FrontView REIT Inc

Results of Operations

The following discussion includes the results of our operations for the periods presented.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Rental Revenues

The $2.5 million increase in contractual rental amounts billed was primarily attributable to a $2.0 million increase in contractual base rent from the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition, a $0.2 million increase in contractual base rent from the growth of our real estate portfolio through new acquisitions during 2023, and $0.7 million in same-store rent growth from our in-place lease escalations, partially offset by a $0.4 million decrease in contractual base rent from properties sold throughout the latter part of 2023 and the first nine months of 2024.

The $0.7 million increase in variable rental amounts earned was mainly due to lease termination fees received during the three months ended September 30, 2024.

Operating Expenses

Depreciation and amortization

The $1.0 million increase in depreciation and amortization for the three months ended September 30, 2024 was primarily due the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition and the growth of our real estate portfolio through new acquisitions in 2023.

Property operating expenses

The $0.7 million increase in property operating expenses was mainly due to the increase in number of properties in our portfolio. For the three months ended September 30, 2024 and 2023, we incurred $2.0 million and $1.3 million of property operating expenses, respectively, and recorded $1.2 million and $1.0 million of additional rent and recovery income included in the contract rental amounts billed, respectively. Substantially all of our leases are net leases pursuant to which our tenants generally are obligated to pay customary expenses associated with the leased property such as real estate taxes, insurance, maintenance and repairs, and in many cases capital costs. For the three months ended September 30, 2024, we incurred $0.8 million in aggregate of expenses that were not tenant obligations, which includes non-recurring legal costs and property operating expenses incurred on vacant properties.

General and Administrative expenses

The $2.3 million decrease in general and administrative expenses is primarily due to approximately $1.4 million in structuring and public company readiness costs and $1.3 million in Internalization expenses incurred during the three months ended September 30, 2023.

Upon completion of the Internalization and the initial public offering, our future general and administrative expenses will include, among other things, the direct employee compensation expense of 15 new employees.

Other expenses and income

Interest expense

During the year ended December 31, 2023, we drew an additional $73.9 million from the Revolving Credit Facility, which bears interest at a rate of SOFR plus 2.36%, to fund new acquisitions of real estate properties. In addition, as part of the 50/50 Joint Venture Acquisition, we consolidated the 50/50 Joint Venture’s share of the ABS debt of approximately $69.7 million, which bears interest at approximately 3.4% and the Term Loan of $17 million, which bears interest at Term SOFR plus 1.8%. The increase in borrowings from the Revolving Credit Facility and the assumption of debt relating to the 50/50 Joint Venture Acquisition, resulted in an increase in interest expense of approximately $0.9 million for CIBC debt (Revolving Credit Facility and Term Loan) and $0.6 million for ABS debt, in addition to amortization of discount costs of $0.6 million, for the three months ended September 30, 2024. This $2.1 million increase is offset by a decrease in amortization of financing costs of approximately $0.2 million. As of September 30, 2024 and September 30, 2023, the aggregate debt outstanding has a weighted average interest rate excluding amortization of deferred financing costs of 4.96% and 5.20%, respectively.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Rental Revenues

The $9.5 million increase in contractual rental amounts billed was primarily attributable to a $7.0 million increase in contractual base rent from the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition, a $2.3 million increase from growth of our real estate portfolio through new acquisitions during 2023, and $1.5 million of same-store rent growth from our in-place lease escalations, partially offset by a $1.2 million decrease in contractual base rent from properties sold throughout the latter part of 2023 and the first nine months of 2024.

The $1.4 million increase in variable rental amounts earned was mainly due to lease termination fees received during the nine months ended September 30 2024.

Operating Expenses

Depreciation and amortization

The $4.1 million increase in depreciation and amortization for the nine months ended September 30, 2024 was primarily due to the consolidation of the 54 properties acquired as part of the 50/50 Joint Venture Acquisition and the growth of our real estate portfolio through new acquisitions in 2023.

Property operating expenses

The $1.8 million increase in property operating expenses was mainly due to the increase in number of properties in our portfolio. For the nine months ended September 30, 2024 and September 30, 2023, we incurred $5.7 million and $3.9 million of property operating expenses, respectively, and recorded $4.4 million and $3.4 million of additional rent and recovery income included in the contract rental amounts billed, respectively. Substantially all of our leases are net leases pursuant to which our tenants generally are obligated to pay customary expenses associated with the leased property such as real estate taxes, insurance, maintenance and repairs, and in many cases capital costs. For the nine months ended September 30, 2024, we incurred $1.3 million in aggregate of expenses that were not tenant obligations, which includes non-recurring legal costs and property operating expenses incurred on vacant properties.

General and Administrative expenses

The $4.0 million decrease in general and administrative expenses is primarily due to approximately $3.1 million in structuring and public company readiness costs and $1.8 million in Internalization expenses incurred during the nine months ended September 30, 2023. This $4.9 million is offset by a $0.8 million increase in audit, tax and consulting incurred during the nine months ended September 30, 2024.

Upon completion of the Internalization and the IPO, our future general and administrative expenses will include, among other things, the direct employee compensation expense of 15 new employees.

Other expenses and income

Interest expense

During the year ended December 31, 2023, we drew an additional $73.9 million from the Revolving Credit Facility, which bears interest at a rate of SOFR plus 2.36%, to fund new acquisitions of real estate properties. In addition, as part of the 50/50 Joint Venture Acquisition, we consolidated the 50/50 Joint Venture’s share of the ABS debt of approximately $69.7 million, which bears interest at approximately 3.4% and the Term Loan of $17 million, which bears interest at Term SOFR plus 1.8%. The increase in borrowings from the Revolving Credit Facility and the assumption of debt relating to the 50/50 Joint Venture Acquisition, resulted in an increase in interest expense of approximately $5.0 million for CIBC debt (Revolving Credit Facility and Term Loan) and $1.7 million for ABS debt, in addition to amortization of discount costs of $1.8 million, for the nine months ended September 30, 2024. This $8.5 million increase is offset by a decrease in amortization of financing costs of approximately $0.5 million. As of September 30, 2024 and September 30, 2023, the aggregate debt outstanding has a weighted average interest rate excluding amortization of deferred financing costs of 4.96% and 5.20%, respectively.

Gain on sale of real estate

During the nine months ended September 30, 2024, we sold five properties at a net gain of approximately $0.3 million. During the nine months ended September 30, 2023, we sold one property at loss of approximately $0.3 million.

Impairment loss

During the nine months ended September 30, 2024, we recorded an impairment loss of $0.6 million relating to an asset held for investment. The amount of impairment fluctuates each period based on existing facts and circumstances.