10-K/A
Peakstone Realty Trust (PKST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
| FORM 10-K/A |
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(Amendment No. 1)
| (Mark One) | |
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2024
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to
Commission File Number: 001-41686
| Peakstone Realty Trust | |||
|---|---|---|---|
| (Exact name of Registrant as specified in its charter) | Maryland | 46-4654479 | |
| --- | --- | ||
| (State or other jurisdiction of<br><br>incorporation or organization) | (IRS Employer<br><br>Identification No.) |
1520 E. Grand Ave
El Segundo, California 90245
(Address of principal executive offices)
(310) 606-3200
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common shares, $0.001 par value per share | PKST | New York Stock Exchange |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☒ |
|---|---|---|---|
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Aggregate market value of the common shares held by non-affiliates of the Company was approximately $377.5 million based on the closing sale price on the New York Stock Exchange for such shares on June 30, 2024.
As of March 24, 2025 there were 36,757,891 common shares outstanding.
Documents Incorporated by Reference: None
Auditor Name: Ernst & Young LLP Auditor Location: Los Angeles, California Auditor Firm ID: 42
EXPLANATORY NOTE
Peakstone Realty Trust (the “Company”), is filing this Amendment No. 1 on Form 10-K/A (the “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”), which was filed on February 20, 2025 with the U.S Securities and Exchange Commission (the “SEC”). In accordance with Rule 3-09 of Regulation S-X, this Amendment provides separate combined financial statements for Galaxy REIT LLC, an unconsolidated joint venture in which the Company previously held an ownership interest (the “Office Joint Venture”). On August 28, 2024, the Company transferred its ownership interest in the Office Joint Venture to the other members of the Office Joint Venture and no longer holds any ownership interest in the Office Joint Venture.
Pursuant to Rule 3-09 of Regulation S-X, the Company included in this Amendment the Office Joint Venture’s unaudited combined financial statements as of August 27, 2024 and for the period from January 1, 2024 to August 27, 2024, the date through which information was available prior to the Company’s transfer of its entire ownership interest in the Office Joint Venture. These unaudited combined financial statements were not available at the time that the Company filed its Form 10-K on February 20, 2025. Additionally, the Company included in this Amendment the Office Joint Venture’s audited combined financial statements as of December 31, 2023 and 2022, for the year ended December 31, 2023 and for the period from August 26, 2022 (Commencement of Operations) to December 31, 2022, and Report of Independent Auditors for these periods. All of these items are filed as Exhibit 99.1 and are included as financial statement schedules in Item 15 of this Amendment.
This Amendment also updates, amends and supplements Part IV, Item 15 of the Form 10-K to include the filing of Exhibit 23.2, the consent of Ernst & Young LLP, and the filing of new Exhibits 31.3 and 31.4 and the furnishing of new Exhibits 32.3 and 32.4, certifications of our Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-14(a) and (b) of the Securities and Exchange Act of 1934.
Except as described above, this Amendment is not intended to update or modify any other information presented in the Form 10-K for the fiscal year ended December 31, 2024, as originally filed. This Amendment does not update or modify in any way the financial position, results of operations, cash flows or related disclosures in the Form 10-K and does not reflect events occurring after the Form 10-K’s original filing date of February 20, 2025. Accordingly, this Amendment should be read in conjunction with the Form 10-K for the year ended December 31, 2024 and any subsequent filings with the SEC.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) List of Documents Filed.
The financial statements previously filed and listed on page F-1 of the previously filed Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 20, 2025. The financial statements listed on the Exhibit Index below are included in this Amendment No. 1 to Annual Report on Form 10-K/A pursuant to Rule 3-09 of Regulation S-X.
Schedule III — Real Estate and Accumulated Depreciation previously filed and set forth beginning on page S-1 of the previously filed Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 20, 2025. All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable and therefore have been omitted.
3. The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index below.
(b) See (a) 3 above.
(c) See (a) 2 above.
EXHIBIT INDEX
The following exhibits are included in this Annual Report on Form 10-K for the year ended December 31, 2024 (and are numbered in accordance with Item 601 of Regulation S-K).
Table of Contents
Table of Contents
Table of Contents
| 99.1† | Unaudited Combined Financial Statements of Galaxy REIT LLC as of August 27, 2024 and for the period from January 1, 2024 to August 27, 2024 and Audited Combined Financial Statements of Galaxy REIT LLC as of December 31, 2023 and for the year ended December 31, 2023, and as of December 31, 2022 and for the period from August 26, 2022 (Commencement of Operations) to December 31, 2022 |
|---|---|
| 101* | The following Peakstone Realty Trust financial information for the period ended December 31, 2023 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss) Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements. |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
| * | Previously filed, or furnished, as applicable, with the Form 10-K on February 20, 2025. |
| † | Filed herewith. |
| †† | Furnished herewith. |
| + | Management contract, compensatory plan or arrangement filed in response to Item 15(a)(3) of Form 10-K. |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PEAKSTONE REALTY TRUST<br><br>(Registrant) | |||
|---|---|---|---|
| Date: | March 27, 2025 | By: | /s/ Javier F. Bitar |
| Javier F. Bitar | |||
| Chief Financial Officer and Treasurer (Principal Financial Officer) |
7
Document
EXHIBIT 10.25
PEAKSTONE REALTY TRUST
RESTRICTED SHARE AWARD AGREEMENT
This RESTRICTED SHARE AWARD AGREEMENT (the “Award”) is made and entered into as of the 18th day of June, 2024, by and between Peakstone Realty Trust, a Maryland real estate investment trust (the “Company”), and __________ (the “Participant”).
Upon and subject to the Additional Terms and Conditions attached hereto and incorporated herein by reference as part of this Award, the Company hereby awards as of the Grant Date to the Participant the Restricted Shares described below in consideration of the Participant’s services to the Company and the Participant hereby accepts the Restricted Shares subject to the terms of the Plan and this Award.
A. Grant Date: June 18, 2024
B. Restricted Shares: _____ restricted common shares of the Company, $0.001 par value per share.
C. Plan (under which Award is granted): Peakstone Realty Trust Second Amended and Restated Employee and Trustee Long-Term Incentive Plan, as amended
D. Vesting Schedule: The Restricted Shares shall become vested in accordance with the following schedule, subject to the Participant’s continued service with the Company as of the applicable vesting date:
Percentage of Restricted Shares
Vesting Date which are Vested Shares
Grant Date 50%
The earlier of (a) the One-Year Anniversary 50%
of Grant Date and (b) the date of the Company’s
2025 Annual Meeting of Shareholders
Notwithstanding the foregoing, in the event that a Liquidation Event occurs and the Participant provides continuous services to the Company and/or any Affiliate until immediately prior to the Liquidation Event, the Restricted Shares shall become fully vested immediately prior to such Liquidation Event.
The Restricted Shares which have become vested pursuant to the Vesting Schedule are herein referred to as the “Vested Shares.” If a tranche of Restricted Shares that becomes vested includes a fraction of a share, such fractional share shall be rounded up or down to the next nearest whole share, but in no event shall the total number of Vested Shares exceed the total number of Restricted Shares set forth in item B above.
Vesting of the Restricted Shares is subject to the Participant’s continued service with the Company or an Affiliate through the applicable vesting date, and no Restricted Shares will become Vested Shares following termination of the Participant’s service with the Company or an Affiliate. Any portion of the Restricted Shares which have not become Vested Shares in accordance with the Vesting Schedule before or at the time the Participant ceases continued service with the Company shall be forfeited.
IN WITNESS WHEREOF, the Company and the Participant have signed this Award as of the Grant Date set forth above.
| COMPANY:<br><br><br><br>PEAKSTONE REALTY TRUST<br><br><br><br><br><br>By: ________________________________<br><br>Name: Michael J. Escalante<br><br>Title: Chief Executive Officer and President | PARTICIPANT:<br><br><br><br><br><br><br><br><br><br><br><br>Name: |
|---|
ADDITIONAL TERMS AND CONDITIONS OF
PEAKSTONE REALTY TRUST
RESTRICTED SHARE AWARD
1. Code Section 83(b) Election. Pursuant to Section 22.5 of the Plan, the Participant acknowledges that the Participant may not make an election under Section 83(b) of the Code without the Company’s consent. Any attempt by the Participant to make an election under Section 83(b) of the Code without the Company’s consent will result in the immediate forfeiture of this Award.
2. Issuance of Restricted Shares.
(a) The Company shall issue the Restricted Shares as of the Grant Date in one or more of the manners described below, as determined by the Company, in its sole discretion:
(i) by the issuance of share certificate(s) evidencing Restricted Shares to the Secretary of the Company or such other agent of the Company as may be designated by the Company or the Secretary (the “Share Custodian”); or
(ii) by documenting the issuance in uncertificated or book entry form on the Company’s share records.
Evidence of the Restricted Shares either in the form of share certificate(s) or book entry, as the case may be, shall be held by the Share Custodian or the Company, as applicable, until the Restricted Shares become Vested Shares in accordance with the Vesting Schedule.
(b) In the event that the Participant forfeits any of the Restricted Shares, the Company shall cancel the issuance on its share records and, if applicable, the Share Custodian shall promptly deliver the share certificate(s) representing the forfeited shares to the Company.
(c) The Participant hereby irrevocably appoints the Share Custodian, and any successor thereto, as the true and lawful attorney-in-fact of the Participant with full power and authority to execute any share transfer power or other instrument necessary to transfer any Restricted Shares to the Company in accordance with this Award, in the name, place, and stead of the Participant, by completing an irrevocable share power in favor of the Share Custodian in the form attached hereto as Exhibit 1. The term of such appointment shall commence on the Grant Date of this Award and shall continue until the last of the Restricted Shares are delivered to the Participant as Vested Shares or are returned to the Company as forfeited Restricted Shares.
(d) In the event the number of Common Shares is increased or reduced as a result of a subdivision or combination of Common Shares or the payment of a share dividend or any other increase or decrease in the number of Common Shares or other transaction such as a merger, reorganization or other change in the capital structure of the Company, the Participant agrees that any certificate representing Common Shares or other securities of the Company issued as a result of any of the foregoing shall be delivered to the Share Custodian or recorded in book entry form, as applicable, and shall be subject to all of the provisions of this Award as if initially granted hereunder.
3. Rights of a Shareholder. Until the share ledger entry reflecting the Restricted Shares accruing to the Participant upon vesting of the Restricted Shares is made, the Participant shall not have any rights as a shareholder of the Company.
4. Dividends. The Participant shall be entitled to dividends or other distributions paid on Restricted Shares but only as and when the Restricted Shares to which the dividends or other distributions are attributable become Vested Shares. Dividends paid on Restricted Shares will be held by the Company and transferred to the Participant, without interest, on such date as the Restricted Shares become Vested Shares. Dividends or other distributions paid on Restricted Shares that are forfeited shall be automatically forfeited by the Participant and retained by the Company.
5. Restrictions on Transfer of Restricted Shares.
(a) Except to the extent approved in writing by the Committee, the Participant shall not have the right to make or permit to exist any transfer or hypothecation, whether outright or as security, with or without consideration, voluntary or involuntary, of all or any part of any right, title, or interest in or to any Restricted Shares or Vested Shares prior to the date the Participant becomes fully vested in all Restricted Shares granted pursuant to this Award. After all Restricted Shares have become fully vested pursuant to this Award, there shall be no restrictions on the transfer of the Vested Shares other than those restrictions imposed by any Applicable Laws.
(b) The restrictions contained in this Section will not apply with respect to transfers of the Restricted Shares pursuant to the laws of descent and distribution governing the state in which the Participant is domiciled at the time of the Participant’s death; provided that the restrictions contained in this Section will continue to be applicable to the Restricted Shares after any such transfer; and provided further that the transferee(s) of such Restricted Shares must agree in writing to be bound by the provisions of this Award.
6. Changes in Capitalization.
(a) The number of Restricted Shares shall be proportionately adjusted from and after the Grant Date for any nonreciprocal transaction between the Company and the holders of capital shares of the Company that causes the per share value of the Common Shares underlying the Award to change (an “Equity Restructuring”), such as a share dividend, share split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend.
(b) In the case of any reclassification or change of outstanding Common Shares issuable upon vesting of the Award, or in the case of any consolidation or merger of the Company with or into another entity (other than a merger in which the Company is the surviving entity and which does not result in any reclassification or change in the then-outstanding Shares) or in the case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, in each case, that is not an Equity Restructuring, then, as a condition of such reclassification, change, consolidation, merger, sale or conveyance, the Company or such successor or purchasing entity, as the case may be, shall make lawful and adequate provision whereby the Participant shall thereafter have the right, subject to the vesting of the Award, to receive the kind and amount of securities, property and/or cash receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of securities issuable upon vesting of the Award immediately before such reclassification, change, consolidation, merger, sale or conveyance. Such provision shall include adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in Subsection (a). Notwithstanding the foregoing, subject to any accelerated vesting upon the consummation of a Liquidation Event as set forth in this Award, if such a transaction occurs, in lieu of causing such rights to be substituted for the Award, the Committee may, upon 20 days’ prior written notice to the Participant, in its sole discretion: (i) shorten the period during which the Award vests, provided it vests not more than 20 days after the date the notice is given, or (ii) cancel the Award upon payment to the Participant in cash, with respect to the Award, of an amount which, in the sole discretion of the Committee, is determined to be equivalent to the amount, if any, by which the Fair Market Value (at the effective time of the transaction) of the consideration that the Participant would have received if the Award had been vested before the effective time. The actions described in this Subsection (b) may be taken without regard to any resulting tax consequences to the Participant. Any determination made by the Committee pursuant to this Subsection (b) will be final and binding on the Participant. Any action taken by the Committee need not treat all participants under the Plan similarly.
(c) The existence of the Plan and this Award shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Shares or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.
7. Compliance With Laws. The Plan, the granting and vesting of this Award under the Plan, the issuance and delivery of the Restricted Shares, and the payment of money or other consideration allowable under the Plan or this Award are subject to compliance with all applicable federal and state laws, rules and regulations (including, but not limited to, state and federal securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Committee, the Board or the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Committee, the Board or the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and this Award shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Nothing in the Plan or in this Award shall require the Company to issue any Shares with respect to the Award if, in the opinion of counsel for the Company, that issuance could constitute a violation of any Applicable Laws. As a condition to the grant or vesting of the Award, the Company may require the Participant (or, in the event of the Participant’s death, the Participant’s legal representatives, heirs, legatees or distributees) to provide written representations concerning the Participant’s (or such other person’s) intentions with regard to the retention or disposition of the Restricted Shares and written covenants as to the manner of disposal of such shares as may be necessary or useful to ensure that the grant, vesting or disposition thereof will not violate the Securities Act, any other law or any rule of any applicable securities exchange or securities association then in effect. The Company shall not be required to register any Shares under the Securities Act or register or qualify any Shares under any state or other securities laws.
8. Legend on Share Certificates. Certificates evidencing the Restricted Shares, if issued, may have the following legend and statements of other applicable restrictions endorsed thereon:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE SOLE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE ANY APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
This legend shall not be required for any Shares issued pursuant to an effective registration statement under the Securities Act. Certificates evidencing the Restricted Shares, to the extent appropriate at the time, shall also have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of any other conditions, restrictions, rights and obligations set forth in this Award and in the Plan.
Instead of the foregoing legend, the certificate may state that the Company will furnish a full statement about certain restrictions on transferability to a shareholder on request and without charge. Such statement shall also be sent on request and without charge to shareholders who are issued shares without a certificate.
9. Governing Laws. This Award shall be construed, administered and enforced according to the laws of the State of Maryland; provided, however, no Restricted Shares shall be issued except, in the reasonable judgment of the Company, in compliance with exemptions under applicable state securities laws of the state in which the Participant resides, and/or any other applicable securities laws.
10. Successors. This Award shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.
11. Notice. Except as otherwise specified herein, all notices and other communications under this Award shall be in writing and shall be (i) personally delivered, (ii) delivered by a nationally recognized overnight courier, or (iii) delivered by email, addressed to the proposed recipient at the last known address or email address of the recipient, as applicable. Any party may designate any other address or email address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein. Any notice will be deemed given (i) the date personal delivery is made, (ii) the date the overnight courier delivery is made, or (iii) the date the email is delivered as evidenced by a delivery receipt.
12. Severability. In the event that any one or more of the provisions or portion thereof contained in this Award shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.
13. Entire Agreement. Subject to the terms and conditions of the Plan, this Award expresses the entire understanding and agreement of the parties. This Award may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
14. Violation. Except as provided in Section 5, any transfer, pledge, sale, assignment, or hypothecation of the Award or any portion thereof shall be a violation of the terms of this Award and shall be void and without effect.
15. Headings. Paragraph headings used herein are for convenience of reference only and shall not be considered in construing this Award.
16. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions or provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.
17. No Right to Continued Service. Neither the establishment of the Plan nor the award of Restricted Shares hereunder shall be construed as giving the Participant the right to continue as a trustee with the Company or any other continued service relationship with the Company or any Affiliate.
18. Special Definitions. As used in this Award,
(a) “Liquidation Event” means any one of the following events which may occur after the Grant Date:
(1) the dissolution or liquidation of the Company;
(2) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity;
(3) a merger, reorganization or consolidation in which the outstanding Shares are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction;
(4) the sale of all or a majority of the outstanding capital shares of the Company to an unrelated person or entity; or
(5) any other transaction in which the owners of the Company’s outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the successor entity immediately upon completion of the transaction; provided, however, that a Liquidation Event shall not include any transaction where the holders of capital shares of the Company do not receive consideration with respect to their capital shares of the Company in such transaction and such capital shares of the Company remain outstanding after the consummation of such transaction.
Notwithstanding the foregoing, no Liquidation Event shall be deemed to have occurred with respect to the Participant by reason of any actions or events in which the Participant participates in a capacity other than in the Participant’s capacity as a trustee of the Company or as a shareholder of the Company solely exercising the Participant’s voting or tendering rights.
(b) Other capitalized terms that are not defined herein have the meaning set forth in the Plan, except where the context does not reasonably permit.
EXHIBIT 1
IRREVOCABLE SHARE POWER
The undersigned hereby assigns and transfers to Peakstone Realty Trust (the “Company”), _____ common shares the Company registered in the name of the undersigned on the share transfer records of the Company; and the undersigned does hereby irrevocably constitute and appoint Javier F. Bitar, as attorney-in-fact, to transfer the aforesaid shares on the books of the Company, with full power of substitution; and the undersigned does hereby ratify and confirm all that said attorney-in-fact lawfully shall do by virtue hereof.
Date:__________ Signed:
Print Name:
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Document
EXHIBIT 10.26
PEAKSTONE REALTY TRUST TIME-BASED RESTRICTED STOCK UNIT AGREEMENT
This Restricted Stock Unit Agreement (this “Agreement”) is made as of March 7, 2025 by and between Peakstone Realty Trust, a Maryland real estate investment trust (the “Company”), and _______________ (the “Participant”).
WHEREAS, the Company maintains the Peakstone Realty Trust Second Amended and Restated Employee and Trustee Long-Term Incentive Plan (as amended from time to time, the “Plan”);
WHEREAS, the Plan authorizes the grant of awards to full-time employees of the Company and its Affiliates;
WHEREAS, Section 10 of the Plan provides for the issuance of Restricted Stock Units (“RSUs”) to eligible persons; and
WHEREAS, the Compensation Committee (the “Committee”) of the Board of Trustees of the Company (the “Board”) has determined that it would be to the advantage and in the best interest of the Company to cause RSUs to be issued to the Participant under the Plan, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1.Issuance of RSUs. As of the date first set forth above (the “Grant Date”), the Participant is hereby granted a total of _____ RSUs (the “Award”), subject to the terms and conditions, rights restrictions and limitations set forth herein and in the Plan.
2.Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.
(a)“Employment Agreement” means that certain Amended and Restated Employment Agreement, dated as of March 23, 2023, between the Company and the Participant, as may be amended from time to time.
3.Plan Governs; Shareholder Rights; Transfer Restrictions.
(a)The RSUs are subject to the terms of the Plan and this Agreement.
(b)The Participant shall be entitled to a Distribution Equivalent Right with respect to each RSU in the event that a dividend, distribution or liquidation payment is paid with respect to Shares of the Company on or after January 1, 2025, provided that the record date for such dividend, distribution or liquidation payment occurs on or after January 1, 2025 and prior to the settlement date of the RSU and the Participant has not forfeited the corresponding RSU prior to the payment date thereof. Such Distribution Equivalent Rights (i) shall, in the aggregate, equal the total number of Shares underlying the Participant’s then outstanding Award, multiplied by the amount of such dividend, distribution or liquidation payment, (ii) shall be in the same form as the applicable dividend, distribution or liquidation payment, and (iii) shall be paid to the Participant within thirty (30) days following the date such dividend, distribution or liquidation payment is paid to the Company’s shareholders or, if such dividend, distribution or liquidation payment was paid to the Company’s shareholders prior to the Grant Date, payment shall occur within thirty (30) days following the Grant Date.
(c)Subject to Section 3(b) above, the Award shall not confer upon the Participant any rights as a shareholder of the Company, including but not limited to, the right to receive any cash distributions or dividends and the right to vote on any issues presented to shareholders for a vote, unless and until the Participant is issued Shares in respect of vested RSUs and such Shares are reflected as issued and outstanding on the Company’s stock ledger.
(d)Without the consent of the Committee (which it may give or withhold in its sole discretion), the Participant shall not sell, pledge, assign, hypothecate, transfer, or otherwise dispose of (collectively, “Transfer”) any unvested RSUs or any portion of the Award attributable to such unvested RSUs (or any securities into which such unvested RSUs are converted or exchanged), other than by will, pursuant to the laws of descent and distribution, to a “family member” within the meaning of the Securities Act or pursuant to a qualified domestic relations order (the “Transfer Restrictions”); provided, however, that the Transfer Restrictions shall not apply to any Transfer of unvested RSUs or the Award to the Company. Any permitted transferee of the Award or RSUs shall take such Award or RSUs subject to the terms of the Plan and this Agreement. Any such permitted transferee must, upon the request of the Company, agree to such waivers, limitations, and restrictions as the Company may reasonably require. Any Transfer of the Award or RSUs which is not made in compliance with the Plan and this Agreement shall be null and void and of no effect ab initio.
4.Vesting.
(a)The RSUs shall vest and, subject solely to Section 12(j) of this Agreement and Section 22.2 of the Plan, become nonforfeitable with respect to one-third (1/3) of the RSUs on December 15 of each of 2025, 2026 and 2027 (with any fractional RSUs rounded as determined by the Committee), subject to the Participant’s continued employment and service with the Company or any of its Subsidiaries (or applicable successors thereto) through the applicable vesting date; provided that vesting may accelerate as specifically set forth in the Employment Agreement.
(b)Except as provided in the Employment Agreement, in the event of the Participant’s termination of employment and service with the Company and its Subsidiaries for any reason, all RSUs that have not vested as of the date of such termination of employment or service (after taking into account any accelerated vesting that occurs in connection with such termination) shall automatically and without further action be cancelled and forfeited without payment of any consideration therefor, and the Participant shall have no further right to or interest in such RSUs.
(c)If not prohibited by Applicable Law, vesting may be suspended by the Committee in its sole discretion during any Company-approved leaves of absence (if any).
5.Settlement of Award. Subject to the release requirements set forth in the Employment Agreement (to the extent applicable) and Participant’s timely execution of any required documents as described in Section 7, on or within seventy (70) days following the date on which the applicable RSU vests, the Company will issue to the Participant one Share for each vested RSU (on a one-to-one basis) in settlement of such RSU. In all cases, the issuance and delivery of Shares under this Agreement is intended to qualify as a short-term deferral as provided by Treasury Regulation Section 1.409A-1(b)(4) and shall be construed and administered in such a manner.
6.Adjustments for Corporate Transactions and Other Events. Participant acknowledges and agrees that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in the Plan. In the event that the RSUs or the Shares underlying the RSUs are changed into or exchanged for a different number or kind of securities of the Company or of another corporation or other entity by reason of merger, consolidation, recapitalization, reclassification, stock split, stock dividend or combination of shares, such new or additional or different securities which are issued upon conversion of or in exchange or substitution for RSUs or the Shares underlying the RSUs which are then subject to vesting shall be subject to the same vesting conditions as such RSUs or Shares, as applicable, unless the Administrator provides for the accelerated vesting of the RSUs or the Shares underlying the RSUs, as applicable.
7.Company Documents. As a condition to the Award, the Participant acknowledges and agrees that, at the Company’s reasonable and customary request, the Participant must timely execute and deliver to the Company any investment representations and/or other documents that the Company, in its sole discretion, deems necessary or desirable to effectuate the issuance of the Shares.
8.Securities Law Compliance. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all Applicable Laws. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by Applicable Law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law.
9.Taxes. The Company or any Subsidiary (as applicable) shall have the authority and the right to deduct or withhold, or require the Participant to remit to such entity, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to the issuance, vesting or payment of the RSUs or Distribution Equivalent Rights (the “Applicable Withholding Obligations”). In satisfaction of the Applicable Withholding Obligations or in satisfaction of any additional tax withholding, the Participant may, if and to the extent authorized and approved by the Committee in its sole discretion, elect to (i) have the Company or such Subsidiary withhold Shares otherwise issuable under the Award or (ii) tender to the Company other Shares owned by the Participant, in either case, having a fair market value equal to the Applicable Withholding Obligations and/or additional tax withholdings, as applicable, in accordance with the terms and conditions of the Plan. Notwithstanding any other provision of the Plan or this Agreement, the number of Shares which may be withheld with respect to the issuance, vesting or payment of the RSUs and the Distribution Equivalent Rights in order to satisfy the Participant’s Applicable Withholding Obligations shall be limited to the number of Shares which have a fair market value on the date of withholding no greater than the aggregate amount of the Applicable Withholding Obligations based on the maximum individual statutory withholding rates in the applicable jurisdiction. The Participant is advised to consult with his or her own tax advisor with respect to such tax consequences and his or her receipt and settlement of the RSUs.
10.Remedies. The Participant shall be liable to the Company and its Subsidiaries for all costs and damages, including incidental and consequential damages, resulting from a disposition or attempted disposition of the Award or the RSUs which is not permitted by the provisions of this Agreement or the Plan. Without limiting the generality of the foregoing, the Participant agrees that the Company shall be entitled to obtain specific performance of the obligations of the Participant under this Agreement and immediate injunctive relief in the event any action or proceeding is brought in equity to enforce the same. The Participant shall not urge as a defense that there is an adequate remedy at law.
11.Code Section 409A.
(a)General. To the extent applicable, this Agreement shall be interpreted so that this Award is exempt from (or, to the extent that exemption is not possible, to comply with) Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder (“Section 409A”). Notwithstanding any provision of this Agreement to the contrary, in the event that following the Grant Date the Company determines that the Award must be revised to maintain exemption from or to comply with Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to (a) exempt the Award from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A; provided, however, that this Section 11 shall not create any obligation on the part of the Company or any of its Subsidiaries to adopt any such amendment, policy or procedure or take any such other action, and none of the Company or any of its Subsidiaries shall have any obligation to indemnify any Person for any taxes imposed under or by operation of Section 409A.
(b)Notwithstanding anything to the contrary in this Agreement, no amounts shall be paid to the Participant under this Agreement during the six (6)-month period following the Participant’s
“separation from service” to the extent that the Committee determines that the Participant is a “specified employee” (each within the meaning of Section 409A) at the time of such separation from service and that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(b)(i). If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes), the Company shall pay to the Participant in a lump-sum all amounts that would have otherwise been payable to the Participant during such six (6)-month period under this Agreement. Such specified employee delay does not apply to payments made on account of payment of employment taxes or income inclusion, as described in Treasury Regulation Section 1.409A-3(j)(4)(vi) and (vii).
(c)Distribution Equivalent Rights. Any Distribution Equivalent Rights granted in connection with the RSUs issued hereunder, and any amounts that may become distributable in respect thereof, shall be treated separately from such RSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A.
12.Miscellaneous.
(a)Incorporation of the Plan. This Agreement is subject to the terms and conditions of the Plan, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. Notwithstanding the foregoing, in the event of any inconsistency between the Plan or this Agreement, on the one hand, and the Employment Agreement, on the other, the terms of the Employment Agreement shall control.
(b)Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries or Affiliates or shall interfere with or restrict in any way the rights of the Company or any of its Subsidiaries or Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or any of its Subsidiaries or Affiliates and the Participant.
(c)No Right to Future Awards. Participation in the Plan is discretionary and voluntary, and the Plan can be terminated at any time, subject to the terms thereof. This Award does not create a right or entitlement to future awards, whether pursuant to the Plan or otherwise.
(d)Governing Law. The laws of the State of Maryland shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
(e)Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board; provided, however, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of the Participant. For purposes of this paragraph, “material” means a change that the Committee or Board determines, in good faith, could reasonably be expected to result in a reduction in the dollar value of the RSUs or could reasonably be expected to result in a curtailment of the Participant’s rights to receive the Shares or Distribution Equivalent Rights hereunder. For clarity, changes to features that the Committee or Board determines in good faith are an insignificant or unimportant feature of the Award, involve an administrative process, or are too remote to be reasonably expected to occur, shall not be considered “material.”
(f)Notices. Any notice pursuant to this Agreement shall be given in writing by (i) personal delivery, (ii) reputable overnight delivery service with proof of delivery, or (iii) email transmission, in each case sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given upon receipt or refusal to accept
delivery, or, in the case of email transmission, as of the date of the transmission provided that such transmission is received by the intended addressee prior to 5:00 p.m. Pacific Time (and any transmission received from and after 5:00 p.m., Pacific Time, shall be deemed received on the next business day (as used herein, the term “business day” shall mean any day other than Saturdays, Sundays and U.S. national holidays):
To the Company: Peakstone Realty Trust
1520 E. Grand Avenue
El Segundo, CA 90245
Attn: Chief Legal Officer
E-mail: nsitzer@pkst.com
To Participant: To the mailing or email address most recently on file in the payroll records of the Company.
(g)Successors and Assigns. The Company or any Subsidiary may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company and its Subsidiaries. Subject to the restrictions on transfer set forth in Section 3 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, committees, successors and assigns.
(h)Entire Agreement. The Plan, this Agreement and the Employment Agreement (including all exhibits thereto, if any) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and its Subsidiaries and Affiliates and the Participant with respect to the subject matter hereof.
(i)Agreement Severable. In the event that any provision of this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of this Agreement.
(j)Compensation Recovery. This Award and the Shares issuable hereunder shall be subject to any compensation recovery policy in effect as of the Grant Date or as may be adopted or maintained by the Company following the Grant Date, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder.
(k)Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, this Agreement and the RSUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
(l)Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive cash or the Shares as a general unsecured creditor with respect to the RSUs, as and when settled pursuant to the terms of this Agreement.
(m)Counterparts. The Agreement may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
(n)
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
| PEAKSTONE REALTY TRUST,<br><br>a Maryland real estate investment trust | |
|---|---|
| By: | |
| Name: | Michael J. Escalante |
| Title: | Chief Executive Officer and President |
The Participant hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement.
| Participant |
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| Print Name: |
| --- |
7
Document
| PEAKSTONE REALTY TRUST |
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Policy on Inside Information and Insider Trading
A.Background/Purpose
Under U.S. federal and state securities laws, it is illegal to purchase or sell securities of Peakstone Realty Trust (the “Company”) while in possession of material, non-public information related to, affecting or regarding the Company or its subsidiaries (such information, “Inside Information”), or to disclose Inside Information to others who then trade in the securities of the Company. Insider trading violations are pursued vigorously by the Securities and Exchange Commission (the “SEC”), U.S. Attorneys and state enforcement authorities and can result in severe penalties. While the regulatory authorities usually concentrate their efforts on the individuals who trade, or who tip Inside Information to others who trade, U.S. federal securities laws also impose potential liability on companies and other “controlling persons” within the organization if they fail to take reasonable steps to prevent insider trading by company personnel.
The Company has adopted this Policy on Inside Information and Insider Trading (this “Policy”) both to satisfy the Company’s obligation to prevent insider trading and to help the Company’s personnel and its external advisors avoid violating insider trading laws.
B.Applicability of Policy
1.Covered Persons
This Policy applies to the following people (collectively, “Covered Persons”):
•all officers of the Company and its subsidiaries;
•all members of the Board of Trustees of the Company (“trustees”);
•all employees of the Company and its subsidiaries;
•immediate family members and any persons who reside in the same household as any of the foregoing persons; and
•any other person whose transactions in the Company’s securities are directed by, or subject to influence or control by the foregoing persons, and any trust, partnership, corporation or other entity over which the foregoing persons have investment control.
“Immediate family member” means any spouse, child, stepchild, grandchild, parent, stepparent, grandparent, sibling, mother or father-in-law, son or daughter-in-law, or brother-in- law or sister-in-law (as well as other adoptive relationships), whether or not sharing the same household as the persons described in the first three bullets above.
The failure of any person subject to this Policy to observe and strictly adhere to the policies and procedures set forth herein at all times will be grounds for disciplinary action, up to and including dismissal. To ensure that Company confidences are protected to the maximum extent possible, no individuals other than specifically authorized personnel may release material information to the public, or respond to inquiries from the media, analysts or others outside the Company.
All consultants and outside advisors assisting the Company on sensitive matters are expected to abide by this Policy, although the Company assumes no responsibility with respect to the actions of persons who are not under its direct control.
2.Covered Transactions
This Policy applies to all transactions in the Company’s securities, including common shares (including any securities that are exercisable for, or convertible or exchangeable into, common shares, including units of limited partnership interest), preferred shares and any other securities the Company may issue from time to time whether or not pursuant to any benefit plan adopted by the Company, as well as derivative securities that are not issued by the Company, such as exchange-traded put or call options or swaps relating to the Company’s securities.
The restrictions contained in this Policy would apply to:
•the sale of the Company’s securities in the open market to pay the exercise price of an option;
•the “cashless exercise” effected through a broker or “same day sale” of an option; and
•any sale of the underlying securities acquired upon the exercise of an option is subject to this Policy.
In addition to the restrictions set forth in this Policy, the following transactions are strictly prohibited at all times:
•trading in call or put options involving the Company’s securities and other derivative securities;
•engaging in short sales of the Company’s securities;
•holding the Company’s securities in a margin account;
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•all forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts; and
•pledging the Company’s securities to secure margin or other loans, except for such pledges in effect as of the date of initial adoption of this Policy and as otherwise approved by the Board of Trustees of the Company.
If you are unsure whether a particular transaction is prohibited under this Policy, you should consult with the Chief Legal Officer prior to engaging in, or entering into, an agreement, understanding or arrangement to engage in, such transaction.
3.Exceptions to Covered Transactions
For purposes of this Policy, the Company considers transactions between Covered Persons and the Company with respect to grants under its Employee and Director Long-Term Incentive Plan or other Company equity incentive plan (or, to the extent applicable, granted outside such plan) to be exempt from this Policy. Such transactions include, without limitation, the following:
•the exercise of options for cash;
•the exercise of options on a “net exercise” basis pursuant to which an optionee either (i) delivers outstanding common shares to the Company or (ii) authorizes the Company to withhold from issuance common shares issuable upon exercise of the option, in either case, having a fair market value on the date of exercise equal to the aggregate exercise price; or
•the forfeiture to the Company of restricted common shares or share units to cover withholding tax obligations.
Furthermore, bona fide gifts of securities are not transactions subject to this Policy, unless the person making the gift possesses material nonpublic information about the Company, provided that Covered Persons must still pre-clear the transaction as described in Section D.3 below (“Specific Policies—Pre-clearance”).
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C.General Policy
No Covered Person who is in possession of Inside Information may, either directly or indirectly (including, without limitation, through a family member, friend or entity in which you or any of your family members is a trustee, officer or controlling equity holder or beneficiary),
(i) purchase or sell the Company’s securities, (ii) engage in any other action to take advantage of Inside Information or (iii) without the consent of the Company, provide Inside Information to any other person outside of the Company, including family and friends.
In addition, Covered Persons may not purchase or sell any securities of any other company, such as a lender, tenant, joint venture partner, possible acquisition target or competitor of the Company, when in possession of material non-public information concerning any such other company obtained during his or her employment with, or service to, the Company or any of its subsidiaries.
D.Specific Policies
1.Black-out Periods
All trustees and executive officers of the Company and its subsidiaries, as well as certain key employees, as listed on Schedule A hereto (as may be amended from time to time by the Chief Legal Officer), as well as any family members or other persons that reside in the same household as those persons (all of the foregoing being “Restricted Persons”) are subject to additional restrictions on their ability to engage in purchase or sale transactions involving the Company’s securities. Restricted Persons are more likely to have access to Inside Information regarding the Company because of their positions or affiliations with the Company and, as a result, their trades in the Company’s securities are more likely to be subject to greater scrutiny. Accordingly, Restricted Persons are prohibited from trading in the Company’s securities during the period beginning on the close of market on the 15th day prior to the end of each fiscal quarter and ending two full trading days following public disclosure of the financial results for that quarter or the full year.
| Quarter | Blackout Period Begins | Blackout Period Ends |
|---|---|---|
| 1 | March 16 | Two full trading days after Q1 earnings are publicly released |
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| 2 | June 15 | Two full trading days after Q2 earnings are publicly released |
| --- | --- | --- |
| 3 | September 15 | Two full trading days after Q3 earnings are publicly released |
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| 4 | December 16 | Two full trading days after annual earnings are publicly released |
| --- | --- | --- |
In addition, from time to time, the Company may impose special black-out periods on Restricted Persons and other employees of the Company if, in the judgment of the Chief Legal Officer, it is likely that such person or persons have become aware of significant corporate developments that have not yet been disclosed to the public, even when trading otherwise may be permitted. If certain Restricted Persons or other employees of the Company become subject to a special black-out period, such persons are prohibited from (i) trading in the Company’s securities and (ii) without the consent of the Company, disclosing to others the fact they are subject to such special black-out period. These special black-out periods may vary in length and may or may not be broadly communicated to Covered Persons. These restrictions do not apply to transactions made under an approved Rule 10b5-1 plan. Unless otherwise specified, the Company will re-open trading after two full days of trading following the date of public disclosure of such significant corporate developments.
2.“Tipping” of Information
Covered Persons may not disclose, convey or “tip” Inside Information to any person by providing them with Inside Information other than to disclose on a “need to know” basis to officers and employees of the Company or outside advisors in the course of performing their duties for the Company. When sharing Inside Information with other officers and employees of the Company or outside advisors, or other persons involved in the business and affairs of the Company, such information should be confined to as small a group as possible. Unlawful tipping includes passing on Inside Information to friends, family members or acquaintances under circumstances that suggest that persons subject to this Policy were trying to help the recipients of such information to make a profit or avoid a loss by trading in the Company’s securities based on such information.
3.Pre-clearance
A Restricted Person must obtain prior clearance from the Chief Legal Officer, or such person’s designee, by submitting (including via email) the information contained in the Request for Clearance to Trade as set forth on Annex A attached hereto, before such Restricted Person makes any purchases or sales (or gifts) of the Company’s securities, regardless of whether a black- out period is then in effect. In evaluating each proposed transaction, the Chief Legal Officer or such person’s designee will consult as necessary with senior management and outside counsel before clearing any proposed trade. Clearance of a transaction is valid for no more than the 5- business day period immediately following receipt by the Restricted Person of such clearance. If clearance is denied, the fact of such denial must be kept confidential by the person requesting such clearance. Restricted Persons do not need to receive pre-clearance for trades pursuant to an approved Rule 10b5-1 plan as described below.
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E.Trading Plans
The restrictions on trading set forth in this Policy do not apply to any trade in the Company’s securities, regardless of awareness of Inside Information, if the transaction is made pursuant to a pre-arranged trading plan (a “Rule 10b5-1 plan”) that meets certain conditions of Rule 10b5-1 of the Securities Exchange Act of 1934 (“Rule 10b5-1”), was entered into outside of a black-out period and when the Restricted Person was not in possession of material, non- public information about the Company, and is operated in good faith. This Policy requires Rule 10b5-1 plans to be written, to specify the amount of, date on, and price at which the Company securities are to be traded or establish a formula for determining such items, and comply with and be operated in accordance with the conditions of Rule 10b5-1, including the following:
•trades under the Rule 10b5-1 plan, and in certain circumstances, an amended Rule 10b5-1 plan, may not commence until expiration of the applicable “cooling-off period” set forth in Rule 10b5-11;
•the Rule 10b5-1 plan must include representations that (i) the person is not aware of material non-public information about the Company or its securities; and (ii) the person is adopting, or in certain cases amending, the Rule 10b5-1 in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5;
•no person may have more than one Rule 10b5-1 plan outstanding at any given time, unless otherwise permitted by the limited exceptions of Rule 10b5-1 (such as plans relating to “sell to cover” arrangements intended to satisfy tax withholding obligations upon the vesting of equity awards); and
•no person may have more than one single-trade Rule 10b5-1 plan (a plan designed to effect the open-market purchase or sale of the total amount of securities covered by the plan in a single transaction) within any consecutive 12-month period, unless otherwise permitted by the limited exceptions of Rule 10b5-1.
1 For directors and Section 16 officers, the cooling-off period set forth in Rule 10b5-1 is generally the later of (i) 90 days after execution of the plan or (ii) two business days following the filing of the Form 10-K or Form 10-Q for the reporting period in which the plan was executed. For all other insiders the cooling-off period is 30 days after execution of the plan.
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A Restricted Person who wishes to enter into, amend or terminate (other than by expiration) a Rule 10b5-1 plan must submit the Trading Plan, or the amendment or notice of termination of the Rule 10b5-1 plan, to the Chief Legal Officer for approval prior to the adoption, amendment or termination of the Rule 10b5-1 plan. Subject to prior approval by the Chief Legal Officer, a Restricted Person may amend or replace his or her Rule 10b5-1 plan only during periods when trading is permitted in accordance with this Policy and when the Restricted Person was not in possession of material, non-public information about the Company.
The Company reserves the right to publicly disclose, announce, or respond to inquiries from the media regarding the adoption, modification, or termination of a Trading Plan and non- Rule 10b5-1 trading arrangements, or the execution of transactions made under a Trading Plan. The Company also reserves the right from time to time to suspend, discontinue, or otherwise prohibit transactions under a Trading Plan if the Chief Legal Officer or the Board, in its discretion, determines that such suspension, discontinuation, or other prohibition is in the best interests of the Company.
Restricted Persons subject to this Policy must promptly report to the Chief Legal Officer the adoption, amendment or termination of any trading plan that is not a Trading Plan, but that was entered into by a Company director or executive officer at a time they asserted they were not aware of material non-public information about the Company or its securities.
F.Compliance
All Covered Persons must promptly report, in accordance with the procedures set forth in the Company’s Code of Business Conduct and Ethics (including through the use of the Company’s Ethics Hotline described in the Code of Business Conduct and Ethics), any trading in the Company’s securities by any Covered Person, or any disclosure of Inside Information or material non-public information concerning other companies by such Covered Person, that such person has reason to believe may violate this Policy or U.S. federal or state securities laws.
Persons in possession of Inside Information when their employment or service terminates may not trade in the Company’s securities until that information has become public or is no longer material.
G.Additional Information
1.What is Inside Information?
“Inside Information” is material information about the Company that is not available to the public. Information generally becomes available to the public when it has been disclosed by the Company or third parties in a press release or other authorized public statement, including any filing with the SEC. In general, information is considered to have been made available to the public after the completion of two full trading days after the formal release of the information. In
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other words, there is a presumption that the public needs approximately two complete trading days to receive and absorb such information.
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2.What is Material Information?
Generally, information about the Company is “material” if it could reasonably be expected to affect someone’s decision to buy, hold or sell the Company’s securities. Information is considered to be material if its disclosure to the public would be reasonably likely to affect
(i) an investor’s decision to buy or sell the securities of the company to which the information relates, or (ii) the market price of that company’s securities. While it is not possible to identify in advance all information that will be deemed to be material, some examples of such information would include the following:
•significant changes in financial results and/or financial condition and financial projections;
•loss of major tenants;
•dividends or share splits;
•share redemption or repurchase programs;
•significant financing transactions;
•changes in management or control;
•plans or agreements related to significant mergers, acquisitions, dispositions, reorganizations, or joint ventures;
•significant litigation or regulatory developments;
•significant increases or decreases in the amount of outstanding securities or indebtedness;
•material write-ups or write-downs of assets or changes in accounting methods;
•actual or projected changes in industry circumstances or competitive conditions that could significantly affect the Company’s revenues, earnings, financial position or prospects;
•significant actual or potential cybersecurity incidents (e.g., a data breach or any other significant disruption in the Company’s operations, or loss, potential loss, breach or unauthorized access of its property or assets, whether at its properties or through its information technology infrastructure); and
•certain transactions with trustees, officers or principal security holders.
It can sometimes be difficult to know whether information would be considered “material.”
The determination of whether information is material is almost always clearer after the fact, when the effect of that information on the market can be quantified. Although you may have information about the Company that you do not consider to be material, U.S. federal regulators and others may conclude (with the benefit of hindsight) that such information was material. Therefore, trading in the Company’s securities when you possess non-public information about the Company can be risky. When doubt exists, the information should be presumed to be material. If you are unsure whether you are in possession of material, nonpublic information, you should consult with the Chief Legal Officer prior to engaging in, or entering into an agreement, understanding or arrangement to engage in, a purchase or sale transaction of any of the Company’s securities.
3.What is the Penalty for Insider Trading?
The purchase or sale of securities while aware of material nonpublic information, or the disclosure of material nonpublic information to others who then trade in the Company’s securities, is prohibited by federal and state securities laws. Insider trading violations are pursued vigorously by the SEC, U.S. Attorneys and state enforcement authorities. Punishment for insider trading violations is severe, and could include significant fines and imprisonment. While the regulatory authorities usually concentrate their efforts on the individuals who trade, or who tip Inside Information to others who trade, the federal securities laws also impose potential liability on companies and other “controlling persons” within the organization if they fail to take reasonable steps to prevent insider trading by company personnel.
In addition, an individual’s failure to comply with this Policy may subject the individual to Company-imposed sanctions, including dismissal for cause, whether or not the employee’s failure to comply results in a violation of law. A violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person’s reputation and irreparably damage a career.
H.Certification
You must sign, date and return the Certification set forth on Annex B attached hereto (or such other certification as the Chief Legal Officer may deem appropriate) stating that you have received, read, understand and agree to comply with the Company’s Policy on Inside Information and Insider Trading. The Company may require you to sign such a Certification on an annual basis, which Certification may be in electronic format. Please note that you are bound by this Policy whether or not you sign the Certification.
If you have any questions about this Policy, you should consult with the Chief Legal
Officer.
Effective as of December 3, 2024
SCHEDULE A RESTRICTED PERSONS
All trustees and employees of the Company.
ANNEX A
REQUEST FOR CLEARANCE TO TRADE
| To: | Peakstone Realty Trust | Attention: Chief Legal Officer |
|---|---|---|
| 150 N Riverside Plaza, Suite 1950 | Phone Number: (310) 606-3200 | |
| Chicago, IL 60606 | E-mail: [●] |
Name: Title:
I hereby request clearance for myself (or a member of my immediate family or household) to execute the following transaction relating to the securities of Peakstone Realty Trust.
Type of Transaction:
I wish to purchase common shares. Number of common shares to be purchased:
I wish to sell common shares. Number of common shares to be sold:
I wish to exercise an option and sell all or a portion of the shares of common stock purchased at the then market price in a “cashless exercise” or “same day sale” and hold any remaining shares of common stock in my brokerage account.
Number of options to be exercised: Number of shares of common stock to be sold: Number of shares of common stock held in account:
Other:
If the request is for a member of my immediate family or household:
Name of Person: Relationship:
I hereby represent that I am not aware of any material, non-public information concerning Peakstone Realty Trust at the time of submitting this request and I agree that should I become aware of any material, non-public information concerning Peakstone Realty Trust prior to consummating the approved transaction, I will not consummate such transaction.
I understand that once approved, the authorization is valid on the date of approval and during the remaining term of the trading window in which it is approved. I further understand that the approval will lapse if, in the judgment of the Chief Legal Officer, I am likely to be aware of material, non-public information or at the expiration of the trading window in which approval is granted, whichever is the first to occur.
| Date | Signature |
|---|---|
| Approved by: | |
| Chief Legal Officer | Date |
ANNEX B CERTIFICATION
I hereby certify that I:
•have read and understand the Policy on Inside Information and Insider Trading (the “Policy”) and related procedures, a copy of which was distributed with this Certificate;
•have complied with the foregoing policy and procedures; and
•will continue to comply with the policy and procedures set forth in the Policy.
| Signature | |
|---|---|
| Name: | |
| --- | --- |
| (Please print) | |
| Title: | |
| --- | |
| Date: | |
| --- |
Document
EXHIBIT 21.1
Exhibit
Subsidiaries in which Peakstone Realty Trust owns, directly or indirectly, an interest:
| Subsidiary | Jurisdiction of Incorporation or Organization |
|---|---|
| GRT (Cardinal REIT Merger Sub), LLC | Maryland |
| PKST OP, L.P. | Delaware |
| GRT OP (Cardinal New GP Sub), LLC | Delaware |
| GRT OP (Cardinal LP Merger Sub), LLC | Delaware |
| Cole Corporate Income Operating Partnership II, LP | Delaware |
| CCIT II Securities Investments, LLC | Delaware |
| ARCP OFC Phoenix (Central) AZ, LLC | Delaware |
| CIM OFC Platteville CO, LLC | Delaware |
| ARCP OFC Johnston IA (Phase II), LLC | Delaware |
| CIM OFC Sparks MD, LLC | Delaware |
| VEREIT OFC Lincoln Hill PA, LLC | Delaware |
| CIM OFC Memphis TN, LLC | Delaware |
| ARCP OFC San Antonio TX, LLC | Delaware |
| ARCP OFC Burlington MA (Phase 2), LLC | Delaware |
| CIM GP OFC San Diego CA, LLC | Delaware |
| CIM OFC San Diego CA, LP | Delaware |
| ARCP ID Bellevue OH, LLC | Delaware |
| ARCP OFC Huntsville AL, LLC | Delaware |
| ARCP OFC Burlington MA, LLC | Delaware |
| VEREIT OFC Phoenix AZ, LLC | Delaware |
| CIM OFC Hunt Valley MD, LLC | Delaware |
| The GC Net Lease (Wake Forest) GP, LLC | Delaware |
| The GC Net Lease (Wake Forest) Investors, L.P. | Delaware |
| SOR Operating Partnership, LLC | Delaware |
| The GC Net Lease (Herndon) Investors, LLC | Delaware |
| The Point at Clark Street REIT, LLC | Delaware |
| The GC Net Lease (Columbia) Investors, LLC | Delaware |
| PKST Management Company, LLC | Delaware |
| --- | --- |
| Griffin Capital Property Management, LLC | Delaware |
| Griffin Capital Essential Asset Property Management, LLC | Delaware |
| Griffin Capital Essential Asset Property Management II, LLC | Delaware |
| IndustrialCo Trust | Maryland |
| Industrial SpinCo Trust | Maryland |
| Griffin Capital Essential Asset TRS, Inc. | Delaware |
| The GC Net Lease (Parsippany) Investors, LLC | Delaware |
| The GC Net Lease (Phoenix Beardsley) Investors, LLC | Delaware |
| The GC Net Lease (Westminster) Investors, LLC | Delaware |
| The GC Net Lease (Lone Tree) Investors, LLC | Delaware |
| The GC Net Lease (Arlington Heights) Investors, LLC | Delaware |
| The GC Net Lease (Heritage III) Investors, LLC | Delaware |
| The GC Net Lease (Fort Mill) Investors, LLC | Delaware |
| The GC Net Lease (Fort Mill II) Investors, LLC | Delaware |
| The GC Net Lease (Lakeland) Investors, LLC | Delaware |
| The GC Net Lease (Scottsdale) Investors, LLC | Delaware |
| The GC Net Lease (Savannah) Investors, LLC | Delaware |
| Griffin (Hampton 300) Essential Asset REIT II, LLC | Delaware |
| Griffin (Hampton 500) Essential Asset REIT II, LLC | Delaware |
| Griffin (Parsippany 14) Essential Asset REIT II, LLC | Delaware |
| Griffin (Groveport) Essential Asset REIT II, LLC | Delaware |
| Griffin (Andover) Essential Asset REIT II, LLC | Delaware |
| The GC Net Lease (GV Quebec Court) Investors, LLC | Delaware |
| Griffin (Auburn Hills) Essential Asset REIT II, LLC | Delaware |
| Griffin (North Charleston) Essential Asset REIT II, LLC | Delaware |
| Griffin (Parsippany 10) Essential Asset REIT II, LLC | Delaware |
| Griffin (Lone Tree) Essential Asset REIT II, LLC | Delaware |
| Griffin (Carmel) Essential Asset REIT II, LLC | Delaware |
| The GC Net Lease (Scottsdale II) Investors, LLC | Delaware |
| The GC Net Lease (Largo) Investors, LLC | Delaware |
| The GC Net Lease (Redmond) Investors, LLC | Delaware |
| The GC Net Lease (Cranberry) Investors, LLC | Delaware |
| --- | --- |
| The GC Net Lease (Whippany) Investors, LLC | Delaware |
| The GC Net Lease (Greenwood Village) Investors, LLC | Delaware |
| The GC Net Lease (Libertyville) Investors, LLC | Delaware |
| The GC Net Lease (Allen Park) Investors, LLC | Delaware |
| Griffin (Etna) Essential Asset REIT II, LLC | Delaware |
| Griffin (Birmingham) Essential Asset REIT II, LLC | Delaware |
| Griffin (Las Vegas Buffalo) Essential Asset REIT II, LLC | Delaware |
| Griffin (Dekalb) Essential Asset REIT II, LLC | Delaware |
| Griffin (Durham) Essential Asset REIT II, L.P. | Delaware |
| Griffin (Durham) Essential Asset REIT II GP, LLC | Delaware |
| The GC Net Lease (Beaver Creek) Investors, LLC | Delaware |
| The GC Net Lease (Beaver Creek) Member, LLC | Delaware |
| Emporia Partners, LLC | Delaware |
| The GC Net Lease (Jacksonville) Investors, LLC | Delaware |
| WR Griffin Patterson, LLC | Delaware |
| The GC Net Lease (Nashville) Investors, LLC | Delaware |
| The GC Net Lease (Houston Enclave) Member, LLC | Delaware |
| The GC Net Lease (Houston Enclave) Investors, LLC | Delaware |
| The GC Net Lease (Charlotte) Investors, LLC | Delaware |
| The GC Net Lease (Charlotte) Member, LLC | Delaware |
| The GC Net Lease (Phoenix Chandler) Investors, LLC | Delaware |
| The GC Net Lease (Phoenix Chandler) Member, LLC | Delaware |
| The GC Net Lease (Warren) Investors, LLC | Delaware |
| The GC Net Lease (Warren) Member, LLC | Delaware |
| Griffin Capital (Highway 94) Manager, LLC | Delaware |
| Griffin Capital (Highway 94) Investors, DST | Delaware |
| Griffin (Concord) Member Essential Asset REIT II, LLC | Delaware |
| Griffin (Concord) Essential Asset REIT II, LLC | Delaware |
| Griffin (Houston Westgate II) Member Essential Asset REIT II, LLC | Delaware |
| Griffin (Houston Westgate II) Essential Asset REIT II, LLC | Delaware |
| Griffin (Mechanicsburg) Member Essential Asset REIT II, LLC | Delaware |
| Griffin (Mechanicsburg) Essential Asset REIT II, LLC | Delaware |
| --- | --- |
| Griffin (Las Vegas Grier) Essential Asset REIT II, LLC | Delaware |
| Griffin (Las Vegas Grier) Member Essential Asset REIT II, LLC | Delaware |
| Griffin (Columbus) Member Essential Asset REIT II, LLC | Delaware |
| Griffin (Columbus) Essential Asset REIT II, LLC | Delaware |
| The GC Net Lease (Triad I) GP, LLC | Delaware |
| The GC Net Lease (Triad I) Investors, L.P. | Delaware |
| PKST Realty, LLC | Delaware |
| GRT VAO OP, LLC | Delaware |
| GRT (Parsippany) Member, LLC | Delaware |
| Delaware | |
| PKST Sunrise HoldCo LLC | Delaware |
| PKST Fort Lupton Country Road 27 LLC | Delaware |
| PKST Pompano Beach NW 40th Court LLC | Delaware |
| PKST Tampa Falkenburg LLC | Delaware |
| PKST Orlando Clemson LLC | Delaware |
| PKST Orlando Cinderlane LLC | Delaware |
| PKST Jacksonville Witten LLC | Delaware |
| PKST Atlanta Veterans Memorial LLC | Delaware |
| PKST Atlanta Discovery LLC | Delaware |
| PKST Atlanta Cash Memorial | Delaware |
| PKST Lively LLC | Delaware |
| PKST Mableton Veterans Memorial LLC | Delaware |
| PKST Norcross McDonough LLC | Delaware |
| PKST Atlanta South Cooks LLC | Delaware |
| PKST Savannah Travis Field LLC | Delaware |
| PKST Melrose Park Indian Boundary LLC | Delaware |
| PKST Burlington Route 130 LLC | Delaware |
| PKST Carteret Minue LLC | Delaware |
| PKST South Plainfield Tyler LLC | Delaware |
| PKST Albuquerque Menaul LLC | Delaware |
| PKST Yaphank Sills LLC | Delaware |
| PKST Cincinnati Spring Grove LLC | Delaware |
| --- | --- |
| PKST Pittsburg Camp Hollow LLC | Delaware |
| PKST Hatfield Unionville Pike LLC | Delaware |
| PKST Philadelphia Essington 6729 LLC | Delaware |
| PKST Philadelphia Essington 6815 LLC | Delaware |
| PKST Philadelphia Essington 6800 LLC | Delaware |
| PKST North Charleston Cross Park 7221 LLC | Delaware |
| PKST North Charleston Cross Park 7227 LLC | Delaware |
| PKST Ladson Benchmark LLC | Delaware |
| PKST Greenville Bruce LLC | Delaware |
| PKST Hermitage Brandau LLC | Delaware |
| PKST Nashville Caden LLC | Delaware |
| PKST Nashville Freightliner LLC | Delaware |
| PKST Memphis Malone LLC | Delaware |
| PKST Baytown Thompson LLC | Delaware |
| PKST Plano Precision LLC | Delaware |
| PKST Fort Worth Enterprise LLC | Delaware |
| PKST Houston Railhead LLC | Delaware |
| PKST San Antonio Middlex LLC | Delaware |
| PKST Round Rock Chisholm LLC | Delaware |
| PKST Houston Oates LLC | Delaware |
| PKST Houston Humble Westfield LLC | Delaware |
| PKST Manassas Centreville LLC | Delaware |
| PKST Norfolk Meads LLC | Delaware |
| PKST Norfolk Harmony LLC | Delaware |
| PKST Everett 28th Place LLC | Delaware |
| PKST Savannah Container LLC | Delaware |
| PKST Kennesaw McCollum LLC | Delaware |
| PKST Burlington River LLC | Delaware |
| PKST Burlington Neck LLC | Delaware |
| PKST Hatfield Bethlehem Pike LLC | Delaware |
Document
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)Registration Statement (Form S-8 No. 333-231816) pertaining to the Peakstone Realty Trust Second Amended and Restated Employee and Trustee Long-Term Incentive Plan,
(2)Registration Statement (Form S-8 No. 333-280527) pertaining to the Peakstone Realty Trust Second Amended and Restated Employee and Trustee Long-Term Incentive Plan, and
(3)Registration Statement (Form S-3 No. 333-273803) and related Prospectus of Peakstone Realty Trust
of our reports dated February 20, 2025, with respect to the consolidated financial statements and schedule of Peakstone Realty Trust and the effectiveness of internal control over financial reporting of Peakstone Realty Trust included in this Annual Report (Form 10-K) for the year ended December 31, 2024.
/s/ Ernst & Young LLP
Los Angeles, California
February 20, 2025
Document
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration Statements:
1)Registration Statement (Form S-8 No. 333-231816) pertaining to the Peakstone Realty Trust Second Amended and Restated Employee and Trustee Long-Term Incentive Plan,
2)Registration Statement (Form S-8 No. 333-280527) pertaining to the Peakstone Realty Trust Second Amended and Restated Employee and Trustee Long-Term Incentive Plan, and
3)Registration Statement (Form S-3 No. 333-273803) and related Prospectus of Peakstone Realty Trust
of our report dated March 26, 2024, with respect to the combined financial statements of Galaxy REIT LLC included in the Annual Report (Form 10-K/A) of Peakstone Realty Trust for the year ended December 31, 2024.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 26, 2025
Document
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael J. Escalante, certify that:
1.I have reviewed this Annual Report on Form 10-K of Peakstone Realty Trust;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent function):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: | February 20, 2025 | By: | /s/ Michael J. Escalante |
|---|---|---|---|
| Michael J. Escalante | |||
| Chief Executive Officer and President | |||
| (Principal Executive Officer) |
Document
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Javier F. Bitar, certify that:
1.I have reviewed this Annual Report on Form 10-K of Peakstone Realty Trust;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent function):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: | February 20, 2025 | By: | /s/ Javier F. Bitar |
|---|---|---|---|
| Javier F. Bitar | |||
| Chief Financial Officer and Treasurer | |||
| (Principal Financial Officer) |
Document
Exhibit 31.3
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael J. Escalante, certify that:
1.I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K/A of Peakstone Realty Trust;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent function):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: | March 27, 2025 | By: | /s/ Michael J. Escalante |
|---|---|---|---|
| Michael J. Escalante | |||
| Chief Executive Officer and President | |||
| (Principal Executive Officer) |
Document
Exhibit 31.4
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Javier F. Bitar, certify that:
1.I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K/A of Peakstone Realty Trust;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent function):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: | March 27, 2025 | By: | /s/ Javier F. Bitar |
|---|---|---|---|
| Javier F. Bitar | |||
| Chief Financial Officer and Treasurer | |||
| (Principal Financial Officer) |
Document
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Peakstone Realty Trust (the “Company”), in connection with the Company’s Annual Report on Form 10-K for the quarterly period ended December 31, 2024 (the “Report”), hereby certifies that:
(i)the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: | February 20, 2025 | By: | /s/ Michael J. Escalante |
|---|---|---|---|
| Michael J. Escalante | |||
| Chief Executive Officer and President | |||
| (Principal Executive Officer) |
Document
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Peakstone Realty Trust (the “Company”), in connection with the Company’s Annual Report on Form 10-K for the quarterly period ended December 31, 2024 (the “Report”), hereby certifies that:
(i)the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: | February 20, 2025 | By: | /s/ Javier F. Bitar |
|---|---|---|---|
| Javier F. Bitar | |||
| Chief Financial Officer and Treasurer | |||
| (Principal Financial Officer) |
Document
Exhibit 32.3
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Peakstone Realty Trust (the “Company”), in connection with the filing of Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the annual period ended December 31, 2024 (the “Report”), hereby certifies that:
(i)the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: | March 27, 2025 | By: | /s/ Michael J. Escalante |
|---|---|---|---|
| Michael J. Escalante | |||
| Chief Executive Officer and President | |||
| (Principal Executive Officer) |
Document
Exhibit 32.4
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Peakstone Realty Trust (the “Company”), in connection with the filing of Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the annual period ended December 31, 2024 (the “Report”), hereby certifies that:
(i)the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: | March 27, 2025 | By: | /s/ Javier F. Bitar |
|---|---|---|---|
| Javier F. Bitar | |||
| Chief Financial Officer and Treasurer | |||
| (Principal Financial Officer) |
galaxyreitllcfinancials2
Galaxy REIT LLC Combined Financial Statements August 27, 2024
Page Report of Independent Auditors 3 Combined Balance Sheet as of December 31, 2023 5 Combined Statements of Operations and Comprehensive Loss for the Period from January 1, 2024 through August 27, 2024 (Unaudited), Year Ended December 31, 2023, and for the Period from August 26, 2022 (Commencement of Operations) through December 31, 2022 6 Combined Statements of Changes in Owners' Equity for the Period from January 1, 2024 through August 27, 2024 (Unaudited), Year Ended December 31, 2023, and for the Period from August 26, 2022 (Commencement of Operations) through December 31, 2022 7 Combined Statements of Cash Flows for the Period from January 1, 2024 through August 27, 2024 (Unaudited), Year Ended December 31, 2023, and for the Period from August 26, 2022 (Commencement of Operations) through December 31, 2022 8 Notes to Combined Financial Statements 10 GALAXY REIT LLC INDEX TO COMBINED FINANCIAL STATEMENTS 2
Report of Independent Auditors To the Partners and Board of Managers of Galaxy REIT LLC Opinion We have audited the combined financial statements of Galaxy REIT, LLC (the Company), which comprise the combined statements of operations and comprehensive loss, changes in owners’ equity and cash flows for the year ended December 31, 2023 and the period from August 26, 2022 (Commencement of Operations) to December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended December 31, 2023 and the period from August 26, 2022 (Commencement of Operations) to December 31, 2022 in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. Index to Combined Financial Statements Ernst & Young LLP One Commerce Square Suite 700 2005 Market Street Philadelphia, Pennsylvania 19103-7096 Tel: +1 215 448 5000 www.ey.com 3
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. March 26, 2024 Index to Combined Financial Statements Ernst & Young LLP One Commerce Square Suite 700 2005 Market Street Philadelphia, Pennsylvania 19103-7096 Tel: +1 215 448 5000 www.ey.com 4
December 31, 2023 Assets Real estate properties, at cost: Land $ 302,384 Buildings and improvements 831,736 Real estate properties, at cost 1,134,120 Less: accumulated depreciation (52,108) Real estate properties, net 1,082,012 Cash and cash equivalents 13,069 Restricted cash 136,180 Tenant and other receivables 8,366 Due from related parties 4,417 Deferred rent receivable 6,485 Deferred leasing costs 7,373 Acquired lease intangible assets, net 83,513 Prepaid expenses and other assets 15,475 Total assets $ 1,356,890 Liabilities Mortgages payable, net $ 1,070,448 Accounts payable, accrued expenses and other liabilities 29,801 Accrued interest 24,841 Due to related parties 4,866 Acquired lease intangibles, net 19,323 Deferred revenue 8,893 Security deposits 1,468 Total liabilities 1,159,640 Owners' Equity Owners' equity 199,088 Perpetual preferred stock, $1,000 stated value, 1,200 shares authorized, 1,000 shares issued and outstanding 1,000 Additional paid in capital (66) Accumulated other comprehensive loss (2,772) Total owners' equity 197,250 Total liabilities and owners' equity $ 1,356,890 The accompanying notes are an integral part of these combined financial statements. GALAXY REIT LLC COMBINED BALANCE SHEET (Dollars in thousands, except share data) 5
For the Period from January 1, 2024 through August 27, 2024 Year Ended For the Period from August 26, 2022 (commencement of operations) through December 31, 2022December 31, 2023 (Unaudited) Revenues Rental revenue $ 102,460 $ 188,956 $ 61,254 Other revenue 4,768 11,654 35 Total revenues 107,228 200,610 61,289 Expenses Operating expenses 27,473 46,217 13,368 Real estate taxes 16,840 24,857 8,004 Depreciation and amortization 39,328 83,965 24,250 Transaction related costs 527 514 638 General and administrative 2,010 2,270 652 Asset management fees 3,001 4,585 1,329 Total expenses 89,179 162,408 48,241 Interest expense (73,042) (179,175) (58,727) Interest income 3,216 1,184 — Gain on sale of real estate 486 — — Gain on securities holdings 6 1 — (Loss) gain on derivative instruments (667) 6,757 603 Loss on extinguishment of debt (50) — — Net loss (52,002) (133,031) (45,076) Net loss attributable to perpetual preferred stockholders (79) (124) — Net loss attributable to common stockholders (52,081) (133,155) (45,076) Other comprehensive income (loss) Change in unrealized gain (loss) on derivative instruments 2,702 (8,426) 5,654 Total other comprehensive income (loss) 2,702 (8,426) 5,654 Comprehensive loss $ (49,379) $ (141,581) $ (39,422) The accompanying notes are an integral part of these combined financial statements. GALAXY REIT LLC COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Dollars in thousands) 6
Preferred Shares Accumulated Other Comprehensive Income (Loss) (1) Additional Paid-in Capital Number of Shares Value Owners' Equity Total Equity Balance, August 26, 2022 (Commencement of Operations) — $ — $ — $ — $ — $ — Contributions — — 375,987 — — 375,987 Equity issuance costs — — (2,681) — — (2,681) Issuance of preferred shares 195 195 — — — 195 Other comprehensive income — — — 5,654 — 5,654 Net loss — — (45,076) — — (45,076) Balance, December 31, 2022 195 $ 195 $ 328,230 $ 5,654 $ — $ 334,079 Contributions — — 4,000 — — 4,000 Equity issuance costs — — 13 — — 13 Issuance of preferred shares 805 805 — — (66) 739 Distributions on preferred shares — — (124) — — (124) Other comprehensive loss — — — (8,426) — (8,426) Net loss — — (133,031) — — (133,031) Balance, December 31, 2023 1,000 $ 1,000 $ 199,088 $ (2,772) $ (66) $ 197,250 Contributions (Unaudited) — — 8,780 — — 8,780 Distributions on preferred shares (Unaudited) — — (79) — — (79) Other comprehensive income (Unaudited) — — — 2,702 — 2,702 Net loss (Unaudited) — — (52,002) — — (52,002) Balance, August 27, 2024 (Unaudited) 1,000 $ 1,000 $ 155,787 $ (70) $ (66) $ 156,651 _______________ (1) Accumulated other comprehensive income (loss) represents unrealized gain (loss) on derivative instruments, net accounted for as cash flow hedges. The accompanying notes are an integral part of these combined financial statements. GALAXY REIT LLC COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY (Dollars in thousands) 7
For the Period from January 1, 2024 through August 27, 2024 Year Ended For the Period from August 26, 2022 (commencement of operations) through December 31, 2022December 31, 2023 (Unaudited) Operating Activities Net loss $ (52,002) $ (133,031) $ (45,076) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 39,328 83,965 24,250 Loss (gain) on derivative instruments 667 (6,757) (603) Gain on securities holdings (6) (1) — Gain on sale of real estate (507) — — Amortization of deferred financing costs 2,258 63,382 27,294 Amortization of above- and below-market lease intangibles, net (1,237) (1,647) (706) Payments for derivative instruments — (9,635) — Changes in operating assets and liabilities: Deferred rent receivable (3,635) (4,273) (2,212) Tenant and other receivables 4,780 (3,030) (5,336) Deferred leasing costs (2,825) (3,470) (2,828) Prepaid expenses and other assets 8,445 12,938 (14,128) Accounts payable, accrued interest and expenses and other liabilities 3,510 18,271 32,114 Due to related parties, net 2,460 (4,393) 4,666 Deferred revenue (1,544) 3,209 5,684 Security deposits 177 (111) — Net cash (used in) provided by operating activities (131) 15,417 23,119 Investing Activities Acquisitions of real estate — — (1,235,825) Proceeds from the sale of real estate 7,257 — — Payments for capital expenditures (12,080) (9,943) (1,447) Net cash used in investing activities (4,823) (9,943) (1,237,272) Financing Activities Proceeds from mortgages payable — — 1,072,865 Payments of equity issuance costs — (66) (2,681) Repayments of mortgages payable (6,647) — — Payments of deferred financing costs (51) (352) (92,740) Proceeds from issuance of preferred stock — 805 195 Dividends paid to perpetual preferred stockholders (60) (85) — Contributions from owners 8,780 4,000 375,987 Distributions to owners — — — Net cash (used in) provided by financing activities 2,022 4,302 1,353,626 Net (decrease) increase in cash and cash equivalents and restricted cash (2,932) 9,776 139,473 Cash and cash equivalents and restricted cash at beginning of period 149,249 139,473 — Cash and cash equivalents and restricted cash at end of period $ 146,317 $ 149,249 $ 139,473 Reconciliation of Cash and Cash Equivalents and Restricted Cash: Cash and cash equivalents $ 8,478 $ 13,069 $ 22,157 Restricted cash 137,839 136,180 117,316 Cash and cash equivalents and restricted cash at end of period $ 146,317 $ 149,249 $ 139,473 GALAXY REIT LLC COMBINED STATEMENTS OF CASH FLOWS (Dollars in thousands) 8
For the Period from January 1, 2024 through August 27, 2024 Year Ended For the Period from August 26, 2022 (commencement of operations) through December 31, 2022December 31, 2023 Supplemental Information Interest paid $ 73,265 $ 87,110 $ 15,412 Supplemental Disclosure of Non-cash Investing and Financing Activities: Capital expenditures payable $ (3,057) $ 2,570 $ 783 Deferred leasing costs payable $ (1,157) $ 904 $ 253 Deferred leasing costs due to related parties $ 272 $ 147 $ 29 Deferred financing costs payable $ 24 $ 10 $ — Perpetual preferred dividends payable $ 19 $ 39 $ — Purchase price adjustment $ — $ (300) $ — Write off of equity issuance costs $ — $ 13 $ — The accompanying notes are an integral part of these combined financial statements. GALAXY REIT LLC COMBINED STATEMENTS OF CASH FLOWS (Dollars in thousands) 9
Note 1 — Organization and Description of the Business Galaxy REIT LLC ("Galaxy REIT") was formed on May 9, 2022 and commenced operations on August 26, 2022 as a Delaware limited liability company that elected and qualified to be taxed as a real estate investment trust ("REIT") for United States ("U.S") federal income tax purposes beginning with the taxable year ended December 31, 2022. The accompanying financial statements reflect the operations on a combined basis of Galaxy REIT LLC and the various REITs in which it is invested including Galaxy Properties REIT LLC, Galaxy IL WI REIT LLC, Galaxy OH REIT LLC, Galaxy KC REIT LLC, Galaxy OR REIT LLC, Galaxy WA REIT LLC and Galaxy MO REIT LLC (collectively, the "Subsidiary REITs" and together with Galaxy REIT, "Galaxy") including their wholly-owned subsidiaries. The subsidiary REITs elected and qualified to be taxed as REITs for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2022. Galaxy is engaged in the business of directly or indirectly, owning, financing, managing, leasing and selling real estate assets in the United States. On August 26, 2022, Galaxy acquired a portfolio of 52 office buildings and two land parcels located in 14 states throughout the United States (the "First Portfolio") from an affiliate. On December 27, 2022, Galaxy acquired a portfolio of six office buildings located in five states throughout the United States (the "Second Portfolio") from an affiliate. As used in these combined financial statements, unless the context otherwise requires, "we," "us," "our Company" mean Galaxy and the entities identified above. All disclosures reflected in the period from January 1, 2024 through August 27, 2024 are unaudited. Real Estate Portfolio As of August 27, 2024, Galaxy owned the following properties: Number of Properties Rentable Square Feet(1) Acres(1) Office properties 57 8,478,647 — Land 2 — 5.6 Total 59 8,478,647 5.6 _______________ (1) Square feet reflects any remeasurements post acquisition. Square footage and acreage amounts are unaudited. Note 2 — Summary of Significant Accounting Policies Principles of Combined Financial Statements The combined financial statements include the accounts of Galaxy and various entities in which it is invested, all of which are managed by the board of managers of RVMC Capital LLC (“RVMC”). Therefore, we have prepared the financial statements on a combined basis due to common ownership and management. All significant intercompany transactions and balances are eliminated in consolidation. A reporting entity consolidates a voting interest entity (“VOE”) it controls and a variable interest entity (“VIE”), in which it is the primary beneficiary. A VOE is an entity whose equity investment is deemed sufficient to finance its activities and to absorb the expected losses of the entity, and where the equity holders have the power to direct the activities that most significantly impact the entity’s economic performance. A reporting entity consolidates a VOE if the reporting entity owns a majority voting interest, or for limited partnership interests, a reporting entity owns a majority of the limited partnership’s voting rights, and none of the non-controlling limited partners hold any substantive participating rights. On the other hand, the primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. A re-assessment of whether an entity is a VIE is performed when a reconsideration event occurs such as a recapitalization transaction or when the governing documents or contractual arrangements are amended such that it changes the characteristics of the entity’s equity investment at risk or the holders of the equity investments at risk, as a group, lose power from voting rights or similar rights to direct the significant activities of the entity. Index to Combined Financial Statements GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 10
Galaxy reviews each operating agreement to understand its rights and the rights of its other partners or members and determine whether those rights are protective or participating. When approval of all the partners or a quorum is required for major decisions such as, among others, approval of operating budgets and business plan, settling disputes with taxing authorities or any other claims, sale or disposition of real estate, placement of new or additional financing secured by the assets of the entity or approval of significant leases and other significant contracts or related party agreements, we consider these to be substantive participating rights that result in shared power of the activities that most significantly impact the performance of the entity and as a result, we do not consolidate such entities. Operating agreements typically contain certain protective rights such as the ability to remove the managing partner in case of willful misconduct or bad acts, requiring partners or members to approve capital expenditures and operating expenditures greater than a particular amount and limitations on the operating activities of the entity. Real Estate and Depreciation Real estate properties are carried at cost less accumulated depreciation and impairment losses, if any. The cost of real estate properties reflects their purchase price or development cost. Galaxy evaluates each acquisition transaction to determine whether the acquired assets meet the definition of a business. If an acquisition does not meet the definition of a business, then it is considered an asset acquisition. An acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related to acquisitions that are asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred and will be included in transaction related costs in the accompanying combined statements of operations and comprehensive loss. Ordinary repairs and maintenance are expensed as incurred. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Galaxy allocates the purchase price of real estate in a transaction accounted for as an asset acquisition to net tangible and identified intangible assets and liabilities acquired based on their relative fair values. Above-market and below-market in-place lease values of acquired properties are recorded based on the net present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) Galaxy’s estimate of the fair market lease rates for the corresponding in-place leases measured over a period equal to the remaining non-cancelable terms of the leases (including the below-market fixed-rate renewal period, if applicable). Capitalized above-market lease values are included in acquired lease intangible assets, net, on the accompanying combined balance sheet and are amortized on a straight-line basis as a reduction of rental revenue over the remaining non-cancelable terms of the respective leases, which generally range from less than one year to nine years. Capitalized below-market lease values are included in acquired lease intangibles, net, on the accompanying combined balance sheet and are amortized on a straight-line basis as an increase to rental revenue over the remaining non-cancelable terms of the respective leases including any below-market fixed-rate renewal periods that are considered probable, which generally range from less than one year to nine years. Intangible assets also include in-place leases based on Galaxy’s evaluation of the specific characteristics of each tenant’s lease. Galaxy estimates the cost to execute leases with terms similar to the remaining lease terms of the acquired in- place leases, including leasing commissions, incremental legal and other incremental related expenses. Recurring non- incremental legal and other costs are expensed to transaction costs on the accompanying combined statements of operations and comprehensive loss. In-place lease assets are included in acquired lease intangible assets, net, on the accompanying combined balance sheet and are amortized to depreciation and amortization expense on a straight-line basis over the remaining term of the respective leases and any fixed-rate bargain renewal periods, which generally range from less than one year to nine years. In the event that a tenant terminates its lease, the unamortized portion of each intangible, including in-place lease values and tenant relationship values, if any, is charged to amortization expense and above- and below-market leases adjustments, if any, are recorded in rental revenue. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 11
Galaxy’s estimates of fair value are made using methods similar to those used by independent appraisers or by using independent appraisals. Factors considered by Galaxy in this analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, Galaxy includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from 12 to 24 months. Galaxy also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired and liabilities assumed. Galaxy also uses the information obtained as a result of its pre-acquisition due diligence as part of its consideration of the accounting standard governing asset retirement obligations and when necessary, will record a conditional asset retirement obligation as part of its purchase price, if applicable. Though Galaxy considers the value of tenant relationships, the amounts are determined on a tenant-specific basis, if applicable. Galaxy may incur various costs in the development and leasing of its properties. The costs directly related to properties under development which include preconstruction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs incurred during the period of development will be capitalized to construction in progress on the combined balance sheet. Development costs incurred associated with the leasing of its properties derived from tenant improvement allowances are capitalized to buildings and improvements on the accompanying combined balance sheet. After the determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project commences and capitalization begins, and when a development project is substantially complete and held available for occupancy and when capitalization must cease, involves a degree of judgment. Depreciation on buildings and improvements is computed using the straight-line method. The estimated useful lives of buildings are 40 years. Improvements to buildings are capitalized and depreciated over useful lives ranging from three to 15 years. Tenant improvements are capitalized and depreciated over the non-cancelable remaining term of the related lease or their estimated useful life, whichever is shorter. Depreciation expense on buildings and improvements amounted to $24.0 million for the period from January 1, 2024 through August 27, 2024, $50.3 million for the year ended December 31, 2023 and $15.5 million for the period from August 26, 2022 (commencement of operations) through December 31, 2022. Galaxy evaluates its real estate investments upon occurrence of a significant adverse change in its operations to assess whether any impairment indicators are present that affect the recovery of the recorded value. If indicators of impairment are identified, Galaxy estimates the future undiscounted cash flows from the use and eventual disposition of the property and compares this amount to the net carrying value of the property. If any real estate investment is considered impaired, a loss is recognized to reduce the net carrying value of the property to its estimated fair value. Estimated fair value is primarily determined by discounting the estimated future cash flows at a risk adjusted rate. Galaxy's strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If Galaxy's strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could have a material impact on the results of operations. No impairment charges have been recorded for the period from January 1, 2024 through August 27, 2024, the year ended December 31, 2023, or for the period from August 26, 2022 (commencement of operations) through December 31, 2022 Lessee Arrangements Galaxy reviews all leases and identifies certain service contracts and evaluates such contracts for the components of a lease, based on the definition that a lease involves a right to control use of the identified asset for a period of time in exchange for consideration. Galaxy records right-of-use ("ROU") assets and lease liabilities at the commencement or acquisition of the lease based on the present value of the lease payments over the lease term on its combined balance sheet. For their leases that do not provide an implicit rate, Galaxy uses a discount rate based on its incremental borrowing rates to determine the present value of lease payments. Galaxy records rental expense for lease payments related to operating leases on a straight-line basis over the lease term. Lease expense for land is included in operating expenses on the combined statements of operations and comprehensive loss. Cash and Cash Equivalents Cash and cash equivalents are highly-liquid investments with original maturities of three months or less. Galaxy maintains cash and cash equivalents in major financial institutions in excess of the insured limit of $0.3 million provided by the Federal Depository Insurance Corporation. Galaxy has not experienced any losses related to these excess balances and management believes its credit risk is minimal. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 12
Restricted Cash Restricted cash consists of cash held in escrows by its lenders for property taxes, working capital, capital expenditures and tenant improvements in connection with Galaxy’s borrowings. Deferred Leasing Costs, Net Deferred leasing costs, which consist of fees and certain incremental direct costs incurred to initiate and renew operating leases, are capitalized and amortized on a straight-line basis over the term of the related lease. Upon the early termination of a lease, any unamortized deferred leasing costs are charged to amortization expense. Amortization of deferred leasing costs is included in depreciation and amortization on the accompanying combined statements of operations and comprehensive loss. As of December 31, 2023, Galaxy had $7.4 million of unamortized deferred leasing costs, net of accumulated amortization of $0.2 million. Amortization expense on deferred leasing costs amounted to $0.5 million for the period from January 1, 2024 through August 27, 2024, $0.2 million for the year ended December 31, 2023, and approximately $20,000 for the period from August 26, 2022 (commencement of operations) through December 31, 2022. Deferred Financing Costs Deferred financing costs, which consist of lender fees, legal, title and other third-party costs related to the issuance of debt, are capitalized and are reported as a deduction from the face amount of the related debt on the accompanying combined balance sheet. Deferred financing costs are amortized over the term of the related debt agreements on a basis which approximates the effective interest method. In the event of early redemption, any unamortized costs are charged to operations. Amortization of deferred financing costs is included in interest expense on the accompanying combined statements of operations and comprehensive loss. As of December 31, 2023, Galaxy had $2.4 million of unamortized deferred financing costs, net of accumulated amortization of $90.7 million. Amortization expense on deferred financing costs amounted to $2.3 million for the period from January 1, 2024 through August 27, 2024, $63.4 million for the year ended December 31, 2023, and $27.3 million for the period from August 26, 2022 (commencement of operations) through December 31, 2022. Fair Value of Financial Instruments Galaxy is required to disclose the fair value information about its financial instruments, whether or not recognized in the accompanying combined balance sheet for which it is practicable to estimate fair value (see Note 7 — Fair Value Measurements). Revenue Recognition and Tenant Accounts Receivable Revenue Recognition Rental revenue is recognized on the straight-line basis over the non-cancelable term of the leases from the later of the date of the commencement of the lease or the date of acquisition of the property. Rental revenue recognition begins when the tenant controls the space through the term of the related lease. When management concludes that Galaxy is the owner of tenant improvements, rental revenue recognition generally begins when the tenant takes possession of the finished space, which is when such tenant improvements are substantially complete. In certain instances, when management concludes that Galaxy is not the owner (the tenant is the owner) of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the space. When management concludes that Galaxy is the owner of tenant improvements for accounting purposes, Galaxy records amounts funded to construct the tenant improvements as a capital asset. When management concludes that the tenant is the owner of tenant improvements for accounting purposes, Galaxy records its contribution towards those improvements as a tenant inducement, which would be included in prepaid expenses and other assets on the accompanying combined balance sheet and amortized as a reduction to rental revenue on a straight-line basis over the term of the related lease. As of December 31, 2023, Galaxy did not have any tenant inducements. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 13
Galaxy takes into account whether the collectability of rents is reasonably assured in determining the amount of straight- line rent to record. For the purpose of determining the straight-line period, the straight-line calculation will take into consideration bargain renewal options, leases where at lease inception the renewal appears reasonably assured and any guarantees by the lessee and does not take into account any contingent rent. For certain leases, Galaxy makes significant assumptions and judgments in determining the lease term, including assumptions when the lease provides the tenant with an early termination option or an option to extend. The lease term impacts the period over which Galaxy determines and records minimum rents, the estimated fair value of lease intangibles upon acquisition and the period over which Galaxy amortizes lease- related costs. Galaxy recognizes the excess of rents recognized over the amounts contractually due pursuant to the underlying leases as part of deferred rent receivable, on the accompanying combined balance sheet. Any rental payments received prior to their due dates are reported in deferred revenue on the accompanying combined balance sheet. Galaxy’s leases also typically provide for tenant reimbursement of a portion of common area maintenance expenses and other operating expenses to the extent that the tenant has a lease on a triple net basis or to the extent that a tenant’s pro rata share of expenses exceeds a base year level set in the lease. Recoveries from tenants, consisting of amounts due from tenants for common area maintenance expenses, real estate taxes and other recoverable costs are recognized as revenue on an accrual basis over the periods in which the related expenditures are incurred. Tenant reimbursements are recognized on a gross basis because Galaxy is generally the primary obligor with respect to the goods and services, the purchase of which, gives rise to the reimbursement obligation; because Galaxy has discretion in selecting the vendors and suppliers; and because Galaxy bears the credit risk in the event the tenants do not reimburse Galaxy. Termination fees, which are included in other revenue on the accompanying combined statements of operations and comprehensive loss, are fees that Galaxy has agreed to accept in consideration for permitting certain tenants to terminate their lease prior to the contractual expiration date. Galaxy recognizes termination fees during the period in which the following conditions are met: (i) the termination agreement is executed, (ii) the termination fee is determinable, and (iii) collectability of the termination fee is assured. Tenant Accounts Receivable Galaxy reviews its tenant accounts receivable, including its straight-line rent receivable, related to base rents, expense reimbursements and other revenues for collectability. Galaxy analyzes its accounts receivable, customer credit worthiness and current economic trends when evaluating the collectability of the tenant’s total future lease payments on a lease by lease basis. If a tenant’s future lease payments, after lease commencement, are determined to be not probable of collection, rental revenue is limited to the lesser of the lease payments, including variable lease payments, that have been collected from the tenant and the rental revenue recognized to date with any adjustment recognized as a current period adjustment to rental revenue. If Galaxy subsequently determines that it is probable it will collect substantially all of the tenant’s remaining lease payments under the lease term, Galaxy will then reinstate the straight-line balance as if the rental revenue had always been accounted for on a straight-line basis with any adjustment recognized as a current period adjustment to rental revenue. Galaxy's reported net earnings are directly affected by management’s estimate of the collectability of its tenant future lease payments. Tenant accounts receivable, primarily derived from expense reimbursements, that are being disputed by the lessee will not be written-off if it is presumed Galaxy will collect these receivables upon resolution with the tenant barring any concerns about the tenant's ability to pay these amounts. Derivative Instruments and Hedging Activities Galaxy is exposed to certain risks arising from both its business operations and economic conditions. Galaxy principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Galaxy manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, Galaxy enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by variable interest rates. Galaxy’s derivative financial instruments are used to manage differences in the amount, timing, and duration of Galaxy’s known or expected cash receipts and its known or expected cash payments principally related to Galaxy’s borrowings. Certain of Galaxy’s borrowings bear interest at variable rates. Galaxy’s objective is to limit or manage its interest rate risk. To accomplish this objective, Galaxy primarily uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 14
Galaxy records all derivatives at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether Galaxy has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied, and continues to satisfy, the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. Galaxy may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or Galaxy elects not to apply hedge accounting. For qualifying cash flow hedges, the changes in fair value of derivatives are deferred into accumulated other comprehensive income (loss) in the accompanying combined balance sheet, which is subsequently reclassified into earnings in the period that the hedged transaction affects earnings. For fair value hedges and derivatives not designated as hedging instruments, the gain or loss, resulting from the change in the fair value of the derivatives, is recognized in earnings, as part of gain (loss) on derivative instruments in the accompanying combined statements of operations and comprehensive loss, during the period of change. Income Taxes Galaxy elected and qualified to be taxed as a REIT under sections 856 through 860 of the Internal Revenue Code ("Code"), commencing with the taxable year ended December 31, 2022. To qualify, and continue to qualify, as a REIT, Galaxy must meet certain organizational and operational requirements. Galaxy intends to continue to adhere to these requirements and maintain its REIT status for the current year and subsequent years. As a REIT, Galaxy generally will not be subject to federal income taxes on taxable income that is distributed to its partners and preferred stockholders. If Galaxy fails to continue to qualify as a REIT in any taxable year, Galaxy will then be subject to federal income taxes on the taxable income at regular corporate rates (including any applicable alternative minimum tax) and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service ("IRS") grants Galaxy relief under certain statutory provisions. Such an event could materially adversely affect net income and net cash available for distribution to partners. Galaxy REIT distributed to its partners and preferred stockholders 100.0% of its REIT taxable income for the period from January 1, 2024 through August 27, 2024, for the year ended December 31, 2023 and for the period from August 26, 2022 (commencement of operations) through December 31, 2022. Accordingly, no provision for federal or state income tax related to such REIT taxable income was recorded in Galaxy's financial statements. Even if Galaxy continues to qualify for taxation as a REIT, it may be subject to certain state and local taxes on its income and property and federal income and excise tax on any undistributed income. For the period from January 1, 2024 through August 27, 2024, for the year ended December 31, 2023 and for the period from August 26, 2022 (commencement of operations) through December 31, 2022, 100.0% of the preferred distribution paid to preferred stockholders was considered a return of capital from a tax perspective. Galaxy’s policy is to classify interest in interest expense and penalties in general and administrative expenses in the accompanying combined statements of operations and comprehensive loss. There have been no interest or penalties recorded for the period from January 1, 2024 through August 27, 2024, nor for the year ended December 31, 2023, or for the period from August 26, 2022 (commencement of operations) through December 31, 2022. The 2024, 2023, and 2022 tax years remain open to examination by the domestic taxing jurisdictions to which Galaxy is subject. Use of Estimates The preparation of the accompanying combined financial statements in conformity with US GAAP requires management to make estimates and assumptions that, in certain circumstances, affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past and current events and economic conditions. Actual results could differ from these estimates. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 15
Risks and Uncertainties Galaxy is subject to risks common to companies in the commercial real estate industry, including, but not limited to, lack of demand for space in the areas where its properties are located, inability to retain existing tenants and attract new tenants, oversupply of or reduced demand for space and changes in market rental rates, defaults by its tenants or its tenants' failure to pay rent on a timely basis, the need to periodically renovate and repair its properties, physical damage to its properties, economic or physical decline of the areas where its properties are located, and potential risk of functional obsolescence of its properties over time. Note 3 — Real Estate First Portfolio On August 26, 2022, Galaxy acquired the First Portfolio for $1.1 billion (the "First Portfolio Purchase Price"), plus acquisition costs of $17.6 million. The acquisition of the First Portfolio was funded with $930.8 million of secured borrowings from institutional lenders and the balance with equity. The transaction qualified as an asset acquisition because substantially all of the fair value was concentrated in a group of similar identifiable assets. As a result, the First Portfolio Purchase Price and the associated transaction costs were allocated to the tangible and intangible assets and liabilities based on the relative fair values. Second Portfolio On December 27, 2022, Galaxy acquired the Second Portfolio for $151.3 million (the "Second Portfolio Purchase Price"), plus acquisition costs of $3.8 million. The acquisition of the Second Portfolio was funded with $142.1 million of secured borrowings from institutional lenders and the balance with equity. The transaction qualified as an asset acquisition because substantially all of the fair value was concentrated in a group of similar identifiable assets. As a result, the Second Portfolio Purchase Price and the associated transaction costs were allocated to the tangible and intangible assets and liabilities based on the relative fair values. The following summarizes the assets acquired and liabilities assumed recorded upon closing of each acquisition. (In thousands, except number of properties) First Portfolio Second Portfolio Land $ 272,327 $ 30,195 Building and improvements 649,740 105,461 Tenant improvements 65,935 9,723 Market lease assets (including ground leases)(1)(2) 25,410 386 Acquired in-place leases(1)(2) 93,125 15,934 Assets acquired 1,106,537 161,699 Security deposits assumed (1,579) — Market lease liabilities(1)(2) (24,241) (6,591) Liabilities assumed (25,820) (6,591) Net cash paid to acquire real estate $ 1,080,717 $ 155,108 Number of properties purchased 54 6 _______________ (1) Weighted-average remaining amortization period for acquired in-place leases, above-market lease intangibles, below- market ground lease intangibles and below-market lease intangibles of the First Portfolio were 5.9 years, 6.3 years, 73.4 years and 4.8 years, respectively, as of the acquisition date. (2) Weighted-average remaining amortization period for acquired in-place leases, above-market lease intangibles and below- market lease intangibles of the Second Portfolio were 6.0 years, 4.6 years and 7.3 years, respectively, as of the acquisition date. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 16
Disposition On May 30, 2024, Galaxy completed the sale of a property located in Dublin, Ohio ("4650 Lakehurst Court"). The following table summarizes the property sale: Contract Sales Price Gain on Sale Property (in thousands) (Unaudited) (Unaudited) 4650 Lakehurst Court $ 7,500 $ 507 Less: disposal costs, net (243) Proceeds from sale of real estate $ 7,257 The disposition of 4650 Lakehurst Court does not represent a strategic shift that had a major effect on Galaxy's operations. Accordingly, the results of operations of 4650 Lakehurst Court remains classified within continuing operations for the periods presented through the date of disposition. Note 4 — Acquired Lease Intangibles As of December 31, 2023, Galaxy's lease intangible assets and liabilities were comprised of the following: (In thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Acquired lease intangible assets, net: In-place leases $ 101,932 $ (35,030) $ 66,902 Above-market leases 23,006 (8,644) 14,362 Below-market ground lease 2,293 (44) 2,249 Total acquired intangible assets $ 127,231 $ (43,718) $ 83,513 Acquired lease intangible liabilities, net: Below-market leases $ (28,608) $ 9,285 $ (19,323) The following table discloses amounts recognized within the accompanying combined statements of operations and comprehensive loss related to amortization of in-place leases and amortization and (accretion) of above- and below-market lease assets and liabilities for the periods presented: For the Period from January 1, 2024 through August 27, 2024 Year Ended December 31, 2023 For the Period from August 26, 2022 (commencement of operations) through December 31, 2022 (In thousands) (Unaudited) Amortization of in-place leases(1) $ 14,828 $ 33,427 $ 8,712 Amortization and (accretion) of above- and below-market leases, net(2) $ (1,237) $ (1,647) $ (706) Amortization of below-market ground leases(3) $ 16 $ 31 $ 13 _______________ (1) Reflected within depreciation and amortization expense. (2) Reflected within rental revenue. (3) Reflected within general and administrative expense. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 17
Note 5 — Mortgages Payable The following table sets forth information regarding mortgages payable outstanding at December 31, 2023: First Portfolio Mortgage Loan(1) $ 736,000 9.25 % September 9, 2024 First Portfolio Mezzanine Loan(1) 194,765 12.19 % September 9, 2024 Second Portfolio Mortgage Loan(1) 142,100 9.60 % January 6, 2025 Gross mortgages payable 1,072,865 9.84%(2) Deferred financing costs, net (2,417) Total mortgages payable, net $ 1,070,448 (In thousands) December 31, 2023 Interest Rate as of Maturity DateDecember 31, 2023 _______________ (1) Interest rate was determined utilizing the respective SOFR rate plus the interest rate margin of each loan at December 31, 2023, before the effect of any interest rate caps. (2) Interest rate on gross mortgages payable is calculated as a weighted-average for mortgages outstanding as of December 31, 2023. First Portfolio Galaxy Loans On August 26, 2022, in connection with the purchase of the First Portfolio, Galaxy, through certain entities in which it is invested, entered into loan agreements with JPMorgan Chase Bank, National Association, ("JPM") and Bank of Montreal ("BMO"), (together, the "Lender"), for total borrowings in the amount of $930.8 million (the "First Portfolio Galaxy Loans"), comprised of a mortgage loan, representing $736.0 million of borrowings ("Mortgage Loan") and a mezzanine loan, representing $194.8 million of borrowings ("Mezzanine Loan"). The Mezzanine Loan was subsequently sold to entities affiliated with Galaxy REIT. The Mortgage Loan bears interest at a per annum variable rate equal to Term SOFR, capped at 4.4% with derivative instruments, plus a spread of 3.885% (after increases to the spread as required by Galaxy's exercised extension options). The Mezzanine Loan bears interest at a per annum variable rate equal to Term SOFR, capped at 4.4% with derivative instruments, plus a spread of 6.824%. The First Portfolio Galaxy Loans provide for monthly interest only payments with all principal outstanding due on the maturity date. The First Portfolio Galaxy Loans were subject to two one-year extension options at Galaxy's option, subject to minimum debt yield tests and an increase to the interest rate spread of 0.25% for each extension. The extension options for the Mortgage Loan and Mezzanine Loan must be exercised simultaneously. On September 9, 2023, Galaxy exercised the first one-year extension option, extending the maturity dates to September 9, 2024. The First Portfolio Galaxy Loans may be prepaid at any time, in whole but not in part, unless necessary to meet a debt yield sufficient to exercise an extension option. The First Portfolio Galaxy Loans are subject to an exit fee upon any repayment or prepayment of the loans, equal to 2.0% of the amount of the First Portfolio Galaxy Loans that are being repaid. Such exit fee is being accrued monthly to accounts payable, accrued expenses and other liabilities on the accompanying combined balance sheet and expensed to interest expense on the accompanying combined statements of operations and comprehensive loss. On May 30, 2024, in connection with the sale of 4650 Lakehurst, Galaxy paid down $6.6 million of the Mortgage Loan and recorded a loss on extinguishment of debt of $0.1 million, which is shown in gain on extinguishment of debt, net on the accompanying combined statements of operations and comprehensive loss. Second Portfolio Galaxy Loan On December 27, 2022, in connection with the purchase of the Second Portfolio, Galaxy, through certain entities in which it is invested, entered into a loan agreement with UBS AG ("UBS") for total borrowings in the amount of $142.1 million (the "Second Portfolio Galaxy Loan"). The Second Portfolio Galaxy Loan bears interest at a per annum variable rate equal to Term SOFR, capped at 4.00% with derivative instruments, plus a spread of 4.25%. The Second Portfolio Galaxy Loan provides for monthly interest only payments with all principal outstanding due on the maturity date. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 18
The Second Portfolio Galaxy Loan is subject to two one-year extension options at Galaxy's option, subject to minimum debt yield tests and an increase to the interest rate spread of 0.25% for each extension. On January 5, 2024, Galaxy exercised the first one-year extension option, extending the maturity date to January 6, 2025. Upon exercise of the first extension option, if (i) any tenant has indicated that it will terminate all or any portion of its lease, (ii) any tenant has indicated that it will not renew or extend its lease or (iii) certain tenants vacate their premises yet continue to pay rent for such premises (i, ii, iii each a "Trigger Event"), Galaxy must deposit 12-months of base rent for such lease into an account controlled by UBS as additional security for UBS. If Galaxy meets the minimum debt yield test in conjunction with the exercise of the second extension option, any funds posted in connection with a Trigger Event will be returned to Galaxy. On January 5, 2024, Galaxy exercised the first one-year extension option, extending the maturity date to January 6, 2025. The Second Portfolio Galaxy Loans may be prepaid at any time, in whole but not in part, unless necessary to meet a debt yield sufficient to exercise an extension option or to release an individual property from the loan. The Second Portfolio Galaxy Loan is subject to an exit fee upon any repayment or prepayment of the loans, equal to 2.0% of the amount of the Second Portfolio Galaxy Loan that is being repaid. To the extent any of the Second Portfolio Galaxy Loan is repaid with proceeds from a loan made by UBS, such exit fee will be reduced to 1.0% of the amount of such amount of the Second Portfolio Galaxy Loan being repaid. As such, the 1.0% exit fee is being accrued monthly to accounts payable, accrued expenses and other liabilities on the accompanying combined balance sheet and expensed to interest expense on the accompanying combined statements of operations and comprehensive loss based on Galaxy's present intention to eventually refinance the Second Portfolio Galaxy Loan with a loan provided by UBS. Note 6 — Preferred Shares Pursuant to the various limited liability company agreements of Galaxy REIT (the "Galaxy REIT LLCA") and the Subsidiary REITs (the "Subsidiary REIT LLCAs" and together with the Galaxy REIT LLCA, the "LLCAs"), Galaxy REIT and each Subsidiary REIT authorized 150 preferred shares at a stated value of $1,000 per share ("Preferred Shares"). Such Preferred Shares will accrue a cumulative preferential cash distribution at a rate of 12.0% per annum per Preferred Share on a daily basis from the first date on which any Preferred Share is issued (and such funds are received by Galaxy), which preferential cash distribution is payable semi-annually in arrears on or before March 31 and September 30 of each year. For the period from January 1, 2024 through August 27, 2024 and the year ended December 31, 2023, Galaxy paid $0.1 million of distributions to preferred stockholders. There were no distributions paid for the period from August 26, 2022 (commencement of operations) through December 31, 2022. As of December 31, 2023, Galaxy had approximately $39,000 of preferred stock distributions payable included in accounts payable, accrued expenses and other liabilities on the accompanying combined balance sheets. Galaxy may redeem its Preferred Shares at its option at a price equal to (i) $1,000 per share plus (ii) all accrued and unpaid distributions on such redeemed Preferred Shares through the date fixed for payment plus (iii) a redemption premium per Preferred Share (if any) equal to $100 per redeemed Preferred Share for Preferred Shares redeemed on or before the second anniversary of the original Preferred Share issue date. Upon liquidation, dissolution or winding up of affairs of Galaxy, Preferred Shareholders would be entitled to a payment equal to the price per share Galaxy would pay if Galaxy were to redeem such shares. Holders of Preferred Shares have no voting rights on matters of Galaxy besides (i) authorization or issuance of any membership interest or equity security with any rights senior to those of the holders of Preferred Shares (ii) any amendment that would have a material adverse effect on the rights and preferences of the Preferred Stockholders or which increases the number of authorized or issued Preferred Units and (iii) the recharacterization of Preferred Shares. On August 26, 2022, Galaxy REIT issued 125 Preferred Shares and each Subsidiary REIT issued 10 Preferred Shares, to WS One Partners, L.P. ("WS One"), an affiliate, in a private placement. As of December 31, 2023, Galaxy REIT and each Subsidiary REIT had 125 Preferred Shares outstanding. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 19
Note 7 — Fair Value Measurements Galaxy is required to disclose the fair value information of its financial instruments, whether or not recognized in the accompanying combined balance sheet, for which it is practical to estimate fair value. ASC 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Galaxy measures and/or discloses the fair value of financial assets and liabilities based on a hierarchy that distinguishes market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. The hierarchy consists of the following three levels: • Level 1 — Valuations using unadjusted quoted prices for assets and liabilities traded in active markets. • Level 2 — Valuations are determined using observable prices that are based on inputs not quoted in active markets, but corroborated by market data. Fair values are primarily obtained from third party pricing services for identical or comparable assets and liabilities. • Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies such as discounted cash flow models or appraisals, and are not based on market pricing. These valuations are generally based on property level cash flow projections and assumptions that are not observable in the market. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized based on the lowest level input that is significant to the fair value measurement. The table below presents Galaxy's assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 aggregated by their levels in the fair value hierarchy: (In thousands) Level 1 Level 2 Level 3 Total December 31, 2023 Assets Derivative instruments $ — $ 4,183 $ — $ 4,183 Currently, Galaxy uses interest rate caps to manage its interest rate risk. The valuation of these instruments are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and option volatility. Galaxy also incorporates credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements. Although Galaxy has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by its counterparties. However, as of December 31, 2023, Galaxy has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, Galaxy has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. The financial assets and liabilities that are not measured at fair value on its accompanying combined balance sheet include cash and cash equivalents, restricted cash, tenant and other receivables, due to/from related parties, accounts payable, accrued expenses and other liabilities, accrued interest, mortgages payable, deferred revenue and security deposits. The fair value of cash and cash equivalents, restricted cash, tenant and other receivables, due to/from related parties, accounts payable, accrued expenses and other liabilities, accrued interest, deferred revenue and security deposits approximate their carrying values due to their short-term nature. The fair values of its mortgages payable which are classified as Level 3, are estimated by discounting the contractual cash flows of each debt obligation to their present value using the adjusted market interest rates, which was provided a by a third party specialist. The table below provides the carrying value, excluding the associated deferred financing costs, and fair value of the mortgage loans as of December 31, 2023: (In thousands) Carrying Value Fair Value Mortgage loans $ 1,072,865 $ 1,069,741 GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 20
Note 8 — Derivative and Hedging Activities Derivatives designated as cash flow hedges of interest rate risk In August 2022, in conjunction with the execution of the First Portfolio Galaxy Loans, Galaxy entered into interest rate cap agreements, with a combined notional value of $930.8 million, that effectively capped Term SOFR at 3.0%. These interest rate caps terminated on September 15, 2023 and were designated as cash flow hedges. In September 2023, Galaxy purchased new interest rate caps that will effectively cap 1-month SOFR at 4.40%. These interest rate caps are co-terminating with their underlying debt interest period on September 15, 2024 and are designated as cash flow hedges. In December 2022, in conjunction with the Second Portfolio Galaxy Loan, Galaxy entered into interest rate cap agreements related to such debt with a combined notional value of $142.1 million that effectively capped Term SOFR at 4.0%. These interest rate caps co-terminated with their underlying debt on January 6, 2024 and were designated as cash flow hedges. In December 2023, Galaxy purchased new interest rate caps that effectively cap 1-month SOFR at 6.11%, effective January 6, 2024. These interest rate caps are co-terminating with their underlying debt on January 6, 2025 and are designated as cash flow hedges. The table below provides the notional amount of Galaxy's designated derivatives that were designated as cash flow hedges of interest rate risk as of December 31, 2023: Number of instruments Notional Amount (In thousands) Interest Rate Caps 22 $ 1,214,965 The changes in fair value of derivatives designated and that qualify as cash flow hedges are recorded to change in unrealized gain (loss) on derivative instruments in other comprehensive (loss) income on the accompanying combined statements of operations and comprehensive loss. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on its variable-rate debt. During the twelve months following August 27, 2024, Galaxy estimates that $3.7 million will be reclassified from accumulated other comprehensive income (loss) as a decrease to interest expense. The table below presents the effect of Galaxy's derivative financial instruments designated as qualifying hedges on the accompanying combined statements of operations and comprehensive loss for the period from January 1, 2024 through August 27, 2024, the year ended December 31, 2023, and for the period from August 26, 2022 (commencement of operations) through December 31, 2022: For the Period from January 1, 2024 through August 27, 2024 Year Ended December 31, 2023 For the Period from August 26, 2022 (commencement of operations) through December 31, 2022 (In thousands) (Unaudited) Amount of gain (loss) on derivative instruments recognized in other comprehensive income (loss) $ 45 $ (1,669) $ 6,257 Amount of gain on derivative instruments reclassified from accumulated other comprehensive income (loss) into gain on derivative instruments $ 79 $ 6,757 $ 603 GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 21
Balance Sheet Classification The table below presents the fair value of Galaxy's derivative financial instruments as well as their classification on the combined balance sheet as of December 31, 2023: (In thousands) Balance Sheet Location Interest rate caps — designated as hedging instruments Prepaid expenses and other assets $ 4,183 Note 9 — Related Party Transactions Galaxy is externally managed by Workspace Property Management, L.P. ("WPM"), a Delaware limited partnership, pursuant to various agreements among WPM and the entities included in the accompanying combined financial statements (the "PM Agreements"). The PM Agreements run in perpetuity unless a termination event, as defined in the PM Agreements, occurs. Pursuant to the PM Agreements, Galaxy is subject to pay compensation to WPM in the form of property management fees, lease override fees, construction supervision fees and operating cost reimbursements. Property Management Fees As compensation for property management services, Galaxy pays WPM a property management fee equal to 2.75% of the aggregate gross monthly revenue received from the operations of the properties, excluding certain proceeds collected by Galaxy (the "Property Management Fee"). Property Management Fees incurred from WPM are expensed as incurred and included in operating expenses on the accompanying combined statements of operations and comprehensive loss. Lease Override Fees As compensation for leasing services, Galaxy pays WPM a lease override fee equal to the Adjusted Rent multiplied by the percentage of standard market commission for a listing broker in the applicable market ("Full Commission"). Adjusted Rent is defined as the sum of gross rent payable during the initial term of a new lease or lease amendment, not including in such amount any amortized tenant improvements or other amortized concessions given to the tenant. For new leases and renewal and expansion amendments in which there is no tenant broker, WPM receives 100.0% of the Full Commission (a "Full Commission Lease Override Fee"). For new leases and renewal and expansion amendments in which there is a tenant broker, WPM receives 50.0% of the Full Commission (a "Half Commission Lease Override Fee", and each, considered with the Full Commission Lease Override Fee, a "Lease Override Fee"). For new leases, 50.0% of the Lease Override Fee is paid to WPM upon signing of the lease and the remaining 50.0% of the Lease Override Fee is paid to WPM 30 days after rent commencement. For renewal and expansion amendments, 100.0% of the Lease Override Fee is paid upon signing of the lease amendment. Lease override fees are capitalized and included in deferred leasing costs, net on the accompanying combined balance sheet. Construction Supervision Fees As compensation for supervision of alterations, improvements and additions made to properties under management, Galaxy pays WPM a construction supervision fee in the amount of 4.0% of project costs, which consist of all costs of construction, including the gross amount paid to any engineer or architect for design services, any general contractor or subcontractors for the completion of the work under the terms of the general contract or subcontract plus any amounts necessarily incurred to perform the work, including, but not limited to: salaries and wages of design and construction employees, but excluding any overhead expenses of WPM (the "Construction Supervision Fee"). Construction Supervision Fees are capitalized and included in buildings and improvements on the accompanying combined balance sheet. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 22
Operating Cost Reimbursements Pursuant to the PM Agreements, all costs and expenses relating to the operations of the properties incurred by WPM in accordance with the annual budget in the performance of its obligations shall be borne by Galaxy. As such, Galaxy reimburses WPM for the operating costs for office space and related expenses directly responsible for managing Galaxy's properties, including, but not limited to, certain salary and overhead, utility, marketing, travel, lodging and related expenses and costs incurred by WPM and its employees or third-party operators in connection with performing management services. Galaxy also reimburses WPM for certain third party costs incurred in connection with providing accounting and reporting services. All cost reimbursements are expensed as incurred and included in operating expenses on the accompanying combined statements of operations and comprehensive loss. Asset Management Fees Pursuant to the Galaxy REIT LLCA, RVMC (the "Asset Manager") is entitled to an annual asset management fee equal to $4.6 million (the "Asset Management Fee"). The Asset Management Fee is not to be reduced for any reductions in asset value, but will be reduced for property dispositions. Asset management fees are expensed as incurred and included in the asset management fees on the accompanying combined statements of operations and comprehensive loss. On May 30, 2024, Galaxy REIT completed the sale of a property in Dublin, Ohio and reduced the annual Asset Management Fee by approximately $24,000. The following table details amounts incurred in connection with Galaxy's aforementioned related party agreements and reimbursements: For the Period from January 1, 2024 through August 27, 2024 For the Period from August 26, 2022 (commencement of operations) through December 31, 2022 Amount due to related parties, netYear Ended December 31, 2023 December 31, 2023 (In thousands) (Unaudited) Property Management Fees $ 2,782 $ 5,276 $ 1,571 $ 3,003 Lease Commissions 866 2,717 1,047 176 Construction Supervision Fees 373 486 91 — Operating Cost Reimbursements 3,627 5,252 1,892 1,342 Asset Management Fees 3,002 4,585 1,329 — Total $ 10,650 $ 18,316 $ 5,930 $ 4,521 Purchase of Properties On August 26, 2022 and December 27, 2022, Galaxy purchased the First Portfolio and Second Portfolio, respectively, from entities owned or controlled by Peakstone Realty Trust ("PKST", formerly known as Griffin Realty Trust, Inc.), in exchange for cash of $1.2 billion in aggregate. Simultaneous with the closing of the First and Second Portfolio, PKST contributed cash in exchange for OP units representing a 49.0% ownership of Galaxy REIT. See Note 3 — Real Estate for further details on the purchase of the First Portfolio and the Second Portfolio. In connection with the First Portfolio and Second Portfolio acquisitions, certain amounts were temporarily settled based on estimates at the time of closing. Subsequently, such estimated amounts were re-prorated once final amounts were ascertained. As a result of such re-prorations, PKST agreed to pay, and subsequently paid in February 2024, $4.2 million. Such amount was included in due from related parties on the accompanying combined balance sheet as of December 31, 2023. Other Reimbursements As of December 31, 2023, Galaxy is owed a net of $0.1 million as a reimbursement for miscellaneous expenses between Galaxy and affiliates, but paid by Galaxy. Such amounts are included in due from related parties on the accompanying combined balance sheet. Diligence and Advisory Fee In connection with the acquisitions of the First Portfolio and the Second Portfolio, Galaxy incurred fees of $12.4 million from affiliates, which were capitalized as part of the cost basis of the acquired assets. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 23
Note 10 — Leases Lessee Arrangement As of December 31, 2023, Galaxy had $3.7 million of ROU assets, net of $0.2 million of accumulated amortization, which is included in prepaid expenses and other assets on the accompanying combined balance sheet. Galaxy recognized rental expense, inclusive of short-term and variable lease costs, for operating leases of $0.1 million for the period from January 1, 2024 through August 27, 2024, $0.3 million for the year ended December 31, 2023, and $0.2 million for the period from August 26, 2022 (commencement of operations) through December 31, 2022. Lessor Arrangements Galaxy leases properties to tenants under operating leases with various expiration dates through 2035. Most of Galaxy’s leases require tenants to pay fixed annual rental payments that may escalate on an annual basis and variable payments for other operating expenses, such as real estate taxes, insurance, common area maintenance, and utilities, that are based on the actual expenses incurred. There was no single tenant that made up more than 10% of the revenues in aggregate for any period presented. Certain of Galaxy's operating leases include tenant options to extend or terminate the lease term. For purposes of determining the lease term, Galaxy excludes these option periods unless it is reasonably assured at lease commencement that the option will be exercised. Galaxy combines its lease and non-lease components that have the same timing and pattern of transfer when the lease component is classified as an operating lease. The non-lease components of their leases primarily consist of common area maintenance, real estate taxes, and insurance reimbursements from their tenants. For the period from January 1, 2024 through August 27, 2024, for the year ended December 31, 2023 and for the period from August 26, 2022 (commencement of operations) through December 31, 2022, Galaxy recorded rental revenue on the accompanying combined statements of operations and comprehensive loss as follows: For the Period from January 1, 2024 through August 27, 2024 Year Ended December 31, 2023 For the Period from August 26, 2022 (commencement of operations) through December 31, 2022 (In thousands) (Unaudited) Rental revenue — operating leases(1) $ 78,159 $ 140,161 $ 45,492 Variable rental revenue — operating leases 24,301 48,795 15,762 Total rental revenue $ 102,460 $ 188,956 $ 61,254 _______________ (1) Rental revenue — operating leases includes $1.2 million, $1.6 million, and $0.7 million of above- and below-market amortization expense for the period from January 1, 2024 through August 27, 2024, the year ended December 31, 2023 and for the period from August 26, 2022 (commencement of operations) through December 31, 2022, respectively. Note 11 — Commitments and Contingencies Legal Matters Galaxy is involved from time to time in litigation on various matters, including disputes with tenants and disputes arising out of agreements to purchase, sell or lease properties. Given the nature of Galaxy’s business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. Galaxy will establish reserves for specific legal proceedings when Galaxy determines that the likelihood of an unfavorable outcome is probable and when the amount of loss is reasonably estimable. Galaxy does not expect that the liabilities, if any, that may ultimately result from such legal actions will have a material adverse effect on the combined financial position, results of operations or cash flows of Galaxy. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 24
Environmental Matters As an owner of real estate, Galaxy is subject to various environmental laws of federal, state, and local governments. Galaxy’s compliance with existing laws has not had a material adverse effect on its financial condition and results of operations, and Galaxy does not believe it will have a material adverse effect in the future. However, Galaxy cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on its current properties or on properties that Galaxy may acquire. Note 12 — Subsequent Events Galaxy evaluated all events and transactions that occurred after August 27, 2024 through March 26, 2025, the date these combined financial statements were available to be issued and noted certain matters requiring disclosure in these combined financial statements as set forth below. On August 28, 2024, Peakstone Realty Trust transferred its 49.0% interest in Galaxy REIT to the other members. On August 28, 2024, Galaxy and certain of its subsidiaries, the investors in Galaxy as well as JPM and BMO as holders of the First Portfolio Galaxy Loan entered into a series of transactions that resulted in a) the extension of the First Portfolio Galaxy Loan to September 27, 2027, b) the repayment and forgiveness of a portion of the First Portfolio Galaxy Loan, c) modification of the interest rate on the First Portfolio Galaxy Loan, and d) the extinguishment of the First Portfolio Mezzanine Loan, among other changes. On December 20, 2024, Galaxy amended the Second Portfolio Galaxy Loan to a) extend the maturity date to January 6, 2027, and b) modify the interest rate, among other changes. GALAXY REIT LLC NOTES TO COMBINED FINANCIAL STATEMENTS August 27, 2024 25