Executive Summary: 2017 Annual Report

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Mitchell A. Sabshon Director, President and Chief Executive Officer

2017 was a year of evolution
in the retail industry. Retail is changing, and changing quickly.

Inland Income Trust’s financial results as of December 31, 2017:

  • Total assets increased $17.8 million from a year ago to approximately $1.38 billion
  • Renewed 85% of expiring leases at an average of
    5.3% higher rental rate
  • Funds from Operations (FFO) were $51.2 million
  • Distributions to investors were $53.3 million
  • Achieved above average economic occupancy of 94.8%
  • Total debt effectively 80% fixed rate

Investing for the Future

A primary initiative in 2017 was the development and announcement of our strategic plan. This plan included three actions meant to better position the Company for future growth.
For each retailer closing stores 2.7 are opening stores

% Net Opening Stores vs. Net Closing1

  • Superstores / WH Clubs
    100%
  • Convenience Stores
    18% 55%
  • Mass Merchandisers
    21% 46%
  • Specialty Softgoods
    29% 38%
  • Specialty Hardgoods
    15% 48%
  • Drug Stores
    21% 36%
  • Food/Grocery
    9% 44%
  • Fast Food
    9% 42%
  • Bar/Restaurants
    13% 36%
  • Department Stores
    14% 14%
  • % Banners Closing Stores
  • % Banners Gaining Stores
1 IHL Group. Debunking the Retail Apocalypse. August 2017.
The performance of many of our top tenants has been solid and our tenants are expanding their footprint across geographic locations.

Off-price powerhouse TJX Companies, our number three top tenant that owns Marshalls, T.J. Maxx, HomeGoods and new HomeSense concept, sees plenty of room for store expansion — particularly in the home good sector. The retailer has more than 3,800 stores worldwide and will open 260 new locations this year.2

PetSmart, North America’s leading pet specialty retailer, our number four top tenant, opened 63 new stores, with 28 brick-and-mortar storefronts added during the quarter ended November 1, 2017, and another 35 during the first half of the fiscal year.3

Ross Stores, our number five top tenant, added 96 new stores in 2017 through October 2017, with 40 recent additions including 30 Ross Dress for Less and ten dd’s DISCOUNTS stores across 22 different states in September and October of 2017. The company currently operates over 1,400 Ross Dress for Less and over 200 dd’s DISCOUNTS locations.4

Ulta Beauty, our number seven top tenant, opened 86 new stores, five relocations and 10 remodels in the first nine months of 2017. The company currently stands at 1,058 stores across 48 states and the District of Columbia.5

2 Chain Store Age. TJX to open 260 stores this year. August 16, 2017.
3 Pymnts.com. PetSmart Continues Brick-And-Mortar Expansion With More Store Openings. December 14, 2017.
4 Ross Dress for Less. Ross Stores Opens 40 New Locations press release. October 9, 2017.
5 Compiled from Ulta earnings releases.
Portfolio Highlights As of December 31, 2017

Portfolio is more than 94% leased and has been more
than 94% leased since we purchased our first properties

More than 80% of our annualized base rent (ABR) is generated from properties anchored and shadow-anchored by grocers

ABR per square foot is $17.16 (excluding ground leases), which is above the national average of $17.12 per square foot6

0

Tenants dominated by retailers selling necessity-based goods and services that are protected from online competition and experiencing growth

0

New leases executed with restaurants, off-price retailers, sporting goods stores, fitness centers and service providers

Diverse geographic footprint with 12% of our portfolio in the west,
31% in the south, 29% in the midwest, and 28% in the east

Comparable Leasing Spread*

* Percentage change between the new contractual rent per square foot (PSF) and the prior contractual rent PSF for comparable new leases and renewals.

6 CBRE. Q4 2017 U.S. Retail Figures.
Financial Highlights As of December 31, 2017
(in thousands) 12/31/17 12/31/16 12/31/15
Balance Sheet Data:
Total Assets $1,375,370 $1,357,560 $1.401,368
Mortgage Loans and Credit Facility Payable, net 691,465 606,025 584,499
Operating Data:
Net Income (Loss) (19,102) (7,961) (13,436)
Funds from Operations (FFO) 51,232 51,899 21,137
Modified Funds from Operations (MFFO) 48,893 47,367 32,652
Inland Real Estate Income Trust, Inc. FFO and MFFo are calculated as follows.
For the year ended December 31 ($ in thousands)
2017 2016 2015 2014 2013
Net Loss: $(19,102) $(7,961) $(13,436) $(4,356) $(2,257)
Add: Depreciation and amortization related to investment properties 61,804 59,860 34,573 7,679 1,004
Provision for impairment of investment property 8,530 - - - -
Funds from operations (FFO) 51,232 51,899 21,137 3,323 (1,523)
Add: Acquisition related costs 754 (1,556) 13,903 5,139 666
Less: Amortization of acquired market lease intangibles, net (1,415) (812) (652) (59) (24)
Straight-line income, net (1,678) (2,164) (1,736) (314) (15)
Modified funds from operations (MFFO) 48,893 47,367 32,652 8,089 (896)