INLAND REAL ESTATE INCOME TRUST, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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
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 have agreed to defer a significant amount of rent owed to us, which

tenants will be obligated to pay over time in addition to their regular

rent but which they may not be able or willing to do, particularly those

whose 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 months ended March 31, 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

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• 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 would 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 months ended March
31, 2022
and 2021 and as of March 31, 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. At March 31,
2022
, we had total assets of $1.1 billion on our balance sheet and owned 44
properties located in 21 states containing 6.5 million square feet. On May 5,
2022
, we entered into a definitive purchase and sale agreement to acquire a
portfolio of eight retail shopping center properties located in seven states
containing 686,851 square feet from certain subsidiaries of Inland Retail
Property Fund, LP
for approximately $278 million (the “Purchase Price”). 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 March 31, 2022, 87% 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 generates traffic for our shopping center. The portfolio properties
have staggered lease maturity dates. Grocery tenants accounted for 18% of our
annualized base rent (“ABR”) as of March 31, 2022.

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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 March 31, 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 March 31, 2022, 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 months ended March 31,
2022
. See Note 4 – “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
refinancings 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 824 leasable
spaces, there are 110 occupied non-grocery big box (anchor spaces of at least
10,000 square feet) and six vacant big box spaces in the portfolio as of April
30, 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 5, 2022, the Company entered into a
definitive purchase and sale agreement to acquire, in the aggregate, eight
retail shopping center properties from certain subsidiaries of Inland Retail
Property Fund, LP
, for approximately $278 million. For additional detail
regarding this expected acquisition, please see Note 14 – “Subsequent Events,”
which is included in our March 31, 2022 Notes to Consolidated Financial
Statements in Item 1. 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

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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 March 31, 2022
Number of properties 44
Purchase price $ 1,346,514
Total square footage 6,481,262
Weighted average physical occupancy 92.8 %
Weighted average economic occupancy 93.0 %
Weighted average remaining lease term (years) 4.5

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The table below presents information for each of our investment properties as of
March 31, 2022.

Square Physical Economic Mortgage Interest
Property Location Footage Occupancy Occupancy Balance Rate (b)
Newington Fair (a) Newington, CT 186,205 100.0 % 100.0 % – –
Wedgewood Commons (a) Olive Branch, MS 169,558 100.0 % 100.0 % – –
Park Avenue (a) Little Rock, AR 79,131 66.7 % 66.7 % – –
North Hills Square (a) Coral Springs, FL 63,829 95.6 % 95.6 % – –
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 187,610 81.6 % 81.6 % – –
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 256,329 92.5 % 92.5 % – –
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 86.7 % 86.7 % – –
Plaza at Prairie Ridge
(a) Pleasant Prairie,WI 9,035 100.0 % 100.0 % – –
Green Tree Shopping
Center Katy, TX 147,621 98.3 % 98.3 % 13,100 3.24 %
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 95.0 % 95.6 % 13,700 3.30 %
Marketplace at El Paseo Fresno, CA
(a) 224,683 95.1 % 95.9 % – –
The Village at Burlington Kansas City, MO
Creek 157,937 86.8 % 86.8 % 17,322 4.25 %
Milford Marketplace Milford, CT 111,995 89.1 % 89.1 % 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 97.8 % 97.8 % – –
Oquirrh Mountain South Jordan, UT
Marketplace (a) 75,950 91.6 % 91.6 % – –
Marketplace at Tech Newport News, VA
Center 210,505 74.4 % 79.4 % 36,089 3.15 %
Coastal North Town Center Myrtle Beach, SC 304,690 95.3 % 95.3 % 41,348 3.17 %
Oquirrh Mountain South Jordan, UT
Marketplace II (a) 10,150 100.0 % 100.0 % – –
Wilson Marketplace (a) Wilson, NC 311,030 96.8 % 96.8 % – –
Pentucket Shopping Center Plaistow, NH
(a) 198,469 93.5 % 93.5 % – –
Hickory Tavern Myrtle Beach, SC 6,588 100.0 % 100.0 % – –
Portfolio total 6,481,262 92.8 % 93.0 % $ 242,818 3.63 %

(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.

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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 March 31,
2022
.

Percent of Percent of
Total Annualized Total
Number Portfolio Base Rent Portfolio
of Annualized Annualized Per Square Square Square
Tenant Name Leases Base Rent (a) Base Rent Foot Footage Footage
The Kroger Co 4 $ 3,444 3.8 % $ 13.80 249,493 3.9 %
The TJX Companies, Inc. 12 3,108 3.4 % 10.08 308,253 4.8 %
Ross Dress for Less, Inc. 10 2,340 2.6 % 8.93 262,080 4.0 %
Ulta Salon, Cosmetics & Fragrance Inc. 10 2,316 2.5 % 22.06 104,958 1.6 %
Albertsons/Jewel/Shaw’s 2 2,304 2.5 % 18.02 127,892 2.0 %
PetSmart 7 2,032 2.2 % 14.67 138,578 2.1 %
Dicks Sporting Goods, Inc. 4 2,012 2.2 % 11.13 180,766 2.8 %
LA Fitness (Fitness International) 2 1,965 2.2 % 21.94 89,600 1.4 %
Kohl’s Department Stores 4 1,888 2.1 % 5.68 332,461 5.1 %
Giant Eagle 1 1,805 2.0 % 13.96 129,340 2.0 %
Top ten tenants 56 $ 23,214 25.5 % $ 12.07 1,923,421 29.7 %

(a) We have entered into rent deferral agreements with certain tenants above

that have generally been heavily impacted by the effects of the COVID-19

pandemic, which is a majority of the top ten tenants. To the extent we have

agreed with a tenant to defer rent due in the base year to a later period,

that deferred rent is still reflected in the annualized base rent amount

above.

The following table sets forth a summary of our tenant diversity for our entire
portfolio and is based on leases in-place at March 31, 2022.

Gross Leasable Percent of Percent of
Area – Total Gross Total Annualized
Tenant Type Square Footage Leasable Area Base Rent
Discount and Department Stores 1,329,910 22.1 % 11.1 %
Grocery 1,084,647 18.0 % 15.5 %
Home Goods 901,984 15.0 % 8.0 %
Lifestyle, Health Clubs, Books & Phones 750,113 12.4 % 16.7 %
Restaurant 536,177 8.9 % 17.4 %
Apparel & Accessories 393,177 6.5 % 9.2 %
Consumer Services, Salons, Cleaners, Banks 276,866 4.6 % 7.7 %
Pet Supplies 245,245 4.1 % 4.3 %
Sporting Goods 205,596 3.4 % 2.8 %
Health, Doctors & Health Foods 174,590 2.9 % 5.4 %
Other 127,216 2.1 % 1.9 %
Total 6,025,521 100.0 % 100.0 %

The following table sets forth a summary, as of March 31, 2022, of the percent
of total annualized base rent and the weighted average lease expiration by size
of tenant.

Percent of Weighted
Total Average Lease
Description – Annualized Base Expiration –
Size of Tenant Square Footage Rent Years
Anchor 10,000 and over 51 % 5.3
Junior Box 5,000-9,999 13 % 4.3
Small Shop Less than 5,000 36 % 3.5
Total 100 % 4.5

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Lease Expirations

The following table sets forth a summary, as of March 31, 2022, of lease
expirations scheduled to occur during the remainder of 2022 and each of the
calendar years from 2022 to 2030 and thereafter, assuming no exercise of renewal
options or early termination rights for leases commenced on or prior to March
31, 2022
. Annualized base rent represents the rent in-place of the applicable
property at March 31, 2022. The table below includes ground leases. If ground
leases are excluded, annualized base rent would equal $82,507 or $17.96 per
square foot for total expiring leases.

Gross
Leasable Percent of Percent of
Area of Total Gross Total Total
Expiring Leasable Annualized Annualized Annualized
Number of Leases – Area of Base Rent Base Rent Base Rent
Expiring Square Expiring of Expiring of Expiring per Leased
Lease Expiration Year Leases Footage Leases Leases Leases Square Foot
2022 (including month-to-month) 99 324,661 5.4 % $ 6,427 7.0 % $ 19.80
2023 111 846,547 14.1 % 11,881 13.0 % 14.03
2024 115 834,524 13.8 % 14,889 16.3 % 17.84
2025 113 793,574 13.2 % 14,522 15.9 % 18.30
2026 86 509,434 8.5 % 8,762 9.6 % 17.20
2027 63 664,095 11.0 % 9,998 11.0 % 15.06
2028 37 695,470 11.5 % 7,332 8.0 % 10.54
2029 15 175,184 2.9 % 2,535 2.8 % 14.47
2030 15 138,400 2.3 % 2,241 2.5 % 16.20
2031 17 156,546 2.6 % 2,835 3.1 % 18.11
Thereafter 33 887,086 14.7 % 9,864 10.8 % 11.12
Leased Total 704 6,025,521 100.0 % $ 91,287 100.0 % $ 15.15

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Liquidity and Capital Resources

General

Our primary uses and sources of cash are as follows:

Uses Sources

• Interest and principal payments on • Cash receipts from our tenants

mortgage loans and

Credit Facility
• Property operating expenses • Sale of shares through the DRP
• • Proceeds from new or

refinanced

General and administrative expenses mortgage loans
• Distributions to stockholders

• Borrowing on our Credit

Facility

• Fees payable to our Business Manager • Proceeds from sales of real estate (if

and Real Estate any)*

Manager

• 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.

We are not currently actively marketing any properties.

At March 31, 2022, we had $79 million outstanding under the Revolving Credit
Facility and $275 million outstanding under the Term Loan. At March 31, 2022 the
interest rates on the Revolving Credit Facility and the Term Loan were 1.84% and
3.26%, respectively. On February 3, 2022, we extended the Revolving Credit
Facility maturity date to February 3, 2026 plus a twelve month extension option.
We also increased the Term Loan outstanding balance to $275 million which now
matures on February 3, 2027. The Company expects to enter into an amendment to
its Credit Agreement to increase the size of the Term Loan to $575 million and
modify several covenants to fund the Company’s acquisition of a portfolio of
eight retail shopping center properties from Inland Retail Property Fund, LP, a
Delaware limited partnership, that is expected to occur on May 17, 2022. As of
May 11, 2022, we had $121 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 $121 million is the maximum available, covenant limitations affect what
we can actually draw, and we expect to have substantially less than $121 million
actually available to draw or otherwise undertake as additional debt after
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 March 31, 2022, we had total debt outstanding of $596.8 million, excluding
mortgage premiums and unamortized debt issuance costs, which bore interest at a
weighted average interest rate of 3.22% per annum. As of March 31, 2022, the
weighted average years to maturity for our debt was 3.8 years. As of both March
31, 2022
and December 31, 2021, our borrowings were 44% of the purchase price of
our investment properties. At March 31, 2022 our cash and cash equivalents
balance was $9.2 million.

In the next twelve months, we have two mortgage loans maturing with an aggregate
principal balance of $26.8 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 three months ended March 31, 2022, we declared distributions on our
common stock in the amount of $0.135600 per share to stockholders of record as
of March 31, 2022 that was paid on or about April 7, 2022. During the three
months ended March 31, 2022, we repurchased $0.9 million of shares of common
stock.

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We have delayed making non-essential capital improvements and other
non-essential capital expenditures at our properties since the onset of the
pandemic, 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
gradually funding capital expenditures at our properties, and we do not expect
the delay in making these capital expenditures to have any material effect on
our tenants or our ability to lease space. In the three months ended March 31,
2022
, we spent $0.3 million more (46% more) on capital expenditures than we did
in the three months ended March 31, 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 March 31, 2022, we have paid all interest and principal amounts when due,
and are in compliance with all financial covenants related to the Credit
Facility as amended.

Cash Flow Analysis

Three Months Ended
March 31, Change
2022 2021 2022 vs. 2021
(Dollar amounts

in thousands)
Net cash flows provided by operating activities $ 11,462 $ 10,616 $

846

Net cash flows used in investing activities $ (934 ) $ (622 ) $ (312 )
Net cash flows used in financing activities $ (8,670 ) $ (10,313 ) $ 1,643

Operating activities

The increase in cash from operating activities during the three months ended
March 31, 2022 compared to the three months ended March 31, 2021 was primarily
due to a payment during the three months ended March 31, 2021 for the Q3 and Q4
2020 business management fees offset partially by reduced collections of
deferred rent from our tenants during the three months ended March 31, 2022 as
the vast majority of outstanding deferred rent was collected by the end of 2021.

Investing activities

Three Months Ended
March 31, Change
2022 2021 2022 vs. 2021
(Dollar amounts in thousands)
Capital expenditures $ (907 ) $ (622 ) $ (285 )
Other assets (27 ) – (27 )
Net cash used in investing activities $ (934 ) $ (622 ) $

(312 )

The increase in cash used for investing activities during the three months ended
March 31, 2022 compared to the three months ended March 31, 2021 was primarily
due to an increase in capital expenditures.

Financing activities

Three Months Ended
March 31, Change
2022 2021 2022 vs. 2021
(Dollar amounts in thousands)
Total changes related to debt $ (3,686 ) $ (10,313 ) $ 6,627
Proceeds from the distribution reinvestment
plan, net of shares repurchased 925 – 925
Distributions paid (4,888 ) – (4,888 )
Early termination of interest rate swap
agreements (1,021 ) – (1,021 )
Net cash used in financing activities $ (8,670 ) $ (10,313 ) $ 1,643

27

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During the three months ended March 31, 2022, cash used to fund debt obligations
decreased $6.6 million from the three months ended March 31, 2021 primarily due
to draws on the credit facility during the three months ended March 31, 2021
that did not recur in 2022, offset by $3.6 million of debt issuance costs paid
related to the Credit Facility during the three months ended March 31, 2022.
During the three months ended March 31, 2022, we generated proceeds from the
sale of shares pursuant to the DRP of $1.8 million. For the three months ended
March 31, 2022, share repurchases were $0.9 million. During the three months
ended March 31, 2022, we paid $4.9 million in distributions. The increases in
distributions paid, proceeds from DRP and share repurchases in 2022 compared to
2021 are due to the reinstatement of the authorization and payment of
distributions, the DRP and the SRP, respectively, 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 three months ended March 31, 2022 and 2021 follows (Dollar amounts in
thousands except per share amounts):

Distributions Paid (1)
Three
Months Distributions Cash Flows
Ended Distributions Declared Per Reinvested From
March 31, Declared Share Cash via DRP Total Operations
2022 $ 4,894 $ 0.271200 $ 3,039 $ 1,849 $ 4,888 $ 11,462
2021 $ – $ – $ – $ – $ – $ 10,616

(1) Distributions were funded by cash flow from operating activities and cash on

hand during the three months ended March 31, 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. During the three months ended March 31, 2022, we
declared distributions on our common stock of $0.135600 per share to
stockholders of record as of March 31, 2022 that was paid on or about April 7,
2022
.

Results of Operations

The following discussions are based on our consolidated financial statements for
the three months ended March 31, 2022 and 2021. Dollar amounts are stated in
thousands.

This section describes and compares our results of operations for the three
months ended March 31, 2022 and 2021. We generate primarily all of our net
operating income from property operations. All 44 investment properties we
currently own were held for the entirety of both periods presented. No
properties were acquired or sold in either period presented.

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 months ended March 31, 2022 and
2021, along with a reconciliation to net loss, calculated in accordance with
U.S. GAAP.

28

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Comparison of the three months ended March 31, 2022 and March 31, 2021

Three Months Ended
March 31,
2022 2021 Change
Rental income $ 29,025 $ 29,674 $ (649 )
Other property income 30 48 (18 )
Total income $ 29,055 $ 29,722 $ (667 )

Property operating expenses $ 5,393 $ 5,518 $ (125 )
Real estate tax expense 3,730 3,670 60
Total property operating expenses $ 9,123 $ 9,188 $ (65 )

Property net operating income $ 19,932 $ 20,534 $ (602 )

Straight-line income (expense), net $ (250 ) $ (21 ) $ (229 )
Amortization of intangibles and lease incentives 138 146 (8 )
General and administrative expenses (1,412 ) (1,313 ) (99 )
Business management fee (2,244 ) (2,234 ) (10 )
Depreciation and amortization (11,854 ) (12,455 ) 601
Interest expense (5,567 ) (6,042 ) 475
Interest and other (expense) income (1 ) 57 (58 )
Net loss $ (1,258 ) $ (1,328 ) $ 70

Net loss. Net loss was $1,258 and $1,328 for the three months ended March 31,
2022
and 2021, respectively.

Total property net operating income. During the three months ended March 31,
2022
, property net operating income decreased $602, total property income
decreased $667, and total property operating expenses including real estate tax
expense decreased $65.

The decrease in total property income is primarily due to a decrease in recovery
income due to a lower recovery percentage and a slight increase in bad debt
expense during the three months ended March 31, 2022. See Note 4 – “Leases” for
additional information regarding the effects of deferred rent and bad debt on
rental income.

Straight-line income (expense), net. Straight-line income (expense), net
decreased $229 in 2022 compared to 2021. This decrease is primarily due to lower
rent abatements during the three months ended March 31, 2022.

Amortization of intangibles and lease incentives. Income from the amortization
of intangibles and lease incentives decreased $8 in 2022 compared to 2021.

General and administrative expenses. General and administrative expenses
increased $99 in 2022 compared to 2021. The increase is primarily due to higher
legal and professional fees during the three months ended March 31, 2022.

Business management fee. Business management fees increased $10 in 2022 compared
to 2021.

Depreciation and amortization. Depreciation and amortization decreased $601 in
2022 compared to 2021. The decrease is primarily due to fully amortized assets
in 2022 compared to 2021.

Interest expense. Interest expense decreased $475 in 2022 compared to 2021. The
decrease is primarily due to lower average interest rates and a decrease in
average debt outstanding in 2022 compared to 2021.

Interest and other income. Interest and other income decreased $58 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.

29
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Leasing Activity

The following table sets forth leasing activity during the three months ended
March 31, 2022. Leases with terms of less than 12 months have been excluded from
the table.

% Change
Number of Gross New Contractual Prior Contractual over Prior Weighted Tenant
Leases Leasable Rent per Square Rent per Square Annualized Average Lease Allowances per
Signed Area Foot Foot Base Rent Term Square Foot
Comparable Renewal
Leases 18 161,502 $ 15.65 $ 14.75 6.1 % 5.6 $ 2.39
Comparable New
Leases 1 1,200 $ 28.00 $ 24.97 12.1 % 5.3 $ –
Non-Comparable New
and Renewal Leases
(a) 14 44,687 $ 17.89 N/A N/A 7.4 $ 19.02
Total 33 207,389

(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.

30
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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 three months ended March 31, 2022 and 2021 are
calculated as follows:

Three Months Ended
March 31,
2022 2021
(Dollar amounts in thousands)
Net loss $ (1,258 ) $ (1,328 )
Depreciation and amortization related to
Add: investment properties 11,854 12,455
Funds from operations (FFO) 10,596 11,127

Amortization of acquired market lease
Less: intangibles, net (166 ) (170 )
Straight-line income (expense), net 250 21
Modified funds from operations (MFFO) $ 10,680 $ 10,978

Subsequent Events

For information related to subsequent events, reference is made to Note 14 –
“Subsequent Events” which is included in our March 31, 2022 Notes to
Consolidated Financial Statements in Item 1.

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