, 2021, we owned 123 properties, of which 59 carried mortgage
loans with outstanding principal balances totaling $815.9 million. The 64
unencumbered properties could be refinanced to raise additional funds, although
covenants in our New Facility limit the amount of unencumbered properties that
can be mortgaged. As of December 31, 2021, Loans Payable represented $225.0
million drawn down on our Revolver and $75.0 million outstanding under our

Term
Loan.



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As of December 31, 2021, we had total assets of $2.2 billion and liabilities of
$1.1 billion. Our net debt (net of unamortized debt issuance costs and net of
cash and cash equivalents) to total market capitalization as of December 31,
2021 was approximately 29% and our net debt, less marketable securities (net of
unamortized debt issuance costs, net of cash and cash equivalents and net of
marketable securities) to total market capitalization as of December 31, 2021
was approximately 25%. Our debt consists of 73% amortizing fixed rate debt with
a weighted average interest rate of 3.85% and a weighted average loan maturity
of 10.7 years. We believe that we have the ability to meet our obligations and
to generate funds for new investments.



As previously announced, on November 5, 2021, we entered into a definitive
merger agreement with ILPT, under which, on the terms and subject to the
conditions set forth in the merger agreement, ILPT will acquire us in an
all-cash transaction, with our common shareholders receiving $21.00 in cash per
share upon the consummation of the transaction. ILPT's acquisition of us is
subject to obtaining the requisite approval of our common shareholders, the
special meeting of shareholders for which is scheduled to take place on February
17, 2022, and the satisfaction of other customary closing conditions. Upon
closing of the merger with ILPT, holders of our outstanding 6.125% Series C
Preferred Stock will receive $25.00 in cash per share plus accumulated and
unpaid dividends to, but not including, the date the merger is completed. As
permitted by the Merger Agreement, we plan to continue to pay our regular
quarterly common stock dividend and our 6.125% Series C Preferred Stock dividend
for each full quarterly dividend period completed prior to the closing of the
transaction, in amounts not exceeding $0.18 per share for our common stock and
equal to $0.3828125 per share for our 6.125% Series C Preferred Stock. This
transaction with ILPT represents the culmination of the publicly announced
comprehensive strategic alternatives review processes conducted by our Board of
Directors during fiscal 2021. Our Board re-initiated its strategic alternatives
review process in September 2021 after a previous agreement for a
stock-for-stock merger that we entered into with another party, following a
strategic alternatives review process in the first half of calendar year 2021,
did not receive the requisite approval of our shareholders.

From December 31, 202122.0 million shares of our 6.125% Series C Preferred Shares were outstanding.

In the three months ended December 31, 2021we payed $17.7 million in total cash dividends, or $0.18 per share to ordinary shareholders.

On January 14, 2021, our Board of Directors approved a 5.9% increase in our
quarterly common stock dividend, raising it to $0.18 per share from $0.17 per
share representing an annualized dividend rate of $0.72 per share. This increase
was the third dividend increase in six years, representing a total increase of
20%. We have maintained or increased our common stock cash dividend for 31
consecutive years. We are one of the few REITs that maintained our dividend
throughout the Global Financial Crisis.



During the three months ended December 31, 2021, we paid $8.4 million in
Preferred Dividends, or $0.3828125 per share, on our outstanding 6.125% Series C
Preferred Stock for the period September 1, 2021 through November 30, 2021. As
of December 31, 2021, we had accrued Preferred Dividends of $2.8 million
covering the period December 1, 2021 to December 31, 2021. Dividends on the
6.125% Series C Preferred Stock are cumulative and payable quarterly at an
annual rate of $1.53125 per share.



We have used a variety of sources to fund our cash needs in addition to cash
generated from operations. In the past, we considered selling marketable
securities from our investment portfolio, borrowing on our unsecured line of
credit facility, term loan or securities margin loans, finance or refinance
debt, or raising capital through registered direct placements and public
offerings of common and preferred stock.



We have a concentration of properties leased to FedEx Corporation (FDX) and FDX
subsidiaries, consisting of 66 separate stand-alone leases covering 11.9 million
square feet as of December 31, 2021 and 63 separate stand-alone leases covering
11.2 million square feet as of December 31, 2020. FDX is experiencing record
demand due to the continued strong growth in ecommerce. Additionally, in periods
of unprecedented turbulence, the services of FedEx are essential in keeping
supply chains moving and in delivering critically needed supplies throughout the
world. As of December 31, 2021, the 66 separate stand-alone leases we have with
FDX and FDX subsidiaries are located in 27 different states and have a weighted
average lease maturity of 8.1 years. The percentage of FDX and its subsidiaries
leased square footage to the total of our rental space was 47% (4% to FDX and
43% to FDX subsidiaries) as of December 31, 2021 and 46% (5% to FDX and 41% to
FDX subsidiaries) as of December 31, 2020.



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As of December 31, 2021, the only tenants, other than FDX and its subsidiaries,
that leased 5% or more of our total square footage were subsidiaries of
Amazon.com, Inc (Amazon), which consists of five separate stand-alone leases for
properties located in four different states, containing 1.5 million total square
feet, comprising 6% of our total leasable square feet. None of our properties
are subject to a master lease or any cross-collateralization agreements.



Annualized Rental and Reimbursement Revenue from FDX and its subsidiaries is
estimated to be approximately 57% (4% to FDX and 53% to FDX subsidiaries) of
total Rental and Reimbursement Revenue for fiscal 2022, and was 57% (5% to FDX
and 52% to FDX subsidiaries) of total Rental and Reimbursement Revenue for
fiscal 2021. The only tenants, other than FDX and its subsidiaries, that we
estimate will comprise 5% or more of our total Rental and Reimbursement Revenue
for fiscal 2022 are subsidiaries of Amazon, which is estimated to be 6% of our
Annualized Rental and Reimbursement Revenue for fiscal 2022 and was 6% for of
our Annualized Rental and Reimbursement Revenue for fiscal 2021.

FDX and Amazon are publicly traded companies and financial information for these entities is available at DRY website, www.sec.gov. FDX and Amazon are rated “BBB” and “AA-“, respectively by S&P Global Ratings
(www.standardandpoors.com) and are rated “Baa2” and “A2”, respectively by Moody’s (www.moodys.com), both of which are considered “Investment Grade” ratings.

During fiscal 2021, we completed the first phase of a two-phase parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Olathe (Kansas City), KS. The first phase of this parking expansion project
was completed for a total cost of $3.4 million, resulting in an initial increase
in annual rent effective November 5, 2020 of approximately $340,000 from
approximately $2.14 million, or $6.83 per square foot, to approximately $2.48
million, or $7.91 per square foot. Furthermore, annual rent increased by 2.1% on
June 1, 2021 and was to continue to increase 2.1% every five years, resulting in
an annualized rent of $2.56 million, or $8.15 per square foot, from November 5,
2020 through May 2031, the remaining term of the lease. During the three months
ended December 31, 2021, we completed the second phase of this parking expansion
project at this location for a total cost of $2.3 million, resulting in an
initial increase in annual rent effective November 19, 2021 of approximately
$185,000 from approximately $2.53 million, or $8.08 per square foot, to
approximately $2.72 million, or $8.67 per square foot. In addition, the
expansion resulted in a new 14.5 year lease which extended the prior lease
expiration date from May 2031 to May 2036. Furthermore, annual rent will
increase by 1.9% on June 1, 2026 resulting in an annualized rent of
approximately $2.76 million, or $8.78 per square foot from November 19, 2021
through the remaining term of the lease.



During the three months ended December 31, 2021, we completed a parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Wheeling, IL for a total cost of $1.0 million, resulting in an initial
increase in annual rent effective October 28, 2021 of approximately $105,000
from approximately $1.27 million, or $10.34 per square foot, to approximately
$1.38 million, or $11.19 per square foot. In addition, the expansion resulted in
a new 9.8 year lease which extended the prior lease expiration date from May
2027 to August 2031.



During the three months ended December 31, 2021, we completed a parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Sauget (St. Louis, MO), IL for a total cost of $3.8 million, resulting in an
initial increase in annual rent effective November 10, 2021 of approximately
$346,000 from approximately $1.04 million, or $5.21 per square foot, to
approximately $1.38 million, or $6.95 per square foot. In addition, the
expansion resulted in a new 13.8 year lease which extended the prior lease
expiration date from May 2029 to August 2035. Furthermore, annual rent will
increase by 3.7% on June 1, 2029 resulting in an annualized rent from November
10, 2021 through the remaining term of the lease of approximately $1.40 million,
or $7.07 per square foot.



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During the three months ended December 31, 2021, we completed a parking
expansion project for FedEx Ground Package System, Inc. at our property located
in Orion, MI for a total cost of $6.5 million, resulting in an initial increase
in annual rent effective November 24, 2021 of approximately $651,000 from
approximately $1.91 million, or $7.77 per square foot, to approximately $2.56
million, or $10.42 per square foot. In addition, the expansion resulted in a new
9.9 year lease which extended the prior lease expiration date from June 2023 to
October 2031.



The four parking expansions completed this quarter, as described above, totaled
$13.7 million and resulted in total increased rent of $1.3 million and a
weighted average lease extension of 6.7 years. In addition to these four parking
expansions completed this quarter, we have several FedEx Ground parking
expansion projects in progress with more under discussion. Currently there are
six parking expansion projects underway, which we expect to cost approximately
$31.4 million. These parking expansion projects will enable us to capture
additional rent while lengthening the terms of these leases. We are also in
discussions to expand the parking at seven additional locations bringing the
total recently completed and likely future parking lot expansion projects to 18
currently.

Due to the proliferation of ecommerce sales and last mile deliveries, it is
important to take into account the large amounts of real estate utilized for
trailer, van, and car parking at many of our properties in determining how our
in-place rental rates compare to market rental rates for properties being used
in a similar manner. Rents per square foot on properties that may be nearby, but
have only limited acreage devoted to parking, are poor comparisons as they
cannot accommodate the same tenant needs.



In addition to the property purchased subsequent to the quarter end, we have
entered into agreements to purchase two, new build-to-suit, industrial buildings
that are currently being developed in Georgia and Texas, totaling 563,000 square
feet. Both of these future acquisitions have net-leased terms of 15 years. The
total purchase price for these two properties is $78.8 million. Both of these
properties are leased to FedEx Ground Package System, Inc. Subject to
satisfactory due diligence and other customary closing conditions and
requirements, we anticipate closing both of these transactions during fiscal
2022. FedEx Ground Package System, Inc.'s ultimate parent, FedEx Corporation is
a publicly-listed company and financial information related to this entity is
available at the SEC's website, www.sec.gov. The references in this report to
the SEC's website are not intended to and do not include, or incorporate by
reference into this report, the information on the www.sec.gov website.



We intend to acquire additional net-leased industrial properties on long-term
leases, primarily to investment grade tenants or their subsidiaries, and, when
needed, expand our current properties. To the extent that funds or appropriate
properties are not available, fewer acquisitions will be made.

Off-balance sheet arrangements

We have no significant off-balance sheet arrangements.

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Funds from operations and adjusted funds from operations

We assess and measure our overall operating results based upon an industry
performance measure referred to as Funds From Operations (FFO), which we believe
is a useful indicator of our operating performance. FFO is used by industry
analysts and investors as a supplemental operating performance measure of a
REIT. FFO, as defined by the National Association of Real Estate Investment
Trusts (Nareit), represents net income attributable to common shareholders, as
defined by accounting principles generally accepted in the United States of
America (U.S. GAAP), excluding gains or losses from sales of previously
depreciated real estate assets, impairment charges related to depreciable real
estate assets and certain non-cash items such as real estate asset depreciation
and amortization. Included in the Nareit FFO White Paper - 2018 Restatement, is
an option pertaining to assets incidental to our main business in the
calculation of Nareit FFO to make an election to include or exclude
mark-to-market changes in the value recognized on these marketable equity
securities. In conjunction with the adoption of the FFO White Paper - 2018
Restatement, for all periods presented, we have elected to exclude unrealized
gains and losses from our investments in marketable equity securities from our
FFO calculation. Nareit created FFO as a non-GAAP supplemental measure of REIT
operating performance. Our calculation of Adjusted Funds From Operations (AFFO)
differs from Nareit's definition of FFO because we exclude certain items that we
view as nonrecurring or impacting comparability from period to period. We define
AFFO as FFO, excluding stock based compensation expense, depreciation of
corporate office tenant improvements, amortization of deferred financing costs,
lease termination income, non-recurring strategic alternatives & proxy costs,
effect of non-cash U.S. GAAP straight-line rent adjustments and subtracting
recurring capital expenditures. We define recurring capital expenditures as all
capital expenditures that are recurring in nature, excluding capital
expenditures related to expansions at our current locations or capital
expenditures that are incurred in conjunction with obtaining a new lease or a
lease renewal. We believe that, as widely recognized measures of performance
used by other REITs, FFO and AFFO may be considered by investors as supplemental
measures to compare our operating performance to those of other REITs. FFO and
AFFO exclude historical cost depreciation as an expense and may facilitate the
comparison of REITs which have a different cost basis. However, other REITs may
use different methodologies to calculate FFO and AFFO and, accordingly, our FFO
and AFFO may not be comparable to all other REITs. The items excluded from FFO
and AFFO are significant components in understanding our financial performance.



FFO and AFFO are non-GAAP performance measures and (i) do not represent Cash
Flow from Operations as defined by U.S. GAAP; (ii) should not be considered as
an alternative to Net Income or Net Income Attributable to Common Shareholders
as a measure of operating performance or to Cash Flows from Operating, Investing
and Financing Activities; and (iii) are not an alternative to Cash Flows from
Operating, Investing and Financing Activities as a measure of liquidity. FFO and
AFFO, as calculated by us, may not be comparable to similarly titled measures
reported by other REITs.



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The following is a reconciliation of our U.S. GAAP Net Income Attributable to
Common Shareholders to our FFO and AFFO for the three months ended December 31,
2021 and 2020 (in thousands):



                                                          Three Months Ended
                                                      12/31/2021         12/31/2020

Net income attributable to common shareholders $11,417 $

25,746

Plus: Depreciation Expense (excluding Corporate
Office Capitalized Costs)                                  13,671          

12,020

Plus: Amortization of Intangible Assets                       603          

532

Plus: Amortization of Capitalized Lease Costs                 308          

303

Less: Unrealized Holding Gains Arising During
the Periods                                               (16,508 )          (19,721 )
FFO Attributable to Common Shareholders (1)                 9,491          

18,880

Plus: Depreciation of Corporate Office
Capitalized Costs                                              57          

57

Plus: Stock Compensation Expense                               94          

57

Plus: Amortization of Financing Costs                         428          

331

Plus: Non-recurring Strategic Alternatives &
Proxy Costs                                                12,274          

-0-

Less: Lease Termination Income                                -0-               (377 )
Less: Recurring Capital Expenditures                          (84 )             (160 )
Less: Effect of Non-cash U.S. GAAP Straight-line
Rent Adjustment                                              (617 )             (618 )
AFFO Attributable to Common Shareholders           $       21,643     $    

  18,170

(1) FFO attributable to common shareholders for the three months ended December

31 2021 includes non-recurring strategic alternatives and indirect costs of $12.3

million. FFO attributable to common shareholders for the three months ended

     December 31, 2021 excluding these Non-recurring Strategic Alternatives &
     Proxy Costs is $21.8 million.




The following are the Cash Flows provided (used) by Operating, Investing and
Financing Activities for the three months ended December 31, 2021 and 2020

(in
thousands):



                            Three Months Ended
                         12/31/2021       12/31/2020

Operating Activities   $      8,393     $     29,692
Investing Activities        (38,112 )       (166,774 )
Financing Activities         (1,186 )        142,845




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