Executive Summary / Key Takeaways

• Liquidity Crisis for Shareholders: Inland Real Estate Income Trust's board suspended its distribution reinvestment and share repurchase programs in September 2024 after concluding a strategic review without pursuing a sale, effectively trapping non-traded shareholders in an illiquid investment while management searches for an accretive growth path.

• Resilient Assets, Stagnant Performance: The company's 87% grocery-anchored portfolio provides defensive characteristics against e-commerce disruption, yet flat year-over-year net operating income, declining occupancy from 93.1% to 91.3%, and persistent net losses demonstrate that portfolio quality alone cannot overcome operational scale disadvantages.

• Refinancing Cliff Creates Immediate Risk: With $121 million in mortgage debt maturing within 12 months and covenant restrictions limiting additional credit facility draws to approximately $36 million, INRE faces a refinancing wave at higher interest rates that will compress already-thin cash flows and reduce financial flexibility.

• Scale Disadvantage vs. Public Peers: Compared to profitable, publicly-traded grocery-anchored REITs like Kimco and Regency Centers , INRE's $379 million market cap and 52-property portfolio lack the negotiating power, tenant diversification, and capital market access necessary to compete effectively for acquisitions and tenants.

• Execution Hinges on "Accretive" Growth Plan: Management's mandate to identify alternatives that increase assets and cash flow on an accretive basis represents the only path to unlocking shareholder value, but the company lacks clear funding sources and has not yet articulated a credible strategy to achieve this goal.

Setting the Scene: The Non-Traded REIT Dilemma

Inland Real Estate Income Trust, formed in August 2011 and headquartered in Oak Brook, Illinois, operates a 52-property portfolio spanning 7.2 million square feet across 24 states. The company generates revenue by owning and managing grocery-anchored shopping centers, with 87% of its annualized base rent derived from necessity-based retail tenants that theoretically provide stable cash flows through economic cycles. This focus on grocery-anchored properties positions INRE in the most resilient segment of brick-and-mortar retail, where foot traffic remains relatively insulated from e-commerce headwinds that have decimated traditional mall operators.

However, INRE's non-traded REIT structure creates a fundamental disconnect between asset quality and shareholder value realization. Unlike its publicly-traded peers, INRE's shares do not trade on a national exchange, leaving investors dependent on the company's intermittent share repurchase program for liquidity. When management suspended this program in October 2024 alongside its distribution reinvestment plan, it eliminated the primary exit path for shareholders, effectively transforming the investment into a private-equity-style holding with indefinite duration. This matters because it removes the market's ability to price the portfolio daily, masking underlying operational issues while management attempts to engineer a value-unlocking event.

The company's scale disadvantage becomes immediately apparent when positioned against the competitive landscape. Kimco Realty operates over 400 grocery-anchored centers with a $13.65 billion market cap; Regency Centers manages 550+ properties valued at $12.47 billion; Brixmor and Federal Realty each exceed $7.5 billion in market capitalization. INRE's $379 million market cap and 52-property footprint represent a fraction of Kimco's property count (52 properties vs. 400+), conferring minimal bargaining power with national tenants and limiting access to institutional capital markets. This size disparity directly impacts per-property operating costs, tenant retention capabilities, and acquisition currency, creating a structural headwind that portfolio quality alone cannot overcome.

Business Model Under Pressure: When Grocery Anchors Aren't Enough

INRE's strategic focus on grocery-anchored properties represents both its primary competitive advantage and its most significant limitation. The 87% grocery exposure provides defensive characteristics, as evidenced by the sector's resilience during economic downturns and pandemic-related disruptions. Grocery tenants drive consistent traffic, supporting junior tenants who pay higher rents per square foot. This dynamic allows INRE to maintain occupancy rates above 91% even as traditional retail landlords struggle with vacancy.

Yet this same concentration exposes INRE to tenant-specific risks that larger peers can diversify away. Party City's bankruptcy in December 2024 resulted in lease rejections across four INRE properties, with two spaces still being marketed as of September 2025. American Freight and Rite Aid added two more vacant spaces, creating a re-leasing burden that consumes management attention and capital. While these represent less than 1% of total square footage, the incident highlights how a small portfolio amplifies the impact of individual tenant failures. Larger REITs like Kimco can absorb dozens of tenant bankruptcies without materially impacting overall occupancy or financial performance.

The suspension of the distribution reinvestment plan in October 2024 carries particularly negative implications. The DRP had generated $148 million in aggregate proceeds by issuing 6.76 million shares, providing a steady source of equity capital without diluting existing shareholders through public offerings. Eliminating this funding source while simultaneously halting share repurchases signals that management views the stock as fully valued relative to underlying asset value, or worse, that the company cannot afford to continue providing liquidity while preserving capital for operations. This matters because it cuts off a critical capital-raising mechanism at a time when the company needs funds for tenant improvements and potential acquisitions.

Financial Performance: Flatlining in a Growing Market

INRE's third-quarter 2025 results reveal a business treading water despite favorable market conditions for grocery-anchored retail. Total property income increased a modest 1.73% year-over-year to $38 million, while property net operating income remained essentially flat at $25.1 million. This stagnation occurred during a period when publicly-traded grocery-anchored REITs reported same-store NOI growth of 3-5%, suggesting INRE is losing ground competitively. The modest revenue growth stems from base rent increases on new and renewed leases, but these gains are offset by rising operating expenses and tenant vacancies.

The company's inability to convert top-line growth into bottom-line profitability represents its most pressing financial challenge. INRE posted a net loss of $2 million in Q3 2025 and $6.7 million for the nine-month period, continuing a pattern of persistent unprofitability that contrasts sharply with peers. Kimco generated $130 million in net income in its most recent quarter; Regency produced $202.6 million in core operating earnings. INRE's losses reflect both scale inefficiencies and higher interest expenses relative to asset base, creating a structural disadvantage that management's "accretive growth" mandate must address.

Occupancy trends provide further cause for concern. Physical and economic occupancy both declined approximately 30 basis points from June 2025 levels, and have fallen 180 basis points since December 2024. While 91.3% physical occupancy remains respectable, the directional trend matters more than the absolute level. Declining occupancy in a grocery-anchored portfolio suggests either localized market weakness, tenant credit issues, or ineffective asset management. For a company with only 52 properties, each 1% decline in occupancy represents approximately $1.5 million in lost annual revenue, directly impacting NOI and debt service coverage.

Lease spreads tell a mixed story. Comparable renewal leases achieved 6.8% increases over prior rents, while new leases commanded 13.7% premiums, indicating strong demand for INRE's spaces when available. However, with leases representing 4% of ABR expiring in the remainder of 2025 and 7% in 2026, the company must execute flawlessly on re-leasing to maintain occupancy. The weighted average remaining lease term of 4.5 years provides moderate stability but falls short of the 6-8 year terms larger REITs secure with investment-grade tenants.

Debt Refinancing: The Ticking Clock

INRE's capital structure presents an immediate challenge that management cannot defer. As of November 6, 2025, three mortgage loans totaling $121.3 million mature within the next 12 months, requiring refinancing in an interest rate environment significantly higher than when the original debt was issued. The company expects to enter an amended credit facility agreement to extend terms and increase drawable amounts, but this solution merely shifts the problem rather than solving it.

The credit facility mechanics reveal constrained financial flexibility. While total commitments stand at $475 million, covenant limitations—specifically the leverage ratio—reduce available draws to approximately $36 million as of November 2025. The recent $17 million draw on the revolving credit facility to repay a $16.1 million mortgage on The Village at Burlington Creek property demonstrates the refinancing strategy in action, but each such transaction reduces capacity for other purposes. This matters because it prioritizes short-term survival over long-term growth, limiting management's ability to fund tenant improvements or pursue acquisitions.

Interest expense decreased $578 thousand in Q3 2025 due to lower average debt outstanding and rates, but this trend will reverse as maturing debt refinances at current market rates. Management explicitly acknowledges that interest rates and hedging costs have increased since the original debt was incurred, meaning future draws will carry higher coupons. For an unprofitable REIT with flat NOI, every basis point of additional interest expense directly increases net losses and reduces cash available for distributions or growth investments.

The weighted average years to maturity for mortgages payable stands at just 0.20 years as of September 2025, indicating virtually all property-level debt is coming due imminently. This creates a refinancing cliff that management must navigate while simultaneously trying to execute on its growth mandate. Larger peers like Regency Centers and Federal Realty (FRT) maintain staggered debt maturities and investment-grade ratings that provide access to unsecured bonds at favorable rates. INRE's property-specific mortgage debt and non-traded status confine it to secured lending markets with higher costs and stricter covenants.

Competitive Position: Outgunned and Outscaled

INRE's competitive disadvantages extend beyond simple size metrics. Publicly-traded grocery-anchored REITs operate with significant structural advantages that INRE cannot replicate. Kimco's $13.65 billion market cap and 400+ property portfolio generate institutional investor interest, analyst coverage, and favorable debt terms. Regency Centers' $12.47 billion valuation and coastal market focus command premium rents and tenant quality. Brixmor's (BRX) $7.85 billion scale enables sophisticated redevelopment strategies that extract additional value from existing assets.

The financial metrics reveal the performance gap. Kimco trades at 1.30 times book value with a 5.16% dividend yield and 34.33% operating margin. Regency commands 1.87 times book with 39.36% operating margins. INRE trades at 1.12 times book but operates at a loss, meaning its discount to peers reflects fundamental weakness rather than value opportunity. The company's 7.6% free cash flow yield appears attractive until one considers the lack of growth and reinvestment requirements for tenant improvements.

Scale disadvantages manifest in operational metrics. Larger REITs negotiate master leases with national grocery chains across dozens of properties, securing favorable terms and co-tenancy protections. INRE must negotiate property-by-property, lacking leverage to extract similar concessions. When a national retailer like Party City fails, Kimco can backfill the space from a pipeline of 50+ prospective tenants across its portfolio; INRE must market each vacancy individually, incurring higher leasing commissions and longer downtime.

The non-traded structure, once marketed as a stability advantage, has become a strategic liability. Without public equity currency, INRE cannot pursue the acquisition-driven growth strategies that have created value for Kimco and Regency shareholders. The suspension of the DRP eliminates a key equity funding source, leaving debt as the primary growth capital option for an already leveraged, unprofitable company. This matters because it traps the company in a negative cycle: lack of scale prevents profitability, which limits capital access, which prevents scale-building.

Risks and Asymmetries: Where the Thesis Breaks

The central investment thesis for INRE—that its grocery-anchored portfolio provides defensive value while management pursues accretive growth—faces several material risks that could permanently impair capital. The most immediate is execution risk on the refinancing front. If credit markets tighten or property valuations decline, INRE may be unable to secure sufficient refinancing capacity, forcing asset sales at inopportune times. The company's reliance on a single credit facility administered by a syndicate of banks creates concentration risk that larger REITs mitigate through diversified funding sources.

Tenant credit quality represents another asymmetric risk. While grocery anchors provide stability, junior tenants in the current environment face mounting pressure from inflation, labor costs, and shifting consumer spending. The Party City (PRTY), American Freight, and Rite Aid (RAD) bankruptcies may be harbingers of broader small-format retail distress. With 4% of ABR expiring in 2025 and 7% in 2026, INRE has minimal lease rollover protection if tenant failures accelerate. Larger peers mitigate this risk through tenant diversification across thousands of leases; INRE's concentrated portfolio offers no such cushion.

The strategic review's conclusion not to pursue a sale carries subtle but important implications. Either the board received insufficient bids reflecting a discount to perceived asset value, or no strategic buyers expressed interest at any price. In the first scenario, management overestimates portfolio quality relative to market-clearing levels. In the second, the non-traded structure and small scale render the company unacquirable. Both outcomes suggest the private market value of INRE's assets may be lower than book value, making the 1.12 price-to-book ratio potentially expensive rather than cheap.

Management's mandate to pursue "accretive" growth introduces additional risk. In an environment of rising interest rates and compressed cap rates, truly accretive acquisitions are scarce. INRE may be tempted to chase yield by acquiring lower-quality assets or overleveraging, further impairing financial stability. The company's history of unprofitability suggests it has not demonstrated an ability to generate accretive returns on invested capital, making any new growth initiative suspect until proven otherwise.

Valuation Context: Pricing an Illiquid, Unprofitable REIT

Trading at $10.50 per share with a $379 million market capitalization, INRE presents a valuation puzzle that traditional metrics struggle to solve. The price-to-book ratio of 1.12 suggests the market values assets modestly above carrying value, but this comparison to profitable peers is misleading. Kimco (KIM) trades at 1.30 times book while generating 34% operating margins; Regency (REG) at 1.87 times book with 39% margins. INRE's discount reflects its unprofitable operations and lack of liquidity, not a value opportunity.

Given the company's negative earnings, price-to-earnings ratios are meaningless. Revenue multiples provide more insight. With trailing twelve-month revenue of $150 million, INRE trades at approximately 2.5 times sales. This compares favorably to Kimco (6.43x), Regency (8.19x), and Brixmor (5.83x), but the discount is warranted given negative margins and minimal growth. More relevant is the free cash flow yield of 7.6% ($29 million FCF on $379 million market cap), which appears attractive but must be evaluated in context of required reinvestment and debt service.

The balance sheet provides both comfort and concern. Book value of $9.33 per share supports the current trading price, but this value is trapped in illiquid real estate and encumbered by debt. With $121 million in near-term mortgage maturities and limited credit facility availability, the company faces a liquidity squeeze that could force asset sales below book value. The absence of a public equity market eliminates the possibility of issuing shares to de-lever or fund growth, a tool readily available to Kimco, Regency, and Brixmor.

Management's commitment to publish a net asset value estimate by December 31, 2025, may provide clarity, but history suggests non-traded REIT NAVs often reflect optimistic assumptions. The true market value of INRE's assets will be revealed only if and when the company pursues a liquidity event, whether through listing, sale, or liquidation. Until then, shareholders are effectively limited partners in a private real estate fund with an uncertain exit timeline.

Conclusion: A Portfolio in Search of a Viable Structure

Inland Real Estate Income Trust occupies an uncomfortable middle ground: too small to compete effectively with public REITs, too large to operate as a nimble private partnership, and too illiquid to provide shareholders with a reliable exit. The grocery-anchored portfolio offers genuine defensive characteristics, but flat NOI, declining occupancy, and persistent losses demonstrate that asset quality cannot overcome operational and structural disadvantages.

The strategic review's conclusion not to pursue a sale, combined with the suspension of shareholder liquidity programs, represents a critical inflection point. Management must now deliver on its promise to identify accretive growth alternatives, but faces a refinancing cliff, covenant restrictions, and a lack of proven acquisition expertise. The tenant bankruptcy wave, while manageable in isolation, exposes the portfolio's concentration risk and re-leasing costs.

For investors, the thesis hinges on two variables: whether management can execute a credible growth strategy that leverages the grocery-anchored focus while achieving profitability, and whether the company can navigate its debt refinancing without diluting asset value or overleveraging. The 7.6% free cash flow yield provides some compensation for the illiquidity premium, but this benefit is offset by negative growth and refinancing risk.

Until INRE provides a clear path to liquidity and demonstrates an ability to generate accretive returns, the stock remains a show-me story trading at a valuation that reflects its challenges rather than its opportunities. The grocery-anchored moat provides downside protection, but without scale, profitability, or a viable exit mechanism, that protection may prove insufficient to justify the investment.