FrontView REIT Inc

Liquidity/REIT Requirements

Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs. As a REIT, we are required to distribute to our stockholders at least 90% of our taxable income determined without regard to the dividends paid deduction and excluding net capital gain, on an annual basis. As a result, it is unlikely that we will be able to retain substantial cash balances to meet our liquidity needs from our annual taxable income. Instead, we expect to meet our liquidity needs primarily by relying upon external sources of capital, such as borrowings under our debt facilities or additional equity or preferred offerings or other capital raises, which would all be subject to a number of market and other factors in order to be successfully accessible.

Short-term Liquidity Requirements

Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt and to pay distributions. Since our portfolio has had a historically strong occupancy level and substantially all of our leases are net leases, we do not currently anticipate making significant capital expenditures or incurring other significant property operating costs (unless vacancies adjust beyond historical norms) that would materially adversely impact short-term financial liquidity. We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances, net cash provided by operating activities, and borrowings under our New Revolving Credit Facility and New Delayed Draw Term Loan or through the issuance of debt or equity instruments subject to market conditions.

Long-term Liquidity Requirements

Our long-term liquidity requirements consist primarily of funds necessary to repay debt, including $253.2 million of debt (net of fees) that is anticipated to be repaid in December 2024, and to invest in additional revenue generating properties. Debt capital is provided through our New Revolving Credit Facility and New Delayed Draw Term Loan, as well as potentially through the issuance of debt and equity instruments subject to market conditions and Company operating performance. The source and mix of our debt capital in the future will be impacted by market conditions. We plan to prudently balance our debt portfolio with a combination of fixed and floating rate debt and will evaluate opportunities to hedge certain interest rate risk where appropriate.

We expect to meet our long-term liquidity requirements primarily from borrowings under our New Revolving Credit Facility and New Delayed Draw Term Loan, any future debt and equity financings, and proceeds from limited sales of our properties. Our ability to access these capital sources may be impacted by unfavorable market conditions, particularly in the debt and equity capital markets and the real estate market in general, that are outside of our control. In addition, our success will depend on our operating performance, our borrowing restrictions, our degree of leverage, market perceptions of the Company, our access to debt, equity or other capital instruments and other factors. Our acquisition growth strategy significantly depends on our ability to obtain acquisition-financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization.

Pro Forma Liquidity and Capital

As of September 30, 2024, we had on a pro forma basis $93.3 million of cash and cash equivalents. In addition, upon completion of the initial public offering and following the repayment of our obligations under the ABS Notes in December, we expect to have $196.5 million of available borrowing capacity under our New Revolving Credit Facility. We believe that following completion of our initial public offering, we have access to capital sufficient to meet our capital needs for the reasonably foreseeable future.

Target Leverage

We have pro forma total debt outstanding of $249.9 million (net of fees), pro forma Net Debt of $160.2 million, and a pro forma Net Debt-to-Annualized Adjusted EBITDAre ratio of approximately 3.9x. Our long-term goal is to target a net debt-to-annualized adjusted EBITDAre ratio of 6.0x or below. We may from time to time modify our leverage policy in light of then current economic conditions, relative costs and availability of debt and equity capital, changes in the market price of our Common Stock, acquisition opportunities, and other factors.

Equity Capital Resources

As a new publicly traded REIT we plan to access the public equity markets to maintain an appropriate mix of debt and equity in line with our leverage policy, primarily through follow-on equity offerings and eventually through an at-the-market common equity offering program (“ATM Program”) once we are shelf eligible. Our public offerings will be used to repay debt, fund acquisitions, and for other general corporate purposes.

Description of Certain Debt Outstanding After Our Initial Public Offering

The following is a summary of the material provisions of our ABS Notes, New Revolving Credit Facility and New Delayed Draw Term Loan.

ABS Notes

As of September 30, 2024, $253.2 million aggregate principal amount of the ABS Notes issued by affiliates of our predecessor were outstanding (net of fees) and interest on the ABS Notes accrues at an annual rate equal to 3.4%. The anticipated repayment date for the ABS Notes is in December 2024. The ABS Notes are secured by liens on 132 outparcel properties, which represented 47.5% of our total outparcel properties based on the number of properties as of September 30, 2024.

New Revolving Credit Facility

Upon closing of our initial public offering, a group of lenders, including JPMorgan Chase Bank, N.A. acts as administrative agent, provided commitments for our New Revolving Credit Facility, allowing borrowings of up to $250 million, including $20 million available for issuance of letters of credit. Our New Revolving Credit Facility has an initial maturity in October 2027 together with two 12-month extension options, subject to certain conditions, including payment of a 0.125% fee on the aggregate outstanding amount of the revolving commitments.

The New Revolving Credit Facility contains a commitment fee of 0.15% per annum if average daily usage in such quarter is over 50% of total revolving commitments and 0.25% per annum if average daily usage in such quarter is equal to or less than 50% of total revolving commitments. Borrowings under our New Revolving Credit Facility will bear interest at floating rates based on adjusted SOFR plus an applicable margin based on our leverage ratio ranging between 1.20% and 1.75% per annum. As of September 30, 2024, the applicable margin was 1.20%.

The New Revolving Credit Facility contains an applicable facility fee based on our credit rating ranging between 0.125% and 0.30% per annum. As of September 30, 2024, the applicable facility fee was 0.30%.

New Delayed Draw Term Loan

Upon closing of our initial public offering, a group of lenders, including JPMorgan Chase Bank, N.A. as administrative agent, provided commitments for our New Delayed Draw Term Loan, allowing borrowings of up to $200 million. Our New Delayed Draw Term Loan is available to be drawn until October 2025 and has an initial maturity of October 2027 together with two 12-month extension options, at our election, subject to certain conditions including payment of a 0.125% fee on the aggregate outstanding principal amount of the term loan. We plan to use the New Delayed Draw Term Loan to repay our ABS Notes when they mature in December 2024. Our New Delayed Draw Term Loan includes a ticking fee of 0.20% per annum on the average daily amount of unfunded term loan commitments.

Borrowings under our New Delayed Draw Term Loan bear interest at floating rates based on Adjusted SOFR plus an applicable margin based on our leverage ratio ranging between 1.20% and 1.75% per annum. As of September 30, 2024, the applicable margin was 1.20%.

Covenants

We will be subject to various covenants and financial reporting requirements pursuant to our New Revolving Credit Facility and New Delayed Draw Term Loan. The table below summarizes the applicable financial covenants. If a default or event of default exists, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification.

Contractual Obligations

The following table provides information with respect to our contractual commitments and obligations as of September 30, 2024. Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations.