8-K
Modiv Industrial, Inc. (MDV)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 14, 2022
Modiv Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 001-40814 | 47-4156046 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 120 Newport Center Drive<br><br> <br>Newport Beach,<br> California | 92660 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (888) 686-6348
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which<br><br> <br>registered |
|---|---|---|
| Class C Common Stock, $0.001 par value per share | MDV | New York Stock Exchange |
| 7.375% Series A Cumulative Redeemable Perpetual Preferred | MDV.PA | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
| Item 2.02. | Results of Operations and Financial Condition |
|---|
On November 14, 2022, Modiv Inc., a Maryland corporation (the “Company”), issued an earnings press release relating to the Company’s financial results for the quarter ended September 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Company also issued supplemental data, an investor presentation and a third quarter snapshot for the quarter ended September 30, 2022. A copy of the supplemental data, investor presentation and the third quarter snapshot are attached hereto as Exhibits 99.2, 99.3 and 99.4 which are incorporated herein by reference. The press release, supplemental data, investor presentation and third quarter snapshot are available on the Company’s website.
The information in Item 2.02 of this Current Report, including Exhibits 99.1, 99.2, 99.3 and 99.4 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, unless it is specifically incorporated by reference therein. References to the Company’s website in this Current Report on Form 8-K and in the attached Exhibits 99.1, 99.2, 99.3 and 99.4 to this Current Report on Form 8-K do not incorporate by reference the information on such website into this Current Report on Form 8-K and the Company disclaims any such incorporation by reference.
| Item 7.01. | Regulation FD Disclosure |
|---|
On November 14, 2022, the Company issued an earnings press release relating to the Company’s financial results for the quarter ended September 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Company also issued supplemental data, an investor presentation and a third quarter snapshot for the quarter ended September 30, 2022. A copy of the supplemental data, investor presentation and third quarter snapshot are attached hereto as Exhibits 99.2, 99.3 and 99.4 which are incorporated herein by reference.
The furnishing of this earnings press release and supplemental data is not intended to constitute a representation that such furnishing is required by Regulation FD or other securities laws, or that the earnings press release and supplemental data include material investor information that is not otherwise publicly available. In addition, the Company does not assume any obligation to update such information in the future.
The information in Item 7.01 of this Current Report, including Exhibits 99.1, 99.2, 99.3 and 99.4 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act or the Exchange Act, unless it is specifically incorporated by reference therein.
| Item 9.01. | Financial Statements and Exhibits |
|---|
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Modiv Inc. Earnings Press Release dated November 14, 2022 |
| 99.2 | Modiv Inc. Quarterly Supplemental Data For The Quarter Ended September 30, 2022 |
| 99.3 | Modiv Inc. Investor Presentation - November 2022 |
| 99.4 | Modiv Inc. Third Quarter 2022 Snapshot |
| 104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MODIV INC.<br><br> <br>(Registrant) | ||
|---|---|---|
| By: | /s/ RAYMOND J. PACINI | |
| Name: Raymond J. Pacini | ||
| Title: Chief Financial Officer | ||
| Date: November 14, 2022 |
Exhibit 99.1
Modiv Announces Third Quarter 2022 Results
NEWPORT BEACH, CA, November 14, 2022 – Modiv Inc. (“Modiv” or the “Company”) (NYSE:MDV), an internally managed real estate investment trust (“REIT”) that acquires, owns, and manages a diversified portfolio of single-tenant net-lease real estate properties, today announced operating results for the third quarter ended September 30, 2022.
Highlights for the quarter ended September 30, 2022, including subsequent events, are as follows:
| ● | Consistent total quarterly revenue of $10.2 million. Revenue was up 17% year-over-year, after adjusting for a $1.5 million one-time early termination fee in the year-ago quarter. |
|---|---|
| ● | Quarterly AFFO of $3.1 million, or $0.31 per diluted share, in line with our 2022 annual AFFO per share guidance. |
| --- | --- |
| ● | Continued execution of portfolio repositioning with $28.7 million of industrial property acquisitions at an initial cap rate of 7.6% and $22.2 million of office property dispositions at an exit cap rate<br> of 7.4%, resulting in a $4.7 million gain on the sale of two Las Vegas office properties. |
| --- | --- |
| ● | Successfully exercised a $150 million credit facility accordion on October 21, significantly expanding total capacity to $400 million. |
| --- | --- |
| ● | Declared monthly dividends per common share of $0.09583, equivalent to an annual rate of $1.15 per share; represents a dividend yield of 11% based on the $10.64 closing price of common stock on November<br> 10, 2022. |
| --- | --- |
“This was a quarter of consistent yeoman’s work, patiently executing on our long-term growth plan and strategic portfolio repositioning, which included the completion of two previously announced acquisitions and two non-core asset dispositions,” said Aaron Halfacre, Chief Executive Officer of Modiv. “We believe that market participants are currently seeking price discovery after a volatile summer. We have remained disciplined in our evaluation of new investment opportunities, focusing on exploring larger scale portfolio acquisitions as well as select individual industrial manufacturing facilities. Following the recent exercise of the accordion feature on our credit facility, we have a substantial amount of dry powder to make accretive acquisitions that will drive attractive long-term returns for our shareholders.”
Financial review for the third quarter 2022
Total Revenues
Total revenues were consistent year-over-year at $10.2 million. The year-ago third-quarter revenue included a $1.5 million early termination fee related to a Texas property leased to Dana Incorporated, which was sold in July 2021. Excluding this early termination fee, third-quarter revenue increased $1.5 million, or 17% year-over-year, due primarily to rental income from 16 acquisitions year-to-date and partially offset by a decrease in rental income from the sale of six office properties and one flex property in 2022.
Operating Results
Net income attributable to common stockholders was $3.0 million, or $0.40 per basic share and $0.35 per diluted share, compared to net income of $3.5 million, or $0.47 per basic and $0.40 per diluted share in the prior-year period. The decrease in net income attributable to common stockholders primarily reflected a full quarter of dividends on the preferred stock issued in September 2021 and greater interest expense on the Company’s revolving credit facility due to rising interest rates, partially offset by the decrease in general and administrative expense. Following the purchase of a second interest rate swap on October 26, 2022, the Company hedged its $250 million term loan at a weighted average interest rate of 4.33% when the Company’s leverage ratio is no more than 40%. The weighted average interest rate on the Company’s total debt outstanding of $201.4 million as of October 31, 2022 is 4.08% based on a 38% leverage ratio as of September 30, 2022.
The decrease in diluted net income per share also reflected an increase in the fully diluted share count primarily due to the issuance of 1.3 million Class C OP units in January 2022 in connection with our acquisition of the Kia auto dealership property.
Adjusted Funds from Operations (AFFO)
Quarterly AFFO was $3.1 million, or $0.31 per diluted share, compared with AFFO of $3.8 million, or $0.44 per diluted share in the third quarter of 2021. The decrease in AFFO per share was primarily attributable to the same factors discussed above that impacted net income, and an increase in fully diluted shares outstanding from our dividend reinvestment program and the aforementioned Class C OP unit issuance.
AFFO is a measure that is not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See the Reconciliation of Non-GAAP Measures later in this press release.
Dividend Information
As previously announced, Modiv declared a monthly cash dividend per common share of $0.09583 payable to common stockholders of record as of October 31, 2022, November 30, 2022, and December 30, 2022, which will be paid on or about November 23, 2022, December 23, 2022, and January 25, 2023, respectively. The current monthly dividend amount of $0.09583 per share represents an annualized dividend rate of $1.15 per share of common stock, which represents a yield of 11% based on the closing price of our common stock on November 10, 2022.
Real Estate Portfolio Highlights
Investment Activity
During the third quarter, the Company completed two previously-announced acquisitions and invested: (i) $5.3 million in two properties leased to subsidiaries of Producto Holdings, LLC, which specializes in manufacturing, machining, drilling, form grinding, heat treating, inspecting, and engineering precision tools for the medical, semiconductor, aerospace, ammunition, and defense markets; and (ii) $23.4 million in four properties leased to Valtir, a manufacturer of commercial highway products, such as guardrails and barriers, at a combined initial cap rate of 7.61% and weighted average cap rate of 9.55%.
The Company defines “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property. The Company defines “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property. The vast majority of Modiv’s real estate leases have annual rent escalations, which generally range from 2-3%.
Disposition Activity
During the third quarter, the Company completed the sale of two office properties in Las Vegas, Nevada for proceeds of $22.2 million at an exit cap rate of 7.4%, resulting in gains on sale of $4.7 million.
Portfolio
As of September 30, 2022, the Company’s portfolio consisted of 47 properties located in 17 states. The portfolio had approximately 3.2 million square feet of aggregate leasable space, which is 100% leased to 30 different commercial tenants doing business in 17 separate industries. The portfolio includes 26 industrial properties representing 54% of the portfolio, 13 retail properties representing 19% of the portfolio, and 8 office properties representing 27% of the portfolio (based on pro forma ABR as of September 30, 2022). As part of the Company’s long-term strategy to reduce office exposure, Modiv has decreased its office allocation by 23% since September 30, 2021.
Annualized base rent of the properties owned on September 30, 2022 (based on rates in effect on September 30, 2022) totaled $34.8 million and the portfolio’s weighted average lease term was 11.3 years as of September 30, 2022. Approximately 50% of the Company's tenants have (or whose parent company has) an investment-grade credit rating from a recognized credit rating agency of “BBB-” or better.
Balance Sheet and Liquidity
As of September 30, 2022, total cash and cash equivalents were $5.7 million and the Company had $201.4 million of outstanding indebtedness consisting of $44.6 million of mortgages and $156.8 million outstanding on the Company's $250 million credit facility. The Company’s leverage ratio was 38% as of September 30, 2022.
On October 27, the Company announced that it exercised the accordion feature of its credit facility on October 21^st^, increasing it to $400 million. The credit facility is now comprised of a $150 million revolving credit facility and a $250 million term loan. The credit facility includes an updated accordion option that allows the Company to request additional revolver and term loan lender commitments up to a total of $750 million. The maturities for the revolver and term loan remain unchanged with the revolver’s maturity in January 2026 with options to extend for a total of 12 months, and the term loan’s maturity in January 2027.
The credit facility is priced on a leverage-based grid that fluctuates based on the Company’s actual leverage ratio at the end of the prior quarter. Based on the leverage ratio of 38% as of the quarter ended September 30, 2022, the interest rate for the revolver is SOFR plus 155 basis points plus a 10-basis point SOFR index adjustment. The interest rate on the Revolver was 4.7125% on October 31, 2022. Based on the current balance sheet, approximately 97% of the Company’s indebtedness holds a fixed interest rate. The weighted average interest rate on the total debt outstanding of $201.4 million as of October 31, 2022 is 4.08% based on the 38% leverage ratio as of September 30, 2022.
On October 26, 2022, the Company purchased a five-year swap to fix SOFR at 3.44% on an additional $100 million of the term loan that will result in a fixed interest rate of 5.04% on additional draws under the expanded term loan when the Company’s leverage ratio is less than or equal to 40%. As part of the swap transaction, the Company sold a one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under the credit facility, the interest rate will continue to vary based on the current leverage ratio.
2022 Annual Guidance
The Company expects full-year 2022 per share AFFO to remain within the previously announced guidance range of $1.26 to $1.36. Given current market volatility, second half acquisition and disposition activity has slowed.
Note: The Company does not provide guidance on net income. The Company only provides guidance on total AFFO and does not provide a reconciliation of this forward-looking non-GAAP guidance to net income due to the inherent difficulty in quantifying certain items necessary to provide such reconciliation as a result of their unknown effect, timing and potential significance. Examples of such items include impairments of assets, gains and losses from sales of assets, and depreciation and amortization from new acquisitions.
Conference Call and Webcast
A conference call and audio webcast with analysts and investors will be held on Monday, November 14, 2022, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time, to discuss the third quarter 2022 operating results and answer questions.
Live conference call: 1-877-514-3620 at 8:00 a.m. Pacific Time, Monday, November 14
Webcast: To listen to the webcast, either live or archived, use this link https://event.choruscall.com/mediaframe/webcast.html?webcastid=evipRqiE
or visit the investor relations page of Modiv’s website at www.modiv.com.
About Modiv
Modiv Inc. is an internally managed REIT that acquires, owns, and manages a diversified portfolio of single-tenant net-lease real estate. The Company primarily invests in industrial and retail properties that are mission critical to tenants. Driven by innovation and an investor-first focus, the Modiv name reflects its commitment to providing investors with Monthly Dividends. As of September 30, 2022, Modiv had a $545 million real estate portfolio (based on estimated fair value) comprised of 3.2 million square feet of aggregate leasable area. For more information, please visit: www.modiv.com.
Forward-looking Statements
Certain statements contained in this press release, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements regarding our plans, strategies and prospects, both business and financial. Such forward-looking statements are subject to various risks and uncertainties, including but not limited to those described under the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 23, 2022. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this press release and in the Company’s other filings with the SEC. Any forward-looking statements herein speak only as of the time when made and are based on information available to the Company as of such date and are qualified in their entirety by this cautionary statement. The Company assumes no obligation to revise or update any such statement now or in the future, unless required by law.
Notice Involving Non-GAAP Financial Measures
In addition to U.S. GAAP financial measures, this press release and the supplemental financial and operating report included in our Form 8-K dated November 14, 2022 contain and may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are provided below.
Investor Inquiries:
Megan McGrath, Financial Profiles, Inc.
Mmcgrath@finprofiles.com
310-622-8248
MODIV INC.
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Rental income | $ | 10,212,418 | $ | 10,241,690 | $ | 30,255,185 | $ | 28,323,568 | ||||
| Expenses: | ||||||||||||
| General and administrative | 1,838,388 | 2,907,956 | 5,559,753 | 7,526,577 | ||||||||
| Stock compensation expense | 549,240 | 743,609 | 1,740,852 | 2,115,341 | ||||||||
| Depreciation and amortization | 3,598,592 | 3,814,503 | 10,581,765 | 11,817,529 | ||||||||
| Interest expense | 2,514,838 | 1,831,545 | 5,280,167 | 5,711,330 | ||||||||
| Property expenses | 2,063,892 | 1,681,059 | 6,794,369 | 5,302,292 | ||||||||
| Reversal of impairment of real estate investment property | - | - | - | (400,999 | ) | |||||||
| Impairment of goodwill | - | - | 17,320,857 | - | ||||||||
| Total expenses | 10,564,950 | 10,978,672 | 47,277,763 | 32,072,070 | ||||||||
| Operating income (loss): | ||||||||||||
| Gain on sale of real estate investments | 4,671,284 | 4,242,771 | 13,074,162 | 4,532,413 | ||||||||
| Operating income (loss) | 4,318,752 | 3,505,789 | (3,948,416 | ) | 783,911 | |||||||
| Other income (expense): | ||||||||||||
| Interest income | 1,665 | 1,270 | 16,863 | 1,370 | ||||||||
| Income from unconsolidated investment in a real estate property | 64,358 | 75,403 | 226,690 | 222,705 | ||||||||
| Gain on forgiveness of economic relief note payable | - | - | - | 517,000 | ||||||||
| Loss on early extinguishment of debt | - | - | (1,725,318 | ) | - | |||||||
| Other | 65,992 | 65,993 | 198,128 | 217,978 | ||||||||
| Other income (expense), net | 132,015 | 142,666 | (1,283,637 | ) | 959,053 | |||||||
| Net income (loss) | 4,450,767 | 3,648,455 | (5,232,053 | ) | 1,742,964 | |||||||
| Less: net income (loss) attributable to noncontrolling interest in Operating Partnership | 528,540 | - | (1,180,275 | ) | - | |||||||
| Net income (loss) attributable to Modiv Inc. | 3,922,227 | 3,648,455 | (4,051,778 | ) | 1,742,964 | |||||||
| Preferred stock dividends | (921,875 | ) | (143,403 | ) | (2,765,625 | ) | (143,403 | ) | ||||
| Net income (loss) attributable to common stockholders | $ | 3,000,352 | $ | 3,505,052 | $ | (6,817,403 | ) | $ | 1,599,561 | |||
| Net income (loss) per share attributable to common stockholders: | ||||||||||||
| Basic | $ | 0.40 | $ | 0.47 | $ | (0.91 | ) | $ | 0.21 | |||
| Diluted | $ | 0.35 | $ | 0.40 | $ | (0.91 | ) | $ | 0.18 | |||
| Weighted-average number of common shares outstanding: | ||||||||||||
| Basic | 7,449,968 | 7,531,559 | 7,486,945 | 7,575,013 | ||||||||
| Diluted | 10,180,543 | 8,750,875 | 7,486,945 | 8,763,112 | ||||||||
| Distributions declared per common stock | $ | 0.2875 | $ | 0.2625 | $ | 0.9625 | $ | 0.7875 |
MODIV INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| December 31, 2021 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Real estate investments: | |||||
| Land | 107,564,295 | $ | 61,005,402 | ||
| Building and improvements | 337,335,727 | 251,246,290 | |||
| Equipment | 4,429,000 | - | |||
| Tenant origination and absorption costs | 20,074,123 | 21,504,210 | |||
| Total investments in real estate property | 469,403,145 | 333,755,902 | |||
| Accumulated depreciation and amortization | (44,025,915 | ) | (37,611,133 | ) | |
| Total investments in real estate property, net | 425,377,230 | 296,144,769 | |||
| Unconsolidated investment in a real estate property | 9,988,498 | 9,941,338 | |||
| Total real estate investments, net | 435,365,728 | 306,086,107 | |||
| Real estate investments held for sale, net | - | 31,510,762 | |||
| Total real estate investments, net | 435,365,728 | 337,596,869 | |||
| Cash and cash equivalents | 5,726,888 | 55,965,550 | |||
| Restricted cash | - | 2,441,970 | |||
| Receivable from early termination of lease | - | 1,836,767 | |||
| Tenant receivables | 8,433,895 | 5,996,919 | |||
| Above-market lease intangibles, net | 1,939,305 | 691,019 | |||
| Prepaid expenses and other assets | 6,387,245 | 5,856,255 | |||
| Interest rate swap derivative | 4,786,903 | - | |||
| Assets related to real estate investments held for sale | - | 788,296 | |||
| Goodwill, net | - | 17,320,857 | |||
| Total assets | 462,639,964 | $ | 428,494,502 | ||
| Liabilities and Equity | |||||
| Mortgage notes payable, net | 44,530,130 | $ | 152,223,579 | ||
| Mortgage notes payable related to real estate investments held for sale, net | - | 21,699,912 | |||
| Total mortgage notes payable, net | 44,530,130 | 173,923,491 | |||
| Credit facility revolver | 6,775,000 | 8,022,000 | |||
| Credit facility term loan, net | 148,913,350 | - | |||
| Accounts payable, accrued and other liabilities | 9,658,378 | 11,844,881 | |||
| Below-market lease intangibles, net | 9,910,280 | 11,102,940 | |||
| Interest rate swap derivatives | - | 788,016 | |||
| Liabilities related to real estate investments held for sale | - | 383,282 | |||
| Total Liabilities | 219,787,138 | 206,064,610 | |||
| Commitments and contingencies | |||||
| 7.375% Series A cumulative redeemable perpetual preferred stock, 0.001 par value, 2,000,000 shares authorized; issued and outstanding as of September 30, 2022 and December 31, 2021 | 2,000 | 2,000 | |||
| Class C common stock 0.001 par value, 300,000,000 shares authorized; 7,697,926 shares issued and 7,464,781 shares outstanding as of September 30, 2022, and 7,426,636 shares issued and outstanding as of December 31, 2021 | 7,698 | 7,427 | |||
| Class S common stock 0.001 par value, 100,000,000 shares authorized; no shares and 63,768 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | - | 64 | |||
| Additional paid-in-capital | 277,079,074 | 273,441,831 | |||
| Treasury stock, at cost, 233,145 shares and no shares as of September 30, 2022 and December 31, 2021, respectively | (3,957,752 | ) | - | ||
| Cumulative distributions and net losses | (115,634,474 | ) | (101,624,430 | ) | |
| Accumulated other comprehensive income | 3,618,477 | - | |||
| Total Modiv Inc. equity | 161,115,023 | 171,826,892 | |||
| Noncontrolling interest in the Operating Partnership | 81,737,803 | 50,603,000 | |||
| Total equity | 242,852,826 | 222,429,892 | |||
| Total liabilities and equity | 462,639,964 | $ | 428,494,502 |
All values are in US Dollars.
MODIV INC.
Reconciliation of Non-GAAP Measures
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net income (loss) (in accordance with GAAP) | $ | 4,450,767 | $ | 3,648,455 | $ | (5,232,053 | ) | $ | 1,742,964 | ||||
| Preferred stock dividends | (921,875 | ) | (143,403 | ) | (2,765,625 | ) | (143,403 | ) | |||||
| Net loss attributable to common stockholders and Class C OP Units | 3,528,892 | 3,505,052 | (7,997,678 | ) | 1,599,561 | ||||||||
| FFO adjustments: | |||||||||||||
| Add: | Depreciation and amortization of real estate properties | 3,598,592 | 3,342,713 | 10,581,765 | 10,420,000 | ||||||||
| Amortization of lease incentives | 176,296 | 86,694 | 323,347 | 192,235 | |||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 192,551 | 182,324 | 573,487 | 545,896 | |||||||||
| Less: | Gain on sale of real estate investments, net | (4,671,284 | ) | (4,242,771 | ) | (13,074,162 | ) | (4,532,413 | ) | ||||
| Reversal of impairment of real estate investments | - | - | - | (400,999 | ) | ||||||||
| FFO attributable to common stockholders and Class C OP Units | 2,825,047 | 2,874,012 | (9,593,241 | ) | 7,824,280 | ||||||||
| AFFO adjustments: | |||||||||||||
| Add: | Amortization of corporate intangibles | - | 471,790 | - | 1,397,529 | ||||||||
| Impairment of goodwill | - | - | 17,320,857 | - | |||||||||
| Stock compensation | 549,240 | 743,609 | 1,740,852 | 2,115,341 | |||||||||
| Deferred financing costs | 101,783 | 7,393 | 1,470,289 | 207,086 | |||||||||
| Non-recurring loan prepayment penalties | - | - | 615,336 | - | |||||||||
| Swap termination costs | - | - | 733,000 | 23,900 | |||||||||
| Amortization of above-market lease intangibles | 43,763 | 32,454 | 108,675 | 97,367 | |||||||||
| Due diligence expenses, including abandoned pursuit costs | 44,863 | 474,429 | 636,171 | 723,669 | |||||||||
| Less: | Deferred rents | (237,164 | ) | (247,716 | ) | (1,046,721 | ) | (950,694 | ) | ||||
| Unrealized gains on interest rate swaps, net | 59,000 | (166,338 | ) | (1,319,013 | ) | (684,057 | ) | ||||||
| Amortization of below-market lease intangibles | (258,652 | ) | (364,573 | ) | (971,536 | ) | (1,099,723 | ) | |||||
| Gain on forgiveness of economic relief note payable | - | - | - | (517,000 | ) | ||||||||
| Other adjustments for unconsolidated investment in a real estate property | (188 | ) | (12,195 | ) | (564 | ) | (56,585 | ) | |||||
| AFFO attributable to common stockholders and Class C OP Units | $ | 3,127,692 | $ | 3,812,865 | $ | 9,694,105 | $ | 9,081,113 | |||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 7,449,968 | 7,531,559 | 7,486,945 | 7,575,013 | |||||||||
| Fully Diluted (1) | 10,180,543 | 8,750,875 | 10,217,361 | 8,763,112 | |||||||||
| FFO Per Share: | |||||||||||||
| Basic | $ | 0.38 | $ | 0.38 | $ | (1.28 | ) | $ | 1.03 | ||||
| Fully Diluted | $ | 0.28 | $ | 0.33 | $ | (1.28 | ) | $ | 0.89 | ||||
| AFFO Per Share | |||||||||||||
| Basic | $ | 0.42 | $ | 0.51 | $ | 1.29 | $ | 1.20 | |||||
| Fully Diluted | $ | 0.31 | $ | 0.44 | $ | 0.95 | $ | 1.04 | |||||
| (1) | Includes the Class C, Class M, Class P and Class R OP Units to compute the weighted average number of shares. | ||||||||||||
| --- | --- |
FFO is defined by the National Association of Real Estate Investment Trusts (“Nareit”) as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures, preferred distributions and real estate impairments. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.
Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation, deferred rents, amortization of in-place lease valuation intangibles, deferred financing fees, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-offs of transaction costs and other one-time transactions. We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance and ability to sustain our current distribution level. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or our future ability to pay our dividends.
By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities. For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, FFO and AFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.
Neither the SEC, Nareit, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure.
MODIV INC.
Reconciliation of Non-GAAP Measures - Adjusted EBITDA
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net income (loss) | $ | 4,450,767 | $ | 3,648,455 | $ | (5,232,053 | ) | $ | 1,742,964 | ||||
| Add: | Depreciation and amortization | 3,598,592 | 3,814,503 | 10,581,765 | 11,817,529 | ||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 192,551 | 182,324 | 573,487 | 545,895 | |||||||||
| Interest expense | 2,514,838 | 1,831,545 | 5,280,167 | 5,711,330 | |||||||||
| Loss on early extinguishment of debt | - | - | 1,725,318 | - | |||||||||
| Interest expense on unconsolidated investment in real estate property | 98,624 | 100,788 | 294,404 | 301,207 | |||||||||
| Reversal of impairment of real estate investment property | - | - | - | (400,999 | ) | ||||||||
| Impairment of goodwill | - | - | 17,320,857 | - | |||||||||
| Stock compensation | 549,240 | 743,609 | 1,740,852 | 2,115,341 | |||||||||
| Write-off of due diligence costs related to abandoned acquisition of 10 properties leased to Walgreens | - | - | 587,000 | - | |||||||||
| Less: | Gain on sale of real estate investments, net | (4,671,284 | ) | (4,242,771 | ) | (13,074,162 | ) | (4,532,413 | ) | ||||
| Adjusted EBITDA | $ | 6,733,328 | $ | 6,078,453 | $ | 19,797,635 | $ | 17,300,854 | |||||
| Annualized Adjusted EBITDA | $ | 26,933,312 | $ | 24,313,812 | $ | 26,396,847 | $ | 23,067,805 | |||||
| Net debt: | |||||||||||||
| Consolidated debt | $ | 201,365,536 | $ | 182,146,897 | $ | 201,365,536 | $ | 182,146,897 | |||||
| Debt of unconsolidated investment in real estate property (a) | 9,544,130 | 9,764,171 | 9,544,130 | 9,764,171 | |||||||||
| Consolidated cash and restricted cash | (5,726,888 | ) | (54,710,887 | ) | (5,726,888 | ) | (54,710,887 | ) | |||||
| Cash of unconsolidated investment in real estate property (a) | (341,007 | ) | (487,490 | ) | (341,007 | ) | (487,490 | ) | |||||
| $ | 204,841,771 | $ | 136,712,691 | $ | 204,841,771 | $ | 136,712,691 | ||||||
| Net debt / Adjusted EBITDA | 7.6x | 5.6x | 7.8x | 5.9x | |||||||||
| (a) | Reflects the Company's 72.71% pro rata share of the tenant-in-common's mortgage note payable and cash. | ||||||||||||
| --- | --- |
We define Net Debt as gross debt less cash and cash equivalents and restricted cash. We define Adjusted EBITDA as GAAP net income or loss adjusted to exclude real estate related depreciation and amortization, gains or losses from the sales of depreciable property, extraordinary items, provisions for impairment on real estate investments and goodwill, interest expense and non-cash items such as non-cash compensation expenses. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA is not a measure of financial performance under GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA as an alternative to net income or cash flows from operating activities determined in accordance with GAAP.
Exhibit 99.2
NYSE: MDV
QUARTERLY SUPPLEMENTAL DATA
September 30, 2022
Modiv Inc.
Supplemental Information - Third Quarter 2022
| Table of Contents | ||
|---|---|---|
| About the Data | 3 | |
| Company Overview | 4 | |
| Financial Results | ||
| Statements of Operations - Last Five Quarters | 5 | |
| Statements of Comprehensive (Loss) Income - Last Five Quarters | 6 | |
| Earnings Per Share - Last Five Quarters | 7 | |
| FFO and AFFO - Last Five Quarters | 8 | |
| Adjusted EBITDA - Last Five Quarters | 9 | |
| Leverage Ratio | 10 | |
| Balance Sheets and Capitalization | ||
| Capitalization | 11 | |
| Balance Sheets | 12 | |
| Debt Overview | 13 | |
| Credit Facility and Mortgage Notes Covenants | 14 | |
| Real Estate | ||
| Acquisitions | 15 | |
| Dispositions | 16 | |
| Top 10 Tenants | 17 | |
| Property Type | 17 | |
| Industry Diversification | 18 | |
| Geographic Diversification | 19 | |
| Lease Expirations | 20 | |
| Appendix | ||
| Disclosures Regarding Non-GAAP and Other Metrics | 21 |
2
About the Data
This data and other information described herein are as of and for the three months ended September 30, 2022 unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with Modiv Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, including the financial statements and management's discussion and analysis of financial condition and results of operations.
Forward Looking Statements
Information set forth herein contains forward-looking statements, which reflect our current views regarding our business, financial performance, growth prospects and strategies, market opportunities, and market trends. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words. All of the forward-looking statements herein are subject to various risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results, performance, and achievements could differ materially from those expressed in or by the forward-looking statements and may be affected by a variety of risks and other factors. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from such forward-looking statements. These factors include, but are not limited to, risks and uncertainties related to the COVID-19 pandemic and its related impacts on us and our tenants, general economic conditions, including but not limited to impacts of the Russian war against Ukraine, supply-chain disruptions, increases in the rate of inflation and interest rates, local real estate conditions, tenant financial health, and property acquisitions and the timing of these acquisitions. These and other risks, assumptions, and uncertainties are described in our filings with the SEC, which are available on the SEC’s website at www.sec.gov. You are cautioned not to place undue reliance on any forward-looking statements included herein. All forward-looking statements are made as of the date of this document and the risk that actual results, performance, and achievements will differ materially from the expectations expressed or referenced herein will increase with the passage of time. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.
3
Company Overview
Modiv Inc. (NYSE:MDV) (“Modiv”, the “Company”, “we”, “us” and “our”) is an internally managed real estate investment trust (“REIT”) that acquires, owns and manages a diversified portfolio of predominantly single-tenant net-lease real estate properties. The Company primarily invests in industrial and retail properties that are mission critical to tenants. Driven by innovation and an investor-first focus, Modiv is committed to providing investors with Monthly Dividends. As of September 30, 2022, Modiv had a $545 million real estate portfolio (based on estimated fair value) comprised of 3.2 million square feet of aggregate leasable area. For more information, please visit: www.modiv.com.
| Management Team: | Independent Directors: |
|---|---|
| Aaron S. Halfacre | Adam S. Markman |
| Chief Executive Officer and Director | Chairman of the Board |
| Raymond J. Pacini | Asma Ishaq |
| Chief Financial Officer and Secretary | |
| Sandra G. Sciutto | Curtis B. McWilliams |
| Chief Accounting Officer | |
| John C. Raney | Thomas H. Nolan, Jr. |
| Chief Legal Officer | |
| William R. Broms | Kimberly Smith |
| Chief Investment Officer | |
| Connie Tirondola |
Investor Inquiries:
Megan McGrath, Financial Profiles, Inc.
Mmcgrath@finprofiles.com
310-622-8248
Transfer Agent:
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
800-736-3001
4
Modiv Inc.
Condensed Consolidated Statements of Operations - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | |||||||||||
| Rental income (a) | $ | 10,212,418 | $ | 10,394,118 | $ | 9,648,649 | $ | 7,899,149 | $ | 10,241,690 | |||||
| Expenses: | |||||||||||||||
| General and administrative | 1,838,388 | 1,615,182 | 2,106,183 | 2,186,563 | 2,930,578 | ||||||||||
| Stock compensation | 549,240 | 679,747 | 511,865 | 629,539 | 743,609 | ||||||||||
| Depreciation and amortization | 3,598,592 | 3,682,681 | 3,300,492 | 3,449,407 | 3,814,503 | ||||||||||
| Interest expense | 2,514,838 | 1,197,154 | 1,568,175 | 1,874,867 | 1,831,545 | ||||||||||
| Property expenses (b) | 2,063,892 | 1,965,885 | 2,764,592 | 1,580,629 | 1,658,437 | ||||||||||
| Impairment of goodwill and intangible assets (c) | — | — | 17,320,857 | 3,767,190 | — | ||||||||||
| Total expenses | 10,564,950 | 9,140,649 | 27,572,164 | 13,488,195 | 10,978,672 | ||||||||||
| Other operating income (loss): | |||||||||||||||
| Gain on sale of real estate investments | 4,671,284 | 1,002,101 | 7,400,777 | 3,271,289 | 4,242,771 | ||||||||||
| Operating income (loss) | 4,318,752 | 2,255,570 | (10,522,738 | ) | (2,317,757 | ) | 3,505,789 | ||||||||
| Other income (expense): | |||||||||||||||
| Interest income | 1,665 | 1,763 | 13,435 | 19,958 | 1,270 | ||||||||||
| Income from investment in unconsolidated entity | 64,358 | 66,868 | 95,464 | 53,337 | 75,403 | ||||||||||
| Loss on early extinguishment of debt (d) | — | — | (1,725,318 | ) | — | — | |||||||||
| Other (a) | 65,992 | 66,143 | 65,993 | 65,993 | 65,993 | ||||||||||
| Other (expense) income, net | 132,015 | 134,774 | (1,550,426 | ) | 139,288 | 142,666 | |||||||||
| Net income (loss) | 4,450,767 | 2,390,344 | (12,073,164 | ) | (2,178,469 | ) | 3,648,455 | ||||||||
| Less: net income (loss) attributable to noncontrolling interest in Operating Partnership | 528,540 | 219,214 | (1,928,029 | ) | — | — | |||||||||
| Net income (loss) attributable to Modiv Inc. | 3,922,227 | 2,171,130 | (10,145,135 | ) | (2,178,469 | ) | 3,648,455 | ||||||||
| Preferred stock dividends (e) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | |||||
| Net income (loss) attributable to common stockholders | $ | 3,000,352 | $ | 1,249,255 | $ | (11,067,010 | ) | $ | (3,100,344 | ) | $ | 3,505,052 | |||
| Earnings (loss) per share attributable to common stockholders | |||||||||||||||
| Basic | $ | 0.40 | $ | 0.17 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.47 | |||
| Diluted | $ | 0.35 | $ | 0.14 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.40 | |||
| Weighted-average number of common shares outstanding | |||||||||||||||
| Basic | 7,449,968 | 7,478,973 | 7,533,158 | 7,531,167 | 7,531,559 | ||||||||||
| Diluted (f) | 10,180,543 | 10,221,490 | 7,533,158 | 7,531,167 | 8,750,875 | ||||||||||
| Distributions declared per common share (g) | $ | 0.2875 | $ | 0.2875 | $ | 0.3875 | $ | 0.2875 | $ | 0.2625 | |||||
| (a) | Rental income includes tenant reimbursements for property expenses. During the three months ended September 30, 2021, the Company reclassified $65,993 related to asset management fees earned on the Company's 72.71% tenant-in-common<br> interest (“TIC Interest”) in an industrial property in Santa Clara, California to conform with the December 31, 2021 and later presentation. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | Property expenses for the third quarter of 2022 include increased property taxes, repair and maintenance and property management fees compared with the comparable quarter of 2021, primarily related to the growth of our portfolio. These<br> expenses are largely offset by tenant reimbursements included in rental income. Property expenses for the first quarter of 2022 also include $587,000 in write-offs of costs related to our proposed acquisition of 10 properties leased to<br> Walgreens which we abandoned due to inability to obtain the mortgage servicer's approval prior to the contract termination date of February 18, 2022 and changes in market conditions. | ||||||||||||||
| --- | --- | ||||||||||||||
| (c) | Goodwill, which relates to the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock is materially below<br> our historical net asset value and the book value of our equity. The impairment of intangible assets in the fourth quarter of 2021 relates to the Company’s decision to terminate its crowdfunding operations. | ||||||||||||||
| --- | --- | ||||||||||||||
| (d) | Loss on early extinguishment of debt for the first quarter of 2022 includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit facility with the<br> KeyBank credit facility and mortgage repayments related to four asset sales; (ii) $615,336 of mortgage prepayment fees; and (iii) $733,000 of swap termination fees related to four of the mortgages refinanced with the KeyBank credit facility<br> and the related write-off of unrealized valuation losses of $788,016. | ||||||||||||||
| --- | --- | ||||||||||||||
| (e) | On September 17, 2021, the Company sold 2,000,000 shares of its 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value in an underwritten public offering at $25.00 per share. | ||||||||||||||
| --- | --- | ||||||||||||||
| (f) | Diluted shares outstanding in the second and third quarters of 2022 and the third quarter of 2021 include Class C, Class M, Class P and Class R OP Units since the Company reported net income for those quarters. Diluted shares outstanding<br> for periods when the Company reported a net loss do not include the OP Units since they would be anti-dilutive. | ||||||||||||||
| --- | --- | ||||||||||||||
| (g) | The Company increased the annual distribution rate on its common stock from $1.05 per share to $1.15 per share effective October 1, 2021. Distributions declared during the first quarter of 2022 include a one-time 13th distribution for 2021<br> of $0.10 per share for stockholders of record on January 6, 2022. | ||||||||||||||
| --- | --- |
5
Modiv Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) - Last
Five Quarters
(Unaudited)
| Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | ||||||||
| Net income (loss) | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 |
| Other comprehensive income: | ||||||||||||
| Unrealized holding gain on interest rate swap designated as a cash flow hedge (a) | 4,255,906 | — | — | — | — | |||||||
| Comprehensive income (loss) | 8,706,673 | 2,390,344 | (12,073,164 | ) | (2,178,469 | ) | 3,648,455 | |||||
| Net income (loss) attributable to noncontrolling interest in Operating Partnership | 528,540 | 219,214 | (1,928,029 | ) | — | — | ||||||
| Other comprehensive income attributable to noncontrolling interest in Operating Partnership: | ||||||||||||
| Unrealized holding gain on interest rate swap designated as a cash flow hedge | 637,429 | — | — | — | — | |||||||
| Comprehensive income (loss) attributable noncontrolling interest in Operating Partnership | 1,165,969 | 219,214 | (1,928,029 | ) | — | — | ||||||
| Comprehensive income (loss) attributable to Modiv Inc. | $ | 7,540,704 | $ | 2,171,130 | $ | (10,145,135 | ) | $ | (2,178,469 | ) | $ | 3,648,455 |
| (a) | Reflects the change in fair value of the hedged derivative instrument for the three months ended September 30, 2022 that was designated as a cash flow hedge for financial accounting purposes beginning July 1, 2022. | |||||||||||
| --- | --- |
6
Modiv Inc.
Earnings (Loss) Per Share - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | |||||||||||
| Numerator - Basic: | |||||||||||||||
| Net income (loss) | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | |||
| Net (income) loss attributable to noncontrolling interest in Operating Partnership | (528,540 | ) | (219,214 | ) | 1,928,029 | — | — | ||||||||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | |||||
| Net income (loss) attributable to common stockholders | $ | 3,000,352 | $ | 1,249,255 | $ | (11,067,010 | ) | $ | (3,100,344 | ) | $ | 3,505,052 | |||
| Numerator - Diluted: | |||||||||||||||
| Net income (loss) | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | |||
| Less: preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | |||||
| Net income (loss) attributable to common stockholders | $ | 3,528,892 | $ | 1,468,469 | $ | (12,995,039 | ) | $ | (3,100,344 | ) | $ | 3,505,052 | |||
| Denominator: | |||||||||||||||
| Weighted average shares outstanding - basic | 7,449,968 | 7,478,973 | 7,533,158 | 7,531,167 | 7,531,559 | ||||||||||
| Operating Partnership Units - Class C (a) | 1,312,382 | 1,312,382 | — | — | — | ||||||||||
| Operating Partnership Units - other (b) | 1,418,193 | 1,430,135 | — | — | 1,219,316 | ||||||||||
| Weighted average shares outstanding - diluted | 10,180,543 | 10,221,490 | 7,533,158 | 7,531,167 | 8,750,875 | ||||||||||
| Earnings (loss) per share attributable to common stockholders: | |||||||||||||||
| Basic | $ | 0.40 | $ | 0.17 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.47 | |||
| Diluted | $ | 0.35 | $ | 0.14 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.40 | |||
| (a) | The Company issued 1,312,382 Class C OP Units in connection with its January 18, 2022 acquisition of a KIA auto dealership property in an “UPREIT” transaction. These units were not included in the computation of Diluted EPS for the quarter<br> ended March 31, 2022 because their effect would be anti-dilutive. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | During the three months ended March 31, 2022 and December 31, 2021, the weighted average dilutive effect of 1,347,958 and 1,213,173 shares, respectively, related to Operating Partnership units were excluded from the computation of Diluted<br> EPS because their effect would be anti-dilutive. There were no other outstanding securities or commitments to issue common stock that would have a dilutive effect for the periods then ended. | ||||||||||||||
| --- | --- |
7
Modiv Inc.
FFO and AFFO - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | |||||||||||
| Net income (loss) (in accordance with GAAP) | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | |||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | |||||
| Net income (loss) attributable to common stockholders and Class C OP Units | 3,528,892 | 1,468,469 | (12,995,039 | ) | (3,100,344 | ) | 3,505,052 | ||||||||
| FFO adjustments: | |||||||||||||||
| Add: Depreciation and amortization | 3,598,592 | 3,682,681 | 3,300,492 | 3,290,588 | 3,342,713 | ||||||||||
| Amortization of lease incentives | 176,296 | 75,655 | 71,394 | 53,203 | 86,694 | ||||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 192,551 | 190,468 | 190,468 | 189,439 | 182,324 | ||||||||||
| Less: Gain on sale of real estate investments, net | (4,671,284 | ) | (1,002,101 | ) | (7,400,777 | ) | (3,271,289 | ) | (4,242,771 | ) | |||||
| FFO attributable to common stockholders and Class C OP Units | 2,825,047 | 4,415,172 | (16,833,462 | ) | (2,838,403 | ) | 2,874,012 | ||||||||
| AFFO adjustments: | |||||||||||||||
| Add: Amortization of corporate intangibles (a) | — | — | — | 158,819 | 471,790 | ||||||||||
| Impairment of goodwill and intangible assets (a) | — | — | 17,320,857 | 3,767,190 | — | ||||||||||
| Stock compensation (b) | 549,240 | 679,747 | 511,865 | 629,542 | 743,609 | ||||||||||
| Deferred financing costs (c) | 101,783 | 101,781 | 1,266,725 | 162,200 | 7,393 | ||||||||||
| Non-recurring loan prepayment penalties | — | — | 615,336 | — | — | ||||||||||
| Swap termination costs | — | — | 733,000 | — | — | ||||||||||
| Amortization of above-market lease intangibles | 43,763 | 32,456 | 32,456 | 32,456 | 32,454 | ||||||||||
| Acquisition fees and due diligence expenses, including abandoned pursuit costs (d) | 44,863 | 4,639 | 586,669 | (16,100 | ) | 474,429 | |||||||||
| Less: Deferred rents | (237,164 | ) | (699,053 | ) | (110,505 | ) | 1,138,991 | (247,716 | ) | ||||||
| Unrealized gain on interest rate swaps | 59,000 | (589,997 | ) | (788,016 | ) | (285,982 | ) | (166,338 | ) | ||||||
| Amortization of below-market lease intangibles | (258,652 | ) | (349,810 | ) | (363,074 | ) | (363,074 | ) | (364,573 | ) | |||||
| Other adjustments for unconsolidated investment in a real estate property | (188 | ) | (188 | ) | (188 | ) | (6,191 | ) | (12,195 | ) | |||||
| AFFO attributable to common stockholders and Class C OP Units (e) | $ | 3,127,692 | $ | 3,594,747 | $ | 2,971,663 | $ | 2,379,448 | $ | 3,812,865 | |||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 7,449,968 | 7,478,973 | 7,533,158 | 7,531,167 | 7,531,559 | ||||||||||
| Fully diluted (f) (g) | 10,180,543 | 10,221,490 | 10,193,498 | 8,744,340 | 8,750,875 | ||||||||||
| FFO per share: | |||||||||||||||
| Basic | $ | 0.38 | $ | 0.59 | $ | (2.23 | ) | $ | (0.38 | ) | $ | 0.38 | |||
| Fully diluted | $ | 0.28 | $ | 0.43 | $ | (2.23 | ) | $ | (0.38 | ) | $ | 0.33 | |||
| AFFO per share: | |||||||||||||||
| Basic | $ | 0.42 | $ | 0.48 | $ | 0.39 | $ | 0.32 | $ | 0.51 | |||||
| Fully diluted (e) | $ | 0.31 | $ | 0.35 | $ | 0.29 | $ | 0.27 | $ | 0.44 | |||||
| (a) | Intangible assets reflected the Company’s investment in its crowdfunding platform which was impaired in the fourth quarter of 2021 due to the Company’s decision to terminate its crowdfunding operations. Goodwill, which relates to the 2019<br> acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock was materially below our historical net asset value and the<br> book value of our equity. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | Stock compensation expense includes (i) amortization of the Class P OP Units granted to the Company’s Chief Executive Officer and Chief Financial Officer on December 31, 2019; (ii) amortization of the Class R OP Units granted to all of the<br> Company’s employees, including the Chief Executive Officer and Chief Financial Officer, on January 25, 2021; and (iii) stock granted to the Company’s independent directors each quarter as partial consideration for their service as directors. | ||||||||||||||
| --- | --- | ||||||||||||||
| (c) | Deferred financing costs for the first quarter of 2022 primarily reflect non-cash write-offs of such costs upon refinancing 20 mortgages with the KeyBank credit facility and mortgage repayments related to four asset sales. | ||||||||||||||
| --- | --- | ||||||||||||||
| (d) | Abandoned pursuit costs for the first quarter of 2022 primarily reflect the Company’s decision not to extend the February 18, 2022 termination date for its agreement to purchase a portfolio of 10 properties leased to Walgreens, which the<br> Company abandoned due to inability to obtain the mortgage servicer's approval prior to the contract termination date and changes in market conditions. | ||||||||||||||
| --- | --- | ||||||||||||||
| (e) | The $467,055 decrease in AFFO for the third quarter of 2022 compared with the second quarter of 2022 primarily reflects a $755,000 increase in interest expense on our revolving credit facility due to rising interest rates, partially offset<br> by a $462,000 decrease in deferred rents. | ||||||||||||||
| --- | --- | ||||||||||||||
| (f) | The increase in Diluted shares outstanding beginning in the first quarter of 2022 primarily reflects the issuance of 1,312,382 Class C interests in our operating partnership (OP Units”) as partial consideration for the acquisition of a<br> retail property located on Interstate 405 in Carson, CA, leased to a KIA auto dealership. | ||||||||||||||
| --- | --- | ||||||||||||||
| (g) | Includes the Class C, Class M, Class P and Class R OP Units to compute the weighted average number of shares for each of the three quarters ended in 2022 presented above and the Class M, Class P and Class R OP Units to compute the weighted<br> average number of shares for each of the two quarters ended in 2021 presented above. | ||||||||||||||
| --- | --- |
8
Modiv Inc.
Adjusted EBITDA - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | |||||||||||
| Net income (loss) | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | |||
| Add: Depreciation and amortization | 3,598,592 | 3,682,681 | 3,300,492 | 3,449,407 | 3,814,503 | ||||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 192,551 | 190,468 | 190,468 | 189,439 | 182,324 | ||||||||||
| Interest expense | 2,514,838 | 1,197,155 | 1,568,175 | 1,874,867 | 1,831,545 | ||||||||||
| Loss on early extinguishment of debt (a) | — | — | 1,725,318 | — | — | ||||||||||
| Interest expense on unconsolidated investment in real estate property | 98,624 | 98,135 | 97,645 | 100,257 | 100,788 | ||||||||||
| Impairment of goodwill and intangible assets (b) | — | — | 17,320,857 | 3,767,190 | — | ||||||||||
| Stock compensation | 549,240 | 679,747 | 511,865 | 629,542 | 743,609 | ||||||||||
| Write-off of due diligence costs related to abandoned acquisition of 10 properties leased to Walgreens | — | — | 587,000 | — | — | ||||||||||
| Less: Gain on sale of real estate investments | (4,671,284 | ) | (1,002,101 | ) | (7,400,777 | ) | (3,271,289 | ) | (4,242,771 | ) | |||||
| Adjusted EBITDA | $ | 6,733,328 | $ | 7,236,429 | $ | 5,827,879 | $ | 4,560,944 | $ | 6,078,453 | |||||
| Annualized adjusted EBITDA | $ | 26,933,311 | $ | 28,945,716 | $ | 23,311,516 | $ | 18,243,776 | $ | 24,313,812 | |||||
| Net debt: | |||||||||||||||
| Debt | $ | 201,365,536 | $ | 201,425,173 | $ | 165,509,220 | $ | 183,033,756 | $ | 182,146,897 | |||||
| Debt of unconsolidated investment in real estate property (c) | 9,544,130 | 9,599,182 | 9,653,689 | 9,709,710 | 9,764,171 | ||||||||||
| Cash and restricted cash | (5,726,888 | ) | (11,705,449 | ) | (25,344,063 | ) | (58,407,520 | ) | (54,710,887 | ) | |||||
| Cash of unconsolidated investment in real estate property (c) | (341,007 | ) | (585,357 | ) | (458,948 | ) | (502,041 | ) | (487,490 | ) | |||||
| $ | 204,841,771 | $ | 198,733,549 | $ | 149,359,898 | $ | 133,833,905 | $ | 136,712,691 | ||||||
| Net debt / Adjusted EBITDA | 7.6x | 6.9x | 6.4x | 7.3x | 5.6x | ||||||||||
| (a) | Loss on early extinguishment of debt includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit facility with the KeyBank credit facility and<br> mortgage repayments related to four asset sales; (ii) $615,336 of mortgage prepayment fees; and (iii) $733,000 of swap termination fees related to refinancing four mortgages with the KeyBank credit facility and the related write-off of<br> unrealized valuation losses of $788,016. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | Goodwill, which relates to the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock is materially below<br> our historical net asset value and the book value of our equity. The impairment of intangible assets in the fourth quarter of 2021 relates to the Company’s decision to terminate its crowdfunding operations. | ||||||||||||||
| --- | --- | ||||||||||||||
| (c) | Includes the Company's 72.71% pro rata share of the tenant-in-common's mortgage note payable and cash. | ||||||||||||||
| --- | --- |
9
Modiv Inc.
Leverage ratio
(Unaudited)
In connection with entering into the KeyBank credit facility on January 18, 2022, the Company modified the calculation of its leverage ratio to conform with the definition in the KeyBank credit facility as set forth below.
| September 30,<br><br> <br>2022 | December 31, 2021 (d) | |||||
|---|---|---|---|---|---|---|
| Total Asset Value | ||||||
| Cash and cash equivalents (a) | $ | 5,726,888 | $ | 58,407,520 | ||
| Borrowing base value (b) | 425,311,049 | 362,497,305 | ||||
| Other real estate value (c) | 90,670,000 | 130,670,000 | ||||
| Pro-rata share of unconsolidated investment | 28,567,029 | 28,728,063 | ||||
| Total asset value | $ | 550,274,966 | $ | 580,302,888 | ||
| Indebtedness | ||||||
| Credit facility revolver | $ | 6,775,000 | $ | 55,775,000 | ||
| Credit facility term loan | 150,000,000 | 100,000,000 | ||||
| Mortgage debt (c) | 44,590,536 | 66,833,439 | ||||
| Pro-rata share of unconsolidated investment | 9,544,130 | 9,709,710 | ||||
| Total indebtedness | $ | 210,909,666 | $ | 232,318,149 | ||
| Leverage Ratio | 38 | % | 40 | % | ||
| (a) | The decrease in cash and cash equivalents primarily reflects the use of cash to fund a portion of the acquisitions during the first nine months of 2022. | |||||
| --- | --- | |||||
| (b) | The increase in the borrowing base value reflects the additions of (i) an industrial property acquired in January 2022 and leased to Kalera, Inc.; (ii) eight industrial properties acquired in April 2022 which are leased to Lindsay; and<br> (iii) the Producto and Valtir acquisitions in July and August 2022. These additions were partially offset by the three office properties sold in June, August and September 2022. | |||||
| --- | --- | |||||
| (c) | The decrease in other real estate value and mortgage debt reflects the four property dispositions in February 2022. | |||||
| --- | --- | |||||
| (d) | The December borrowing base value reflects a pro forma adjustment to include acquisition of the KIA auto dealership property on January 18, 2022 and the credit facility amounts reflect pro forma adjustments to reflect debt balances as of<br> the January 18, 2022 closing of the facility, including borrowing to fund a portion of the KIA auto dealership property acquisition. | |||||
| --- | --- |
10
Modiv Inc.
Capitalization as of September 30, 2022
(Unaudited)
| PREFERRED EQUITY | |||
|---|---|---|---|
| 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock | $ | 50,000,000 | |
| % of Total Capitalization | 13 | % | |
| COMMON EQUITY | |||
| Shares of Class C Common Stock | 7,464,781 | ||
| OP Units (Class M, Class P, Class R and Class C) | 2,818,689 | ||
| Total Class C Common Stock and OP Units | 10,283,470 | ||
| Price Per Share / Unit at September 30, 2022 | $ | 14.60 | |
| IMPLIED EQUITY MARKET CAPITALIZATION | $ | 150,138,662 | |
| % of Total Capitalization | 37 | % | |
| DEBT | |||
| Mortgage Debt | |||
| Costco Property | $ | 18,850,000 | |
| Taylor Fresh Foods Property | 12,350,000 | ||
| Sutter Health Property | 13,390,536 | ||
| Total Mortgage Debt | $ | 44,590,536 | |
| KeyBank Credit Facility | |||
| Revolver (a) | $ | 6,775,000 | |
| Term Loan (a) | 150,000,000 | ||
| Total Credit Facility | $ | 156,775,000 | |
| TOTAL DEBT | $ | 201,365,536 | |
| % of Total Capitalization | 50 | % | |
| % of Total Debt - Floating Rate Debt (b) | 3 | % | |
| % of Total Debt - Fixed Rate Debt (b) | 97 | % | |
| % of Total Debt | 100 | % | |
| ENTERPRISE VALUE | |||
| Total Capitalization | $ | 401,504,198 | |
| Less: Cash and Cash Equivalents | (5,726,888 | ) | |
| Enterprise Value | $ | 395,777,310 | |
| (a) | In April 2022, the Company borrowed $44,000,000 to fund the acquisition of an eight-property portfolio of industrial properties leased to Lindsay Precast, LLC (the “Lindsay Acquisition”), drew the remaining $50,000,000 available under the<br> Term loan commitment and reduced the Revolver to $14,775,000 in connection with the swap purchase described below. During the third quarter of 2022, the Company borrowed $28,000,000 to fund the Producto and Valtir acquisitions in July 2022<br> and made $28,000,000 in principal payments on the Revolver in September with cash generated by office property sales during the quarter to reduce interest expense. | ||
| --- | --- | ||
| (b) | On May 10, 2022, we purchased a five-year swap at 2.258% on our $150,000,000 term loan that results in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. As part of this transaction, we sold a one-time<br> option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio. | ||
| --- | --- |
11
Modiv Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| December 31, 2021 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Real estate investments: | |||||
| Land | 107,564,295 | $ | 61,005,402 | ||
| Buildings and improvements | 337,335,727 | 250,723,446 | |||
| Equipment | 4,429,000 | — | |||
| Tenant origination and absorption costs | 20,074,123 | 22,027,054 | |||
| Total investments in real estate property | 469,403,145 | 333,755,902 | |||
| Accumulated depreciation and amortization | (44,025,915 | ) | (37,611,133 | ) | |
| Total investments in real estate property, net | 425,377,230 | 296,144,769 | |||
| Unconsolidated investment in a real estate property | 9,988,498 | 9,941,338 | |||
| Total real estate investments, net | 435,365,728 | 306,086,107 | |||
| Real estate investments held for sale, net | — | 31,510,762 | |||
| Total real estate investments | 435,365,728 | 337,596,869 | |||
| Cash and cash equivalents | 5,726,888 | 55,965,550 | |||
| Restricted cash | — | 2,441,970 | |||
| Receivable from sale of early termination of lease | — | 1,836,767 | |||
| Tenant receivables | 8,433,895 | 5,996,919 | |||
| Above-market lease intangibles, net | 1,939,305 | 691,019 | |||
| Prepaid expenses and other assets | 6,387,245 | 5,856,255 | |||
| Interest rate swap derivative | 4,786,903 | — | |||
| Assets related to real estate investments held for sale | — | 788,296 | |||
| Goodwill | — | 17,320,857 | |||
| Total assets | 462,639,964 | $ | 428,494,502 | ||
| Liabilities and Equity | |||||
| Mortgage notes payable, net | 44,530,130 | $ | 152,223,579 | ||
| Mortgage notes payable related to real estate investments held for sale, net | — | 21,699,912 | |||
| Total mortgage notes payable, net | 44,530,130 | 173,923,491 | |||
| Credit facility revolver | 6,775,000 | — | |||
| Credit facility term loan, net | 148,913,350 | 8,022,000 | |||
| Accounts payable, accrued and other liabilities | 9,658,378 | 11,844,881 | |||
| Below-market lease intangibles, net | 9,910,280 | 11,102,940 | |||
| Interest rate swap derivatives | — | 788,016 | |||
| Liabilities related to real estate investments held for sale | — | 383,282 | |||
| Total liabilities | 219,787,138 | 206,064,610 | |||
| Commitments and contingencies | |||||
| 7.375% Series A cumulative redeemable perpetual preferred stock, 0.001 par value, 2,000,000 shares authorized, issued and outstanding as of September 30, 2022 and December 31, 2021 | 2,000 | 2,000 | |||
| Class C common stock 0.001 par value, 300,000,000 shares authorized, 7,697,926 shares issued and 7,464,781 shares outstanding as of September 30, 2022, respectively, and 7,426,636 shares issued and outstanding as of December 31, 2021 | 7,698 | 7,427 | |||
| Class S common stock 0.001 par value, 100,000,000 shares authorized, no and 63,768 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | — | 64 | |||
| Additional paid-in-capital | 277,079,074 | 273,441,831 | |||
| Treasury stock, at costs, 233,145 shares and no shares as of September 30, 2022 and December 31, 2021, respectively | (3,957,752 | ) | — | ||
| Cumulative distributions and net losses | (115,634,474 | ) | (101,624,430 | ) | |
| Accumulated other comprehensive income | 3,618,477 | — | |||
| Total Modiv Inc. equity | 161,115,023 | 171,826,892 | |||
| Noncontrolling interests in the Operating Partnership | 81,737,803 | 50,603,000 | |||
| Total equity | 242,852,826 | 222,429,892 | |||
| Total liabilities and equity | 462,639,964 | $ | 428,494,502 |
All values are in US Dollars.
12
Modiv Inc.
Debt Overview
(Unaudited)
| Outstanding Balance | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Collateral | September 30, 2022 | December 31, 2021 | Contractual Interest<br><br> <br>Rate | Effective<br><br> <br>Interest Rate | Loan<br><br> <br>Maturity | ||||||||
| Mortgage Notes: | |||||||||||||
| Costco property | $ | 18,850,000 | $ | 18,850,000 | 4.85 | % | 4.85 | % | 1/1/30 | ||||
| Taylor Fresh Foods property | 12,350,000 | 12,350,000 | 3.85 | % | 3.85 | % | 11/1/29 | ||||||
| Sutter Health property | 13,390,536 | 13,597,120 | 4.50 | % | 4.50 | % | 3/9/24 | ||||||
| Various mortgage notes repaid on January 18, 2022 (a) | — | 108,178,317 | Various | Various | Various | ||||||||
| 44,590,536 | 152,975,437 | ||||||||||||
| Plus unamortized mortgage premium | 145,527 | 204,281 | |||||||||||
| Less unamortized deferred financing costs | (205,933 | ) | (956,139 | ) | |||||||||
| Mortgage notes payable, net | 44,530,130 | 152,223,579 | |||||||||||
| KeyBank Credit Facility: | |||||||||||||
| Revolver (a) | 6,775,000 | — | (b) | (b) | 1/18/26 | ||||||||
| Term loan (a) | 150,000,000 | — | (c) | (c) | 1/18/27 | ||||||||
| Bank of California Credit Facility (a) | — | 8,022,000 | (d) | (d) | n/a | ||||||||
| Total Credit Facility | 156,775,000 | 8,022,000 | |||||||||||
| Less unamortized deferred financing costs | (1,107,750 | ) | (100,080 | ) | |||||||||
| 155,667,250 | 7,921,920 | ||||||||||||
| Total debt, net | $ | 200,197,380 | $ | 160,145,499 | |||||||||
| (a) | On January 18, 2022, the Company refinanced 20 mortgage notes and its prior credit facility with the KeyBank Credit Facility. During the second quarter of 2022, the Company borrowed $44,000,000 to fund the Lindsay Acquisition, drew the<br> remaining $50,000,000 available under the Term loan commitment and reduced the Revolver to $6,775,000 in June 2022 to reduce interest expense. During the third quarter of 2022, the Company borrowed $28,000,000 to fund the Producto and Valtir<br> acquisitions in July 2022 and made $28,000,000 in principal payments on the Revolver in September with cash generated by office property sales during the quarter to reduce interest expense. | ||||||||||||
| --- | --- | ||||||||||||
| (b) | The interest rate on the Revolver is based on the Company's leverage ratio at the end of the prior quarter. With our leverage ratio at 38% as of June 30, 2022, the spread over the Secured Overnight Financing Rate (‘‘SOFR’’), including a 10<br> basis point credit adjustment, is 165 basis points and the interest rate on the Revolver was 4.7125% as of September 30, 2022. Following the Federal Reserve Bank’s November 2, 2022 increase in the target range for federal funds by 75 basis<br> points, the interest rate on the Revolver is approximately 5.46%. We also pay an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment. | ||||||||||||
| --- | --- | ||||||||||||
| (c) | On May 10, 2022, we purchased a five-year swap at 2.258% on the $150,000,000 term loan that results in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. As part of this transaction, we agreed to a<br> one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Facility, the interest rate will continue to vary based on our leverage ratio. | ||||||||||||
| --- | --- | ||||||||||||
| (d) | Under the terms of the prior credit facility with Bank of California, the Company paid a variable rate of interest on outstanding amounts equal to one percentage point over the prime rate published in The Wall Street Journal, provided that<br> the interest rate in effect on any one day was not less than 4.75% per annum. | ||||||||||||
| --- | --- |
13
Modiv Inc.
Covenants
Credit Facility and Mortgage Notes Covenants
The following is a summary of key financial covenants for the Company’s credit facility and mortgage notes, as defined and calculated per the terms of the facility's credit agreement and the mortgage notes' governing documents, respectively, which are included in the Company's filings with the U.S. Securities and Exchange Commission. These calculations, which are not based on U.S. GAAP measurements are presented to demonstrate that as of September 30, 2022, the Company believes it is in compliance with the covenants.
| Unsecured Credit Facility Covenants | Required | |
|---|---|---|
| Maximum leverage ratio | <60% | 38% |
| Minimum fixed charge coverage ratio | >1.50x | 1.76 |
| Maximum secured indebtedness ratio | 40% | 8% |
| Minimum consolidated tangible net worth | 210,241,835 | $286,878,741 |
| Minimum investment grade tenants in borrowing base | 30% | 40% |
| Weighted average lease term (years) | 7 | 13 |
All values are in US Dollars.
| Mortgage Notes Key Covenants | Debt service coverage ratio | September 30,<br><br> <br>2022 | ||
|---|---|---|---|---|
| Costco property | N.A. | N.A. | ||
| Taylor Fresh Foods property | 1.5 | 3.4 | ||
| Sutter Health property | 1.4 | 2.4 |
14
Modiv Inc.
Real Estate Acquisitions
(Unaudited)
The following table summarizes the Company’s property acquisition activity during each of last five quarters ended September 30, 2022.
| Q3 2022 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual Rent Increase | Acquisition Price | Initial Cap Rate | Weighted Average<br><br> <br>Cap Rate | ||||||||||
| Producto, two properties acquired in upstate New York | Industrial | 72,373 | 20.0 | 2.0 | % | $ | 5,343,862 | 7.21 | % | 8.8 | % | ||||||
| Valtir, four properties acquired in Ohio, South Carolina, Texas and Utah | Industrial | 293,612 | 20.0 | (a) | 2.3 | % | 23,375,000 | 7.70 | % | 9.7 | % | ||||||
| 365,985 | $ | 28,718,862 | 9.5 | % | |||||||||||||
| Q2 2022 | |||||||||||||||||
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Lease<br><br> <br>Terms (Years) | Annual Rent Increase | Acquisition Price | Initial Cap Rate | Weighted Average Cap Rate | ||||||||||
| Lindsay Precast, eight properties acquired in Colorado (3), Ohio (2), North Carolina, South Carolina and Florida | Industrial | 618,195 | 25.0 | 2.0 | % | $ | 56,150,000 | 6.65 | % | 8.5 | % | ||||||
| Q1 2022 | |||||||||||||||||
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual Rent Increase | Acquisition Price | Initial Cap Rate | Weighted Average Cap Rate | ||||||||||
| KIA, Carson, CA | Retail | 72,623 | 25.0 | 2.0 | % | $ | 69,275,000 | 5.7 | % | 7.3 | % | ||||||
| Kalera, Saint Paul, MN | Industrial | 78,857 | 20.0 | 2.5 | % | 8,079,000 | 7.0 | % | 8.9 | % | |||||||
| 151,480 | $ | 77,354,000 | 8.1 | % | |||||||||||||
| Q4 2021 | |||||||||||||||||
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual Rent Increase | Acquisition Price | Initial Cap Rate | Weighted Average Cap Rate | ||||||||||
| Arrow Tru-Line, Archbold, OH | Industrial | 206,155 | 20.0 | 2.0 | % | $ | 11,460,000 | 6.7 | % | 8.1 | % | ||||||
| Q3 2021 | |||||||||||||||||
| Tenant and Location | Property Type | Area (Square Feet) | Lease Terms (Years) | Annual Rent Increase | Acquisition Price | Initial Cap Rate | Weighted Average Cap Rate | ||||||||||
| Raising Cane’s, San Antonio, TX | Retail | 3,853 | 6.6 | 2.0 | % | $ | 3,607,424 | 6.3 | % | 7.1 | % | ||||||
| (a) | The South Carolina and Ohio properties have a 25-year master lease and the Texas and Utah properties have a 15-year master lease. | ||||||||||||||||
| --- | --- |
15
Modiv Inc.
Real Estate Dispositions
(Unaudited)
The following table summarizes the Company’s property disposition activity during each of last five quarters ended September 30, 2022.
| Q3 2022 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| Williams Sonoma, Summerlin, NV | Office | 35,867 | $ | 7,211,012 | $ | 9,300,000 | $ | 7,260,636 | $ | 335,748 | $ | 1,703,616 | 7.4 | % | ||
| Wyndham, Summerlin, NV | Office | 41,390 | 10,116,502 | 12,900,000 | 9,299,903 | 632,429 | 2,967,668 | 7.4 | % | |||||||
| 77,257 | 17,327,514 | 22,200,000 | 16,560,539 | 968,177 | 4,671,284 | 7.4 | % | |||||||||
| Q2 2022 | ||||||||||||||||
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| EMCOR, Cincinnati, OH | Office | 39,385 | $ | 6,138,538 | $ | 6,525,000 | $ | 5,343,541 | $ | 179,358 | $ | 1,002,101 | 7.8 | % | ||
| Q1 2022 | ||||||||||||||||
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| Bon Secours, Richmond, VA | Office | 72,890 | $ | 10,842,907 | $ | 10,200,000 | $ | 9,768,252 | $ | 252,344 | $ | 179,404 | 8.1 | % | ||
| Omnicare, Richmond, VA | Flex | 51,800 | 7,324,370 | 8,760,000 | 6,478,621 | 218,489 | 2,062,890 | 6.8 | % | |||||||
| Texas Health, Dallas, TX | Office | 38,794 | 7,689,924 | 7,040,000 | 6,711,271 | 168,352 | 160,377 | 7.9 | % | |||||||
| Accredo, Orlando, FL | Office | 63,000 | 10,710,500 | 14,000,000 | 8,552,619 | 449,275 | 4,998,106 | 7.3 | % | |||||||
| 226,484 | $ | 36,567,701 | $ | 40,000,000 | $ | 31,510,763 | $ | 1,088,460 | $ | 7,400,777 | 7.5 | % | ||||
| Q4 2021 | ||||||||||||||||
| Tenant and Location | Property<br><br> <br>Type | Area (Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| Harley Davidson, Bedford, TX | Retail | 70,960 | $ | 13,178,286 | $ | 15,270,000 | $ | 11,608,682 | $ | 390,029 | $ | 3,271,289 | 6.2 | % | ||
| Q3 2021 | ||||||||||||||||
| Tenant and Location | Property <br><br> Type | Area(Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| Dana. Cedar Park, TX | Industrial | 45,465 | $ | 9,452,169 | $ | 10,000,000 | $ | 5,375,746 | $ | 381,483 | $ | 4,242,771 | 7.7 | % |
16
Modiv Inc.
Top 10 Tenants
(Unaudited)
| Tenant | Industry | ABR | ABR as a Percentage of Total Portfolio | Area<br><br> <br>(Square Feet) | Square Feet as<br><br> <br>a Percentage<br><br> <br>of Total<br><br> <br>Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| KIA of Carson | Retail | $ | 3,965,866 | 11 | % | 72,623 | 2 | % | |||
| Lindsay | Industrial | 3,765,259 | 11 | % | 618,195 | 19 | % | ||||
| Sutter Health | Office | 2,625,767 | 7 | % | 106,592 | 3 | % | ||||
| Costco Wholesale | Office | 2,344,733 | 7 | % | 97,191 | 4 | % | ||||
| AvAir | Industrial | 2,307,204 | 7 | % | 162,714 | 5 | % | ||||
| 3M | Industrial | 1,850,648 | 5 | % | 410,400 | 13 | % | ||||
| Valtir | Industrial | 1,804,722 | 5 | % | 293,612 | 9 | % | ||||
| Taylor Fresh Foods | Industrial | 1,632,761 | 5 | % | 216,727 | 7 | % | ||||
| FUJIFILM Dimatix (a) | Industrial | 1,618,910 | 5 | % | 91,740 | 3 | % | ||||
| Cummins | Office | 1,503,088 | 4 | % | 87,230 | 3 | % | ||||
| Total Top 10 Tenants | $ | 23,418,958 | 67 | % | 2,157,024 | 68 | % | ||||
| (a) | Reflects our 72.71% tenant-in-common interest (“TIC Interest”). | ||||||||||
| --- | --- |
Modiv Inc.
Property Type
(Unaudited)
| Property | Number of Properties | ABR | ABR as a<br><br> <br>Percentage of<br><br> <br>Total<br><br> <br>Portfolio | Area (Square Feet) | Square Feet as<br><br> <br>a Percentage<br><br> <br>of Total Portfolio | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Industrial, including TIC Interest | 26 | $ | 18,689,188 | 54 | % | 2,434,373 | 77 | % | ||||
| Retail | 13 | 6,559,083 | 19 | % | 234,029 | 7 | % | |||||
| Office | 8 | 9,595,321 | 27 | % | 508,710 | 16 | % | |||||
| Total Properties | 47 | $ | 34,843,592 | 100 | % | 3,177,112 | 100 | % |
17
Modiv Inc.
Tenant Industry Diversification
(Unaudited)
| Industry | Number of Properties | ABR | ABR as a Percentage of Total Portfolio | Area (Square Feet) | Square Feet as a Percentage of Total Portfolio | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Automobile & Components | 2 | $ | 4,254,034 | 12 | % | 148,623 | 5 | % | ||||
| Transportation | 5 | 4,111,926 | 12 | % | 456,326 | 14 | % | |||||
| General Retailers | 11 | 3,774,797 | 11 | % | 204,744 | 6 | % | |||||
| Precast Concrete | 8 | 3,765,259 | 11 | % | 618,195 | 20 | % | |||||
| Manufacturing | 5 | 3,556,732 | 10 | % | 430,395 | 14 | % | |||||
| Health Care Equipment & Services | 1 | 2,625,767 | 8 | % | 106,592 | 3 | % | |||||
| Food, Beverage & Tobacco | 2 | 2,207,716 | 6 | % | 295,584 | 9 | % | |||||
| Technology Hardware & Equipment | 2 | 2,199,297 | 6 | % | 130,240 | 4 | % | |||||
| Defense | 2 | 2,114,208 | 6 | % | 153,633 | 5 | % | |||||
| Materials | 1 | 1,850,648 | 5 | % | 410,400 | 13 | % | |||||
| Commercial & Professional Services | 2 | 1,554,499 | 4 | % | 70,567 | 2 | % | |||||
| Consumer Services | 1 | 924,000 | 3 | % | 50,000 | 2 | % | |||||
| Pharmaceuticals, Biotechnology & Life Sciences | 1 | 642,722 | 2 | % | 20,800 | 1 | % | |||||
| Energy | 1 | 445,417 | 1 | % | 26,036 | 1 | % | |||||
| Consumer Durables and Apparel | 1 | 254,698 | 1 | % | 40,110 | 1 | % | |||||
| Government | 1 | 322,719 | 1 | % | 11,014 | — | % | |||||
| Hotel & Restaurant | 1 | 239,153 | 1 | % | 3,853 | — | % | |||||
| Total | 47 | $ | 34,843,592 | 100 | % | 3,177,112 | 100 | % |
18
Modiv Inc.
Tenant Geographic Diversification
(Unaudited)
| State | Number of Properties | ABR | ABR as a Percentage of Total Portfolio | Area (Square Feet) | Square Feet as a Percentage of Total Portfolio | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| California | 13 | $ | 13,017,202 | 38 | % | 600,395 | 19 | % | ||||
| Arizona | 2 | 3,939,965 | 11 | % | 379,441 | 12 | % | |||||
| Ohio | 7 | 3,118,528 | 9 | % | 644,021 | 20 | % | |||||
| Florida | 3 | 2,673,359 | 8 | % | 237,329 | 8 | % | |||||
| Washington | 1 | 2,344,733 | 7 | % | 97,191 | 3 | % | |||||
| Illinois | 1 | 1,850,647 | 5 | % | 410,400 | 13 | % | |||||
| Tennessee | 1 | 1,503,088 | 4 | % | 87,230 | 3 | % | |||||
| Texas | 4 | 1,471,927 | 4 | % | 95,766 | 3 | % | |||||
| North Carolina | 2 | 1,361,924 | 4 | % | 134,576 | 4 | % | |||||
| South Carolina | 2 | 876,124 | 3 | % | 129,909 | 4 | % | |||||
| Colorado | 3 | 831,323 | 2 | % | 98,994 | 4 | % | |||||
| Minnesota | 1 | 574,956 | 2 | % | 78,857 | 2 | % | |||||
| Utah | 1 | 498,272 | 1 | % | 72,498 | 2 | % | |||||
| New York | 2 | 386,539 | 1 | % | 72,373 | 2 | % | |||||
| Maine | 2 | 205,400 | 1 | % | 18,126 | 1 | % | |||||
| Georgia | 1 | 103,607 | — | % | 10,906 | — | % | |||||
| Pennsylvania | 1 | 85,998 | — | % | 9,100 | — | % | |||||
| Total | 47 | $ | 34,843,592 | 100 | % | 3,177,112 | 100 | % |
19
Modiv Inc.
Lease Expirations
(Unaudited)
10 Years and Thereafter Lease Expirations
| As of September 30, 2022 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year | Number of<br><br> <br>Leases<br><br> <br>Expiring | Leased<br><br> <br>Square<br><br> <br>Footage Expiring | Percentage of Leased<br><br> <br>Square<br><br> <br>Footage Expiring | Cumulative Percentage<br><br> <br>of Leased Square<br><br> <br>Footage Expiring | Annualized<br><br> <br>Base Rent Expiring | Percentage<br><br> <br>of<br><br> <br>Annualized<br><br> <br>Base Rent Expiring | Cumulative Percentage<br><br> <br>of<br><br> <br>Annualized<br><br> <br>Base Rent Expiring | |||||||||||
| October to December 2022 | — | — | — | % | — | % | $ | — | — | % | — | % | ||||||
| 2023 | 3 | 142,146 | 4.5 | % | 4.5 | % | 988,283 | 2.8 | % | 2.8 | % | |||||||
| 2024 | 1 | 87,230 | 2.8 | % | 7.3 | % | 1,503,088 | 4.3 | % | 7.1 | % | |||||||
| 2025 | 4 | 235,489 | 7.4 | % | 14.7 | % | 5,716,829 | 16.4 | % | 23.5 | % | |||||||
| 2026 | 5 | 280,740 | 8.9 | % | 23.6 | % | 4,764,388 | 13.7 | % | 37.2 | % | |||||||
| 2027 | 1 | 64,637 | 2.0 | % | 25.6 | % | 893,472 | 2.6 | % | 39.8 | % | |||||||
| 2028 | 2 | 22,680 | 0.7 | % | 26.3 | % | 572,891 | 1.6 | % | 41.4 | % | |||||||
| 2029 | 3 | 134,714 | 4.2 | % | 30.5 | % | 2,350,335 | 6.8 | % | 48.2 | % | |||||||
| 2030 | 5 | 45,278 | 1.4 | % | 31.9 | % | 463,363 | 1.3 | % | 49.5 | % | |||||||
| 2031 | — | — | — | % | 31.9 | % | — | — | % | 49.5 | % | |||||||
| 2032 | 2 | 177,204 | 5.6 | % | 37.5 | % | 2,676,204 | 7.7 | % | 57.2 | % | |||||||
| Thereafter | 21 | 1,986,994 | 62.5 | % | 100.0 | % | 14,914,739 | 42.8 | % | 100.0 | % | |||||||
| Total | 47 | 3,177,112 | 100.0 | % | $ | 34,843,592 | 100.0 | % |
20
Modiv Inc.
Disclosures Regarding Non-GAAP and Other Metrics
Notice Involving Non-GAAP Financial Measures
In addition to U.S. GAAP financial measures, this supplemental report contains and may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are provided below.
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts (“Nareit”) promulgated a measure known as FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures and preferred distributions. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.
Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation, deferred rent, amortization of in-place lease valuation intangibles, acquisition-related costs, deferred financing fees, asset impairment write-downs, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-off transaction costs and other one-time transactions.
We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. We believe that AFFO is a beneficial indicator of our ongoing portfolio performance and ability to sustain our current distribution level. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or our future ability to pay our dividends. By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.
For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, FFO and AFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.
21
Neither the SEC, Nareit, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure. Furthermore, as described in the notes to our unaudited condensed consolidated financial statements, the conversion ratios for units of Class M limited partnership interest in the Operating Partnership, units of Class P limited partnership interest in the Operating Partnership and units of Class R limited partnership interest (“Class R OP Units”) in the Operating Partnership can increase if the specified performance hurdles are achieved.
Adjusted EBITDA
We define Adjusted EBITDA as GAAP net income or loss adjusted to exclude depreciation and amortization, gains or losses from the sales of depreciable property, extraordinary items, provisions for impairment on investment in real estate and goodwill and intangibles, interest expense and non-cash items such as non-cash compensation expenses. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA is not a measure of financial performance under GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA as an alternative to net income or cash flows from operating activities determined in accordance with GAAP.
Net Debt
We define Net Debt as gross debt less cash and cash equivalents and restricted cash.
Leverage Ratio
We define our Leverage Ratio as total debt as a percentage of the aggregate fair value of our real estate properties, including our proportionate interest in real estate owned by unconsolidated entities, plus our cash and cash equivalents.
Annualized Base Rent (“ABR”)
ABR represents contractual annual base rent for the next 12 months.
Initial Cap Rate
We define “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property.
Weighted Average Cap Rate
We define “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property.
22
Exhibit 99.3
Exhibit 99.4
