Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References herein to the "Company," "we," "us," or "our" refer to StratCap Digital Infrastructure REIT, Inc., a Maryland corporation, and its subsidiaries including SWIF II Operating Partnership, LP, a Delaware limited partnership, which we refer to herein as the "Operating Partnership," unless the context specifically requires otherwise. As used herein, the term "you" refers to our current stockholders or potential investors in our common stock, as applicable.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report").

Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology such as "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "could," "may," "will" or similar expressions, or the negatives thereof. These may include our financial projections and estimates and their underlying assumptions, statements about plans, objectives and expectations with respect to future operations, statements with respect to acquisitions, statements regarding future performance, statements regarding identified but not yet closed acquisitions, and any other statements that are not historical facts. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. We believe these factors also include but are not limited to those described under Part I Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission ("SEC") on March 31, 2026 (the "Annual Report"), and any such updated risk factors included in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this document and our other filings with the SEC. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

Overview

StratCap Digital Infrastructure REIT, Inc. (the "Company") is a Maryland corporation formed on April 7, 2021 (inception), and has qualified since December 31, 2021, and expects to continue to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). We own all or substantially all of our assets through our Operating Partnership, of which we are the sole general partner. We are externally managed by our Advisor, StratCap Digital Infrastructure Advisors II, LLC, an affiliate of our Sponsor, StratCap Investment Management, LLC.

Our Board will at all times have ultimate oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to the Advisory Agreement, however, we have delegated to our Advisor the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, guidelines, policies and limitations, subject to oversight by our Board. We currently have no employees. Employees of our Advisor perform substantially all of the services related to our asset management, accounting, investor relations, and other administrative activities. Affiliates of our Advisor also have extensive experience in providing responsive and professional property management and leasing services as well as development and construction services. We have retained an affiliate of our Advisor to provide property management and leasing services for most, if not all, of the properties we acquire and to provide development and construction services as needed.

On December 22, 2025, the Company, through the Operating Partnership and its subsidiaries, sold and transferred 100% of the fee simple interest ("Tower Sale") in 48 towers with associated ground leases or easements, 68 tenant leases and other related assets ("Tower Assets") to a third party. The sale of the Tower Assets represented a sale of substantially all of the Company's wholly-owned Tower Assets and, as such, the Tower Assets are reflected as discontinued operations. Refer to Note 6, "Discontinued Operations," for related disclosures.

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As of September 30, 2026, through wholly-owned subsidiaries of our Operating Partnership, we own 100% of the fee simple interest in two data centers leased to three tenants, as well as a 51% interest, through the Datacom JV, in 150 towers with associated ground leases or easements, two rooftop easements, 235 tenant operating leases and other related assets.

On April 30, 2026, the Company ceased offering and selling shares of its common stock pursuant to the Public Offering and filed a Post-Effective Amendment to its Registration Statement to deregister the shares of common stock that remained unsold under the Registration Statement. As of April 30, 2026, the Company had accepted aggregate gross offering proceeds of approximately $31,711,817 in the Public Offering.

Due to recent volatility in the digital infrastructure market driven by uncertainty surrounding technology and AI companies' capital expenditure plans, tighter credit conditions, the current geopolitical environment and a challenging fundraising environment in the retail investor channel marked by increased repurchase requests, the Advisor, with the assistance from a financial advisor, has been internally reviewing the Company's outlook with a view towards determining the best path forward for the Company and its stockholders. As previously disclosed, based on this review and upon the Advisor's recommendation, the Board adopted several immediate actions to preserve liquidity, including the suspension of the Company's distribution program and share repurchase program (other than repurchases sought pursuant to the death or qualifying disability of a stockholder), which suspensions remain in effect as of the date of this filing.

On September 23, 2026, the Company announced that the Board had concluded its strategic alternatives review process. As part of that process, the Board reviewed strategic alternatives, including a potential sale of the Company, and retained a financial advisor that engaged in discussions with potential counterparties. Based on this process and subsequent review, the Board determined not to pursue a sale of the Company at this time.

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To further support the Company's position and enhance the potential amounts available for distribution to stockholders, the Advisor agreed to defer all fees that accrue and would otherwise be payable by the Company to the Advisor and/or its affiliates beginning on April 30, 2026, until such time as determined by the Advisor, in its sole discretion. All or part of such fees will be payable in the sole discretion of our Advisor, as applicable, upon prior notice to the Company.

On May 14, 2026, the Board authorized the amendment of the Company's valuation policy to change the frequency that the Company determines its estimated NAV per share from monthly to quarterly. Therefore, following the announcement of the Company's March 2026 estimated NAV per share, subsequent NAV per share determinations are made on a quarterly basis.

Our primary objective remains maximizing stockholder value while managing the Company's liabilities, capital structure and liquidity. Our Advisor and the Board will continue to evaluate the Company's business plan and consider other alternatives, including potential asset sales or other strategic transactions, measures to manage the Company's liabilities, capital structure and liquidity, and potential special distributions or other returns of capital in connection with any completed transaction. The timing, amount and form of any special distribution or other return of capital would depend on, among other things, the completion and terms of any asset sale or other transaction, the Company's liabilities and liquidity requirements, appropriate reserves, the Company's contractual obligations, applicable legal requirements and further approval by the Board. In the meantime, the Company expects to operate with constrained liquidity and will limit its activities primarily to maintaining existing operations and meeting ongoing obligations.

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Current Market Conditions and Related Risks and Opportunities

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We are not aware of any additional material trends or uncertainties, favorable or unfavorable, other than the market and liquidity conditions discussed above, broader national economic conditions affecting real estate generally and the matters otherwise referred to in this Quarterly Report, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from acquiring properties or real estate related securities. Specifically, the U.S. real estate markets continue to be impacted by the challenging macroeconomic environment, including the uncertainties and disruptions resulting from government policies and regulations, tariffs, higher inflation, geopolitical uncertainty and particularly the effect of the current interest rate environment, as well as actual or perceived changes in economic conditions, which can result from global events such as international trade disputes, a foreign debt crisis, foreign currency volatility, natural disasters, war, epidemics and pandemics, the fear of spread of contagious diseases, and civil unrest and terrorism.

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Results of Operations

As of September 30, 2026, the Company's portfolio represents the two data centers leased to three tenants. The disposition of the Company's Tower Assets in December 2025 represented a strategic shift in the Company's business and as such, qualified for discontinued operations presentation. The results of the properties that have been sold for the three and nine months ended September 30, 2025 were reclassified to loss from discontinued operations. These reclassifications had no effect on our reported net income.

The following table sets forth information regarding our consolidated results of operations for the three and nine months ended September 30, 2026 and 2025, respectively:

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Rental Revenue

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For the three and nine months ended September 30, 2026, rental revenues remained generally flat compared to the three and nine months ended September 30, 2025 as both data centers were fully occupied at the beginning of January 2025.

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General and Administrative

For three and nine months ended September 30, 2026, general and administrative expenses decreased compared to the three and nine months ended September 30, 2025, respectively, due to the decrease in audit fee, legal and printing costs, among others, as a result of the termination of the Public Offering in April 2026 and reduced filings and reporting.

Asset Management Fees

For the three and nine months ended September 30, 2026, asset management fees were slightly lower compared to the three and nine months ended September 30, 2025 due to the slight decrease in NAV. Asset management fees were broadly in line with prior year given there were no material changes in NAV under management.

Performance Participation Allocation

There was no performance participation allocation recognized during the three and nine months ended September 30, 2026 and nine months ended September 30, 2025 as the total returns did not exceed the hurdle rate for the period. During the three months ended September 30, 2025, the Company reversed $165,100 of excess accrual of performance participation allocation.

Loss on Investment in Datacom JV

For the three months ended September 30, 2026, loss on investment in the Datacom JV decreased slightly compared to the three months ended September 30, 2025 due to lower interest expense resulting from a decrease in interest rates and the recovery of previously written off accounts, partially offset by higher depreciation expense. For the nine months ended September 30, 2026, loss on investment in the Datacom JV increased compared to the nine months ended September 30, 2025 due to higher interest expense resulting from increased borrowings and higher depreciation expense, partially offset by higher rental revenue attributable to asset acquisitions.

Interest Expense

For the three and nine months ended September 30, 2026, interest expense slightly decreased compared to the three and nine months ended September 30, 2025 due to the required monthly principal paydown beginning in March 2026 and the repayment in full of the Revolving Facility.

Interest Income

For the three and nine months ended September 30, 2026, interest income increased compared to the three and nine months ended September 30, 2025 due to the increase in average cash balance which was attributable to the proceeds from the Tower Sale.

Net Asset Value

Our Board, including a majority of our independent directors, adopted valuation guidelines that contain a comprehensive set of methodologies to be used by our Advisor and our independent valuation advisor in connection with estimating the values of our assets and liabilities for purposes of our NAV calculation. These guidelines are designed to produce a fair and accurate estimate of the price that would be received for our investments in an arm's-length transaction between a willing buyer and a willing seller in possession of all material information about our investments. Our Advisor and Board will review our valuation guidelines and methodologies related to investments in real property and certain real estate debt and other securities at least annually. From time to time, our Board, including a majority of our independent directors, may adopt changes to the valuation guidelines if it (1) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination or (2) otherwise reasonably believes a change is appropriate for the determination of NAV.

The calculation of our NAV is intended to be a calculation of the fair value of our assets less our outstanding liabilities as described below and will likely differ from the book value of our equity reflected in our financial statements. As a public company, we are required to issue financial statements based on historical cost in accordance with accounting principles generally accepted in the United States of America ("GAAP"). To calculate our NAV for the purpose of establishing a repurchase price for our shares, we adopted a model, as explained below, that adjusts the value of our assets and liabilities from historical cost to fair value generally in accordance with the GAAP principles set forth in the FASB ASC Topic 820, Fair Value Measurements and Disclosures. The Advisor will calculate the fair value of our real estate properties, which will be reviewed for reasonableness by our independent valuation advisor. Our Advisor may retain additional third-parties to assist with our valuations of certain investments. Our Advisor does not rely on third-parties, including our independent valuation advisor, in calculating the NAV. Because these fair value calculations will involve significant professional judgment in the application of both observable and unobservable attributes, the calculated fair value of our assets may differ from their actual realizable value or future fair value.

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The Company prepares its valuations in accordance with the procedure described in the "Net Asset Value Calculations and Valuation Procedures" in Exhibit 99.1 incorporated by reference into this Quarterly Report. While we believe our NAV calculation methodologies are consistent with standard industry practices, there is no rule or regulation that requires we calculate NAV in a certain way. As a result, other REITs may use different methodologies or assumptions to determine NAV. In addition, NAV is not a measure used under GAAP and the valuations of and certain adjustments made to our assets and liabilities used in the determination of NAV will differ from GAAP. You should not consider NAV to be equivalent to stockholders' equity or any other GAAP measure.

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On May 14, 2026, the Board authorized the amendment of the Company's valuation policy to change the frequency that the Company determines its estimated NAV per share from monthly to quarterly.

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September 30, 2026 NAV Per Share

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On October 21, 2026, the Board approved an updated quarterly estimated NAV for each outstanding class of shares of the Company and Class P and Class PX limited partnership units of the Operating Partnership as of September 30, 2026. The Company calculates an estimated NAV per share in accordance with the valuation policy adopted by its audit committee and approved by the Board. The Company's estimated NAV per share for each class of stock is calculated by the Advisor and reviewed and confirmed by the audit committee prior to Board approval.

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The total NAV presented in the following tables includes the NAV of the holders of the Company's Class A shares (were not offered in the Public Offering), Class AX shares (were not offered in the Public Offering), Class I shares and Class IX shares (were not offered in the Public Offering), Class T shares, as well as partnership interests of the Operating Partnership held by parties other than the Company. As of September 30, 2026, no Class D shares, Class DX shares or Class S shares were outstanding. The following table provides a breakdown of the major components of the Company's total NAV as of September 30, 2026:

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The following table provides a breakdown of the Company's total NAV and NAV per share/unit by class as of September 30, 2026:

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Set forth below are the weighted averages of the key assumptions in the discounted cash flow methodology used in the valuations, based on property types:

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These assumptions are determined by our Advisor and reviewed for reasonableness by our independent valuation advisor. A change in these assumptions would impact the calculation of the value of our property investments. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our investment values:

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The following table reconciles U.S. GAAP total equity per our condensed consolidated balance sheet as of September 30, 2026 to our NAV:

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The following details the adjustments to reconcile the Company's total GAAP equity to our NAV:

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Liquidity and Capital Resources

As of September 30, 2026, our current total liquidity is $9,211,997, representing cash and cash equivalents. We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources. Historically, we have generated capital through the issuances of our common stock and OP Units and by borrowing monies. The Public Offering terminated on April 30, 2026 and we are currently not raising any capital.

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Due to recent volatility in the digital infrastructure market driven by uncertainty surrounding technology and AI companies' capital expenditure plans, tighter conditions in the credit markets, the current geopolitical environment and a challenging fundraising environment in the retail investor channel marked by increased repurchase requests, the Advisor, with the assistance from a financial advisor, has been internally reviewing the Company's outlook with a view towards determining the best path forward for the Company and its stockholders. As previously disclosed, based on this review and upon the Advisor's recommendation, the Board adopted several immediate actions to preserve liquidity, including the suspension of the Company's distribution program and share repurchase program (other than repurchases sought pursuant to the death or qualifying disability of a stockholder), which suspensions remain in effect as of the date of this filing. We repaid in full the balance of our Sunflower Secured Credit Facility; therefore, depending on the outcome of the continuing evaluation of the Company's business plan and other alternatives, we may decide to obtain other lines of credit for various purposes. Potential future sources of capital include secured or unsecured financings from banks or other lenders, establishing additional lines of credit, proceeds from the sale of properties and undistributed cash flow. Currently, we have not identified any additional sources of financing and there is no assurance that such sources of financings will be available on favorable terms or at all.

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We anticipate that adequate cash will be generated from operations to fund our operating and administrative expenses and continuing debt service obligations. However, our ability to finance our operations is subject to some uncertainties. Our ability to generate working capital is dependent on our ability to attract and retain tenants and the economic and business environments of the various markets in which our properties are located. Our ability to sell our assets is partially dependent upon the state of real estate markets and the ability of purchasers to obtain financing at reasonable commercial rates.

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For the nine months ended September 30, 2026 and 2025, cash flows from operating activities were negative and did not provide adequate funding for payments of distributions. Proceeds from our offerings have been used to fund the payment of distributions declared and distributed for the three and nine months ended September 30, 2026 and 2025 as follows:

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Contractual Obligations

In September 2026, the Company repaid its outstanding loan balance. There are no current and long-term material cash requirements as of September 30, 2026.

Cash Flows

The following table provides a breakdown of the net change in our cash and cash equivalents for the nine months ended September 30, 2026 and 2025:

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Operating Activities

For the nine months ended September 30, 2026 and 2025, net cash used in operating activities were primarily related to the payments of general and administrative expenses, reimbursement of expenses paid by the Advisor and its affiliates, and interest payments on our outstanding indebtedness. The increase in cash used in operating activities for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 was primarily driven by a repayment of performance participation allocation payable to the Advisor as well as repayment of amounts due to affiliates during the nine months ended September 30, 2026. In general, cash flows from operating activities are affected by the timing of cash receipts and payments.

Investing Activities

For the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, the increase in net cash provided by investing activities was primarily due to a $7.1 million decrease in asset acquisitions and funding of preacquisition development costs.

Financing Activities

For the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, the increase in net cash used in financing activities was primarily due to a $21.5 million decrease in proceeds from the issuance of common stock and OP Units, a $5.5 million decrease in borrowings under the Company's Revolving Facility, and $18.3 million of repayments under the Revolving Facility, including scheduled amortization. These decreases were partially offset by lower distributions and redemptions of common stock and OP Units as these were partially suspended beginning April 2026.

Recent Accounting Pronouncements

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See Note 2, "Summary of Significant Accounting Policies," to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion concerning recent accounting pronouncements.

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Critical Accounting Estimates

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Our critical accounting estimates are disclosed in the "Critical Accounting Estimates" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. No modifications to these estimates were made during the three and nine months ended September 30, 2026.

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