Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This report contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "project," "seek," or "continue," or similar words or the negative thereof. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results. They can be affected by assumptions we might make or by known or unknown risks or uncertainties. Consequently, we cannot provide any assurance with respect to these or any other forward-looking statements. Investors are cautioned not to place undue reliance on any forward-looking statements. See the risk factors identified in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission ("SEC") on March 20, 2025, for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider the potential risks and uncertainties set forth herein and in our Annual Report on Form 10-K for the year ended December 31, 2024 (and our subsequently filed public reports) as being exhaustive, and new factors may emerge that could affect our business. We assume no obligation, and disclaim any duty, to update the forward-looking statements in this report, unless otherwise required by law. You should read the following discussion in conjunction with the condensed consolidated financial statements and notes appearing elsewhere in this filing and our previously filed annual audited financial statements.

Executive Summary:

GTJ REIT, Inc. (the "Company," "we," "us," or "our") is a self-administered and self-managed real estate investment trust ("REIT") which, as of September 30, 2025, owned and operated, through our Operating Partnership, a total of 50 properties consisting of approximately 6.6 million square feet of primarily industrial space on approximately 408 acres of land in New York, New Jersey, Connecticut, Delaware, North Carolina and Florida. As of September 30, 2025, our properties were 95%leased to 61 tenants, with certain tenants having lease agreements in place at multiple locations. The Operating Partnership also owns, through a joint venture, a 50% interest in a 150,325 square foot state-of-the-art industrial building in Piscataway, New Jersey.

We focus primarily on the acquisition, ownership, management and operation of commercial real estate located in New York, New Jersey, Connecticut, Delaware, North Carolina and Florida. To the extent it is in the best interests of our stockholders, we will seek to invest in a diversified portfolio of properties that will satisfy our primary investment objectives of providing our stockholders with stable cash flow, preservation of capital, income growth, and enhancing stockholder value without taking undue risk. We anticipate that the majority of properties we acquire will have both the potential for growth in value and the ability to provide cash distributions to stockholders. In addition, we may continue to look for attractive opportunities to divest certain of our properties, potentially redeploying that capital in our focus markets.

Critical Accounting Policies:

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts in our condensed consolidated financial statements. Actual results could differ from these estimates. Please refer to the section of our Annual Report on Form 10-K for the year ended December 31, 2024, entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" for a discussion of our critical accounting policies. During the nine months ended September 30, 2025, there were no material changes to these policies.

Recent Developments:

Sale of Real Estate:

On April 23, 2025, the Company sold the property located at 25 Corporate Place South, Piscataway, New Jersey for $16.0 million, resulting in an aggregate gain of $7.7 million, net of $0.2 million in closing costs.

Acquisitions of Real Estate:

On January 29, 2025, the Company (through its Operating Partnership) acquired for cash a 5.36 acre lot in Charlotte, North Carolina for $3.9 million, exclusive of closing costs. The property is currently leased to Excel Inc. (d/b/a DHL Supply Chain) pursuant to a lease expiring on December 31, 2025.

On December 23, 2024, the Company (through its Operating Partnership) acquired for cash a property located at 9111 Cheetos Circle, Fort Myers, Florida, consisting of approximately 10.5 acres of land and a 104,120 square-foot building for $35.0 million, exclusive of closing costs. The property is leased to Frito-Lay (a wholly owned subsidiary of PepsiCo) pursuant to a 10-year lease agreement expiring on December 31, 2034.

Proceeds of Mortgage Note Payable:

On April 17, 2025, three wholly owned subsidiaries of the Operating Partnership entered into a loan agreement with John Hancock Life Insurance Company (U.S.A.). The loan agreement provides for a cross-defaulted, cross-collateralized portfolio of commercial mortgage loans in the aggregate principal amount of $25.0 million. The proceeds of the loan were used in connection with the payoff of the Company's mortgage loan with Allstate Life Insurance Company.

On March 15, 2024, three wholly owned subsidiaries of the Operating Partnership entered into a loan agreement with American General Life Insurance Company. The loan agreement provides for a cross-defaulted, cross-collateralized portfolio of commercial mortgage loans in the aggregate principal amount of $125.0 million. The Company used a portion of the proceeds to pay off $90 million of indebtedness that was outstanding under its secured credit facility with Keybank National Association, consisting of $40 million under the Company's revolving credit facility and $50 million under the Company's term loan.

Extension of Revolving Line of Credit Facility:

On July 25, 2025, the Company exercised its option to extend the maturity date of its revolving line of credit facility for one year to August 5, 2026.

Share Redemption Program:

Our common stock is currently not registered under Section 12 of the Exchange Act and there is no established public market for shares of our common stock. In order to provide our stockholders with interim liquidity, on November 8, 2016, the Board of Directors approved a share redemption program authorizing redemption of the Company's shares of common stock (the "Shares"), subject to certain conditions and limitations. On June 30, 2022, the Board of Directors amended and restated the share redemption program, effective as of August 8, 2022 (the "Program"), in order to increase the limit on the amount of redemptions permitted each year from $1 million to $2 million, and starting in 2023, to limit the number of redemptions receiving priority for death or disability to $1 million each year. The following is a summary of terms and provisions of the Program:

Under the Program, the redemption price per Share is equal to 90% of the net asset value ("NAV") per Share as of the end of the most recently completed calendar year. The NAV is approved annually by the Company's Board of Directors. The following table presents the results of the Program:

On July 6, 2021, the Program was temporarily suspended during the Company's self-tender offer and remained suspended for ten (10) business days following the expiration of the offer. The first redemption date following the recommencement of the Program was December 3, 2021.

Since the Program became effective in 2017, the Company received redemption requests during each year exceeding the Program's annual limit (other than in 2020 when the Program was suspended). As a result, the Company was unable to purchase all Shares presented for redemption. The Company honored the requests it received on a pro rata basis in accordance with the policy on priority of redemptions set forth in the Program, subject to giving certain priorities in accordance with the Program. The Company treats any unsatisfied portions of redemption requests as requests for redemption in the next semi-annual period.

On March 6, 2025, the Company received its annual valuation as of December 31, 2024. The annual valuation resulted in an adjustment to the redemption price under the Program from $26.10 to $26.37 per share. The Company has filed a Current Report on Form 8-K with the SEC on March 17, 2025, and mailed to its stockholders an announcement of the redemption price adjustment. The redemption price of $26.37 per share is effective for the semi-annual period running from December 1, 2024 to May 31, 2025 and until such time as the Board determines a new estimated per share NAV. The Company's stockholders are permitted to withdraw any redemption requests upon written notice to the Company at any time prior to ten (10) days before the end of the applicable semi-annual period.

Financial Condition and Results of Operations:

Three Months Ended September 30, 2025 vs. Three Months Ended September 30, 2024

The following table sets forth our results of operations for the periods indicated (in thousands):

Revenues

Total revenues increased $1.4 million, or 7%, to $20.9 million for the three months ended September 30, 2025 from $19.5 million for the three months ended September 30, 2024. The increase is primarily due to increased rental income attributable to higher rental rates in the third quarter of 2025 compared to the third quarter of 2024 and the Company's acquisition of a property in Fort Myers, Florida in the fourth quarter of 2024, partially offset by the sale of one property in Piscataway, New Jersey in the second quarter of 2025.

Operating Expenses

Operating expenses of $10.4 million for the three months ended September 30, 2025 increased $0.7 million, or 7%, from $9.7 million for the three months ended September 30, 2024, primarily due to increased property operating expenses and depreciation and amortization expense in the third quarter of 2025 compared to the third quarter of 2024. The increase in property operating expenses is primarily due to increased insurance expense, utility expense and legal and professional expense in the third quarter of 2025 compared to the third quarter of 2024, and property operating expenses attributable to the Company's property in Fort Myers, Florida acquired in the fourth quarter of 2024, partially offset by the elimination of operating expenses attributable to one of the Company's properties located in Piscataway, New Jersey which was sold in the second quarter of 2025. The increase in depreciation and amortization expense is primarily attributable to the Company's property in Fort Myers, Florida, which was acquired in the fourth quarter of 2024.

Interest Expense

Interest expense for the three months ended September 30, 2025 increased by $0.1 million, or 2%, to $6.8 million from $6.7 million for the three months ended September 30, 2024, primarily as a result of various debt refinancings.

Nine Months Ended September 30, 2025 vs. Nine Months Ended September 30, 2024

The following table sets forth our results of operations for the periods indicated (in thousands):

Revenues

Total revenues increased $3.7 million, or 6%, to approximately $62.5 million for the nine months ended September 30, 2025 from $58.8 million for the nine months ended September 30, 2024. The increase is primarily due to increased rental income attributable to higher rental rates in 2025 compared to 2024, and the Company's acquisition of a property in Fort Myers, Florida in the fourth quarter of 2024, partially offset by the sale of one property in Piscataway, New Jersey in the second quarter of 2025.

Operating Expenses

Operating expenses of $33.9 million for the nine months ended September 30, 2025 decreased $1.5 million, or 4%, from $35.4 million for the nine months ended September 30, 2024, primarily due to decreased general and administrative expenses, partially offset by increased property operating expenses and depreciation and amortization expense. The decrease in general and administrative expenses is primarily attributable to lower executive compensation in 2025 compared to 2024. The increase in property operating expenses is primarily due to increased insurance expense, utility expense and repair and maintenance expenses in 2025 compared to 2024, and property operating expenses attributable to the Company's property in Fort Myers, Florida acquired in the fourth quarter of 2024, partially offset by the elimination of operating expenses attributable to one of the Company's properties located in Piscataway, New Jersey which was sold in the second quarter of 2025. The increase in depreciation and amortization expense is primarily attributable to the Company's property in Fort Myers, Florida, which was acquired in the fourth quarter of 2024.

Gain on Sale of Real Estate

Gain on sale of real estate is attributable to the sale of a property located in Piscataway, New Jersey for $16.0 million on April 23, 2025.

Interest Expense

Interest expense for the nine months ended September 30, 2025 increased by $0.4 million, or 2%, to $20.4 million from $20.0 million for the nine months ended September 30, 2024, primarily as a result of various debt refinancings.

Liquidity and Capital Resources

We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties. These revenues include fixed base rents and recoveries of certain property operating expenses that we have incurred and that we pass through to the individual tenants.

Our primary cash disbursements consist of property operating expenses (which include real estate taxes, repairs and maintenance, insurance, and utilities), general and administrative expenses (which include compensation costs, office expenses, professional fees and other administrative expenses), leasing and acquisition costs (which include third-party costs paid to brokers and consultants), and principal payments and interest expense on our mortgage loans.

Our sources of liquidity and capital include cash flow from operations, cash and cash equivalents, borrowings under our revolving credit facility, refinancing existing mortgage loans, obtaining loans secured by our unencumbered properties, and property sales.

On December 2, 2015, the Company (through its Operating Partnership) entered into the Key Bank Credit Agreement with Key Bank for a $50.0 million revolving credit facility with an initial term of two years, with a one-year extension option, subject to certain other customary conditions. The Company, through the extension option and various amendments to the Key Bank Credit Agreement, extended the maturity date of the revolving credit facility to June 30, 2022.

On October 22, 2021, the Operating Partnership entered into a First Amended and Restated Credit Agreement with Key Bank and the other lenders parties thereto. The Amended and Restated Credit Agreement provided for a $60.0 million senior secured credit facility consisting of (i) a $10.0 million revolving line of credit facility, with an initial term of three years and two one-year extension options and (ii) a $50.0 million term loan facility, with an initial term of four years and a one-year extension option, which was funded in a single advance on October 22, 2021. Up to $10.0 million of the total commitments under the credit facility will be available for the issuance of letters of credit and swing line loans.

So long as no default or event of default has occurred and is continuing, the Operating Partnership shall have the right, from time to time, to request an increase in the size of the term loan, request an additional incremental term loan facility, or increase commitments under the revolving line of credit facility, collectively in an aggregate amount that would not cause the Credit Facility to exceed $125 million.

On August 5, 2022, the Operating Partnership entered into a First Amendment (the "First Amendment") to the First Amended and Restated Credit Agreement with Key Bank, as agent and lender, First Financial Bank, as lender, and the Company and certain direct and indirect subsidiaries of the Company as guarantors. The First Amendment amended the First Amended and Restated Credit Agreement to, among other things, (i) increase the amount available under the revolving line of credit facility from $10.0 million to $40.0 million, (ii) extend the maturity date of the revolving line of credit facility from October 22, 2024 to August 5, 2025, (iii) extend the maturity date of the term loan facility from October 22, 2025 to August 5, 2026, (iv) replace the interest rate option based on LIBOR with interest rate options based on the Secured Overnight Financing Rate ("SOFR"), including term SOFR and daily simple SOFR, and (v) add certain subsidiaries of the Operating Partnership as guarantors, and mortgages encumbering properties owned by such subsidiaries as collateral. As of August 5, 2022, outstanding borrowings under the revolving line of credit facility were $40.0 million.

On August 5, 2022, certain subsidiaries of the Operating Partnership refinanced the AIG Loan on certain properties by entering into new loan agreements (collectively the "New AIG Loan Agreements") with AIG Asset Management (U.S.), LLC, as administrative agent, and the other lenders from time to time party thereto. The New AIG Loan Agreements provide for secured loans in the aggregate principal amount of $225.0 million.

In addition, on March 15, 2024, certain subsidiaries of the Operating Partnership refinanced the outstanding debt of certain properties by entering into a new loan agreement (the "Loan Agreement") with American General Life Insurance Company. The Loan Agreement provides for a secured loan in the aggregate principal amount of $125.0 million. The Company used a portion of the proceeds to pay off $90.0 million of indebtedness that was outstanding under its senior secured credit facility with Key Bank, consisting of $40.0 million under the revolving line of credit facility and $50.0 million under the term loan facility.

On July 25, 2025, the Company exercised its option to extend the maturity date of the Revolver for one year to August 5, 2026.

Our available liquidity at September 30, 2025 was approximately $44.6 million, consisting of cash and cash equivalents and our available borrowing capacity under our revolving line of credit facility. As of September 30, 2025, the Company had outstanding borrowings of $18.4 million under the revolving line of credit facility.

Net Cash Flows:

Nine Months Ended September 30, 2025 vs. Nine Months Ended September 30, 2024

Operating Activities

Net cash provided by operating activities was $19.4 million for the nine months ended September 30, 2025. Cash provided by operating activities included (i) income before depreciation, amortization, stock compensation, gain on sale of real estate, rental income in excess of amounts billed, non-cash lease expense and income from equity investment in unconsolidated affiliate of $21.7 million, (ii) an increase in other liabilities of $0.2 million and (iii) distributions from unconsolidated affiliate of $0.2 million, partially offset by (iv) a decrease in accounts payable and accrued expenses of approximately $1.0 million and (v) an increase in other assets of approximately $1.7 million primarily attributable to increased rent receivables..

Net cash provided by operating activities was $17.1 million for the nine months ended September 30, 2024. Cash provided by operating activities included (i) income before depreciation, amortization, stock compensation, rental income in excess of amounts billed, non-cash lease expense and income from equity investment in unconsolidated affiliate of approximately $18.8 million, (ii) distributions from unconsolidated affiliate of $0.2 million and (iii) an increase in other liabilities of $1.4 million, partially offset by (iv) an increase in other assets of $2.9 million primarily attributable to increased rent receivables and deferred leasing costs and (v) a decrease in accounts payable and accrued expenses of $0.4 million.

Investing Activities

Net cash provided by investing activities was $7.8 million for the nine months ended September 30, 2025. Cash provided by investing activities resulted from (i) net proceeds from the disposition of one property of $15.8 million, partially offset by (ii) the acquisition of one property for $3.6 million, (iii) property improvements of $3.4 million and (iv) deposit for property acquisition of $1.0 million.

Net cash used in investing activities was $2.7 million for the nine months ended September 30, 2024. Cash used in investing activities resulted from (i) property improvements of $1.4 million and (ii) deposits for property acquisitions of $1.3 million.

Financing Activities

Net cash used in financing activities was $33.3 million for the nine months ended September 30, 2025. Cash used in financing activities resulted from (i) the payment of mortgage principal of $2.1 million, (ii) the repayment of the Company's mortgage indebtedness with Allstate Life Insurance Company of $33.6 million, (iii) the payment of the Company's fourth quarter 2024 dividend, 2024 supplemental dividend and 2025 dividends totaling $16.1 million, (iv) distributions to noncontrolling interests of $3.2 million, (v) repurchases of the Company's common stock of $2.8 million and (vi) financing deposits and costs of $0.5 million, partially offset by (vii) proceeds of mortgage payable with John Hancock Life Insurance Company of $25.0 million.

Net cash provided by financing activities was $10.5 million for the nine months ended September 30, 2024. Cash provided by financing activities resulted from (i) proceeds of mortgage loan payable of $125.0 million with American General Life Insurance Company, partially offset by (ii) the repayment of the Company's outstanding term loan payable of $50.0 million with Key Bank, (iii) the repayment of the Company's revolving line of credit facility with Key Bank of $40.0 million, (iv) the payment of mortgage principal of approximately $2.2 million, (v) the payment of the Company's fourth quarter 2023 dividend, 2023 supplemental dividend and 2024 dividends totaling $13.3 million, (vi) distributions to noncontrolling interests of $2.7 million, (vii) financing costs of $3.6 million for mortgage note payable with American General Life Insurance Company and (viii) repurchases of the Company's common stock of $2.7 million.

Non-GAAP Financial Measures

Funds from Operations and Adjusted Funds from Operations

We consider Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO"), each of which are non-GAAP measures, to be additional measures of an equity REIT's operating performance. We report FFO in addition to our net income and net cash provided by operating activities. Management has adopted the definition suggested by the National Association of Real Estate Investment Trusts ("NAREIT") and defines FFO to equal net income computed in accordance with GAAP, excluding gains or losses from sales of property, excluding impairment write-downs of depreciated property, plus real estate-related depreciation and amortization. We believe these measurements provide a more complete understanding of our performance when compared year over year and better reflect the impact on our operations from trends in occupancy rates, rental rates, operating costs and general and administrative expense which may not be immediately apparent from net income.

Management considers FFO a meaningful additional measure of operating performance because it primarily excludes the assumption that the value of our real estate assets diminishes predictably over time and industry analysts have accepted it as a performance measure. FFO is presented to assist investors in analyzing our performance. It is helpful because it excludes various items included in net income that are not indicative of operating performance, such as gains or losses from sales of property, impairment write-downs and depreciation and amortization. Management believes AFFO to be a meaningful, additional measure of operating performance because it provides information consistent with the Company's analysis of its operating performance by excluding non-cash and certain other income and expense items such as straight-lined rent, amortization of other intangible assets, mark to market debt adjustments, financing costs, our realized gain from an investment in a limited partnership, insurance recoveries related to casualty loss, gain or loss on extinguishment of debt, and stock compensation expense, which are not indicative of the results of our operating portfolio.

However, FFO and AFFO:

FFO and AFFO as defined by us may not be comparable to similarly titled items reported by other real estate investment trusts due to possible differences in the application of the NAREIT definition used by such REITs.

The reconciliation of net income attributable to our common stockholders in accordance with GAAP to FFO and AFFO for the three and nine months ended September 30, 2025 and 2024 is as follows (in thousands). All amounts are net of noncontrolling interest.

The Company believes FFO and AFFO to be the most appropriate supplemental disclosure of operating performance for a REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO and AFFO provide a uniform supplemental basis for evaluating the earnings performance of REITs considering the unique capital structure of each REIT.

Cash Payments for Financing

Payments of interest under our mortgage notes payable will consume a portion of our cash flow, reducing net income and consequently, the distributions to be made to our stockholders.

Trend in Financial Resources

We expect to receive additional rent payments over time due to scheduled increases in rent set forth in the leases on our properties. It should be noted, however, that the additional rent payments are expected to result in an approximately equal obligation to make additional distributions to stockholders, and will therefore not result in a material increase in working capital.

Inflation

Inflation has increased substantially in the United States during the past few years. In response, the Federal Reserve increased interest rates throughout 2023, and, although the Federal Reserve lowered interest rates in September 2024, November 2024, December 2024, September 2025 and November 2025, it may raise interest rates in the future. Higher interest rates imposed by the Federal Reserve to address inflation may increase our interest expense on our variable rate borrowings. In addition, increased inflation could have a negative impact on the Company's property operating expenses, as these costs could increase at a rate higher than the Company's rents. Our properties have tenants whose leases include expense reimbursements and other provisions to minimize the effect of inflation. However, rising costs could adversely affect our tenants' businesses, and there is no guarantee our tenants would be able to absorb these expense increases and continue to pay us their portion of property operating expenses and rent.