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): February 23, 2023
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.) |
| 200 S. Virginia Street,<br> Suite 800<br><br> <br>Reno, Nevada | 89501 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (888) 686-6348
120 Newport Center Drive, Newport Beach, CA 92660
(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 February 23, 2023, Modiv Inc., a Maryland corporation (the “Company”), issued an earnings press release relating to the Company’s financial results for the fourth quarter and year ended December 31, 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 for the quarter ended December 31, 2022. A copy of the supplemental data is attached hereto as Exhibit 99.2 which is incorporated herein by reference. The press release and supplemental data are available on the Company’s website.
The information in Item 2.02 of this Current Report, including Exhibits 99.1 and 99.2 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 and 99.2 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 February 23, 2023, the Company issued an earnings press release relating to the Company’s financial results for the fourth quarter and year ended December 31, 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 for the quarter ended December 31, 2022. A copy of the supplemental data is attached hereto as Exhibit 99.2 which is 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 and 99.2, 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 February 23, 2023 |
| 99.2 | Modiv Inc. Quarterly Supplemental Data For The Quarter Ended December 31, 2022 |
| 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: February 23, 2023 |
Exhibit 99.1
Modiv Announces Fourth Quarter and Full Year 2022 Results
Reno, Nevada, February 23, 2023 – Modiv Inc. (“Modiv” or the “Company”) (NYSE:MDV), an internally managed real estate investment trust (“REIT”) that acquires, owns, and manages a portfolio of single-tenant net-lease real estate properties, today announced operating results for the fourth quarter and full year ended December 31, 2022.
Highlights for the full year ended December 31, 2022:
| ◾ | Revenue of $46.2 million increased 22% year-over-year |
|---|---|
| ◾ | Annual AFFO increased 45% year-over-year to $16.6 million, or $1.63 per diluted share, exceeding the Company’s 2022 annual AFFO guidance of $1.26 - $1.36 per diluted share |
| --- | --- |
Highlights for the fourth quarter ended December 31, 2022:
| ◾ | Revenue of $14.4 million increased 63% year-over-year |
|---|---|
| ◾ | Quarterly AFFO of $6.9 million, or $0.68 per diluted share, compared with $2.4 million or $0.27 per diluted share in the year-ago quarter |
| --- | --- |
Recent Business Developments
| ◾ | In December 2022, the Company signed a new 12-year lease for its property in Rancho Cordova, California with the State of California that included an option for the tenant to purchase. The property<br> was most recently occupied by Sutter Health which agreed to an early termination fee and paid Modiv $3.8 million in December 2022. |
|---|---|
| ◾ | On December 30, 2022, the Company sold a retail property in San Antonio, Texas, leased to Raising Cane’s for a sale price of $4.3 million, representing a 5.66% exit cap rate. On January 26, 2023, the<br> Company redeployed the proceeds to acquire an industrial manufacturing property in Princeton, Minnesota, leased to Plastic Products Company, Inc., for a purchase price of $6.4 million, representing an initial cap rate of 7.51% and a weighted<br> average cap rate of 9.20%. |
| --- | --- |
| ◾ | In January 2023, the Company signed a two-year lease extension with Solar Turbines, which has occupied the property located in San Diego, California since 2008. This is the third lease extension<br> executed by the tenant and this renewal includes a 14% increase in the first year rental rate followed by another 3% increase in the second year. |
| --- | --- |
| ◾ | Our Net Asset Value (NAV) per fully diluted share as of December 31, 2022 was $27.72, based on the appraisal of the Company’s portfolio conducted by Cushman & Wakefield. Given Modiv’s closing<br> price of $11.76 as of February 22, 2023, the Company’s stock is trading at a 58% discount to NAV and 36% discount to the depreciated GAAP book value of $18.49 per share. |
| --- | --- |
| ◾ | Declared monthly dividends per common share of $0.09583, equivalent to an annual rate of $1.15 per share; represents a dividend yield of 9.8% based on the $11.76 closing price of the Company’s common<br> stock on February 22, 2023. |
| --- | --- |
Management Commentary
“Our team successfully navigated our first full year as a public company in what was undoubtedly the worst decline in public REIT valuations experienced since 2008. When you measure the fundamental results that are in the direct control of our management team, Modiv experienced a tremendous year of execution including: acquiring over $162 million of properties; significantly growing AFFO and exceeding guidance; obtaining research coverage from multiple investment banks; and completing an IPO that provided full liquidity to our legacy common stockholders,” said Aaron Halfacre, Chief Executive Officer of Modiv.
“On top of that, we grew and strengthened our portfolio in 2022. We materially increased our ownership of durable industrial properties while decreasing our exposure to office assets by nearly 30%, our weighted average lease term or WALT increased from 6.3 years to 11.9 years, and with careful expense management we reduced our G&A expense by $1.9 million. Additionally, we lowered our cost of capital by restructuring our debt at low fixed rates and expanded our credit facility. These tangible results showcase our ability to execute our strategic plan and I am very confident about our prospects in 2023,” concluded Halfacre.
Fourth Quarter and Full Year 2022 Financial Overview
Total Revenues
Total revenue for the fourth quarter was $14.4 million, a year-over-year increase of $5.6 million reflecting growth in the Company’s portfolio and the early termination fee revenue paid by Sutter Health related to our property in Rancho Cordova, California. Excluding the $3.8 million early termination fee revenue, fourth quarter revenue increased $1.8 million, or 20% year-over-year.
Total revenue for the full year 2022 was $46.2 million, an increase from full year 2021 of $8.3 million, reflecting growth in the Company’s portfolio and early termination fee revenue. Excluding the early termination fee revenue, 2022 annual revenue increased $4.5 million, or 12% year-over-year, due primarily to rental income from 16 acquisitions, partially offset by the sale of eight non-core properties in 2022.
Operating Results
Net loss attributable to common stockholders for the fourth quarter was $(0.2) million, or $(0.02) per basic and diluted share, compared to net loss attributable to common stockholders of $(3.1) million, or $(0.41) per basic and diluted share in the prior-year period. The $2.9 million decrease in net loss attributable to common stockholders reflected the $3.8 million early termination fee, which was offset by a $1.7 million decrease in gain on sale of real estate investments.
Net loss attributable to common stockholders for 2022 was $(7.0) million, or $(0.93) per basic and diluted share, compared to net loss attributable to common stockholders of $(1.5) million, or $(0.20) per basic and diluted share in the prior-year period. The $5.5 million increase in net loss attributable to common stockholders reflects a $17.3 million write off of goodwill and a $1.7 million loss on early extinguishment of debt during the first quarter of 2022, along with a $2.0 million increase in property expenses for the year (partially offset by tenant reimbursements included in revenue). These increases in expenses were partially offset by the $8.3 million increase in revenue discussed above, a $6.1 million increase in gains on sale of real estate and a $1.9 million decrease in general and administrative expenses.
Adjusted Funds from Operations (AFFO)
Quarterly AFFO was $6.9 million, or $0.68 per diluted share, compared with AFFO of $2.4 million, or $0.27 per diluted share in the fourth quarter of 2021. The $4.5 million increase in AFFO was primarily attributable to the $3.8 million early termination fee discussed above, while AFFO per diluted share reflects an increase in fully diluted shares outstanding from our dividend reinvestment program and the issuance of 1.3 million Class C OP units (at $25.00 per unit) in connection with the January 2022 acquisition of a KIA auto dealership property in Carson, California.
AFFO for the year ended December 31, 2022 was $16.6 million, or $1.63 per diluted share, compared with AFFO of $11.4 million, or $1.30 per diluted share in 2021. The $5.2 million increase in AFFO was primarily attributable to the increase in early termination fee revenue and the decrease in general and administrative expenses discussed above. Excluding the $3.8 million early termination fee revenue for 2022, AFFO per diluted share was $1.26.
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 January 31, 2023, February 28, 2023, and March 31, 2023, which will be paid on or about February 24, 2023, March 24, 2023, and April 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 9.8% based on the closing price of our common stock on February 22, 2023.
Real Estate Portfolio Highlights
Investment Activity
On January 26, 2023, the Company acquired an industrial manufacturing property in Princeton, Minnesota, for $6.4 million. This property has a remaining lease term of 5.75 years and is leased to Plastic Products Company, Inc. which is a custom thermoplastic, metal and ceramic injection molder that has been in business since 1962. The rent on this property will increase by 20% on November 1, 2023, with annual increases of 3% thereafter. The initial cap rate is 7.51% and the weighted average cap rate is 9.20%.
During 2022, the Company acquired a total of $162.7 million of real estate properties including an opportunistic acquisition of one retail property for $69.4 million, which is leased to a KIA auto dealership and included $32.8 million of equity being issued at $25.00 per share, and 15 industrial manufacturing properties for a total of $93.3 million. The combined initial cap rate for the industrial manufacturing properties was 7.0% and the weighted average cap rate was 8.9%.
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
On December 30, 2022, the Company completed the sale of its retail property located in San Antonio, Texas that was leased to Raising Cane’s for $4.3 million, which resulted in a $0.7 million gain on sale for the fourth quarter of 2022. During 2022, the Company completed the sale of six office properties, one flex property and one retail property with total contract sales prices of $73.0 million, generating net proceeds of $48.7 million and gains on sale of $12.2 million. Modiv will continue its efforts to sell non-core properties during 2023.
Portfolio
As of December 31, 2022, the Company’s portfolio consisted of 46 properties located in 17 states. The portfolio had approximately 3.2 million square feet of aggregate leasable space, which was 100% leased to 28 different commercial tenants doing business in 16 separate industries. The portfolio includes 27 industrial properties representing 59% of the portfolio, 12 retail properties representing 20% of the portfolio, and 7 office properties representing 21% of the portfolio (based on pro forma annual base rent as of December 31, 2022). As part of the Company’s long-term strategy to reduce office exposure, Modiv has decreased its office allocation by nearly 30% since December 31, 2021.
Annualized base rent of the properties owned on December 31, 2022 (based on rates in effect on December 31, 2022) totaled $33.7 million and the portfolio’s weighted average lease term was 11.9 years as of December 31, 2022 compared with 6.3 years as of December 31, 2021. Approximately 48% 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 December 31, 2022, total cash and cash equivalents were $8.6 million and the Company had $197.5 million of outstanding indebtedness consisting of $44.5 million of mortgages and $153.0 million outstanding on the Company’s $400 million credit facility. The Company’s leverage ratio was 38% as of December 31, 2022.
The Company’s credit facility is comprised of a $150 million revolving credit facility and a $250 million term loan, of which $100 million is expected to be drawn during the first four months of 2023. The credit facility includes an accordion option that allows the Company to request additional revolver and term loan lender commitments up to a total of $750 million. The revolver maturity is in January 2026 with options to extend for a total of 12 months, and the term loan’s maturity is 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 December 31, 2022 balance sheet and interest rate swap agreements entered into during 2022, approximately 98% of the Company’s indebtedness holds a fixed interest rate. The weighted average interest rate on the total debt outstanding of $197.5 million as of December 31, 2022 was 4.03% based on the 38% leverage ratio as of September 30, 2022 and December 31, 2022.
2023 Annual Guidance
Modiv believes 2023 will be even more transformational than 2022 and has determined it to be prudent to publicly disclose the following corporate goals for 2023 that may impact Modiv’s earnings growth and share price over the balance of the year.
| ◾ | 2023 acquisition volume of at least $100 million of industrial manufacturing properties. |
|---|---|
| ◾ | Enhanced delineation and accelerated disposition of Modiv’s non-core/legacy office and retail assets as the Company furthers its goal to become a pure-play industrial manufacturing REIT. |
| --- | --- |
| ◾ | No material changes anticipated in G&A or property expenses. |
| --- | --- |
| ◾ | The Company does not intend to issue equity at current low share price levels and has no planned need for new debt sources beyond our current credit facility capacity. |
| --- | --- |
| ◾ | Following inquiries recently received, Modiv will begin to explore long-term and strategic investment proposals from large institutional investors that have identified Modiv’s growth potential and<br> management capabilities. Barring any uniquely compelling and accretive opportunities, Modiv has no current knowledge of any actionable proposals and does not anticipate providing further updates unless required. |
| --- | --- |
Given this is a catalyst year for Modiv, the Company is not providing specific 2023 AFFO guidance at this time.
Conference Call and Webcast
A conference call and audio webcast with analysts and investors will be held on Thursday, February 23, 2023, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time, to discuss the fourth quarter and full year 2022 operating results and answer questions.
Live conference call: 1-877-514-3620 at 8:00 a.m. Pacific Time, Thursday, February 23, 2023
Webcast: To listen to the webcast, either live or archived, use this link https://event.choruscall.com/mediaframe/webcast.html?webcastid=mAokDz4P
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 portfolio of single-tenant net-lease real estate. The Company actively acquires critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation’s supply chains. Driven by an investor-first focus, the Modiv name reflects its commitment to providing investors with Monthly Dividends. As of December 31, 2022, Modiv had a $535 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 February 23, 2023 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:
Margaret Boyce, Financial Profiles, Inc.
mboyce@finprofiles.com
310-622-8247
MODIV INC.
Consolidated Statements of Operations
For the Three and Tweve Months Ended December 31, 2022
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Rental income | $ | 14,372,106 | $ | 8,831,534 | $ | 46,174,267 | $ | 37,889,831 | ||||
| Expenses: | ||||||||||||
| General and administrative | 2,252,304 | 2,188,493 | 7,812,057 | 9,715,067 | ||||||||
| Stock compensation expense | 660,171 | 629,538 | 2,401,022 | 2,744,881 | ||||||||
| Depreciation and amortization | 4,347,809 | 3,449,407 | 14,929,574 | 15,266,936 | ||||||||
| Interest expense | 2,826,490 | 1,874,867 | 8,106,658 | 7,586,197 | ||||||||
| Property expenses | 2,105,257 | 1,578,700 | 8,899,626 | 6,880,993 | ||||||||
| Impairment (reversal of impairment) of real estate investment property | 2,080,727 | - | 2,080,727 | (400,999 | ) | |||||||
| Impairment of goodwill and intangible assets | - | 3,767,190 | 17,320,857 | 3,767,190 | ||||||||
| Total expenses | 14,272,758 | 13,488,195 | 61,550,521 | 45,560,265 | ||||||||
| Operating loss: | ||||||||||||
| Gain on sale of real estate investments, net | 669,185 | 2,338,904 | 12,196,371 | 6,136,588 | ||||||||
| Operating loss | 768,533 | (2,317,757 | ) | (3,179,883 | ) | (1,533,846 | ) | |||||
| Other income (expense): | ||||||||||||
| Interest income | 5,047 | 19,958 | 21,910 | 21,328 | ||||||||
| Income from unconsolidated investment in a real estate property | 51,312 | 53,337 | 278,002 | 276,042 | ||||||||
| Gain on forgiveness of economic relief note payable | - | - | - | 517,000 | ||||||||
| Loss on early extinguishment of debt | - | - | (1,725,318 | ) | - | |||||||
| Other | (104,157 | ) | 65,993 | 93,971 | 283,971 | |||||||
| Other (expense) income, net | (47,798 | ) | 139,288 | (1,331,435 | ) | 1,098,341 | ||||||
| Net income (loss) | 720,735 | (2,178,469 | ) | (4,511,318 | ) | (435,505 | ) | |||||
| Less: net loss attributable to noncontrolling interest in Operating Partnership | (42,508 | ) | - | (1,222,783 | ) | - | ||||||
| Net income (loss) attributable to Modiv Inc. | 763,243 | (2,178,469 | ) | (3,288,535 | ) | (435,505 | ) | |||||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (3,687,500 | ) | (1,065,278 | ) | ||||
| Net loss attributable to common stockholders | $ | (158,632 | ) | $ | (3,100,344 | ) | $ | (6,976,035 | ) | $ | (1,500,783 | ) |
| Net loss per share attributable to common stockholders: | ||||||||||||
| Basic and diluted | $ | (0.02 | ) | $ | (0.41 | ) | $ | (0.93 | ) | $ | (0.20 | ) |
| Weighted-average number of common shares outstanding: | ||||||||||||
| Basic and diluted | 7,487,728 | 7,531,167 | 7,487,204 | 7,544,834 | ||||||||
| Distributions declared per common stock | $ | 0.2875 | $ | 0.2875 | $ | 1.2500 | $ | 1.0800 |
MODIV INC.
Consolidated Balance Sheets
(Unaudited)
| 2021 | |||||
| Assets | |||||
| Real estate investments: | |||||
| Land | 103,657,237 | $ | 61,005,402 | ||
| Building and improvements | 329,867,099 | 251,246,290 | |||
| Equipment | 4,429,000 | - | |||
| Tenant origination and absorption costs | 19,499,749 | 21,504,210 | |||
| Total investments in real estate property | 457,453,085 | 333,755,902 | |||
| Accumulated depreciation and amortization | (46,752,322 | ) | (37,611,133 | ) | |
| Total investments in real estate property, net | 410,700,763 | 296,144,769 | |||
| Unconsolidated investment in a real estate property | 10,007,420 | 9,941,338 | |||
| Total real estate investments excluding real estate investments held for sale, net | 420,708,183 | 306,086,107 | |||
| Real estate investments held for sale, net | 5,255,725 | 31,510,762 | |||
| Total real estate investments, net | 425,963,908 | 337,596,869 | |||
| Cash and cash equivalents | 8,608,649 | 55,965,550 | |||
| Restricted cash | - | 2,441,970 | |||
| Receivable from early termination of lease | - | 1,836,767 | |||
| Tenant receivables | 8,859,329 | 5,996,919 | |||
| Above-market lease intangibles, net | 1,850,756 | 691,019 | |||
| Prepaid expenses and other assets | 6,100,937 | 5,856,255 | |||
| Interest rate swap derivative | 4,629,702 | - | |||
| Assets related to real estate investments held for sale | 12,765 | 788,296 | |||
| Goodwill, net | - | 17,320,857 | |||
| Total assets | 456,026,046 | $ | 428,494,502 | ||
| Liabilities and Equity | |||||
| Mortgage notes payable, net | 44,435,556 | $ | 152,223,579 | ||
| Mortgage notes payable related to real estate investments held for sale, net | - | 21,699,912 | |||
| Total mortgage notes payable, net | 44,435,556 | 173,923,491 | |||
| Credit facility revolver | 3,000,000 | 8,022,000 | |||
| Credit facility term loan, net | 148,018,164 | - | |||
| Accounts payable, accrued and other liabilities | 9,245,933 | 11,844,881 | |||
| Below-market lease intangibles, net | 9,675,686 | 11,102,940 | |||
| Interest rate swap derivatives | 498,866 | 788,016 | |||
| Liabilities related to real estate investments held for sale | 117,881 | 383,282 | |||
| Total Liabilities | 214,992,086 | 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<br> outstanding as of December 31, 2022 and 2021, respectively | 2,000 | 2,000 | |||
| Class C common stock, 0.001 par value, 300,000,000 shares authorized; 7,762,506 shares issued and 7,512,353 shares<br> outstanding as of December 31, 2022, and 7,426,636 shares issued and outstanding as of December 31, 2021 | 7,762 | 7,427 | |||
| Class S common stock, 0.001 par value, 100,000,000 shares authorized; no shares issued and outstanding as of December 31,<br> 2022 and 63,768 shares issued and outstanding as of December 31, 2021 | - | 64 | |||
| Additional paid-in-capital | 278,349,384 | 273,441,831 | |||
| Treasury stock, at cost, 250,153 shares as of December 31, 2022 and no shares held as of December 31, 2021 | (4,161,618 | ) | - | ||
| Cumulative distributions and net losses | (117,949,240 | ) | (101,624,430 | ) | |
| Accumulated other comprehensive income | 3,502,616 | - | |||
| Total Modiv Inc. equity | 159,750,904 | 171,826,892 | |||
| Noncontrolling interest in the Operating Partnership | 81,283,056 | 50,603,000 | |||
| Total equity | 241,033,960 | 222,429,892 | |||
| Total liabilities and equity | 456,026,046 | $ | 428,494,502 |
All values are in US Dollars.
MODIV INC.
Reconciliation of Non-GAAP Measures
For the Three and Twelve Months Ended December 31, 2022
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net income (loss) (in accordance with GAAP) | 720,735 | $ | (2,178,469 | ) | $ | (4,511,318 | ) | $ | (435,505 | ) | |||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (3,687,500 | ) | (1,065,278 | ) | |||||
| Net loss attributable to common stockholders and Class C OP Units | (201,140 | ) | (3,100,344 | ) | (8,198,818 | ) | (1,500,783 | ) | |||||
| FFO adjustments: | |||||||||||||
| Add: | Depreciation and amortization of real estate properties | 4,347,809 | 3,290,588 | 14,929,574 | 13,710,588 | ||||||||
| Amortization of lease incentives | 88,752 | 53,203 | 412,098 | 245,438 | |||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 203,554 | 189,439 | 777,041 | 735,335 | |||||||||
| Impairment of real estate investment | 2,080,727 | - | 2,080,727 | - | |||||||||
| Less: | Gain on sale of real estate investments, net | (669,185 | ) | (2,338,904 | ) | (12,196,371 | ) | (6,136,588 | ) | ||||
| Reversal of impairment of real estate investments | - | - | - | (400,999 | ) | ||||||||
| FFO attributable to common stockholders and Class C OP Units | 5,850,517 | (1,906,018 | ) | (2,195,749 | ) | 6,652,991 | |||||||
| AFFO adjustments: | |||||||||||||
| Add: | Amortization of corporate intangibles | - | 158,819 | - | 1,556,348 | ||||||||
| Impairment of goodwill and intangible assets | - | 3,767,190 | 17,320,857 | 3,767,190 | |||||||||
| Non-recurring corporate relocation costs | 500,000 | - | 500,000 | - | |||||||||
| Stock compensation | 660,170 | 629,542 | 2,401,022 | 2,744,881 | |||||||||
| Deferred financing costs | 179,641 | 162,200 | 1,649,929 | 369,286 | |||||||||
| Non-recurring loan prepayment penalties | - | - | 615,336 | - | |||||||||
| Swap termination costs | - | - | 733,000 | 23,900 | |||||||||
| Amortization of above-market lease intangibles | 88,549 | 32,456 | 197,224 | 129,823 | |||||||||
| Due diligence expenses, including abandoned pursuit costs | 25,051 | (16,100 | ) | 661,222 | 696,825 | ||||||||
| Less: | Deferred rents | (643,784 | ) | 206,606 | (3,237,482 | ) | (1,478,818 | ) | |||||
| Unrealized gains on interest rate swaps, net | 505,263 | (285,982 | ) | (813,750 | ) | (970,039 | ) | ||||||
| Amortization of below-market lease intangibles | (231,175 | ) | (363,074 | ) | (1,202,711 | ) | (1,462,797 | ) | |||||
| Gain on forgiveness of economic relief note payable | - | - | - | (517,000 | ) | ||||||||
| Other adjustments for unconsolidated investment in a real estate property | 5,815 | (6,191 | ) | 5,251 | (62,776 | ) | |||||||
| AFFO attributable to common stockholders and Class C OP Units | $ | 6,940,047 | $ | 2,379,448 | $ | 16,634,149 | $ | 11,449,814 | |||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 7,487,728 | 7,531,167 | 7,487,204 | 7,544,834 | |||||||||
| Fully Diluted (1) | 10,195,869 | 8,744,340 | 10,225,850 | 8,780,131 | |||||||||
| FFO Per Share: | |||||||||||||
| Basic | $ | 0.78 | $ | (0.25 | ) | $ | (0.29 | ) | $ | 0.88 | |||
| Fully Diluted | $ | 0.57 | $ | (0.25 | ) | $ | (0.29 | ) | $ | 0.76 | |||
| AFFO Per Share | |||||||||||||
| Basic | $ | 0.93 | $ | 0.32 | $ | 2.22 | $ | 1.52 | |||||
| Fully Diluted | $ | 0.68 | $ | 0.27 | $ | 1.63 | $ | 1.30 | |||||
| (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 Twelve Months Ended December 31, 2022
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net income (loss) (in accordance with GAAP) | $ | 720,735 | $ | (2,178,469 | ) | $ | (4,511,318 | ) | $ | (435,505 | ) | ||
| Add: | Depreciation and amortization | 4,347,809 | 3,449,407 | 14,929,574 | 15,266,936 | ||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 203,554 | 189,439 | 777,041 | 735,335 | |||||||||
| Interest expense | 2,826,490 | 1,874,867 | 8,106,658 | 7,586,197 | |||||||||
| Loss on early extinguishment of debt | - | - | 1,725,318 | - | |||||||||
| Interest expense on unconsolidated investment in real estate property | 98,073 | 100,257 | 392,477 | 552,144 | |||||||||
| Impairment (reversal of impairment) of real estate investment property | 2,080,727 | - | 2,080,727 | (400,999 | ) | ||||||||
| Impairment of goodwill and intangible assets | - | 3,767,190 | 17,320,857 | 3,767,190 | |||||||||
| Stock compensation | 660,171 | 629,538 | 2,401,022 | 2,744,881 | |||||||||
| Acquisition fees and due diligence costs, including abandoned pursuit costs | 25,051 | (16,100 | ) | 661,222 | 696,825 | ||||||||
| Less: | Gain on sale of real estate investments, net | (669,185 | ) | (2,338,904 | ) | (12,196,371 | ) | (6,136,588 | ) | ||||
| Adjusted EBITDA | $ | 10,293,425 | $ | 5,477,225 | $ | 31,687,207 | $ | 24,376,416 | |||||
| Annualized Adjusted EBITDA | $ | 41,173,698 | $ | 21,908,900 | $ | 31,687,207 | $ | 24,376,416 | |||||
| Net debt: | |||||||||||||
| Consolidated debt | $ | 197,515,009 | $ | 183,033,756 | $ | 197,515,009 | $ | 183,033,756 | |||||
| Debt of unconsolidated investment in real estate property (a) | 9,487,515 | 9,709,710 | 9,487,515 | 9,709,710 | |||||||||
| Consolidated cash and restricted cash | (8,608,649 | ) | (58,407,520 | ) | (8,608,649 | ) | (58,407,520 | ) | |||||
| Cash of unconsolidated investment in real estate property (a) | (218,424 | ) | (502,041 | ) | (218,424 | ) | (502,041 | ) | |||||
| $ | 198,175,450 | $ | 133,833,905 | $ | 198,175,450 | $ | 133,833,905 | ||||||
| Net debt / Adjusted EBITDA | 4.8x | 6.1x | 6.3x | 5.5x |
(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, non-cash items such as non-cash compensation expenses and write-offs of transaction costs and other one-time transactions. 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.
MODIV INC.
Non-GAAP Measures - Net Asset Value Per Share
Estimated as of December 31, 2022 and Pro Forma Estimate as of January 31, 2022
(Unaudited)
| December 31, 2022 | January 31, 2022 (a) | |||||||
|---|---|---|---|---|---|---|---|---|
| Estimated<br><br> Value | Per Share<br><br> NAV | Pro Forma<br><br> Value | Per Share<br><br> NAV | |||||
| Assets | ||||||||
| Real estate properties | $ | 503,700,000 | $ | 48.76 | $ | 463,054,000 | $ | 45.73 |
| Investments in unconsolidated entity: Santa Clara property tenant-in-common interest (b) | 19,768,921 | 1.91 | 18,894,790 | 1.87 | ||||
| Cash and cash equivalents | 8,608,649 | 0.83 | 65,263,037 | 6.45 | ||||
| Interest rate swap derivative | 4,629,702 | 0.45 | - | - | ||||
| Other assets | 3,989,400 | 0.39 | 5,878,710 | 0.58 | ||||
| Total Assets | $ | 540,696,672 | $ | 52.34 | $ | 553,090,537 | $ | 54.62 |
| Liabilities | ||||||||
| Mortgage notes payable | $ | 41,293,644 | $ | 4.00 | $ | 46,236,403 | $ | 4.57 |
| Credit facility | 153,000,000 | 14.81 | 155,775,000 | 15.38 | ||||
| Accrued interest payable | 285,392 | 0.03 | 272,481 | 0.03 | ||||
| Accrued dividends and distributions payable | 1,768,068 | 0.17 | 1,028,074 | 0.10 | ||||
| Interest rate swap derivatives | 498,866 | 0.05 | - | - | ||||
| Other liabilities | 7,448,302 | 0.72 | 8,731,045 | 0.86 | ||||
| Total Liabilities | 204,294,272 | 19.78 | 212,043,003 | 20.94 | ||||
| Series A preferred stock | 50,000,000 | 4.84 | 50,000,000 | 4.94 | ||||
| Total estimated net asset value | $ | 286,402,400 | $ | 27.72 | $ | 291,047,534 | $ | 28.74 |
| Fully-diluted shares outstanding (c) | 10,331,042 | 10,125,412 | ||||||
| (a) | The estimated pro forma NAV per share (unaudited) as of January 31, 2022 reflected (i) the estimated asset values for 35 properties (excluding four assets held for sale) that<br> were in our portfolio on January 31, 2022, including two acquisitions completed in January 2022, (ii) net cash received from four dispositions that were pending as of January 31, 2022 and completed in February 2022, (iii) borrowings under<br> the credit facility provided by KeyBank National Association (“KeyBank”) and repayment of 20 mortgages in January 2022, and (iv) the estimated fair value of debt on the three consolidated mortgages remaining after the closing of the<br> credit facility provided by KeyBank and the four dispositions completed in February 2022. | |||||||
| --- | --- | |||||||
| (b) | Reflects the Company's 72.7% interest in the equity of the Santa Clara property which includes real estate valued at $30,910,000 and a mortgage with a fair value of $12,097,225. | |||||||
| --- | --- | |||||||
| (c) | Fully-diluted shares outstanding as of December 31, 2022 and January 31, 2022 includes the following: | |||||||
| --- | --- | |||||||
| i) | 1,312,382 Class C OP Units issued on January 18, 2022 in connection with the acquisition of the KIA auto dealership property; | |||||||
| --- | --- | |||||||
| ii) | 1,189,964 shares that would result from conversion of 657,949.5 Class M OP Units and 56,029 Class P OP Units assuming a conversion ratio of 1.6667 shares of the Company’s Class C<br> Common Stock for each Class M OP Unit and Class P OP Unit outstanding; and | |||||||
| --- | --- | |||||||
| iii) | 316,343 shares and 101,855 shares, respectively, that would result from conversion of Class R OP Units. | |||||||
| --- | --- |
Exhibit 99.2
NYSE: MDV
QUARTERLY SUPPLEMENTAL DATA
December 31, 2022
Modiv Inc.
Supplemental Information - Fourth 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 | |
| (Loss) 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 December 31, 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 Annual Report on Form 10-K for the year ended December 31, 2022, including the financial statements and management's discussion and analysis of financial condition and results of operations, which will be filed in March 2023.
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 portfolio of single-tenant net-lease properties throughout the United States, with a focus on acquiring critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation's supply chains. We also own non-core, legacy retail and office real estate properties, and are gradually reducing our office and retail exposure, subject to market conditions, with the goal of becoming a pure-play industrial manufacturing REIT. Driven by an investor-first focus and an experienced and dedicated management team, Modiv is committed to providing investors with MOnthly DIVidends through a durable portfolio of real estate investments designed to generate both current income and long-term growth. As of December 31, 2022, Modiv had a $535 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.
Modiv strives towards a “best-in-class” corporate governance structure through a board of directors and management team with decades of institutional real estate industry experience.
| 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:
Margaret Boyce, Financial Profiles, Inc.
mboyce@finprofiles.com
310-622-8247
Transfer Agent:
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
800-736-3001
4
Modiv Inc.
Consolidated Statements of Operations - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> 2022 | September 30,<br><br> 2022 | June 30,<br><br> 2022 | March 31,<br><br> 2022 | December 31,<br><br> 2021 | |||||||||||
| Rental income (a) | $ | 14,372,106 | $ | 10,951,673 | $ | 10,676,148 | $ | 10,174,340 | $ | 8,831,534 | |||||
| Expenses: | |||||||||||||||
| General and administrative (b) | 2,252,304 | 1,838,388 | 1,615,182 | 2,106,183 | 2,188,493 | ||||||||||
| Stock compensation | 660,171 | 549,240 | 679,747 | 511,865 | 629,538 | ||||||||||
| Depreciation and amortization | 4,347,809 | 3,598,592 | 3,682,681 | 3,300,492 | 3,449,407 | ||||||||||
| Interest expense | 2,826,490 | 2,514,838 | 1,197,154 | 1,568,175 | 1,874,867 | ||||||||||
| Property expenses (c) | 2,105,257 | 2,063,892 | 1,965,885 | 2,764,592 | 1,578,700 | ||||||||||
| Impairment of real estate investment property (d) | 2,080,727 | — | — | — | — | ||||||||||
| Impairment of goodwill and intangible assets (e) | — | — | — | 17,320,857 | 3,767,190 | ||||||||||
| Total expenses | 14,272,758 | 10,564,950 | 9,140,649 | 27,572,164 | 13,488,195 | ||||||||||
| Other operating income (loss): | |||||||||||||||
| Gain on sale of real estate investments | 669,185 | 3,932,029 | 720,071 | 6,875,086 | 2,338,904 | ||||||||||
| Operating income (loss) | 768,533 | 4,318,752 | 2,255,570 | (10,522,738 | ) | (2,317,757 | ) | ||||||||
| Other income (expense): | |||||||||||||||
| Interest income | 5,047 | 1,665 | 1,763 | 13,435 | 19,958 | ||||||||||
| Income from investment in unconsolidated entity | 51,312 | 64,358 | 66,868 | 95,464 | 53,337 | ||||||||||
| Loss on early extinguishment of debt (f) | — | — | — | (1,725,318 | ) | — | |||||||||
| Other (a) | (104,157 | ) | 65,992 | 66,143 | 65,993 | 65,993 | |||||||||
| Other (expense) income, net | (47,798 | ) | 132,015 | 134,774 | (1,550,426 | ) | 139,288 | ||||||||
| Net income (loss) | 720,735 | 4,450,767 | 2,390,344 | (12,073,164 | ) | (2,178,469 | ) | ||||||||
| Less: net income (loss) attributable to noncontrolling interest in Operating Partnership | (42,508 | ) | 528,540 | 219,214 | (1,928,029 | ) | — | ||||||||
| Net income (loss) attributable to Modiv Inc. | 763,243 | 3,922,227 | 2,171,130 | (10,145,135 | ) | (2,178,469 | ) | ||||||||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | |||||
| Net (loss) income attributable to common stockholders | $ | (158,632 | ) | $ | 3,000,352 | $ | 1,249,255 | $ | (11,067,010 | ) | $ | (3,100,344 | ) | ||
| (Loss) earnings per share attributable to common stockholders | |||||||||||||||
| Basic | $ | (0.02 | ) | $ | 0.40 | $ | 0.17 | $ | (1.47 | ) | $ | (0.41 | ) | ||
| Diluted | $ | (0.02 | ) | $ | 0.35 | $ | 0.14 | $ | (1.47 | ) | $ | (0.41 | ) | ||
| Weighted-average number of common shares outstanding | |||||||||||||||
| Basic | 7,487,728 | 7,449,968 | 7,478,973 | 7,533,158 | 7,531,167 | ||||||||||
| Diluted (g) | 7,487,728 | 10,180,543 | 10,221,490 | 7,533,158 | 7,531,167 | ||||||||||
| Distributions declared per common share (h) | $ | 0.2875 | $ | 0.2875 | $ | 0.2875 | $ | 0.3875 | $ | 0.2875 | |||||
| (a) | Rental income includes tenant reimbursements for property expenses and the fourth quarter of 2022 includes an early termination fee of $3,781,929 received from Sutter Health. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | General and administrative expenses include a $500,000 accrual for estimated costs of relocating our corporate offices to Reno, Nevada. | ||||||||||||||
| --- | --- | ||||||||||||||
| (c) | Property expenses for the fourth quarter of 2022 include increased property taxes and property management fees compared with the comparable quarter of 2021, primarily related to the growth of our<br> portfolio. These 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<br> leased to 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. | ||||||||||||||
| --- | --- | ||||||||||||||
| (d) | Impairment of investment in real estate property represents an impairment charge for a property located in Rocklin, California to reflect the net realizable value as a result of its reclassification<br> to asset held for sale. The sale of this property is expected to close by March 31, 2023. | ||||||||||||||
| --- | --- | ||||||||||||||
| (e) | 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 our<br> common stock is materially below 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 our decision to terminate our crowdfunding operations. | ||||||||||||||
| --- | --- | ||||||||||||||
| (f) | 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<br> and the prior credit facility with the 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<br> refinanced with the KeyBank credit facility and the related write-off of unrealized valuation losses of $788,016. | ||||||||||||||
| --- | --- | ||||||||||||||
| (g) | Diluted shares outstanding in the second and third quarters of 2022 include Class C, Class M, Class P and Class R OP Units since we reported net income for those quarters. Diluted shares outstanding<br> for periods when we reported a net loss do not include the OP Units since they would be anti-dilutive. | ||||||||||||||
| --- | --- | ||||||||||||||
| (h) | We increased the annual distribution rate on our 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<br> one-time 13th distribution for 2021 of $0.10 per share for stockholders of record on December 31, 2021. | ||||||||||||||
| --- | --- |
5
Modiv Inc.
Consolidated Statements of Comprehensive Income (Loss) - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> 2022 | September 30,<br><br> 2022 | June 30,<br><br> 2022 | March 31,<br><br> 2022 | December 31,<br><br> 2021 | |||||||||
| Net income (loss) | $ | 720,735 | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | |
| Other comprehensive income: | |||||||||||||
| Unrealized holding (loss) gain on interest rate swap designated as a cash flow hedge (a) | (216,200 | ) | 4,255,906 | — | — | — | |||||||
| Comprehensive income (loss) | 504,535 | 8,706,673 | 2,390,344 | (12,073,164 | ) | (2,178,469 | ) | ||||||
| Net (loss) income attributable to noncontrolling interest in Operating Partnership | (42,508 | ) | 528,540 | 219,214 | (1,928,029 | ) | — | ||||||
| Other comprehensive (loss) income attributable to noncontrolling interest in Operating Partnership: | |||||||||||||
| Unrealized holding (loss) gain on interest rate swap designated as a cash flow hedge | (34,942 | ) | 637,429 | — | — | — | |||||||
| Comprehensive (loss) income attributable noncontrolling interest in Operating Partnership | (77,450 | ) | 1,165,969 | 219,214 | (1,928,029 | ) | — | ||||||
| Comprehensive income (loss) attributable to Modiv Inc. | $ | 581,985 | $ | 7,540,704 | $ | 2,171,130 | $ | (10,145,135 | ) | $ | (2,178,469 | ) | |
| (a) | Reflects the change in fair value of the hedged derivative instrument for the six months ended December 31, 2022 that was designated as a cash flow hedge for financial accounting purposes beginning<br> July 1, 2022. | ||||||||||||
| --- | --- |
6
Modiv Inc.
(Loss) Earnings Per Share - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> 2022 | September 30,<br><br> 2022 | June 30,<br><br> 2022 | March 31,<br><br> 2022 | December 31,<br><br> 2021 | |||||||||||
| Numerator - Basic: | |||||||||||||||
| Net income (loss) | $ | 720,735 | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | |||
| Net loss (income) attributable to noncontrolling interest in Operating Partnership | 42,508 | (528,540 | ) | (219,214 | ) | 1,928,029 | — | ||||||||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | |||||
| Net (loss) income attributable to common stockholders | $ | (158,632 | ) | $ | 3,000,352 | $ | 1,249,255 | $ | (11,067,010 | ) | $ | (3,100,344 | ) | ||
| Numerator - Diluted: | |||||||||||||||
| Net income (loss) | $ | 720,735 | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | |||
| Less: preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | |||||
| Net (loss) income attributable to common stockholders | $ | (201,140 | ) | $ | 3,528,892 | $ | 1,468,469 | $ | (12,995,039 | ) | $ | (3,100,344 | ) | ||
| Denominator: | |||||||||||||||
| Weighted average shares outstanding - basic | 7,487,728 | 7,449,968 | 7,478,973 | 7,533,158 | 7,531,167 | ||||||||||
| Operating Partnership Units - Class C (a) | — | 1,312,382 | 1,312,382 | — | — | ||||||||||
| Operating Partnership Units - other (b) | — | 1,418,193 | 1,430,135 | — | — | ||||||||||
| Weighted average shares outstanding - diluted | 7,487,728 | 10,180,543 | 10,221,490 | 7,533,158 | 7,531,167 | ||||||||||
| (Loss) earnings per share attributable to common stockholders: | |||||||||||||||
| Basic | $ | (0.02 | ) | $ | 0.40 | $ | 0.17 | $ | (1.47 | ) | $ | (0.41 | ) | ||
| Diluted | $ | (0.02 | ) | $ | 0.35 | $ | 0.14 | $ | (1.47 | ) | $ | (0.41 | ) | ||
| (a) | We issued 1,312,382 Class C OP Units at an agreed upon value of $25 per unit in connection with our January 18, 2022 acquisition of a KIA auto dealership property in an “UPREIT” transaction. These units<br> were not included in the computation of Diluted EPS for the quarters ended December 31, 2022 and March 31, 2022 because their effect would be anti-dilutive. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | During the three months ended December 31, 2022, March 31,<br><br><br><br> 2022 and December 31, 2021, the weighted average dilutive effect of 1,395,759, 1,347,958 and 1,213,173 shares, respectively, related to other Operating Partnership units were<br> excluded from the computation of Diluted 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 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> 2022 | September 30,<br><br> 2022 | June 30,<br><br> 2022 | March 31,<br><br> 2022 | December 31,<br><br> 2021 | ||||||||||||
| Net income (loss) (in accordance with GAAP) | $ | 720,735 | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | ||||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | ||||||
| Net (loss) income attributable to common stockholders and Class C OP Units | (201,140 | ) | 3,528,892 | 1,468,469 | (12,995,039 | ) | (3,100,344 | ) | ||||||||
| FFO adjustments: | ||||||||||||||||
| Add: | Depreciation and amortization | 4,347,809 | 3,598,592 | 3,682,681 | 3,300,492 | 3,290,588 | ||||||||||
| Amortization of lease incentives | 88,752 | 176,296 | 75,655 | 71,394 | 53,203 | |||||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 203,554 | 192,551 | 190,468 | 190,468 | 189,439 | |||||||||||
| Impairment of real estate investment property | 2,080,727 | — | — | — | — | |||||||||||
| Less: | Gain on sale of real estate investments, net | (669,185 | ) | (3,932,029 | ) | (720,071 | ) | (6,875,086 | ) | (2,338,904 | ) | |||||
| FFO attributable to common stockholders and Class C OP Units | 5,850,517 | 3,564,302 | 4,697,202 | (16,307,771 | ) | (1,906,018 | ) | |||||||||
| AFFO adjustments: | ||||||||||||||||
| Add: | Amortization of corporate intangibles (a) | — | — | — | — | 158,819 | ||||||||||
| Impairment of goodwill and intangible assets (a) | — | — | — | 17,320,857 | 3,767,190 | |||||||||||
| Non-recurring corporate relocation costs | 500,000 | — | — | — | — | |||||||||||
| Stock compensation (b) | 660,170 | 549,240 | 679,747 | 511,865 | 629,542 | |||||||||||
| Deferred financing costs (c) | 179,641 | 101,783 | 101,781 | 1,266,725 | 162,200 | |||||||||||
| Non-recurring loan prepayment penalties | — | — | — | 615,336 | — | |||||||||||
| Swap termination costs | — | — | — | 733,000 | — | |||||||||||
| Amortization of above-market lease intangibles | 88,549 | 43,763 | 32,456 | 32,456 | 32,456 | |||||||||||
| Acquisition fees and due diligence expenses, including abandoned pursuit costs (d) | 25,051 | 44,863 | 4,639 | 586,669 | (16,100 | ) | ||||||||||
| Less: | Deferred rents | (643,784 | ) | (976,419 | ) | (981,083 | ) | (636,196 | ) | 206,606 | ||||||
| Unrealized gain on interest rate swaps | 505,263 | 59,000 | (589,997 | ) | (788,016 | ) | (285,982 | ) | ||||||||
| Amortization of below-market lease intangibles | (231,175 | ) | (258,652 | ) | (349,810 | ) | (363,074 | ) | (363,074 | ) | ||||||
| Other adjustments for unconsolidated investment in a real estate property | 5,815 | (188 | ) | (188 | ) | (188 | ) | (6,191 | ) | |||||||
| AFFO attributable to common stockholders and Class C OP Units (e) | $ | 6,940,047 | $ | 3,127,692 | $ | 3,594,747 | $ | 2,971,663 | $ | 2,379,448 | ||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 7,487,728 | 7,449,968 | 7,478,973 | 7,533,158 | 7,531,167 | |||||||||||
| Fully diluted (f) (g) | 10,195,869 | 10,180,543 | 10,221,490 | 10,193,498 | 8,744,340 | |||||||||||
| FFO per share: | ||||||||||||||||
| Basic | $ | 0.78 | $ | 0.48 | $ | 0.63 | $ | (2.16 | ) | $ | (0.25 | ) | ||||
| Fully diluted | $ | 0.57 | $ | 0.35 | $ | 0.46 | $ | (2.16 | ) | $ | (0.25 | ) | ||||
| AFFO per share: | ||||||||||||||||
| Basic | $ | 0.93 | $ | 0.42 | $ | 0.48 | $ | 0.39 | $ | 0.32 | ||||||
| Fully diluted (e) | $ | 0.68 | $ | 0.31 | $ | 0.35 | $ | 0.29 | $ | 0.27 | ||||||
| (a) | Intangible assets reflected our investment in our crowdfunding platform which was impaired in the fourth quarter of 2021 due to our decision to terminate our crowdfunding operations. Goodwill, which<br> 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 our common stock was materially below our historical net asset<br> value and the book value of our equity. | |||||||||||||||
| --- | --- | |||||||||||||||
| (b) | Stock compensation expense includes (i) amortization of the Class P OP Units granted to our Chief Executive Officer and Chief Financial Officer on December 31, 2019; (ii) amortization of the Class R<br> OP Units granted to all of our employees, including the Chief Executive Officer and Chief Financial Officer, on January 25, 2021; and (iii) stock granted to our independent directors each quarter as partial consideration for their service as<br> 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<br> related to four asset sales. | |||||||||||||||
| --- | --- | |||||||||||||||
| (d) | Abandoned pursuit costs for the first quarter of 2022 primarily reflect the write-off of due diligence costs incurred due to our decision not to extend the February 18, 2022 termination date for our<br> agreement to purchase a portfolio of 10 properties leased to Walgreens, which we abandoned due to inability to obtain the mortgage servicer's approval prior to the contract termination date and changes in market conditions. | |||||||||||||||
| --- | --- | |||||||||||||||
| (e) | AFFO for the fourth quarter of 2022 includes an early termination fee of $3,751,984 received from Sutter Health.. | |||||||||||||||
| --- | --- | |||||||||||||||
| (f) | The increase in diluted shares outstanding beginning in the first quarter of 2022 primarily reflects the issuance of 1,312,382<br> Class C interests in our operating partnership (OP Units”) as partial consideration for the acquisition of a 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 four quarters ended in 2022 presented above and the Class M, Class P and<br> Class R OP Units to compute the weighted average number of shares for the quarter ended in 2021 presented above. | |||||||||||||||
| --- | --- |
8
Modiv Inc.
Adjusted EBITDA - Last Five Quarters
(Unaudited)
| Three Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> 2022 | September 30,<br><br> 2022 | June 30,<br><br> 2022 | March 31,<br><br> 2022 | December 31,<br><br> 2021 | ||||||||||||
| Net (loss) income (in accordance with GAAP) | $ | 720,735 | $ | 4,450,767 | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | ||||
| Add: | Depreciation and amortization | 4,347,809 | 3,598,592 | 3,682,681 | 3,300,492 | 3,449,407 | ||||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 203,554 | 192,551 | 190,468 | 190,468 | 189,439 | |||||||||||
| Interest expense | 2,826,490 | 2,514,838 | 1,197,155 | 1,568,175 | 1,874,867 | |||||||||||
| Loss on early extinguishment of debt (a) | — | — | — | 1,725,318 | — | |||||||||||
| Interest expense on unconsolidated investment in real estate property | 98,073 | 98,624 | 98,135 | 97,645 | 100,257 | |||||||||||
| Impairment of real estate investment property (b) | 2,080,727 | — | — | — | — | |||||||||||
| Impairment of goodwill and intangible assets (c) | — | — | — | 17,320,857 | 3,767,190 | |||||||||||
| Stock compensation | 660,171 | 549,240 | 679,747 | 511,865 | 629,542 | |||||||||||
| Acquisition fees and due diligence expenses, including abandoned pursuit costs | 25,051 | 44,863 | 4,639 | 586,669 | (16,100 | ) | ||||||||||
| Less: | Gain on sale of real estate investments | (669,185 | ) | (3,932,029 | ) | (720,071 | ) | (6,875,086 | ) | (2,338,904 | ) | |||||
| Adjusted EBITDA | $ | 10,293,425 | $ | 7,517,446 | $ | 7,523,098 | $ | 6,353,239 | $ | 5,477,229 | ||||||
| Annualized adjusted EBITDA | $ | 41,173,698 | $ | 30,069,783 | $ | 30,092,392 | $ | 25,412,956 | $ | 21,908,916 | ||||||
| Net debt: | ||||||||||||||||
| Debt | $ | 197,515,009 | $ | 201,365,536 | $ | 201,425,173 | $ | 165,509,220 | $ | 183,033,756 | ||||||
| Debt of unconsolidated investment in real estate property (d) | 9,487,515 | 9,487,515 | 9,599,182 | 9,653,689 | 9,709,710 | |||||||||||
| Cash and restricted cash | (8,608,649 | ) | (5,726,888 | ) | (11,705,449 | ) | (25,344,063 | ) | (58,407,520 | ) | ||||||
| Cash of unconsolidated investment in real estate property (d) | (218,424 | ) | (341,007 | ) | (585,357 | ) | (458,948 | ) | (502,041 | ) | ||||||
| $ | 198,175,450 | $ | 204,785,156 | $ | 198,733,549 | $ | 149,359,898 | $ | 133,833,905 | |||||||
| Net debt / Adjusted EBITDA | 4.8x | 6.8x | 6.6x | 5.9x | 6.1x | |||||||||||
| (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<br> with the 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 refinancing four mortgages with the KeyBank credit<br> facility and the related write-off of unrealized valuation losses of $788,016. | |||||||||||||||
| --- | --- | |||||||||||||||
| (b) | Impairment of real estate investment property represents an impairment charge for a property located in Rocklin, California to reflect its net realizable value as a result of its reclassification to<br> asset held for sale. The sale of this property is expected to close by March 31, 2023. | |||||||||||||||
| --- | --- | |||||||||||||||
| (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 our<br> common stock is materially below 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 our decision to terminate our crowdfunding operations. | |||||||||||||||
| --- | --- | |||||||||||||||
| (d) | Includes our approximate 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, we modified the calculation of our leverage ratio to conform with the definition used in our KeyBank credit facility as set forth below.
| December 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 (d) | |||||
|---|---|---|---|---|---|---|
| Total Asset Value | ||||||
| Cash and cash equivalents (a) | $ | 8,608,649 | $ | 58,407,520 | ||
| Borrowing base value (b) | 408,598,973 | 362,497,305 | ||||
| Other real estate value (c) | 97,340,000 | 130,670,000 | ||||
| Pro-rata share of unconsolidated investment | 28,582,595 | 28,728,063 | ||||
| Total asset value | $ | 543,130,217 | $ | 580,302,888 | ||
| Indebtedness | ||||||
| Credit facility revolver | $ | 3,000,000 | $ | 55,775,000 | ||
| Credit facility term loan | 150,000,000 | 100,000,000 | ||||
| Mortgage debt (c) | 44,515,009 | 66,833,439 | ||||
| Pro-rata share of unconsolidated investment | 9,487,515 | 9,709,710 | ||||
| Total indebtedness | $ | 207,002,524 | $ | 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 in 2022. | |||||
| --- | --- | |||||
| (b) | The increase in the borrowing base value reflects the additions of (i) eight industrial properties acquired in April 2022 which are leased to Lindsay Precast and (ii) the Producto and Valtir<br> acquisitions in July and August 2022. These additions were partially offset by the three office properties sold in June, August and September 2022 and one retail property sold in December 2022. | |||||
| --- | --- | |||||
| (c) | The decrease in other real estate value and mortgage debt primarily reflects the four property dispositions in February 2022. | |||||
| --- | --- |
10
Modiv Inc.
Capitalization as of December 31, 2022
(Unaudited)
| PREFERRED EQUITY | |||
|---|---|---|---|
| 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock | $ | 50,000,000 | |
| % of Total Capitalization | 14 | % | |
| COMMON EQUITY | |||
| Shares of Class C Common Stock | 7,512,353 | ||
| OP Units (Class M, Class P, Class R and Class C) | 2,818,689 | ||
| Total Class C Common Stock and OP Units | 10,331,042 | ||
| Price Per Share / Unit at December 31, 2022 | $ | 12.00 | |
| IMPLIED EQUITY MARKET CAPITALIZATION | $ | 123,972,504 | |
| % of Total Capitalization | 33 | % | |
| DEBT | |||
| Mortgage Debt | |||
| Costco Property | $ | 18,850,000 | |
| Taylor Fresh Foods Property | 12,350,000 | ||
| Sutter Health Property | 13,315,009 | ||
| Total Mortgage Debt | $ | 44,515,009 | |
| KeyBank Credit Facility | |||
| Revolver | $ | 3,000,000 | |
| Term Loan (a) & (b) | 150,000,000 | ||
| Total Credit Facility | $ | 153,000,000 | |
| TOTAL DEBT | $ | 197,515,009 | |
| % of Total Capitalization | 53 | % | |
| % of Total Debt - Floating Rate Debt | 2 | % | |
| % of Total Debt - Fixed<br> Rate Debt (a) & (b) | 98 | % | |
| % of Total Debt | 100 | % | |
| ENTERPRISE VALUE | |||
| Total Capitalization | $ | 371,487,513 | |
| Less: Cash and Cash Equivalents | (8,608,649 | ) | |
| Enterprise Value | $ | 362,878,864 | |
| (a) | 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<br> this transaction, we sold a one-time 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. | ||
| --- | --- | ||
| (b) | On October 26, 2022, we purchased another five-year swap at 3.440% on our $100,000,000 term loan commitment that will result in a fixed interest rate of 5.04% when our leverage ratio is less than or<br> equal to 40%. As part of this transaction, we sold a one-time 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.
Consolidated Balance Sheets
(Unaudited)
| December 31,<br><br> <br>2021 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Real estate investments: | |||||
| Land | 103,657,237 | $ | 61,005,402 | ||
| Buildings and improvements | 329,867,099 | 250,723,446 | |||
| Equipment | 4,429,000 | — | |||
| Tenant origination and absorption costs | 19,499,749 | 22,027,054 | |||
| Total investments in real estate property | 457,453,085 | 333,755,902 | |||
| Accumulated depreciation and amortization | (46,752,322 | ) | (37,611,133 | ) | |
| Total investments in real estate property, net | 410,700,763 | 296,144,769 | |||
| Unconsolidated investment in a real estate property | 10,007,420 | 9,941,338 | |||
| Total real estate investments excluding real estate investments held for sale, net | 420,708,183 | 306,086,107 | |||
| Real estate investments held for sale, net | 5,255,725 | 31,510,762 | |||
| Total real estate investments, net | 425,963,908 | 337,596,869 | |||
| Cash and cash equivalents | 8,608,649 | 55,965,550 | |||
| Restricted cash | — | 2,441,970 | |||
| Receivable from sale of early termination of lease | — | 1,836,767 | |||
| Tenant receivables | 8,859,329 | 5,996,919 | |||
| Above-market lease intangibles, net | 1,850,756 | 691,019 | |||
| Prepaid expenses and other assets | 6,100,937 | 5,856,255 | |||
| Interest rate swap derivative | 4,629,702 | — | |||
| Assets related to real estate investments held for sale | 12,765 | 788,296 | |||
| Goodwill | — | 17,320,857 | |||
| Total assets | 456,026,046 | $ | 428,494,502 | ||
| Liabilities and Equity | |||||
| Mortgage notes payable, net | 44,435,556 | $ | 152,223,579 | ||
| Mortgage notes payable related to real estate investments held for sale, net | — | 21,699,912 | |||
| Total mortgage notes payable, net | 44,435,556 | 173,923,491 | |||
| Credit facility revolver | 3,000,000 | 8,022,000 | |||
| Credit facility term loan, net | 148,018,164 | — | |||
| Accounts payable, accrued and other liabilities | 9,245,933 | 11,844,881 | |||
| Below-market lease intangibles, net | 9,675,686 | 11,102,940 | |||
| Interest rate swap derivatives | 498,866 | 788,016 | |||
| Liabilities related to real estate investments held for sale | 117,881 | 383,282 | |||
| Total liabilities | 214,992,086 | 206,064,610 | |||
| Commitments and contingencies | |||||
| 7.375% Series A cumulative redeemable perpetual preferred stock, 0.001 par value, 2,000,000<br> shares authorized, issued and outstanding as of December 31, 2022 and 2021 | 2,000 | 2,000 | |||
| Class C common stock, 0.001 par value, 300,000,000 shares authorized, 7,762,506 shares issued and 7,512,353 shares outstanding as of December 31, 2022 and 7,426,636<br> shares issued and outstanding as of December 31, 2021 | 7,762 | 7,427 | |||
| Class S common stock, 0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 63,768 shares issued and outstanding as of December 31,<br><br><br><br> 2021 | — | 64 | |||
| Additional paid-in-capital | 278,349,384 | 273,441,831 | |||
| Treasury stock, at costs, 250,153 shares held as of December 31, 2022 and no shares as of December 31, 2021 | (4,161,618 | ) | — | ||
| Cumulative distributions and net losses | (117,949,240 | ) | (101,624,430 | ) | |
| Accumulated other comprehensive income | 3,502,616 | — | |||
| Total Modiv Inc. equity | 159,750,904 | 171,826,892 | |||
| Noncontrolling interests in the Operating Partnership | 81,283,056 | 50,603,000 | |||
| Total equity | 241,033,960 | 222,429,892 | |||
| Total liabilities and equity | 456,026,046 | $ | 428,494,502 |
All values are in US Dollars.
12
Modiv Inc.
Debt Overview
(Unaudited)
| Outstanding Balance | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Collateral | December 31,<br><br> <br>2022 | December 31,<br><br> <br>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 | 13,315,009 | 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 | ||||||||
| 44,515,009 | 152,975,437 | ||||||||||||
| Plus unamortized mortgage premium | 119,245 | 204,281 | |||||||||||
| Less unamortized deferred financing costs | (198,698 | ) | (956,139 | ) | |||||||||
| Mortgage notes payable, net | 44,435,556 | 152,223,579 | |||||||||||
| KeyBank Credit Facility: | |||||||||||||
| Revolver (a) | 3,000,000 | — | (b) | (b) | 1/18/26 | ||||||||
| Term loan (a)(d)(e) | 150,000,000 | — | (c) | (c) | 1/18/27 | ||||||||
| Bank of California Credit Facility (a) | — | 8,022,000 | (f) | (f) | n/a | ||||||||
| Total Credit Facility | 153,000,000 | 8,022,000 | |||||||||||
| Less unamortized deferred financing costs | (1,981,836 | ) | (100,080 | ) | |||||||||
| 151,018,164 | 7,921,920 | ||||||||||||
| Total debt, net | $ | 195,453,720 | $ | 160,145,499 | |||||||||
| (a) | On January 18, 2022, we refinanced 20 mortgage notes and our prior credit facility with the KeyBank Credit Facility. During the second quarter of 2022, we borrowed $44,000,000 to fund the Lindsay<br> Acquisition, drew the 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, we borrowed $28,000,000 to fund the<br> Producto and Valtir 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. During the fourth quarter, a<br> repayment of $3,775,000 was made on the Revolver utilizing proceeds from the Sutter Health early termination fee. | ||||||||||||
| --- | --- | ||||||||||||
| (b) | The interest rate on the Revolver is based on our leverage ratio at the end of the prior quarter. With our leverage ratio at 38% as of September 30, 2022, the spread over the Secured Overnight<br> Financing Rate (‘‘SOFR’’), including a 10 basis point credit adjustment, is 165 basis points and the interest rate on the Revolver was 5.96% as of December 31, 2022.<br> 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<br> this transaction, we agreed to a 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) | On October 21, 2022, we exercised the accordion feature of our Credit Facility. Our Credit Facility was increased to $400,000,000 and is comprised of a $150,000,000 Revolver and a $250,000,000 Term<br> Loan. The Credit Facility includes an updated accordion option that allows us to request additional Revolver and Term Loan lender commitments up to a total of $750,000,000. On December 20, 2022, the Credit Agreement was amended to allow us to<br> draw on the additional $100,000,000 Term Loan commitment up to five times between December 20, 2022 and April 19, 2023 in exchange for a quarterly unused fee. | ||||||||||||
| --- | --- | ||||||||||||
| (e) | On October 26, 2022, we purchased another five-year swap at 3.440% on our $100,000,000 term loan commitment that will result in a fixed interest rate of 5.04% when our leverage ratio is less than or<br> equal to 40%. As part of this transaction, we sold a one-time 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. | ||||||||||||
| --- | --- | ||||||||||||
| (f) | Under the terms of the prior credit facility with Bank of California, we paid a variable rate of interest on outstanding amounts equal to one percentage point over the prime rate published in The<br> Wall Street Journal, provided that 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 our 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 our 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 December 31, 2022, we believe we are in compliance with the covenants.
| Unsecured Credit Facility Covenants | Required | December 31,<br><br> <br>2022 | |||
|---|---|---|---|---|---|
| Maximum leverage ratio | <60% | 38% | |||
| Minimum fixed charge coverage ratio | >1.50x | 2.00x | |||
| Maximum secured indebtedness ratio | 40% | 8% | |||
| Minimum consolidated tangible net worth | $ | 210,760,509 | $ | 289,242,981 | |
| Minimum investment grade tenants in borrowing base | 30% | 41% | |||
| Weighted average lease term (years) | 7 | 13 | |||
| Mortgage Notes Key Covenants | Debt service<br><br> <br>coverage ratio | December 31,<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 our property acquisition activity during each of last five quarters ended December 31,
2022.
| Q4 2022 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tenant and Location | Property <br><br> Type | Area<br><br> <br>(Square Feet) | Lease<br><br> <br>Terms (Years) | Annual Rent<br><br> <br>Increase | Acquisition<br><br> <br>Price | Initial Cap<br><br> <br>Rate | Weighted<br><br> <br>Average<br><br> <br>Cap Rate | ||||||||||
| None | — | — | — | % | $ | — | — | % | — | % | |||||||
| Q3 2022 | |||||||||||||||||
| --- | |||||||||||||||||
| Tenant and Location | Property <br><br> Type | Area<br><br> <br>(Square Feet) | Lease<br><br> Terms <br><br> (Years) | Annual Rent<br><br> <br>Increase | Acquisition <br><br> Price | Initial Cap <br><br> Rate | Weighted<br><br> <br>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<br><br> <br>(Square Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual Rent<br><br> <br>Increase | Acquisition<br><br> <br>Price | Initial Cap<br><br> <br>Rate | Weighted<br><br> <br>Average<br><br> <br>Cap Rate | ||||||||||
| Lindsay Precast, eight properties acquired in Colorado (3), Ohio (2), North Carolina, South Carolina and<br> 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<br><br> <br>(Square Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual Rent <br><br> Increase | Acquisition <br><br> Price | Initial Cap<br><br> <br>Rate | Weighted<br><br> <br>Average<br><br> <br>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<br><br> <br>(Square Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual Rent<br><br> <br>Increase | Acquisition<br><br> <br>Price | Initial Cap<br><br> <br>Rate | Weighted<br><br> <br>Average<br><br> <br>Cap Rate | ||||||||||
| Arrow Tru-Line, Archbold, OH | Industrial | 206,155 | 20.0 | 2.0 | % | $ | 11,460,000 | 6.7 | % | 8.1 | % | ||||||
| (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 our property disposition activity during each of last five quarters ended December 31,
2022.
| Q4 2022 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tenant and Location | Property<br><br> <br>Type | Area (Square<br><br> <br>Feet) | Acquisition<br><br> <br>Price | Disposition<br><br> <br>Price | Net Book<br><br> <br>Value | Disposition<br><br> <br>Costs | Gain on Sale | Cap Rate | ||||||||
| Raising Cane's, San Antonio, TX | Retail | 3,853 | $ | 3,644,221 | $ | 4,313,045 | $ | 3,504,097 | $ | 139,763 | $ | 669,185 | 5.7 | % | ||
| Q3 2022 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property<br><br> <br>Type | Area (Square<br><br> <br>Feet) | Acquisition <br><br> Price | Disposition<br><br> <br>Price | Net Book<br><br> <br>Value | Disposition<br><br> <br>Costs | Gain on Sale | Cap Rate | ||||||||
| Williams Sonoma, Summerlin, NV | Office | 35,867 | $ | 7,211,012 | $ | 9,300,000 | $ | 7,339,316 | $ | 335,748 | $ | 1,624,936 | 7.4 | % | ||
| Wyndham, Summerlin, NV | Office | 41,390 | 10,116,502 | 12,900,000 | 9,960,478 | 632,429 | 2,307,093 | 7.4 | % | |||||||
| 77,257 | $ | 17,327,514 | $ | 22,200,000 | $ | 17,299,794 | $ | 968,177 | $ | 3,932,029 | 7.4 | % | ||||
| Q2 2022 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property<br><br> <br>Type | Area (Square<br><br> <br>Feet) | Acquisition <br><br> Price | Disposition <br><br> Price | Net Book <br><br> Value | Disposition <br><br> Costs | Gain on Sale | Cap Rate | ||||||||
| EMCOR, Cincinnati, OH | Office | 39,385 | $ | 6,138,538 | $ | 6,525,000 | $ | 5,625,571 | $ | 179,358 | $ | 720,071 | 7.8 | % | ||
| Q1 2022 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property<br><br> <br>Type | Area (Square<br><br> <br>Feet) | Acquisition<br><br> <br>Price | Disposition<br><br> <br>Price | Net Book<br><br> <br>Value | Disposition<br><br> <br>Costs | Gain on Sale | Cap Rate | ||||||||
| Bon Secours, Richmond, VA | Office | 72,890 | $ | 10,842,907 | $ | 10,200,000 | $ | 9,919,061 | $ | 252,344 | $ | 28,595 | 8.1 | % | ||
| Omnicare, Richmond, VA | Flex | 51,800 | 7,324,370 | 8,760,000 | 6,650,887 | 218,489 | 1,890,624 | 6.8 | % | |||||||
| Texas Health, Dallas, TX | Office | 38,794 | 7,689,924 | 7,040,000 | 6,784,168 | 168,352 | 87,480 | 7.9 | % | |||||||
| Accredo, Orlando, FL | Office | 63,000 | 10,710,500 | 14,000,000 | 8,682,338 | 449,275 | 4,868,387 | 7.3 | % | |||||||
| 226,484 | $ | 36,567,701 | $ | 40,000,000 | $ | 32,036,454 | $ | 1,088,460 | $ | 6,875,086 | 7.5 | % | ||||
| Q4 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property<br><br> <br>Type | Area (Square<br><br> <br>Feet) | Acquisition<br><br> <br>Price | Disposition<br><br> <br>Price | Net Book <br><br> Value | Disposition <br><br> Costs | Gain on Sale | Cap Rate | ||||||||
| Harley Davidson, Bedford, TX | Retail | 70,960 | $ | 13,178,286 | $ | 15,270,000 | $ | 12,541,067 | $ | 390,029 | $ | 2,338,904 | 6.2 | % |
16
Modiv Inc.
Top 10 Tenants
(Unaudited)
| Tenant | Industry | ABR | ABR as a<br><br> <br>Percentage of<br><br> <br>Total Portfolio | Area<br><br> <br>(Square Feet) | Square Feet<br><br> <br>as a<br><br> <br>Percentage of<br><br> <br>Total Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| KIA of Carson | Retail | $ | 3,984,941 | 12 | % | 72,623 | 2 | % | |||
| Lindsay | Industrial | 3,783,930 | 11 | % | 618,195 | 20 | % | ||||
| Costco Wholesale | Office | 2,362,956 | 7 | % | 97,191 | 3 | % | ||||
| AvAir | Industrial | 2,318,570 | 7 | % | 162,714 | 5 | % | ||||
| 3M | Industrial | 1,856,419 | 6 | % | 410,400 | 13 | % | ||||
| Valtir | Industrial | 1,814,847 | 5 | % | 293,612 | 9 | % | ||||
| Taylor Fresh Foods | Industrial | 1,638,884 | 5 | % | 216,727 | 7 | % | ||||
| FUJIFILM Dimatix (a) | Industrial | 1,630,916 | 5 | % | 91,740 | 3 | % | ||||
| Cummins | Office | 1,520,789 | 4 | % | 87,230 | 3 | % | ||||
| Northrop Grumman (b) | Industrial | 1,274,437 | 4 | % | 107,419 | 3 | % | ||||
| Total Top 10 Tenants | $ | 22,186,689 | 66 | % | 2,157,851 | 68 | % | ||||
| (a) | Reflects our approximate 72.71% tenant-in-common interest (“TIC Interest”). | ||||||||||
| --- | --- | ||||||||||
| (b) | Reclassified on December 31, 2022 to industrial property from office property to reflect the lessee's change in use since a majority of the square footage of the property is now being used as<br> laboratory space. | ||||||||||
| --- | --- |
Modiv Inc.
Property Type
(Unaudited)
| Property | Number of<br><br> <br>Properties | ABR | ABR as a<br><br> <br>Percentage of<br><br> <br>Total<br><br> <br>Portfolio | Area<br><br> <br>(Square Feet) | Square Feet as<br><br> <br>a Percentage<br><br> <br>of Total<br><br> <br>Portfolio | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Industrial, including TIC Interest (1) | 27 | $ | 19,982,934 | 59 | % | 2,541,792 | 80 | % | ||||
| Retail | 12 | 6,702,239 | 20 | % | 230,176 | 7 | % | |||||
| Office (1) | 7 | 6,982,193 | 21 | % | 401,291 | 13 | % | |||||
| Total Properties | 46 | $ | 33,667,366 | 100 | % | 3,173,259 | 100 | % | ||||
| (1) | One property was reclassified on December 31, 2022 to industrial from office to reflect the lessee's change in use since a majority of the square footage of the property is now being used as<br> laboratory space. | |||||||||||
| --- | --- |
17
Modiv Inc.
Tenant Industry Diversification
(Unaudited)
| Industry | Number of<br><br> <br>Properties | ABR | ABR as a<br><br> <br>Percentage of<br><br> <br>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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Automobile & Components | 2 | $ | 4,549,518 | 13 | % | 148,623 | 5 | % | ||||
| Transportation | 5 | 4,133,417 | 12 | % | 456,326 | 14 | % | |||||
| General Retailers | 11 | 3,801,253 | 11 | % | 204,744 | 6 | % | |||||
| Precast Concrete | 8 | 3,783,928 | 11 | % | 618,195 | 19 | % | |||||
| Manufacturing | 5 | 3,585,653 | 10 | % | 430,395 | 14 | % | |||||
| Food, Beverage & Tobacco | 2 | 2,217,374 | 7 | % | 295,584 | 9 | % | |||||
| Technology Hardware & Equipment | 2 | 2,215,635 | 7 | % | 130,240 | 4 | % | |||||
| Defense | 2 | 2,126,623 | 6 | % | 153,633 | 5 | % | |||||
| Materials | 1 | 1,856,419 | 6 | % | 410,400 | 13 | % | |||||
| Government | 2 | 1,593,142 | 5 | % | 117,606 | 4 | % | |||||
| Commercial & Professional Services | 2 | 1,566,981 | 5 | % | 70,567 | 2 | % | |||||
| Consumer Services | 1 | 924,000 | 3 | % | 50,000 | 2 | % | |||||
| Pharmaceuticals, Biotechnology & Life Sciences | 1 | 645,900 | 2 | % | 20,800 | 1 | % | |||||
| Energy | 1 | 565,643 | 2 | % | 26,036 | 1 | % | |||||
| Consumer Durables and Apparel | 1 | 101,880 | — | % | 40,110 | 1 | % | |||||
| Total | 46 | $ | 33,667,366 | 100 | % | 3,173,259 | 100 | % |
18
Modiv Inc.
Tenant Geographic Diversification
(Unaudited)
| State | Number of<br><br> <br>Properties | ABR | ABR as a<br><br> <br>Percentage of<br><br> <br>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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| California | 13 | $ | 11,964,073 | 36 | % | 600,395 | 19 | % | ||||
| Arizona | 2 | 3,957,454 | 12 | % | 379,441 | 12 | % | |||||
| Ohio | 7 | 3,133,160 | 9 | % | 644,021 | 20 | % | |||||
| Florida | 3 | 2,689,529 | 8 | % | 237,329 | 8 | % | |||||
| Washington | 1 | 2,362,956 | 7 | % | 97,191 | 3 | % | |||||
| Illinois | 1 | 1,856,419 | 5 | % | 410,400 | 13 | % | |||||
| Tennessee | 1 | 1,520,789 | 5 | % | 87,230 | 3 | % | |||||
| North Carolina | 2 | 1,369,728 | 4 | % | 134,576 | 4 | % | |||||
| Texas | 3 | 1,234,022 | 4 | % | 91,913 | 3 | % | |||||
| South Carolina | 2 | 880,764 | 3 | % | 129,909 | 4 | % | |||||
| Colorado | 3 | 835,446 | 2 | % | 98,994 | 3 | % | |||||
| Minnesota | 1 | 578,490 | 2 | % | 78,857 | 3 | % | |||||
| Utah | 1 | 501,065 | 1 | % | 72,498 | 2 | % | |||||
| New York | 2 | 388,466 | 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 | 46 | $ | 33,667,366 | 100 | % | 3,173,259 | 100 | % |
19
Modiv Inc.
Lease Expirations
(Unaudited)
10 Years and Thereafter Lease Expirations
| As of December 31, 2022 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year | Number of<br><br> <br>Leases<br><br> <br>Expiring | Leased<br><br> <br>Square<br><br> <br>Footage<br><br> <br>Expiring | Percentage of<br><br> <br>Leased<br><br> <br>Square<br><br> <br>Footage<br><br> <br>Expiring | Cumulative<br><br> <br>Percentage<br><br> <br>of Leased<br><br> <br>Square<br><br> <br>Footage<br><br> <br>Expiring | Annualized<br><br> <br>Base Rent<br><br> <br>Expiring | Percentage<br><br> <br>of<br><br> <br>Annualized<br><br> <br>Base<br><br> <br>Rent Expiring | Cumulative<br><br> <br>Percentage<br><br> <br>of<br><br> <br>Annualized<br><br> <br>Base Rent<br><br> <br>Expiring | |||||||||||
| 2023 | 2 | 116,110 | 3.7 | % | 3.7 | % | 311,455 | 0.9 | % | 0.9 | % | |||||||
| 2024 | 1 | 87,230 | 2.8 | % | 6.5 | % | 1,520,789 | 4.5 | % | 5.4 | % | |||||||
| 2025 | 4 | 154,933 | 4.9 | % | 11.4 | % | 3,678,106 | 10.9 | % | 16.3 | % | |||||||
| 2026 | 5 | 280,740 | 8.8 | % | 20.2 | % | 4,808,337 | 14.3 | % | 30.6 | % | |||||||
| 2027 | 1 | 64,637 | 2.0 | % | 22.2 | % | 898,954 | 2.7 | % | 33.3 | % | |||||||
| 2028 | 1 | 18,827 | 0.6 | % | 22.8 | % | 341,972 | 1.0 | % | 34.3 | % | |||||||
| 2029 | 3 | 134,714 | 4.2 | % | 27.0 | % | 2,360,905 | 7.0 | % | 41.3 | % | |||||||
| 2030 | 5 | 45,278 | 1.4 | % | 28.4 | % | 463,363 | 1.4 | % | 42.7 | % | |||||||
| 2031 | — | — | — | % | 28.4 | % | — | — | % | 42.7 | % | |||||||
| 2032 | 2 | 177,204 | 5.6 | % | 34.0 | % | 2,687,570 | 8.0 | % | 50.7 | % | |||||||
| Thereafter | 22 | 2,093,586 | 66.0 | % | 100.0 | % | 16,595,915 | 49.3 | % | 100.0 | % | |||||||
| Total | 46 | 3,173,259 | 100.0 | % | $ | 33,667,366 | 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, and 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. 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.
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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, non-cash items such as non-cash compensation expenses and write-offs of transaction costs and other one-time transactions. 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.
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