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): August 11, 2022
Modiv Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 001-40814 | 47-4156046 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 120 Newport Center Drive<br><br> <br>Newport Beach,<br> California | 92660 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (888) 686-6348
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which<br><br> <br>registered |
|---|---|---|
| Class C Common Stock, $0.001 par value per share | MDV | New York Stock Exchange |
| 7.375% Series A Cumulative Redeemable Perpetual Preferred | MDV.PA | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition |
|---|
On August 11, 2022, Modiv Inc., a Maryland corporation (the “Company”), issued an earnings press release relating to the Company’s financial results for the quarter ended June 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Company also issued supplemental data and an earnings presentation for the quarter ended June 30, 2022. A copy of the supplemental data and earnings presentation are attached hereto as Exhibits 99.2 and 99.3 which are incorporated herein by reference. The press release, supplemental data and earnings presentation are available on the Company’s website.
The information in Item 2.02 of this Current Report, including Exhibits 99.1, 99.2 and 99.3 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, unless it is specifically incorporated by reference therein. References to the Company’s website in this Current Report on Form 8-K and in the attached Exhibits 99.1, 99.2 and 99.3 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 August 11, 2022, the Company issued an earnings press release relating to the Company’s financial results for the quarter ended June 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Company also issued supplemental data and an earnings presentation for the quarter ended June 30, 2022. A copy of the supplemental data and earnings presentation are attached hereto as Exhibits 99.2 and 99.3 which are incorporated herein by reference.
The furnishing of this earnings press release and supplemental data is not intended to constitute a representation that such furnishing is required by Regulation FD or other securities laws, or that the earnings press release and supplemental data include material investor information that is not otherwise publicly available. In addition, the Company does not assume any obligation to update such information in the future.
The information in Item 7.01 of this Current Report, including Exhibits 99.1, 99.2 and 99.3 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 August 11, 2022 |
| 99.2 | Modiv Inc. Quarterly Supplemental Data For The Quarter Ended June 30, 2022 |
| 99.3 | Modiv Inc. Earnings Presentation For The Quarter Ended June 30, 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: August 11, 2022 |
Exhibit 99.1
Modiv Announces Second Quarter 2022 Results
NEWPORT BEACH, CA, August 11, 2022 – Modiv Inc. (“Modiv” or the “Company”) (NYSE:MDV), an internally managed real estate investment trust (“REIT”) that acquires, owns and manages a diversified portfolio of single-tenant net-lease real estate properties, today announced operating results for the second quarter ended June 30, 2022.
Highlights for the quarter and six months ended June 30, 2022 including subsequent events:
| ● | Total quarterly revenue increased 14% year-over-year to $10.4 million |
|---|---|
| ● | Quarterly AFFO increased 18% year-over-year to $3.6 million, or $0.48 per basic share and $0.35 per diluted share |
| --- | --- |
| ● | Acquired approximately $162 million of properties year-to-date, including 15 industrial manufacturing properties at a weighted average cap rate of 8.87% |
| --- | --- |
| ● | Declared monthly dividends per common share of $0.09583, equivalent to an annual rate of $1.15 per share which represents a yield of 7.4% based on the recent price of our common<br> stock. |
| --- | --- |
Summary of recent property investments:
| Acquisition Date | Tenant | Purchase<br><br> <br>Price | ABR (1) | Initial<br><br> <br>Cap Rate (2) | Weighted<br><br> <br>Average<br><br> <br>Cap Rate (3) | Lease<br><br> <br>Term<br><br> <br>(Years) | Rent<br><br> <br>Escalations | Frequency | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| January 2022 | KIA of Carson | $ | 69,275,000 | $ | 3,948,000 | 5.70 | % | 7.30 | % | 25 | 2.00 | % | Annually | ||||
| January 2022 | Kalera | 8,079,000 | 565,530 | 7.00 | % | 8.94 | % | 20 | 2.50 | % | Annually | ||||||
| April 2022 | Lindsay Precast | 56,150,000 | 3,734,141 | 6.65 | % | 8.52 | % | 25 | 2.00 | % | Annually | ||||||
| July 2022 | Producto | 5,343,862 | 385,255 | 7.21 | % | 8.76 | % | 20 | 2.00 | % | Annually | ||||||
| July 2022 | Valtir 1 | 7,922,321 | 718,312 | 9.07 | % | 10.64 | % | 15 | 2.25 | % | Annually | ||||||
| July & August 2022 | Valtir 2 | 15,452,679 | 1,081,688 | 7.00 | % | 9.26 | % | 25 | 2.25 | % | Annually | ||||||
| $ | 162,222,862 | $ | 10,432,926 | 6.43 | % | 8.20 | % | 22 | 2.17 | % | |||||||
| (1) | ABR is the annual base rent. | ||||||||||||||||
| --- | --- | ||||||||||||||||
| (2) | Initial Cap Rate is the ABR divided by the purchase price. | ||||||||||||||||
| --- | --- | ||||||||||||||||
| (3) | Weighted Average Cap Rate is the average of total fixed rent over the lease term divided by the purchase price. | ||||||||||||||||
| --- | --- |
“During the second quarter, we remained disciplined and focused as we successfully executed upon our long-term strategy of increasing our ownership of industrial manufacturing properties while reducing our exposure to legacy office assets. Despite a challenging market environment, we grew AFFO by 18% to $3.6 million and total revenue by 14% year-over-year to $10.4 million,” said Aaron Halfacre, Chief Executive Officer of Modiv. “With $47 million in office sales and $93 million in industrial purchases year-to-date, the Modiv team, yet again, has demonstrated its ability to transform our portfolio to match our long-term strategic goals despite being a newly listed and under-the-radar value play.”
Financial review for the second quarter 2022
Total Revenues
Total revenues increased 14% year-over-year to $10.4 million, from $9.1 million reported in the prior year quarter. The growth in revenue primarily reflected an increase in rental income from acquisitions made in the second half of 2021 and the first half of 2022, partially offset by seven property dispositions during the same time period.
Operating Results
The second quarter of 2022 included a $1.0 million gain on the sale of one office property. In total, net income attributable to common stockholders was $1.2 million, or $0.17 per basic share and $0.14 per diluted share, compared to a net loss of $1.0 million, or a loss of $0.13 per basic and diluted share in the prior year period.
Adjusted Funds from Operations (AFFO)
Quarterly AFFO increased 18% to $3.6 million, or $0.48 per basic share and $0.35 per diluted share from AFFO of $3.0 million, or $0.40 per basic share and $0.34 per diluted share in the prior year period. This result was driven primarily by accretive acquisitions and the portfolio’s annual rent increases.
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 July 29, 2022, August 31, 2022 and September 30, 2022 which will be paid on or about August 25, 2022, September 26, 2022 and October 25, 2022, 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 7.4% based on the recent price of our common stock.
Real Estate Portfolio Highlights
Investment Activity
In April 2022, the Company invested $56.1 million in a portfolio of eight properties leased to Lindsay Precast, LLC, an industry-leading precast concrete manufacturer and steel fabricator with a 60-year operating history, at a weighted average cap rate of 8.5%. The acquisition of Lindsay Precast’s portfolio of properties includes $2.8 million of expansion capital for one of the properties in Colorado and reflects a 25-year lease term with 2% annual rent increases.
Subsequent to quarter end, the Company invested (i) $5.3 million in two properties leased to subsidiaries of Producto Holdings, LLC, which specializes in manufacturing, machining, drilling, form grinding, heat treating, inspecting and engineering precision tools for the medical, semiconductor, aerospace, ammunition, and defense markets, and (ii) $23.4 million in four properties leased to Valtir, a manufacturer of commercial highway products such as guardrails and barriers, at attractive weighted average cap rates as set forth in the above table.
The Company defines “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property. The Company defines “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property. The vast majority of Modiv’s real estate leases have annual rent escalations, which generally range from 2-3%.
Disposition Activity
During June 2022, the Company sold one office property leased to EMCOR for aggregate net proceeds of $6.3 million and the Company is currently under contract to sell an additional office property leased to Williams Sonoma, which is expected to close in August 2022. While there are no guarantees that this anticipated sale will be completed, the Company has received a $500,000 non-refundable deposit from the buyer. The exit cap rate for these two office property sales is 7.56%.
Portfolio
As of June 30, 2022, the Company’s portfolio consisted of 43 properties located in 16 states. The portfolio had approximately 2.9 million square feet of aggregate leasable space 100% leased to 29 different commercial tenants doing business in 15 separate industries.
On a pro forma basis, when including the Producto and Valtir acquisitions and the anticipated Williams Sonoma disposition with our portfolio as of June 30^th^, the Company owns 48 properties including 26 industrial properties representing 51% of the portfolio, 13 retail properties representing 19% of the portfolio and 9 office properties representing 30% of the portfolio (based on pro forma ABR as of June 30, 2022). As part of the Company’s long-term strategy to reduce office exposure, Modiv has decreased its office allocation by 20% since September 30, 2021.
Pro forma annualized base rent (based on rates in effect on June 30, 2022) totaled $35.6 million and the pro forma portfolio’s weighted average lease term was 11.6 years as of June 30, 2022. Approximately 52% 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 June 30, 2022, total cash and cash equivalents were $11.7 million and the Company had $201.4 million of outstanding indebtedness consisting of $44.6 million of mortgages and $156.8 million outstanding on the Company's $250 million credit facility.
As of June 30, 2022, the Company had available borrowing capacity of approximately $60.0 million on the Revolver. Based on the current balance sheet, approximately 97% of the Company’s indebtedness holds a fixed interest rate. Subsequent to June 30, 2022, the Company borrowed $28.0 million to fund the Producto and Valtir acquisitions.
Until the Company achieves scale with total assets of greater than $1.0 billion, it may seek to increase near-term leverage if it identifies attractive acquisition opportunities in advance of completing dispositions or raising additional equity. On a pro forma basis, when including the Producto and Valtir acquisitions with our balance sheet as of June 30, 2022, the Company’s leverage (defined as debt as a percentage of the aggregate fair value of the Company's real estate properties plus the Company’s cash and cash equivalents) was 42%.
2022 Annual Guidance
The Company is maintaining 2022 AFFO per share guidance range of $1.26 to $1.36. This AFFO per share guidance reflects expected dispositions of office properties and further acquisitions of industrial manufacturing properties during the next four months of 2022.
Note: The Company does not provide guidance on net income. The Company only provides guidance on total AFFO and does not provide a reconciliation of this forward-looking non-GAAP guidance to net income due to the inherent difficulty in quantifying certain items necessary to provide such reconciliation as a result of their unknown effect, timing and potential significance. Examples of such items include impairments of assets, gains and losses from sales of assets, and depreciation and amortization from new acquisitions.
Conference Call and Webcast
A conference call and audio webcast with analysts and investors will be held on Thursday, August 11, 2022, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time, to discuss the second quarter 2022 operating results and answer questions.
Live conference call: 1-877-514-3620 at 8:00 a.m. Pacific Time, Thursday, August 11
Webcast: To listen to the webcast, either live or archived, use this link
https://event.choruscall.com/mediaframe/webcast.html?webcastid=wrFD7Jxs
or visit the investor relations page of Modiv’s website at www.modiv.com.
About Modiv
Modiv Inc. is an internally managed REIT that acquires, owns and manages a diversified portfolio of single-tenant net-lease real estate. The Company primarily invests in industrial and retail properties that are mission critical to tenants. Driven by innovation and an investor-first focus, Modiv is committed to providing investors with Monthly
Dividends and More Diversification. As of June 30, 2022, Modiv had a $540 million real estate portfolio \(based on estimated fair value\) comprised of 2.9 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 August 11, 2022 contain and may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are provided below.
Investor Inquiries:
Megan McGrath, Financial Profiles, Inc.
Mmcgrath@finprofiles.com
310-622-8248
MODIV INC.
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2022 and 2021
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Rental income | $ | 10,394,118 | $ | 9,107,008 | $ | 20,042,767 | $ | 18,081,878 | ||||
| Expenses: | ||||||||||||
| General and administrative | 1,615,182 | 1,932,635 | 3,721,365 | 4,618,621 | ||||||||
| Stock compensation expense | 679,747 | 767,087 | 1,191,612 | 1,371,732 | ||||||||
| Depreciation and amortization | 3,682,681 | 3,978,323 | 6,983,173 | 8,003,026 | ||||||||
| Interest expense | 1,197,154 | 2,098,649 | 2,765,329 | 3,879,785 | ||||||||
| Property expenses | 1,965,885 | 1,874,033 | 4,730,477 | 3,621,233 | ||||||||
| Reversal of impairment of real estate investment property | - | (400,999 | ) | - | (400,999 | ) | ||||||
| Impairment of goodwill | - | - | 17,320,857 | - | ||||||||
| Total expenses | 9,140,649 | 10,249,728 | 36,712,813 | 21,093,398 | ||||||||
| Other operating loss: | ||||||||||||
| Gain on sale of real estate investments | 1,002,101 | - | 8,402,878 | 289,642 | ||||||||
| Operating income (loss) | 2,255,570 | (1,142,720 | ) | (8,267,168 | ) | (2,721,878 | ) | |||||
| Other (expense) income: | ||||||||||||
| Interest income | 1,763 | 51 | 15,198 | 101 | ||||||||
| Income from unconsolidated investment in a real estate property | 66,868 | 74,834 | 162,332 | 147,301 | ||||||||
| Gain on forgiveness of economic relief note payable | - | - | - | 517,000 | ||||||||
| Loss on early extinguishment of debt | - | - | (1,725,318 | ) | - | |||||||
| Other, net | 66,143 | 65,992 | 132,136 | 151,985 | ||||||||
| Other (expense) income, net | 134,774 | 140,877 | (1,415,652 | ) | 816,387 | |||||||
| Net income (loss) | 2,390,344 | (1,001,843 | ) | (9,682,820 | ) | (1,905,491 | ) | |||||
| Less: net income (loss) attributable to noncontrolling interest in Operating Partnership | 219,214 | - | 1,708,815 | - | ||||||||
| Net income (loss) attributable to Modiv Inc. | 2,171,130 | (1,001,843 | ) | (7,974,005 | ) | (1,905,491 | ) | |||||
| Preferred stock dividends | (921,875 | ) | - | (1,843,750 | ) | - | ||||||
| Net income (loss) attributable to common stockholders | $ | 1,249,255 | $ | (1,001,843 | ) | $ | (9,817,755 | ) | $ | (1,905,491 | ) | |
| Earnings (loss) per share attributable to common stockholders | ||||||||||||
| Basic | $ | 0.17 | $ | (0.13 | ) | $ | (1.31 | ) | $ | (0.25 | ) | |
| Diluted | $ | 0.14 | $ | (0.13 | ) | $ | (1.31 | ) | $ | (0.25 | ) | |
| Weighted-average number of common shares outstanding | ||||||||||||
| Basic | 7,478,973 | 7,614,196 | 7,505,673 | 7,630,401 | ||||||||
| Diluted | 10,221,490 | 7,614,196 | 7,505,673 | 7,630,401 | ||||||||
| Distributions declared per common stock | $ | 0.2875 | $ | 0.2625 | $ | 0.6750 | $ | 0.5250 |
MODIV INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| December 31, 2021 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Real estate investments: | |||||
| Land | 107,569,641 | $ | 61,005,402 | ||
| Building and improvements | 327,472,940 | 251,246,290 | |||
| Equipment | 4,429,000 | - | |||
| Tenant origination and absorption costs | 21,384,224 | 21,504,210 | |||
| Total investments in real estate property | 460,855,805 | 333,755,902 | |||
| Accumulated depreciation and amortization | (43,728,520 | ) | (37,611,133 | ) | |
| Total investments in real estate property, net | 417,127,285 | 296,144,769 | |||
| Unconsolidated investment in a real estate property | 9,956,517 | 9,941,338 | |||
| Total real estate investments, net | 427,083,802 | 306,086,107 | |||
| Real estate investments held for sale, net | - | 31,510,762 | |||
| Total real estate investments, net | 427,083,802 | 337,596,869 | |||
| Cash and cash equivalents | 11,705,449 | 55,965,550 | |||
| Restricted cash | - | 2,441,970 | |||
| Receivable from early termination of lease | 1,446,767 | 1,836,767 | |||
| Tenant receivables | 8,059,635 | 5,996,919 | |||
| Above-market lease intangibles, net | 626,107 | 691,019 | |||
| Prepaid expenses and other assets | 6,766,867 | 5,856,255 | |||
| Interest rate swap on derivative | 589,997 | - | |||
| Assets related to real estate investments held for sale | - | 788,296 | |||
| Goodwill | - | 17,320,857 | |||
| Total assets | 456,278,624 | $ | 428,494,502 | ||
| Liabilities and Equity | |||||
| Mortgage notes payable, net | 44,608,815 | $ | 152,223,579 | ||
| Mortgage notes payable related to real estate investments held for sale, net | - | 21,699,912 | |||
| Total mortgage notes payable, net | 44,608,815 | 173,923,491 | |||
| Credit facility revolver | 6,775,000 | 8,022,000 | |||
| Credit facility term loan, net | 148,850,050 | - | |||
| Accounts payable, accrued and other liabilities | 8,733,757 | 11,844,881 | |||
| Below-market lease intangibles, net | 10,175,284 | 11,102,940 | |||
| Interest rate swap derivatives | - | 788,016 | |||
| Liabilities related to real estate investments held for sale | - | 383,282 | |||
| Total Liabilities | 219,142,906 | 206,064,610 | |||
| Commitments and contingencies | |||||
| 7.375% Series A cumulative redeemable perpetual preferred stock, 0.001 par value, 2,000,000 shares<br> authorized, issued and outstanding as of June 30, 2022 and December 31, 2021 | 2,000 | 2,000 | |||
| Class C common stock 0.001 par value, 300,000,000 shares authorized, 7,643,992 shares issued and<br> 7,456,562 shares outstanding as of June 30, 2022, respectively, and 7,426,636 shares issued and outstanding as of December 31, 2021 | 7,644 | 7,427 | |||
| Class S common stock 0.001 par value, 100,000,000 shares authorized, no and 63,768 shares issued and<br> outstanding as of June 30, 2022 and December 31, 2021, respectively | - | 64 | |||
| Additional paid-in-capital | 275,922,227 | 273,441,831 | |||
| Treasury stock, at cost, 187,430 shares and no shares as of June 30, 2022 and December 31, 2021,<br> respectively | (3,253,902 | ) | - | ||
| Cumulative distributions and net losses | (116,491,382 | ) | (101,624,430 | ) | |
| Total Modiv Inc. equity | 156,186,587 | 171,826,892 | |||
| Noncontrolling interest in the Operating Partnership | 80,949,131 | 50,603,000 | |||
| Total equity | 237,135,718 | 222,429,892 | |||
| Total liabilities and equity | 456,278,624 | $ | 428,494,502 |
All values are in US Dollars.
MODIV INC.
Reconciliation of Non-GAAP Measures
For the Three and Six Months Ended June 30, 2022 and 2021
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net income (loss) (in accordance with GAAP) | $ | 2,390,344 | $ | (1,001,843 | ) | $ | (9,682,820 | ) | $ | (1,905,491 | ) | ||
| Preferred stock dividends | (921,875 | ) | - | (1,843,750 | ) | - | |||||||
| Net loss attributable to common stockholders and Class C OP Units | 1,468,469 | (1,001,843 | ) | (11,526,570 | ) | (1,905,491 | ) | ||||||
| FFO adjustments: | |||||||||||||
| Add: | Depreciation and amortization of real estate properties | 3,682,681 | 3,512,727 | 6,983,173 | 7,077,287 | ||||||||
| Amortization of lease incentives | 75,655 | 40,240 | 147,049 | 105,541 | |||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 190,468 | 181,786 | 380,936 | 363,572 | |||||||||
| Less: | Gain on sale of real estate investments, net | (1,002,101 | ) | - | (8,402,878 | ) | (289,642 | ) | |||||
| Reversal of impairment of real estate investments | - | (400,999 | ) | - | (400,999 | ) | |||||||
| FFO attributable to common stockholders and Class C OP Units | 4,415,172 | 2,331,911 | (12,418,290 | ) | 4,950,268 | ||||||||
| AFFO adjustments: | |||||||||||||
| Add: | Amortization of corporate intangibles | - | 465,596 | - | 925,739 | ||||||||
| Impairment of goodwill | - | - | 17,320,857 | - | |||||||||
| Stock compensation | 679,747 | 767,087 | 1,191,612 | 1,371,732 | |||||||||
| Deferred financing costs | 101,781 | 100,624 | 1,368,506 | 199,693 | |||||||||
| Non-recurring loan prepayment penalties | - | - | 615,336 | - | |||||||||
| Swap termination costs | - | - | 733,000 | 23,900 | |||||||||
| Amortization of above-market lease intangibles | 32,456 | 32,458 | 64,912 | 64,913 | |||||||||
| Acquisition fees and due diligence expenses, including abandoned pursuit costs | 4,639 | 238,496 | 591,308 | 249,240 | |||||||||
| Less: | Deferred rents | (699,053 | ) | (428,155 | ) | (809,558 | ) | (702,978 | ) | ||||
| Unrealized gains on interest rate swaps | (589,997 | ) | (90,600 | ) | (1,378,013 | ) | (517,719 | ) | |||||
| Amortization of below-market lease intangibles | (349,810 | ) | (367,575 | ) | (712,884 | ) | (735,150 | ) | |||||
| Gain on forgiveness of economic relief note payable | - | - | - | (517,000 | ) | ||||||||
| Other adjustments for unconsolidated investment in a real estate property | (188 | ) | (12,196 | ) | (376 | ) | (44,390 | ) | |||||
| AFFO attributable to common stockholders and Class C OP Units | $ | 3,594,747 | $ | 3,037,646 | $ | 6,566,410 | $ | 5,268,248 | |||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 7,478,973 | 7,614,196 | 7,505,673 | 7,630,401 | |||||||||
| Fully Diluted (1) | 10,221,490 | 8,833,945 | 10,241,023 | 8,880,365 | |||||||||
| FFO Per Share: | |||||||||||||
| Basic | $ | 0.59 | $ | 0.31 | $ | (1.65 | ) | $ | 0.65 | ||||
| Fully Diluted | $ | 0.43 | $ | 0.26 | $ | (1.65 | ) | $ | 0.56 | ||||
| AFFO Per Share | |||||||||||||
| Basic | $ | 0.48 | $ | 0.40 | $ | 0.87 | $ | 0.69 | |||||
| Fully Diluted | $ | 0.35 | $ | 0.34 | $ | 0.64 | $ | 0.59 | |||||
| (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 rent, amortization of in-place lease valuation intangibles, acquisition-related costs, 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 Six Months Ended June 30, 2022 and 2021
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net income (loss) | $ | 2,390,344 | $ | (1,001,843 | ) | $ | (9,682,820 | ) | $ | (1,905,491 | ) | ||
| Add: | Depreciation and amortization | 3,682,681 | 3,978,323 | 6,983,173 | 8,003,026 | ||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 190,468 | 181,786 | 380,936 | 363,572 | |||||||||
| Interest expense | 1,197,154 | 2,098,649 | 2,765,329 | 3,879,785 | |||||||||
| Loss on early extinguishment of debt | - | - | 1,725,318 | - | |||||||||
| Interest expense on unconsolidated investment in real estate property | 98,135 | 100,366 | 195,780 | 200,419 | |||||||||
| Reversal of impairment of real estate investment property | - | (400,999 | ) | - | (400,999 | ) | |||||||
| Impairment of goodwill | - | - | 17,320,857 | - | |||||||||
| Stock compensation | 679,747 | 767,087 | 1,191,612 | 1,371,732 | |||||||||
| Write-off of due diligence costs related to abandoned acquisition of 10 properties leased to Walgreens | - | - | 587,000 | - | |||||||||
| Less: | Gain on sale of real estate investments, net | (1,002,101 | ) | - | (8,402,878 | ) | (289,642 | ) | |||||
| Adjusted EBITDA | $ | 7,236,428 | $ | 5,723,369 | $ | 13,064,307 | $ | 11,222,402 | |||||
| Annualized Adjusted EBITDA | $ | 28,945,712 | $ | 22,893,476 | $ | 26,128,614 | $ | 22,444,804 | |||||
| Net debt: | |||||||||||||
| Consolidated debt | $ | 201,425,173 | $ | 190,181,378 | $ | 201,425,173 | $ | 190,181,378 | |||||
| Debt of unconsolidated investment in real estate property (a) | 9,599,182 | 9,817,066 | 9,599,182 | 9,817,066 | |||||||||
| Consolidated cash and restricted cash | (11,705,449 | ) | (10,374,445 | ) | (11,705,449 | ) | (10,374,445 | ) | |||||
| Cash of unconsolidated investment in real estate property (a) | (585,357 | ) | (572,064 | ) | (585,357 | ) | (572,064 | ) | |||||
| $ | 198,733,549 | $ | 189,051,935 | $ | 198,733,549 | $ | 189,051,935 | ||||||
| Net debt / Adjusted EBITDA | 6.9 | x | 8.3 | x | 7.6 | x | 8.4 | x | |||||
| (a) | Reflects the Company's 72.71% pro rata share of the tenant-in common's mortgage note payable and cash. | ||||||||||||
| --- | --- |
We define Net Debt as gross debt less cash and cash equivalents and restricted cash. We define Adjusted EBITDA as GAAP net income or loss adjusted to exclude real estate related depreciation and amortization, gains or losses from the sales of depreciable property, extraordinary items, provisions for impairment on real estate investments and goodwill, interest expense and non-cash items such as non-cash compensation expenses. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA is not a measure of financial performance under GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA as an alternative to net income or cash flows from operating activities determined in accordance with GAAP.
Exhibit 99.2
NYSE: MDV
QUARTERLY SUPPLEMENTAL DATA
June 30, 2022
Modiv Inc.
Supplemental Information - Second Quarter 2022
| Table of Contents | ||
|---|---|---|
| About the Data | 3 | |
| Company Overview | 4 | |
| Financial Results | ||
| Statements of Operations - Last Five Quarters | 5 | |
| Earnings Per Share - Last Five Quarters | 6 | |
| FFO and AFFO - Last Five Quarters | 7 | |
| Adjusted EBITDA - Last Five Quarters | 8 | |
| Leverage Ratio | 9 | |
| Balance Sheets and Capitalization | ||
| Capitalization | 10 | |
| Balance Sheets | 11 | |
| Debt Overview | 12 | |
| Credit Facility and Mortgage Notes Covenants | 13 | |
| Real Estate | ||
| Acquisitions | 14 | |
| Dispositions | 15 | |
| Top 10 Tenants | 16 | |
| 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 June 30, 2022 unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with Modiv Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, including the financial statements and management's discussion and analysis of financial condition and results of operations.
Forward Looking Statements
Information set forth herein contains forward-looking statements, which reflect our current views regarding our business, financial performance, growth prospects and strategies, market opportunities, and market trends. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words. All of the forward-looking statements herein are subject to various risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results, performance, and achievements could differ materially from those expressed in or by the forward-looking statements and may be affected by a variety of risks and other factors. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from such forward-looking statements. These factors include, but are not limited to, risks and uncertainties related to the COVID-19 pandemic and its related impacts on us and our tenants, general economic conditions, including but not limited to impacts of the Russian war against Ukraine, supply-chain disruptions, increases in the rate of inflation and interest rates, local real estate conditions, tenant financial health, and property acquisitions and the timing of these acquisitions. These and other risks, assumptions, and uncertainties are described in our filings with the SEC, which are available on the SEC’s website at www.sec.gov. You are cautioned not to place undue reliance on any forward-looking statements included herein. All forward-looking statements are made as of the date of this document and the risk that actual results, performance, and achievements will differ materially from the expectations expressed or referenced herein will increase with the passage of time. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.
3
Company Overview
Modiv Inc. (NYSE:MDV) (“Modiv”, the “Company”, “we”, “us” and “our”) is an internally managed real estate investment trust (“REIT”) that acquires, owns and manages a diversified portfolio of predominantly single-tenant net-lease real estate properties. The Company primarily invests in industrial and retail properties that are mission critical to tenants. Driven by innovation and an investor-first focus, Modiv is committed to providing investors with Monthly Dividends and More Diversification. As of June 30, 2022, Modiv had a $540 million real estate portfolio (based on estimated fair value) comprised of 2.9 million square feet of aggregate leasable area. For more information, please visit: www.modiv.com.
| Management Team: | Independent Directors: |
|---|---|
| Aaron S. Halfacre | Adam S. Markman |
| Chief Executive Officer and Director | Chairman of the Board |
| Raymond J. Pacini | Asma Ishaq |
| Chief Financial Officer and Secretary | |
| Sandra G. Sciutto | Curtis B. McWilliams |
| Chief Accounting Officer | |
| John C. Raney | Thomas H. Nolan, Jr. |
| Chief Legal Officer | |
| William R. Broms | Kimberly Smith |
| Chief Investment Officer | |
| David Collins | Connie Tirondola |
| Chief Property Officer |
Investor Inquiries:
Megan McGrath, Financial Profiles, Inc.
Mmcgrath@finprofiles.com
310-622-8248
Transfer Agent:
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
800-736-3001
4
Modiv Inc.
Condensed Consolidated Statements of Operations - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | June 30,<br><br> <br>2021 | |||||||||||
| Rental income (a) | $ | 10,394,118 | $ | 9,648,649 | $ | 7,899,149 | $ | 10,241,690 | $ | 9,107,008 | |||||
| Expenses: | |||||||||||||||
| General and administrative | 1,615,182 | 2,106,183 | 2,186,563 | 2,930,578 | 2,108,782 | ||||||||||
| Stock compensation | 679,747 | 511,865 | 629,539 | 743,609 | 767,087 | ||||||||||
| Depreciation and amortization | 3,682,681 | 3,300,492 | 3,449,407 | 3,814,503 | 3,978,323 | ||||||||||
| Interest expense | 1,197,154 | 1,568,175 | 1,874,867 | 1,831,545 | 2,098,649 | ||||||||||
| Property expenses (b) | 1,965,885 | 2,764,592 | 1,580,629 | 1,658,437 | 1,697,886 | ||||||||||
| Reversal of impairment of real estate investment property | — | — | — | — | (400,999 | ) | |||||||||
| Impairment of goodwill and intangible assets (c) | — | 17,320,857 | 3,767,190 | — | — | ||||||||||
| Total expenses | 9,140,649 | 27,572,164 | 13,488,195 | 10,978,672 | 10,249,728 | ||||||||||
| Other operating income (loss): | |||||||||||||||
| Gain on sale of real estate investments | 1,002,101 | 7,400,777 | 3,271,289 | 4,242,771 | — | ||||||||||
| Operating income (loss) | 2,255,570 | (10,522,738 | ) | (2,317,757 | ) | 3,505,789 | (1,142,720 | ) | |||||||
| Other (expense) income: | |||||||||||||||
| Interest income | 1,763 | 13,435 | 19,958 | 1,270 | 51 | ||||||||||
| Income from investment in unconsolidated entity | 66,868 | 95,464 | 53,337 | 75,403 | 74,834 | ||||||||||
| Loss on early extinguishment of debt (d) | — | (1,725,318 | ) | — | — | — | |||||||||
| Other (a) | 66,143 | 65,993 | 65,993 | 65,993 | 65,992 | ||||||||||
| Other (expense) income, net | 134,774 | (1,550,426 | ) | 139,288 | 142,666 | 140,877 | |||||||||
| Net income (loss) | 2,390,344 | (12,073,164 | ) | (2,178,469 | ) | 3,648,455 | (1,001,843 | ) | |||||||
| Less: net income (loss) attributable to noncontrolling interest in Operating Partnership | 219,214 | (1,928,029 | ) | — | — | — | |||||||||
| Net income (loss) attributable to Modiv Inc. | 2,171,130 | (10,145,135 | ) | (2,178,469 | ) | 3,648,455 | (1,001,843 | ) | |||||||
| Preferred stock dividends (e) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | — | ||||||
| Net income (loss) attributable to common stockholders | $ | 1,249,255 | $ | (11,067,010 | ) | $ | (3,100,344 | ) | $ | 3,505,052 | $ | (1,001,843 | ) | ||
| Earnings (loss) per share attributable to common stockholders | |||||||||||||||
| Basic | $ | 0.17 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.47 | $ | (0.13 | ) | ||
| Diluted | $ | 0.14 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.40 | $ | (0.13 | ) | ||
| Weighted-average number of common shares outstanding | |||||||||||||||
| Basic | 7,478,973 | 7,533,158 | 7,531,167 | 7,531,559 | 7,614,196 | ||||||||||
| Diluted (f) | 10,221,490 | 7,533,158 | 7,531,167 | 8,750,875 | 7,614,196 | ||||||||||
| Distributions declared per common share (g) | $ | 0.2875 | $ | 0.3875 | $ | 0.2875 | $ | 0.2625 | $ | 0.2625 | |||||
| (a) | Rental income includes tenant reimbursements for property expenses. During the three months ended June 30, 2021 and September 30, 2021, the Company reclassified $65,993 related to asset management fees earned on the Company's<br> 72.71% tenant-in-common interest (“TIC Interest”) in an industrial property in Santa Clara, California to conform with the December 31, 2021 and later presentation. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | Property expenses for the second quarter of 2022 include increased property and other taxes compared with the comparable quarter of 2021, primarily related to the growth of our portfolio. These expenses are largely offset by tenant<br> reimbursements included in rental income. Property expenses for the first quarter of 2022 also include $587,000 in write-offs of costs related to our proposed acquisition of 10 properties leased to Walgreens which we abandoned due to<br> inability to obtain the mortgage servicer's approval prior to the contract termination date of February 18, 2022 and changes in market conditions. | ||||||||||||||
| --- | --- | ||||||||||||||
| (c) | Goodwill, which relates to the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock is<br> 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 the Company’s decision to terminate its crowdfunding operations. | ||||||||||||||
| --- | --- | ||||||||||||||
| (d) | Loss on early extinguishment of debt for the first quarter of 2022 includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit<br> 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 refinanced<br> with the KeyBank credit facility and the related write-off of unrealized valuation losses of $788,016. | ||||||||||||||
| --- | --- | ||||||||||||||
| (e) | On September 17, 2021, the Company sold 2,000,000 shares of its 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value in an underwritten public offering at $25.00 per share. | ||||||||||||||
| --- | --- | ||||||||||||||
| (f) | Diluted shares outstanding in the second quarter of 2022 and the third quarter of 2021 include Class C, Class M, Class P and Class R OP Units since the Company reported net income for those quarters. Diluted shares outstanding<br> for periods when the Company reported a net loss do not include the OP Units since they would be anti-dilutive. | ||||||||||||||
| --- | --- | ||||||||||||||
| (g) | The Company increased the annual distribution rate on its common stock from $1.05 per share to $1.15 per share effective October 1, 2021. Distributions declared during the first quarter of 2022 include a one-time 13th<br> distribution for 2021 of $0.10 per share for stockholders of record on January 6, 2022. | ||||||||||||||
| --- | --- |
5
Modiv Inc.
Earnings (Loss) Per Share - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | June 30,<br><br> <br>2021 | |||||||||||
| Numerator - Basic: | |||||||||||||||
| Net income (loss) | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | $ | (1,001,843 | ) | ||
| Net (income) loss attributable to noncontrolling interest in Operating Partnership | (219,214 | ) | 1,928,029 | — | — | — | |||||||||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | — | ||||||
| Net income (loss) attributable to common stockholders | $ | 1,249,255 | $ | (11,067,010 | ) | $ | (3,100,344 | ) | $ | 3,505,052 | $ | (1,001,843 | ) | ||
| Numerator - Diluted: | |||||||||||||||
| Net income (loss) | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | $ | (1,001,843 | ) | ||
| Less: preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | — | ||||||
| Net income (loss) attributable to common stockholders | $ | 1,468,469 | $ | (12,995,039 | ) | $ | (3,100,344 | ) | $ | 3,505,052 | $ | (1,001,843 | ) | ||
| Denominator: | |||||||||||||||
| Weighted average shares outstanding - basic | 7,478,973 | 7,533,158 | 7,531,167 | 7,531,559 | 7,614,196 | ||||||||||
| Operating Partnership Units - Class C (a) | 1,312,382 | — | — | — | — | ||||||||||
| Operating Partnership Units - other (b) | 1,430,135 | — | — | 1,219,316 | — | ||||||||||
| Weighted average shares outstanding - diluted | 10,221,490 | 7,533,158 | 7,531,167 | 8,750,875 | 7,614,196 | ||||||||||
| Earnings (loss) per share attributable to common stockholders: | |||||||||||||||
| Basic | $ | 0.17 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.47 | $ | (0.13 | ) | ||
| Diluted | $ | 0.14 | $ | (1.47 | ) | $ | (0.41 | ) | $ | 0.40 | $ | (0.13 | ) | ||
| (a) | The Company issued 1,312,382 Class C OP Units in connection with its January 18, 2022 acquisition of a KIA auto dealership property in an “UPREIT” transaction. These units were not included in the computation of Diluted EPS for the<br> quarter ended March 31, 2022 because their effect would be anti-dilutive. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | During the three months ended March 31, 2022, December 31, 2021 and June 30, 2021, the weighted average dilutive effect of 1,347,958, 1,213,173 and 1,219,789 shares, respectively, related to 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 period then ended. | ||||||||||||||
| --- | --- |
6
Modiv Inc.
FFO and AFFO - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | June 30,<br><br> <br>2021 | |||||||||||
| Net income (loss) (in accordance with GAAP) | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | $ | (1,001,843 | ) | ||
| Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (143,403 | ) | — | ||||||
| Net income (loss) attributable to common stockholders and Class C OP Units | 1,468,469 | (12,995,039 | ) | (3,100,344 | ) | 3,505,052 | (1,001,843 | ) | |||||||
| FFO adjustments: | |||||||||||||||
| Add: Depreciation and amortization | 3,682,681 | 3,300,492 | 3,290,588 | 3,342,713 | 3,512,727 | ||||||||||
| Amortization of lease incentives | 75,655 | 71,394 | 53,203 | 86,694 | 40,240 | ||||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 190,468 | 190,468 | 189,439 | 182,324 | 181,786 | ||||||||||
| Less: Gain on sale of real estate investments, net | (1,002,101 | ) | (7,400,777 | ) | (3,271,289 | ) | (4,242,771 | ) | — | ||||||
| Reversal of impairment of real estate investment properties | — | — | — | — | (400,999 | ) | |||||||||
| FFO attributable to common stockholders and Class C OP Units | 4,415,172 | (16,833,462 | ) | (2,838,403 | ) | 2,874,012 | 2,331,911 | ||||||||
| AFFO adjustments: | |||||||||||||||
| Add: Amortization of corporate intangibles (a) | — | — | 158,819 | 471,790 | 465,596 | ||||||||||
| Impairment of goodwill and intangible assets (a) | — | 17,320,857 | 3,767,190 | — | — | ||||||||||
| Stock compensation (b) | 679,747 | 511,865 | 629,542 | 743,609 | 767,087 | ||||||||||
| Deferred financing costs (c) | 101,781 | 1,266,725 | 162,200 | 7,393 | 100,624 | ||||||||||
| Non-recurring loan prepayment penalties | — | 615,336 | — | — | — | ||||||||||
| Swap termination costs | — | 733,000 | — | — | — | ||||||||||
| Amortization of above-market lease intangibles | 32,456 | 32,456 | 32,456 | 32,454 | 32,458 | ||||||||||
| Acquisition fees and due diligence expenses, including abandoned pursuit costs (d) | 4,639 | 586,669 | (16,100 | ) | 474,429 | 238,496 | |||||||||
| Less Deferred rents | (699,053 | ) | (110,505 | ) | 1,138,991 | (247,716 | ) | (428,155 | ) | ||||||
| Unrealized gain on interest rate swaps | (589,997 | ) | (788,016 | ) | (285,982 | ) | (166,338 | ) | (90,600 | ) | |||||
| Amortization of below-market lease intangibles | (349,810 | ) | (363,074 | ) | (363,074 | ) | (364,573 | ) | (367,575 | ) | |||||
| Other adjustments for unconsolidated investment in a real estate property | (188 | ) | (188 | ) | (6,191 | ) | (12,195 | ) | (12,196 | ) | |||||
| AFFO attributable to common stockholders and Class C OP Units | $ | 3,594,747 | $ | 2,971,663 | $ | 2,379,448 | $ | 3,812,865 | $ | 3,037,646 | |||||
| Weighted average shares outstanding | |||||||||||||||
| Basic | 7,478,973 | 7,533,158 | 7,531,167 | 7,531,559 | 7,614,196 | ||||||||||
| Fully diluted (e) (f) | 10,221,490 | 10,193,498 | 8,744,340 | 8,750,875 | 8,833,985 | ||||||||||
| FFO per share | |||||||||||||||
| Basic | $ | 0.59 | $ | (2.23 | ) | $ | (0.38 | ) | $ | 0.38 | $ | 0.31 | |||
| Fully diluted | $ | 0.43 | $ | (2.23 | ) | $ | (0.38 | ) | $ | 0.33 | $ | 0.26 | |||
| AFFO per share | |||||||||||||||
| Basic | $ | 0.48 | $ | 0.39 | $ | 0.32 | $ | 0.51 | $ | 0.40 | |||||
| Fully diluted | $ | 0.35 | $ | 0.29 | $ | 0.27 | $ | 0.44 | $ | 0.34 | |||||
| (a) | Intangible assets reflected the Company’s investment in its crowdfunding platform which was impaired in the fourth quarter of 2021 due to the Company’s decision to terminate its crowdfunding operations. Goodwill, which relates to<br> the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock was materially below our historical net<br> asset value and the book value of our equity. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | Stock compensation expense includes (i) amortization of the Class P OP Units granted to the Company’s Chief Executive Officer and Chief Financial Officer on December 31, 2019; (ii) amortization of the Class R OP Units granted to<br> all of the Company’s employees, including the Chief Executive Officer and Chief Financial Officer, on January 25, 2021; and (iii) stock granted to the Company’s independent directors each quarter as partial consideration for their<br> service as directors. | ||||||||||||||
| --- | --- | ||||||||||||||
| (c) | Deferred financing costs for the first quarter of 2022 primarily reflect non-cash write-offs of such costs upon refinancing 20 mortgages with the KeyBank credit facility and mortgage repayments related to four asset sales. | ||||||||||||||
| --- | --- | ||||||||||||||
| (d) | Abandoned pursuit costs for the first quarter of 2022 primarily reflect the Company’s decision not to extend the February 18, 2022 termination date for its agreement to purchase a portfolio of 10 properties leased to Walgreens,<br> which the Company abandoned due to inability to obtain the mortgage servicer's approval prior to the contract termination date and changes in market conditions. | ||||||||||||||
| --- | --- | ||||||||||||||
| (e) | The increase in Diluted shares outstanding beginning in the first quarter of 2022 primarily reflects the issuance of 1,312,382 Class C interests in our operating partnership (OP Units”) as partial consideration for the acquisition<br> of a retail property located on Interstate 405 in Carson, CA, leased to a KIA auto dealership. | ||||||||||||||
| --- | --- | ||||||||||||||
| (f) | Includes the Class C, Class M, Class P and Class R OP Units to compute the weighted average number of shares for the quarter ended June 30, 2022 and the Class M, Class P and Class R OP Units to compute the weighted average number<br> of shares for each prior quarter. | ||||||||||||||
| --- | --- |
7
Modiv Inc.
Adjusted EBITDA - Last Five Quarters
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2022 | March 31,<br><br> <br>2022 | December 31,<br><br> <br>2021 | September 30,<br><br> <br>2021 | June 30,<br><br> <br>2021 | |||||||||||
| Net income (loss) | $ | 2,390,344 | $ | (12,073,164 | ) | $ | (2,178,469 | ) | $ | 3,648,455 | $ | (1,001,843 | ) | ||
| Add: Depreciation and amortization | 3,682,681 | 3,300,492 | 3,449,407 | 3,814,503 | 3,978,323 | ||||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 190,468 | 190,468 | 189,439 | 182,324 | 181,786 | ||||||||||
| Interest expense | 1,197,155 | 1,568,175 | 1,874,867 | 1,831,545 | 2,098,649 | ||||||||||
| Loss on early extinguishment of debt (a) | — | 1,725,318 | — | — | — | ||||||||||
| Interest expense on unconsolidated investment in real estate property | 98,135 | 97,645 | 100,257 | 100,788 | 100,366 | ||||||||||
| Reversal of impairment of real estate investment property | — | — | — | — | (400,999 | ) | |||||||||
| Impairment of goodwill and intangible assets (b) | — | 17,320,857 | 3,767,190 | — | — | ||||||||||
| Stock compensation | 679,747 | 511,865 | 629,542 | 743,609 | 767,087 | ||||||||||
| Write-off of due diligence costs related to abandoned acquisition of 10 properties leased to Walgreens | — | 587,000 | — | — | — | ||||||||||
| Less: Gain on sale of real estate investments | (1,002,101 | ) | (7,400,777 | ) | (3,271,289 | ) | (4,242,771 | ) | — | ||||||
| Adjusted EBITDA | $ | 7,236,429 | $ | 5,827,879 | $ | 4,560,944 | $ | 6,078,453 | $ | 5,723,369 | |||||
| Annualized adjusted EBITDA | $ | 28,945,716 | $ | 23,311,516 | $ | 18,243,776 | $ | 24,313,812 | $ | 22,893,476 | |||||
| Net debt: | |||||||||||||||
| Debt | $ | 201,425,173 | $ | 165,509,220 | $ | 183,033,756 | $ | 182,146,897 | $ | 190,181,378 | |||||
| Debt of unconsolidated investment in real estate property (c) | 9,599,182 | 9,653,689 | 9,709,710 | 9,764,171 | 9,817,066 | ||||||||||
| Cash and restricted cash | (11,705,449 | ) | (25,344,063 | ) | (58,407,520 | ) | (54,710,887 | ) | (10,374,445 | ) | |||||
| Cash of unconsolidated investment in real estate property (c) | (585,357 | ) | (458,948 | ) | (502,041 | ) | (487,490 | ) | (572,064 | ) | |||||
| $ | 198,733,549 | $ | 149,359,898 | $ | 133,833,905 | $ | 136,712,691 | $ | 189,051,935 | ||||||
| Net debt / Adjusted EBITDA | 6.9 | x | 6.4 | x | 7.3 | x | 5.6 | x | 8.3 | x | |||||
| (a) | Loss on early extinguishment of debt includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit facility with the KeyBank credit facility<br> 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 facility and the related<br> write-off of unrealized valuation losses of $788,016. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | Goodwill, which relates to the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock is<br> 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 the Company’s decision to terminate its crowdfunding operations. | ||||||||||||||
| --- | --- | ||||||||||||||
| (c) | Includes the Company's 72.71% pro rata share of the tenant-in-common's mortgage note payable and cash. | ||||||||||||||
| --- | --- |
8
Modiv Inc.
Leverage ratio
(Unaudited)
In connection with entering into the KeyBank credit facility on January 18, 2022, the Company modified the calculation of its leverage ratio to conform with the definition in the KeyBank credit facility as set forth below.
| June 30,<br><br> <br>2022 | December 31, 2021 (d) | |||||
|---|---|---|---|---|---|---|
| Total Asset Value | ||||||
| Cash and cash equivalents (a) | $ | 11,705,449 | $ | 58,407,520 | ||
| Borrowing base value (b) | 388,766,886 | 362,497,305 | ||||
| Other real estate value (c) | 122,076,864 | 130,670,000 | ||||
| Pro-rata share of unconsolidated investment | 28,811,379 | 28,728,063 | ||||
| Total asset value | $ | 551,360,578 | $ | 580,302,888 | ||
| Indebtedness | ||||||
| Credit facility revolver (a) | $ | 6,775,000 | $ | 55,775,000 | ||
| Credit facility term loan | 150,000,000 | 100,000,000 | ||||
| Mortgage debt (c) | 44,650,173 | 66,833,439 | ||||
| Pro-rata share of unconsolidated investment | 9,599,182 | 9,709,710 | ||||
| Total indebtedness | $ | 211,024,355 | $ | 232,318,149 | ||
| Leverage Ratio | 38 | % | 40 | % | ||
| (a) | The decrease in cash and cash equivalents primarily reflects the use of cash for the Lindsay property portfolio acquisition in April 2022. | |||||
| --- | --- | |||||
| (b) | The increase in the borrowing base value reflects the addition of four industrial properties acquired in April 2022 which are leased to Lindsay and the addition of the one industrial property acquired in January 2022 and leased to<br> Kalera, Inc., partially offset by the one office property sold in June 2022. | |||||
| --- | --- | |||||
| (c) | The decrease in other real estate value and mortgage debt reflects the four property dispositions in February 2022, partially offset by the addition of four industrial properties leased to Lindsay which will not be added to the<br> borrowing base value until completion of a reverse 1031 exchange. | |||||
| --- | --- | |||||
| (d) | The December borrowing base value reflects a pro forma adjustment to include acquisition of the KIA auto dealership property on January 18, 2022 and the credit facility amounts reflect pro forma adjustments to reflect debt balances as<br> of the January 18, 2022 closing of the facility, including borrowing to fund a portion of the KIA auto dealership property acquisition. | |||||
| --- | --- |
9
Modiv Inc.
Capitalization as of June 30, 2022
(Unaudited)
| PREFERRED EQUITY | |||
|---|---|---|---|
| 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock | $ | 50,000,000 | |
| % of Total Capitalization | 12 | % | |
| COMMON EQUITY | |||
| Shares of Class C Common Stock | 7,456,562 | ||
| OP Units (Class M, Class P, Class R and Class C) | 2,831,356 | ||
| Total Class C Common Stock and OP Units | 10,287,918 | ||
| Price Per Share / Unit at June 30, 2022 | $ | 17.68 | |
| IMPLIED EQUITY MARKET CAPITALIZATION | $ | 181,890,390 | |
| % of Total Capitalization | 42 | % | |
| DEBT | |||
| Mortgage Debt | |||
| Costco Property | $ | 18,850,000 | |
| Taylor Fresh Foods Property | 12,350,000 | ||
| Sutter Health Property | 13,450,173 | ||
| Total Mortgage Debt | $ | 44,650,173 | |
| KeyBank Credit Facility | |||
| Revolver (a) | $ | 6,775,000 | |
| Term Loan (a) | 150,000,000 | ||
| Total Credit Facility | $ | 156,775,000 | |
| TOTAL DEBT | $ | 201,425,173 | |
| % of Total Capitalization | 46 | % | |
| % of Total Debt - Floating Rate Debt (b) | 3 | % | |
| % of Total Debt - Fixed Rate Debt (b) | 97 | % | |
| % of Total Debt | 100 | % | |
| ENTERPRISE VALUE | |||
| Total Capitalization | $ | 433,315,563 | |
| Less: Cash and Cash Equivalents | (11,705,449 | ) | |
| Enterprise Value | $ | 421,610,114 | |
| (a) | In April 2022, the Company borrowed $44,000,000 to fund the acquisition of an eight-property portfolio of industrial properties leased to Lindsay Precast, LLC (the “Lindsay Acquisition”), drew the remaining $50,000,000 available under<br> the Term loan commitment and reduced the Revolver to $14,775,000 in connection with the swap purchase described below. In June 2022, the Company made an $8,000,000 principal payment on the Revolver with available cash on hand to reduce<br> interest expense. | ||
| --- | --- | ||
| (b) | On May 10, 2022, we purchased a five-year swap at 2.258% on our $150,000,000 term loan that results in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. As part of this transaction, we sold a<br> 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. | ||
| --- | --- |
10
Modiv Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| December 31, 2021 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Real estate investments: | |||||
| Land | 107,569,641 | $ | 61,005,402 | ||
| Buildings and improvements | 327,472,940 | 250,723,446 | |||
| Tenant origination and absorption costs | 21,384,224 | 22,027,054 | |||
| Equipment | 4,429,000 | — | |||
| Total investments in real estate property | 460,855,805 | 333,755,902 | |||
| Accumulated depreciation and amortization | (43,728,520 | ) | (37,611,133 | ) | |
| Total investments in real estate property, net | 417,127,285 | 296,144,769 | |||
| Unconsolidated investment in a real estate property | 9,956,518 | 9,941,338 | |||
| Total real estate investments, net | 427,083,803 | 306,086,107 | |||
| Real estate investments held for sale, net | — | 31,510,762 | |||
| Total real estate investments | 427,083,803 | 337,596,869 | |||
| Cash and cash equivalents | 11,705,449 | 55,965,550 | |||
| Restricted cash | — | 2,441,970 | |||
| Receivable from sale of early termination of lease | 1,446,767 | 1,836,767 | |||
| Tenant receivables | 8,059,634 | 5,996,919 | |||
| Above-market lease intangibles, net | 626,107 | 691,019 | |||
| Prepaid expenses and other assets | 6,766,867 | 5,856,255 | |||
| Interest rate swap derivative | 589,997 | — | |||
| Assets related to real estate investments held for sale | — | 788,296 | |||
| Goodwill | — | 17,320,857 | |||
| Total assets | 456,278,624 | $ | 428,494,502 | ||
| Liabilities and Equity | |||||
| Mortgage notes payable, net | 44,608,815 | $ | 152,223,579 | ||
| Mortgage notes payable related to real estate investments held for sale, net | — | 21,699,912 | |||
| Total mortgage notes payable, net | 44,608,815 | 173,923,491 | |||
| Credit facility revolver | 6,775,000 | 8,022,000 | |||
| Credit facility term loan, net | 148,850,050 | — | |||
| Accounts payable, accrued and other liabilities | 8,733,757 | 11,844,881 | |||
| Below-market lease intangibles, net | 10,175,284 | 11,102,940 | |||
| Interest rate swap derivatives | — | 788,016 | |||
| Liabilities related to real estate investments held for sale | — | 383,282 | |||
| Total liabilities | 219,142,906 | 206,064,610 | |||
| Commitments and contingencies | |||||
| 7.375% Series A cumulative redeemable perpetual preferred stock, 0.001 par value, 2,000,000 shares authorized, issued and outstanding as of June 30, 2022 and December 31, 2021 | 2,000 | 2,000 | |||
| Class C common stock 0.001 par value, 300,000,000 shares authorized, 7,643,992 shares issued and 7,456,562 shares outstanding as of June 30, 2022, respectively, and 7,426,636 shares issued<br> and outstanding as of December 31, 2021 | 7,644 | 7,427 | |||
| Class S common stock 0.001 par value, 100,000,000 shares authorized, no and 63,768 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | — | 64 | |||
| Additional paid-in-capital | 275,922,227 | 273,441,831 | |||
| Treasury stock, at costs, 187,430 shares and no shares as of June 30, 2022 and December 31, 2021, respectively | (3,253,902 | ) | — | ||
| Cumulative distributions and net losses | (116,491,382 | ) | (101,624,430 | ) | |
| Total Modiv Inc. equity | 156,186,587 | 171,826,892 | |||
| Noncontrolling interests in the Operating Partnership | 80,949,131 | 50,603,000 | |||
| Total equity | 237,135,718 | 222,429,892 | |||
| Total liabilities and equity | 456,278,624 | $ | 428,494,502 |
All values are in US Dollars.
11
Modiv Inc.
Debt Overview
(Unaudited)
| Outstanding Balance | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Collateral | June 30, 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 | 13,450,173 | 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 | |||||||||
| 44,650,173 | 152,975,437 | |||||||||||||
| Plus unamortized mortgage premium | 171,810 | 204,281 | ||||||||||||
| Less unamortized deferred financing costs | (213,168 | ) | (956,139 | ) | ||||||||||
| Mortgage notes payable, net | 44,608,815 | 152,223,579 | ||||||||||||
| KeyBank Credit Facility: | ||||||||||||||
| Revolver (a) | 6,775,000 | — | (b) | (b) | 1/18/26 | |||||||||
| Term loan (a) | 150,000,000 | — | (c) | (c) | 1/18/27 | |||||||||
| Bank of California Credit Facility (a) | — | 8,022,000 | (d) | (d) | n/a | |||||||||
| Total Credit Facility | 156,775,000 | 8,022,000 | ||||||||||||
| Less unamortized deferred financing costs | (1,149,950 | ) | (100,080 | ) | ||||||||||
| 155,625,050 | 7,921,920 | |||||||||||||
| Total debt, net | $ | 200,233,865 | $ | 160,145,499 | ||||||||||
| (a) | On January 18, 2022, the Company refinanced 20 mortgage notes and its prior credit facility with the KeyBank Credit Facility. In April 2022, the Company borrowed $44,000,000 to fund the Lindsay Acquisition, drew the remaining<br> $50,000,000 available under the Term loan commitment and reduced the Revolver to $14,775,000 in preparation for the swap agreement described below. In June 2022, the Company made an $8,000,000 principal payment on the Revolver with<br> available cash on hand to reduce interest expense. | |||||||||||||
| --- | --- | |||||||||||||
| (b) | The interest rate on the Revolver is based on the Company's leverage ratio at the end of the prior quarter. With our leverage ratio at 34% as of March 31, 2022, the spread over the Secured Overnight Financing Rate (‘‘SOFR’’),<br> including a 10 basis point credit adjustment, is 165 basis points and the interest rate on the Revolver was 3.150% as of June 30, 2022. Our leverage ratio as of June 30, 2022 was 38% and following the Federal Reserve Bank’s July 27,<br> 2022 increase in the target range for federal funds by 75 basis points, the interest rate on the Revolver is approximately 3.96%. We also pay an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount<br> of the unused commitment. | |||||||||||||
| --- | --- | |||||||||||||
| (c) | On May 10, 2022, we purchased a five-year swap at 2.258% on the $150,000,000 term loan that results in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. As part of this transaction, we agreed to a<br> one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Facility, the interest rate will continue to vary based on our leverage ratio. | |||||||||||||
| --- | --- | |||||||||||||
| (d) | Under the terms of the prior credit facility with Bank of California, the Company paid a variable rate of interest on outstanding amounts equal to one percentage point over the prime rate published in The Wall Street Journal,<br> provided that the interest rate in effect on any one day was not less than 4.75% per annum. | |||||||||||||
| --- | --- |
12
Modiv Inc.
Covenants
Credit Facility and Mortgage Notes Covenants
The following is a summary of key financial covenants for the Company’s credit facility and mortgage notes, as defined and calculated per the terms of the facility's credit agreement and the mortgage notes' governing documents, respectively, which are included in the Company's filings with the U.S. Securities and Exchange Commission. These calculations, which are not based on U.S. GAAP measurements are presented to demonstrate that as of June 30, 2022, the Company believes it is in compliance with the covenants.
| Unsecured Credit Facility Covenants | Required | June 30, 2022 | ||
|---|---|---|---|---|
| Maximum leverage ratio | <60% | 38% | ||
| Minimum fixed charge coverage ratio | >1.50x | 1.82 | ||
| Maximum secured indebtedness ratio | 40% | 8% | ||
| Minimum consolidated tangible net worth | $ | 209,795,448 | $ | 280,864,238 |
| Minimum investment grade tenants in borrowing base | 30% | 52% | ||
| Mortgage Notes Key Covenants | Debt service<br><br> <br>coverage ratio | June 30, 2022 | ||
| --- | --- | --- | ||
| Costco property | N.A. | N.A. | ||
| Taylor Fresh Foods property | 1.5 | 3.4 | ||
| Sutter Health property | 1.4 | 2.4 |
13
Modiv Inc.
Real Estate Acquisitions
(Unaudited)
The following table summarizes the Company’s property acquisition activity during each of last five quarters ended June 30, 2022.
| Q2 2022(a) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tenant and Location | Property<br><br> <br>Type | Area<br><br> <br>(Square<br><br> <br>Feet) | Lease<br><br> <br>Terms (Years) | Annual Rent<br><br> <br>Increase | Acquisition<br><br> <br>Price | Initial<br><br> <br>Cap 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 Florida | Industrial | 618,195 | 25.0 | 2.0 | % | $ | 56,150,000 | 6.65 | % | 8.52 | % | |||||
| Q1 2022 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property Type | Area (Square<br><br> <br>Feet) | Lease 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 Cap<br><br> <br>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 | 22.5 | 2.3 | % | $ | 77,354,000 | 6.4 | % | 8.1 | % | |||||||
| Q4 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property<br><br> <br>Type | Area (Square<br><br> <br>Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual<br><br> <br>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 | % | |||||
| Q3 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property Type | Area (Square Feet) | Lease Terms (Years) | Annual Rent Increase | Acquisition Price | Initial Cap Rate | Weighted Average Cap Rate | |||||||||
| Raising Cane’s, San Antonio, TX | Retail | 3,853 | 6.6 | 2.0 | % | $ | 3,607,424 | 6.3 | % | 7.1 | % | |||||
| Q2 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |||||||||
| Tenant and Location | Property<br><br> <br>Type | Area (Square<br><br> <br>Feet) | Lease<br><br> <br>Terms<br><br> <br>(Years) | Annual<br><br> <br>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 | ||||||||||||||||
| (a) | On July, 15, 2022, the Company acquired two industrial properties leased to New Vision Industries, LLC and Juniper Ring Acquisitions, LLC (the "Producto Acquisition") for $5,343,862 which represents an initial cap rate of 7.21% and a<br> weighted average cap rate of 8.76%. The properties are located in Upstate New York. On July 26 and August 4, 2022, the Company acquired four industrial properties leased to Valtir, LLC for $23,375,000 which represents an initial cap<br> rate of 7.70% and a weighted average cap rate of 9.73%. The properties are located in South Carolina, Ohio, Texas and Utah. | |||||||||||||||
| --- | --- |
14
Modiv Inc.
Real Estate Dispositions
(Unaudited)
The following table summarizes the Company’s property disposition activity during each of last five quarters ended June 30, 2022.
| Q2 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 | ||||||||
| EMCOR, Cincinnati, OH | Office | 39,385 | $ | 6,138,538 | $ | 6,525,000 | $ | 5,343,541 | $ | 179,358 | $ | 1,002,101 | 7.8 | % | ||
| Q1 2022 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property Type | Area (Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| Bon Secours, Richmond, VA | Office | $ | 72,890 | $ | 10,842,907 | $ | 10,200,000 | $ | 9,768,252 | $ | 252,344 | $ | 179,404 | 8.1 | % | |
| Omnicare, Richmond, VA | Industrial | 51,800 | 7,324,370 | 8,760,000 | 6,478,621 | 218,489 | 2,062,890 | 6.8 | % | |||||||
| Texas Health, Dallas TX | Office | 38,794 | 7,689,924 | 7,040,000 | 6,711,271 | 168,352 | 160,377 | 7.9 | % | |||||||
| Accredo, Orlando, FL | Office | 63,000 | 10,710,500 | 14,000,000 | 8,552,619 | 449,275 | 4,998,106 | 7.3 | % | |||||||
| $ | 226,484 | $ | 36,567,701 | $ | 40,000,000 | $ | 31,510,763 | $ | 1,088,460 | $ | 7,400,777 | 7.5 | % | |||
| Q4 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property Type | Area (Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| Harley Davidson, Bedford, TX | Retail | $ | 70,960 | $ | 13,178,286 | $ | 15,270,000 | $ | 11,608,682 | $ | 390,029 | $ | 3,271,289 | 6.2 | % | |
| Q3 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tenant and Location | Property Type | Area(Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| Dana. Cedar Park, TX | Industrial | $ | 45,465 | $ | 9,452,169 | $ | 10,000,000 | $ | 5,375,746 | $ | 381,483 | $ | 4,242,771 | 7.7 | % | |
| Q2 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| Tenant and Location | Property Type | Area (Square Feet) | Acquisition Price | Disposition Price | Net Book Value | Disposition Costs | Gain on Sale | Cap Rate | ||||||||
| None |
15
Modiv Inc.
Top 10 Tenants
(Unaudited)
| Tenant (a) | 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 | $ | 3,946,792 | 11 | % | 72,623 | 3 | % | |||
| Lindsay | Industrial | 3,746,588 | 11 | % | 618,195 | 21 | % | ||||
| Sutter Health | Office | 2,609,779 | 7 | % | 106,592 | 4 | % | ||||
| Costco Wholesale | Office | 2,326,509 | 7 | % | 97,191 | 3 | % | ||||
| AvAir | Industrial | 2,295,839 | 7 | % | 162,714 | 6 | % | ||||
| 3M | Industrial | 1,792,764 | 5 | % | 410,400 | 14 | % | ||||
| Taylor Farm | Industrial | 1,626,728 | 5 | % | 216,727 | 7 | % | ||||
| FUJIFILM Dimatix (b) | Industrial | 1,606,903 | 5 | % | 91,740 | 3 | % | ||||
| Cummins | Office | 1,485,386 | 4 | % | 87,230 | 3 | % | ||||
| Northrop Grumman | Office | 1,262,084 | 4 | % | 107,419 | 4 | % | ||||
| Total Top 10 Tenants | $ | 22,699,372 | 66 | % | 1,970,831 | 68 | % | ||||
| (a) | Following the Valtir Acquisition in July and August 2022, Valtir, LLC’s ABR of $1,800,000 represents approximately 5% of our total ABR. | ||||||||||
| --- | --- | ||||||||||
| (b) | Reflects our 72.71% tenant-in-common interest (“TIC Interest”). | ||||||||||
| --- | --- |
Modiv Inc.
Property Type
(Unaudited)
| Property | Number of<br><br> <br>Properties | ABR | ABR as<br><br> <br>a Percentage of<br><br> <br>Total Portfolio (a) | Area <br><br> (Square Feet) | Square Feet as<br><br> <br>a Percentage<br><br> <br>of Total<br><br> <br>Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Industrial (b) | 20 | $ | 16,217,803 | 48 | % | 2,068,388 | 72 | % | |||
| Retail | 13 | 6,528,883 | 19 | % | 234,029 | 8 | % | ||||
| Office | 10 | 11,398,322 | 33 | % | 585,967 | 20 | % | ||||
| Total Properties | 43 | $ | 34,145,008 | 100 | % | 2,888,384 | 100 | % | |||
| (a) | Following the Company's July 2022 acquisitions of six industrial properties and a pending office disposition in August 2022, we own 26 industrial properties representing 51% of the portfolio, 13 retail properties representing 19% of<br> the portfolio and 10 office properties representing 30% of the portfolio (based on pro forma ABR of $35,649,730 as of June 30, 2022). | ||||||||||
| --- | --- | ||||||||||
| (b) | Including TIC Interest. | ||||||||||
| --- | --- |
16
Modiv Inc.
Tenant Industry Diversification (a)
(Unaudited)
| Industry | Number of 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<br><br> <br>as a<br><br> <br>Percentage of Total<br><br> <br>Portfolio | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Manufacturing | 11 | $ | 6,889,787 | 20 | % | 888,987 | 31 | % | ||||
| Automobile & Components | 2 | 4,259,878 | 12 | % | 235,853 | 8 | % | |||||
| General Retailers | 11 | 3,751,085 | 11 | % | 190,254 | 7 | % | |||||
| Health Care Equipment & Services | 1 | 2,609,779 | 8 | % | 106,592 | 4 | % | |||||
| Transportation | 1 | 2,295,839 | 7 | % | 162,714 | 6 | % | |||||
| Food, Beverage & Tobacco | 2 | 2,198,150 | 6 | % | 295,584 | 10 | % | |||||
| Technology Hardware & Equipment | 2 | 2,085,401 | 6 | % | 130,240 | 4 | % | |||||
| Defense | 2 | 2,032,163 | 6 | % | 153,633 | 5 | % | |||||
| Materials | 1 | 1,792,764 | 5 | % | 410,400 | 14 | % | |||||
| Commercial & Professional Services | 2 | 1,542,100 | 5 | % | 70,567 | 2 | % | |||||
| Pharmaceuticals, Biotechnology & Life Sciences | 1 | 1,179,234 | 3 | % | 20,800 | 1 | % | |||||
| Consumer Durables and Apparel | 2 | 1,088,051 | 3 | % | 75,977 | 3 | % | |||||
| Consumer Services | 1 | 924,000 | 3 | % | 91,390 | 3 | % | |||||
| Hotel & Restaurant | 2 | 639,559 | 2 | % | 18,343 | 1 | % | |||||
| Energy | 1 | 534,500 | 2 | % | 26,036 | 1 | % | |||||
| Government | 1 | 322,719 | 1 | % | 11,014 | — | % | |||||
| Total | 43 | $ | 34,145,009 | 100 | % | 2,888,384 | 100 | % | ||||
| (a) | Data as of June 30, 2022, which does not reflect the Producto and Valtir acquisitions which closed in July and August 2022. | |||||||||||
| --- | --- |
17
Modiv Inc.
Tenant Geographic Diversification (a)
(Unaudited)
| State | Number of<br><br> <br>Properties | ABR | ABR as a<br><br> <br>Percentage of<br><br> <br>Total Portfolio | Area (Square<br><br> <br>Feet) | Square Feet<br><br> <br>as a<br><br> <br>Percentage of<br><br> <br>Total Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| California | 13 | $ | 13,045,207 | 38 | % | 600,395 | 21 | % | |||
| Arizona | 2 | 3,922,567 | 12 | % | 379,441 | 13 | % | ||||
| Florida | 3 | 2,657,272 | 8 | % | 237,329 | 8 | % | ||||
| Ohio | 6 | 2,474,694 | 7 | % | 510,343 | 18 | % | ||||
| Washington | 1 | 2,326,510 | 7 | % | 97,191 | 3 | % | ||||
| Illinois | 1 | 1,792,764 | 5 | % | 410,400 | 14 | % | ||||
| Nevada | 2 | 1,626,251 | 5 | % | 77,257 | 3 | % | ||||
| Tennessee | 1 | 1,485,386 | 4 | % | 87,230 | 3 | % | ||||
| North Carolina | 2 | 1,354,120 | 4 | % | 134,576 | 5 | % | ||||
| Texas | 3 | 1,243,557 | 4 | % | 62,879 | 2 | % | ||||
| Colorado | 3 | 827,201 | 2 | % | 98,994 | 4 | % | ||||
| Minnesota | 1 | 571,421 | 2 | % | 78,857 | 2 | % | ||||
| South Carolina | 1 | 423,053 | 1 | % | 75,360 | 3 | % | ||||
| Maine | 2 | 205,400 | 1 | % | 18,126 | 1 | % | ||||
| Georgia | 1 | 103,607 | — | % | 10,906 | — | % | ||||
| Pennsylvania | 1 | 85,998 | — | % | 9,100 | — | % | ||||
| Total | 43 | $ | 34,145,008 | 100 | % | 2,888,384 | 100 | % | |||
| (a) | Data as of June 30, 2022, which does not reflect the Producto and Valtir acquisitions which closed in July and August 2022. | ||||||||||
| --- | --- |
18
Modiv Inc.
Lease Expirations
(Unaudited)
10 Years and Thereafter Lease Expirations
| As of June 30, 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 Annualized<br><br> <br>Base Rent<br><br> <br>Expiring (a) | Cumulative<br><br> <br>Percentage<br><br> <br>of<br><br> <br>Annualized<br><br> <br>Base Rent<br><br> <br>Expiring | |||||||||||
| July to December 2022 | — | — | — | % | — | % | $ | — | — | % | — | % | ||||||
| 2023 | 3 | 142,146 | 4.9 | % | 4.9 | % | 1,255,104 | 3.7 | % | 3.7 | % | |||||||
| 2024 | 1 | 87,230 | 3.0 | % | 7.9 | % | 1,485,386 | 4.3 | % | 8.0 | % | |||||||
| 2025 | 6 | 312,746 | 10.8 | % | 18.7 | % | 7,305,706 | 21.4 | % | 29.4 | % | |||||||
| 2026 | 5 | 280,740 | 9.7 | % | 28.4 | % | 4,733,806 | 13.9 | % | 43.3 | % | |||||||
| 2027 | 1 | 64,637 | 2.2 | % | 30.6 | % | 887,991 | 2.6 | % | 45.9 | % | |||||||
| 2028 | 2 | 22,680 | 0.8 | % | 31.4 | % | 561,766 | 1.6 | % | 47.5 | % | |||||||
| 2029 | 3 | 134,714 | 4.7 | % | 36.1 | % | 2,172,577 | 6.4 | % | 53.9 | % | |||||||
| 2030 | 5 | 45,278 | 1.6 | % | 37.7 | % | 463,363 | 1.4 | % | 55.3 | % | |||||||
| 2031 | — | — | — | % | 37.7 | % | — | — | % | 55.3 | % | |||||||
| 2032 | 2 | 177,204 | 6.1 | % | 43.8 | % | 2,664,838 | 7.8 | % | 63.1 | % | |||||||
| Thereafter | 15 | 1,621,009 | 56.2 | % | 100.0 | % | 12,614,471 | 36.9 | % | 100.0 | % | |||||||
| Total | 43 | 2,888,384 | 100.0 | % | $ | 34,145,008 | 100.0 | % | ||||||||||
| (a) | The pro forma effect of including the July and August 2022 Producto and Valtir acquisitions and the expected disposition of the Williams Sonoma office property in August 2022 will increase our percentage of ABR expiring after 2032 from<br> 44.7% to 49.0% with the percentage of ABR expiring from 2023 through 2026 decreasing to 3.5%, 4.2%, 18.6% and 13.3%, respectively, for a pro forma total of 39.6% expiring through the end of 2026 compared with 43.3% above. | |||||||||||||||||
| --- | --- |
19
Modiv Inc.
Disclosures Regarding Non-GAAP and Other Metrics
Notice Involving Non-GAAP Financial Measures
In addition to U.S. GAAP financial measures, this supplemental report contains and may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are provided below.
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts (“Nareit”) promulgated a measure known as FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures and preferred distributions. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.
Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation, deferred rent, amortization of in-place lease valuation intangibles, acquisition-related costs, deferred financing fees, asset impairment write-downs, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-off transaction costs and other one-time transactions.
We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. We believe that AFFO is a beneficial indicator of our ongoing portfolio performance and ability to sustain our current distribution level. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or our future ability to pay our dividends. By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.
For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, FFO and AFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.
20
Neither the SEC, Nareit, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure. Furthermore, as described in the notes to our unaudited condensed consolidated financial statements, the conversion ratios for units of Class M limited partnership interest in the Operating Partnership, units of Class P limited partnership interest in the Operating Partnership and units of Class R limited partnership interest (“Class R OP Units”) in the Operating Partnership can increase if the specified performance hurdles are achieved.
Adjusted EBITDA
We define Adjusted EBITDA as GAAP net income or loss adjusted to exclude depreciation and amortization, gains or losses from the sales of depreciable property, extraordinary items, provisions for impairment on investment in real estate and goodwill and intangibles, interest expense and non-cash items such as non-cash compensation expenses. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA is not a measure of financial performance under GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA as an alternative to net income or cash flows from operating activities determined in accordance with GAAP.
Net Debt
We define Net Debt as gross debt less cash and cash equivalents and restricted cash.
Leverage Ratio
We define our Leverage Ratio as total debt as a percentage of the aggregate fair value of our real estate properties, including our proportionate interest in real estate owned by unconsolidated entities, plus our cash and cash equivalents.
Annualized Base Rent (“ABR”)
ABR represents contractual annual base rent for the next 12 months.
Initial Cap Rate
We define “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property.
Weighted Average Cap Rate
We define “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property.
21
Exhibit 99.3
FINANCIAL HIGHLIGHTS AS OF JUNE 30, 2022 Maturity Schedule Capitalization Table 93% of Debt Maturities have a Fixed Weighted Average Rate @ 4% 7% of Debt Maturities are Floating @ SOFR + 165 bps $1.26 - $1.36 2022 AFFO per share Guidance $540M Gross Real Estate Value 35%+ Discount to Consensus Target Price $1.15 Annual Per Share Dividend (Paid Monthly) $65M Purchasing Power From Revolver and Cash
