Exhibit 99.2
NYSE: MDV
QUARTERLY SUPPLEMENTAL DATA
March 31, 2024
Financial Information
and
Portfolio Information
Modiv Industrial, Inc.
Supplemental Information - First Quarter 2024
Table of Contents | ||
About the Data | 3 | |
Company Overview | 4 | |
Financial Results | ||
Earnings Release | 5 | |
Consolidated Statements of Operations - Last Five Quarters | 9 | |
Property Portfolio - Statements of Operations - First Quarter of 2024 | 11 | |
Consolidated Statements of Comprehensive (Loss) Income - Last Five Quarters | 13 | |
Earnings (Loss) Per Share - Last Five Quarters | 14 | |
FFO and AFFO - Last Five Quarters | 15 | |
Property Portfolio - FFO and AFFO - First Quarter of 2024 | 17 | |
Adjusted EBITDA - Last Five Quarters | 18 | |
Leverage Ratio | 19 | |
Balance Sheets and Capitalization | ||
Capitalization | 20 | |
Consolidated Balance Sheets | 21 | |
Property Portfolio - Balance Sheets - As of March 31, 2024 | 22 | |
Debt Overview | 23 | |
Credit Facility and Mortgage Notes Covenants | 24 | |
Real Estate | ||
Real Estate Acquisitions | 25 | |
Real Estate Dispositions | 26 | |
Top 20 Tenants | 27 | |
Property Type | 28 | |
Tenant Industry Diversification | 29 | |
Tenant Geographic Diversification | 29 | |
Lease Expirations | 30 | |
Appendix | ||
Disclosures Regarding Non-GAAP and Other Metrics | 31 |
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About the Data
This data and other information described herein are as of and for the three months ended March 31, 2024 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 Industrial, Inc.'s (f/k/a Modiv Inc.) Annual Report on Form 10-K for the year ended December 31, 2023 filed on March 7, 2024 and Quarterly Report on From 10-Q for the quarter ended March 31, 2024, including the financial statements and management's discussion and analysis of financial condition and results of operations filed on May 2, 2024.
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, changes in the rate of inflation and interest rates, general economic conditions, local real estate conditions, tenant financial health, property acquisitions and dispositions and the timing of any acquisitions and dispositions, supply-chain disruptions and negative impacts associated with the violence and unrest in the Middle East, and the ongoing Russian war against Ukraine and sanctions which have been implemented by the United States and other countries against Russia and Iran. 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.
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Company Overview
Modiv Industrial, Inc. (NYSE:MDV) (“Modiv Industrial”, the “Company”, “we”, “us” and “our”) is a real estate investment trust (“REIT”) that acquires, owns and manages a portfolio of single-tenant net-lease real estate. The Company actively acquires critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation's supply chains. For more information, please visit: www.modiv.com.
Modiv Industrial strives towards a “best-in-class” corporate governance structure through a board of directors and management team with decades of institutional real estate industry experience.
Management Team: | Independent Directors: |
Aaron S. Halfacre | Adam S. Markman |
Chief Executive Officer and Director | Chairman of the Board |
Raymond J. Pacini | Curtis B. McWilliams |
Chief Financial Officer and Secretary | |
John C. Raney | Kimberly Smith |
Chief Operating Officer and General Counsel | |
Sandra G. Sciutto | Thomas H. Nolan, Jr. |
Chief Accounting Officer | |
William R. Broms | Connie Tirondola |
Chief Investment Officer |
Investor Inquiries:
management@modiv.com
Transfer Agent:
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
800-736-3001
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Modiv Industrial Announces First Quarter 2024 Results
Management Provides NAV per share and Forward-Looking Thoughts
Reno, Nevada, May 2, 2024 – Modiv Industrial, Inc. (“Modiv Industrial”, “Modiv”, the “Company”, “we” or “our”), (NYSE:MDV), the only public REIT exclusively focused on acquiring industrial manufacturing real estate, today announced operating results for the first quarter ended March 31, 2024.
Highlights:
• | First quarter rental income of $11.9 million increased $1.6 million, or 15.4% year-over-year. |
• | First quarter AFFO of $3.3 million increased $0.2 million, or 6.6% year-over year. |
• | Received $1.4 million non-refundable deposit, following the completion of due diligence, on the previously announced disposition of our Issaquah, Washington office property to KB Home (NYSE: KBH). |
• | Entered into a letter of intent (LOI) to acquire an industrial manufacturing property for $6,400,000 with a company that produces optical systems for the defense and aerospace industries. The property is located in the Tampa Florida MSA and the tenant is expected to enter into a 20-year lease, with 2.85% annual rent escalations, at an initial cap rate of 8.13% and a weighted average cap rate of 10.75%. |
• | Cash balance of $18.4 million as of March 31, 2024 and $150 million available on our revolving credit facility. |
• | Obtained independent appraisals of real estate portfolio as of January 31, 2024. |
• | Compelling upside opportunity in current share price when compared to our implied average NAV per share of $23.63 and our current GAAP book value per share of $15.64. |
• | Fully covered dividend yield of 7.72% based on our closing price of $14.90 on May 1, 2024. |
“Of all the quarterly earnings releases, first quarter is always the most quirky given in terms of timing that it comes so soon after the release of fourth quarter results. In our case, we were speaking about 2023 results less than 60 days ago. During that short time, the broader market has consistently delivered the price volatility, economic uncertainty and geo-political risk that have plagued us for what feels like dog years now. Here at Modiv, we too have been consistent with what we do – patient, nose-to-the-grindstone execution. Though we have no seismic shifts to announce today, we have been steadfast in our focused pursuit of a tectonic transformation. Let’s get to it…
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Business Outlook:
Acquisition Activity – Like a sniper laying prone for a seemingly endless period of time, scanning for the right target and adjusting for the wind, before they find their shot, we too have been ever so patient in our acquisitions process over the past six plus months as we waited to pull the trigger on the right transaction. Though its just an LOI, and subject to the normal contingencies of due diligence, we are pleased that the Tampa MSA acquisition we have found meets our very specific goal of acquiring a manufacturing facility in an industry that is both critical and durable. Furthermore, this transaction highlights our ability to make single asset purchases on an unlevered and accretive basis. Should it pass due diligence, this acquisition is anticipated to close late May/early June and then we can share more details.
True, it’s a small transaction that won’t profoundly move the needle, but it definitely showcases our discipline, our patience and our self-restraint to not hammer out rote acquisition volume for the sake of big numbers. If you see yourself as a hammer, then everything else you see is a nail, and we believe that hammers aren’t heroes in this current market.
Disposition Activity – Though we previously announced the sale contract with KB Home to buy our Issaquah, Washington office asset (currently leased to Costco), it is nice to have their exhaustive due diligence behind us and the $1.4 million deposit now fully non-refundable. That’s good news as KB Home is very thorough and wouldn’t give up that money if they weren’t serious. Unexpectedly, as KB Home went through city zoning and approvals, it came to everyone’s attention that there was a recently legislated environmental setback requirement of 150 feet along one side of the property line. This setback requirement resulted in less buildable area and, as a result, less townhome units they could sell. After some back and forth, we ultimately agreed upon a new selling price of $25.3 million to enable both parties to move forward. From our perspective, selling for a slight reduction in price that leads to more housing options in that tight residential market was a better outcome than us trying to lease or sell a soon-to-be empty office building. Additionally, should they find a way to fit a higher number of townhomes on the site through their design efforts, then we have a mechanism in place that increases the ultimate sales price by $325,000 for each additional unit. Lastly, getting to collect the full rent from our existing tenant for the next year is a big plus. We think this dispo is a win-win.
Recent External Valuations – In the past six years we have had our portfolio of assets independently appraised (and publicly disclosed) a total of 10 times. Why? Simply put, we believe that data informs decision-making and transparency empowers awareness. This year we elected to increase the data and transparency by having two nationally recognized valuation agents independently appraise the same portfolio of assets. Historically, we have engaged just Cushman & Wakefield to conduct an appraisal. This year we engaged both Cushman & Wakefield and CBRE. We took the data from their estimates of values for our properties (and our fixed rate mortgages) and then we calculated our net asset value (NAV) per share as delineated in the table further below and also in our accompanying 8-K filing. The result of our calculations imputes an average NAV of $23.63 per share – a greater than 50% premium to where we have recently been trading. Appraisals are just one of the many forms of valuations, and like the other forms (e.g. discounted cash flow models, analysts’ consensus targets, cap rate analysis and P/AFFO metrics) all suggest that MDV is currently trading below fair value. What you do with this information is completely up to you, but for us it drives our motivation to work tirelessly to close the value gap and to work with those investors who wish to do the same.
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Discussions with Potential Strategic Partners – As we mentioned in our fourth quarter 2023 earnings release, we have had some very productive conversations with a few investors that believe in our asset class and see the opportunity. Over the past 60 days we have narrowed down our conversations to two possible strategic partners that both have existing industrial manufacturing portfolios and both are contemplating the contribution of their assets in exchange for our equity. These two possible partners are both well known, have great reputations and are quite savvy. As you can imagine, given the current market backdrop, the conversations are more nuanced than they might otherwise be. Negotiating, in this instance, is not unlike doing integral calculus with an array of principal variables with finite value ranges that are uniquely and collectively impacted by each other as well as from other derivative variables that are constantly changing. This calculus is notably more difficult given our desire to see if we can manifest all three of us coming together – the benefits of such a combination could lead to considerably more economic scale, greater diversification, meaningful index inclusion buying, increased trading float and a higher percentage of institutional ownership.
Imagine three battleships, each very capable in their own right. One battleship is anchored along the shore of Miami, one battleship is anchored along the shore of England and the third battleship is in the middle of the Atlantic Ocean. Imagine that Modiv is that third battleship and from our vantage point we can clearly see an easy path to either the shore in Miami or the English shore – we could go toward either. Now the battleship alongside the Miami shore has a harder time seeing a path toward the battleship alongside the English shore, and vice versa. What we are presently attempting to do is to get all three battleships to sail to a new location and to form an armada of strength that no individual battleship could obtain on their own. Stormy market weather, economic currents and geo-political waves mean that each ship must be very thoughtful (and patient) when it comes to seafaring.
Obviously, we aren’t so barmy as to take an all or nothing approach at the expense of viable alternatives. Negotiating in volatile markets can be a fatiguing and frustrating exercise, sometimes the ideas make sense but the timing is off. At this stage of the process, we see the range of outcomes that could possibly arise (in no particular order or probability) as: 1) a three-way deal; 2) a two-way deal with either party; 3) no deals at all; or 4) no deals for now. There are no assurances that anything will manifest, but we can tell you we are working hard to see if something can. We will keep you posted.
Ok, I think that about does it. Until we meet again… hug your families, enjoy life and stay modivated!” – Aaron Halfacre, CEO of Modiv Industrial.
Conference Call and Webcast
A conference call and audio webcast with analysts and investors will be held on Thursday, May 2, 2024, at 10:30 a.m. Eastern Time / 7:30 a.m. Pacific Time, to discuss the first quarter 2024 operating results and answer questions.
Live conference call: 1-877-407-0789 or 1-201-689-8562 at 10:30 a.m. Eastern Time, Thursday, May 2, 2023
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Webcast: To listen to the webcast, either live or archived, please use this LINK or visit the investor relations page of Modiv’s website at www.modiv.com.
About Modiv Industrial
Modiv Industrial, Inc. is an internally managed REIT that is focused on single-tenant net-lease industrial manufacturing real estate. The Company actively acquires critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation’s supply chains. 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, 2023 filed with the SEC on March 7, 2024. 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 May 2, 2024 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.
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.
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.
Inquiries:
management@modiv.com
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Modiv Industrial, Inc.
Consolidated Statements of Operations - Last Five Quarters
(Unaudited)
Three Months Ended | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||
Income: | ||||||||||||||||||||
Rental income (a) | $ | 11,900,567 | $ | 12,288,516 | $ | 12,500,338 | $ | 11,836,563 | $ | 10,311,182 | ||||||||||
Management fee income | 65,993 | 65,993 | 65,993 | 65,993 | 65,993 | |||||||||||||||
Total income | 11,966,560 | 12,354,509 | 12,566,331 | 11,902,556 | 10,377,175 | |||||||||||||||
Expenses: | ||||||||||||||||||||
General and administrative | 1,999,401 | 1,402,055 | 1,735,104 | 1,597,776 | 1,908,055 | |||||||||||||||
Stock compensation expense (b) | 1,378,502 | 1,381,001 | 8,469,867 | 660,170 | 660,169 | |||||||||||||||
Depreciation and amortization | 4,133,501 | 4,147,570 | 4,175,209 | 3,956,334 | 3,272,061 | |||||||||||||||
Property expenses (c) | 983,982 | 731,081 | 1,195,224 | 1,527,868 | 1,706,843 | |||||||||||||||
Impairment of real estate investment property (d) | — | 888,186 | — | — | 3,499,438 | |||||||||||||||
Total expenses | 8,495,386 | 8,549,893 | 15,575,404 | 7,742,148 | 11,046,566 | |||||||||||||||
Gain (loss) on sale of real estate investments (e) | 3,187,806 | — | (1,708,801 | ) | — | — | ||||||||||||||
Operating income (loss) | 6,658,980 | 3,804,616 | (4,717,874 | ) | 4,160,408 | (669,391 | ) | |||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 123,839 | 28,967 | 26,386 | 216,841 | 53,695 | |||||||||||||||
Dividend income | 108,373 | 285,000 | 190,000 | — | — | |||||||||||||||
Income from unconsolidated investment in a real estate property | 73,854 | 72,043 | 79,164 | 72,773 | 55,567 | |||||||||||||||
Interest (expense) income, including unrealized gain or loss on interest rate swaps and net of derivative settlements (f) | (2,307,149 | ) | (7,045,059 | ) | (2,922,918 | ) | 179,931 | (4,018,792 | ) | |||||||||||
(Decrease) increase in fair value of investment in common/preferred stock (g) | (20,574 | ) | 978,658 | 440,000 | — | — | ||||||||||||||
Other | — | 33,724 | — | — | — | |||||||||||||||
Other (expense) income, net | (2,021,657 | ) | (5,646,667 | ) | (2,187,368 | ) | 469,545 | (3,909,530 | ) | |||||||||||
Net income (loss) | 4,637,323 | (1,842,051 | ) | (6,905,242 | ) | 4,629,953 | (4,578,921 | ) | ||||||||||||
Less: net (income) loss attributable to noncontrolling interests in Operating Partnership | (912,864 | ) | 546,967 | 1,368,896 | (649,643 | ) | 816,199 | |||||||||||||
Net income (loss) attributable to Modiv Industrial, Inc. | 3,724,459 | (1,295,084 | ) | (5,536,346 | ) | 3,980,310 | (3,762,722 | ) | ||||||||||||
Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | ||||||||||
Net income (loss) attributable to common stockholders | $ | 2,802,584 | $ | (2,216,959 | ) | $ | (6,458,221 | ) | $ | 3,058,435 | $ | (4,684,597 | ) | |||||||
Net income (loss) per share attributable to common stockholders: | ||||||||||||||||||||
Basic | $ | 0.33 | $ | (0.29 | ) | $ | (0.86 | ) | $ | 0.41 | $ | (0.62 | ) | |||||||
Net income (loss) per share attributable to common stockholders and noncontrolling interests: | ||||||||||||||||||||
Diluted | $ | 0.33 | $ | (0.29 | ) | $ | (0.86 | ) | $ | 0.35 | $ | (0.62 | ) | |||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||||||
Basic | 8,568,353 | 7,621,871 | 7,548,052 | 7,532,106 | 7,532,452 | |||||||||||||||
Diluted (h) | 11,359,258 | 7,621,871 | 7,548,052 | 10,638,311 | 7,532,452 | |||||||||||||||
Distributions declared per common share (i) | $ | 0.2875 | $ | 1.3975 | $ | 0.2875 | $ | 0.2875 | $ | 0.2875 |
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(a) | Rental income includes tenant reimbursements for property expenses. |
(b) | Stock compensation expense in the third quarter of 2023 included a one-time non-cash catch-up adjustment of $7,822,197 related to our determination that at that time it was probable that we would achieve our performance target for FFO of $1.05 per diluted share for the year ended December 31, 2023, exclusive of the dilutive effect of the performance units and related stock compensation expense. Our FFO per fully diluted share excluding the dilutive impact of the performance units and the related stock compensation expense was $1.77 for the year ended December 31, 2023. The $0.72 of FFO per diluted share in excess of the performance target of $1.05 per diluted share exceeded the target by 69%. As a result of achieving our performance target of FFO of $1.05 per diluted share (excluding the performance units), our Class R OP Units automatically converted based on a conversion ratio of 2.5 Class C OP Units for each Class R OP Unit for a total of 790,857 Class C OP Units, some of which were then exchanged for the Company's Class C Common Stock, as of March 31, 2024. Stock compensation expense of $733,332 for the performance units was recorded for the fourth quarter of 2023 and the first quarter of 2024 to recognize the final vesting periods. |
(c) | Property expenses are largely offset by tenant reimbursements included in rental income. |
(d) | The impairment charges for the first and fourth quarters of 2023 relate to an office property located in Nashville, Tennessee leased to Cummins, Inc. through February 29, 2024, which was sold on February 28, 2024. We determined that an impairment charge in the first quarter of 2023 was triggered by expectations of a shortened holding period and estimated the property's fair value based upon market comparables at the time. The additional charge in the fourth quarter of 2024 was based on the sale agreement executed on December 15, 2023, reflecting the excess of the property's carrying value over the property's contracted sale price less estimated selling costs for the sale. |
(e) | Gain on sale of real estate investments of $3,187,806 for the first quarter of 2024 relates to the sales of two non-core properties. Loss on sale of real estate investments for the third quarter of 2023 includes a loss of $(1,887,040) on the sale of 13 non-core properties to Generation Income Properties, Inc. ("GIPR") (11 retail and two office), partially offset by a gain on the sale of the Rocklin, California property. Sale proceeds from the GIPR sale included cash of $30,000,000 and newly issued GIPR preferred stock with a liquidation value of $12,000,000. The loss includes the $2,380,000 difference between the $12,000,000 liquidation value and the $9,620,000 fair value of our investment in GIPR’s newly-created Series A Redeemable Preferred Stock received on August 10, 2023. |
(f) | Interest expense (income), including unrealized gain or loss on interest rate swaps and net of derivative settlements in the first quarter of 2024 includes $1,036,270 of net unrealized gain on interest rate swaps and $1,670,732 of derivative cash settlements received. The fourth quarter of 2023 includes $3,400,139 unrealized loss on interest rate swaps, net of $1,617,279 of derivative cash settlements received. The third quarter of 2023 is net of $795,425 unrealized gain on interest rate swaps and $1,586,641 of derivative cash settlements received, the second quarter of 2023 is net of $3,708,597 unrealized gain on interest rate swaps and $1,401,716 of derivative cash settlements received and the first quarter of 2023 includes $1,722,184 unrealized loss on interest rate swaps and is net of $1,074,085 of derivative cash settlements received. |
(g) | Decrease (increase) in fair value of investment in common/preferred stock reflects adjustments to fair value. |
(i) | Diluted shares outstanding for periods when we reported a net loss do not include the OP Units since they would be anti-dilutive. Diluted shares during the first quarter of 2024 and the second quarter of 2023 include Class C, Class M, Class P and Class R OP Units. |
(j) | Distributions for the three months ended December 31, 2023 include the distribution of GIPR common stock of $1.11 per share declared on December 29, 2023 which reflects 0.28 shares of GIPR common stock per one share of our stock multiplied by $3.95 which was the closing price of GIPR common stock on December 29, 2023. |
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Modiv Industrial, Inc.
Property Portfolio - Statements of Operations - First Quarter of 2024
(Unaudited)
Three Months Ended March 31, 2024 | ||||||||||||||||||||
Industrial Core | Tactical Non-Core (1) | Other Non-Core (2) | Non-Property & Other (3) | Consolidated | ||||||||||||||||
Income: | ||||||||||||||||||||
Rental income | $ | 8,663,832 | $ | 2,757,676 | $ | 479,059 | $ | — | $ | 11,900,567 | ||||||||||
Management fee income | — | — | — | 65,993 | 65,993 | |||||||||||||||
Total income | 8,663,832 | 2,757,676 | 479,059 | 65,993 | 11,966,560 | |||||||||||||||
Expenses: | ||||||||||||||||||||
General and administrative | — | — | — | 1,999,401 | 1,999,401 | |||||||||||||||
Stock compensation expense | — | — | — | 1,378,502 | 1,378,502 | |||||||||||||||
Depreciation and amortization | 3,279,932 | 808,902 | 44,667 | — | 4,133,501 | |||||||||||||||
Property expenses | 535,562 | 331,346 | 117,074 | — | 983,982 | |||||||||||||||
Impairment of real estate investment property | — | — | — | — | — | |||||||||||||||
Total expenses | 3,815,494 | 1,140,248 | 161,741 | 3,377,903 | 8,495,386 | |||||||||||||||
Gain on sale of real estate investments, net | 3,178,860 | — | 8,946 | — | 3,187,806 | |||||||||||||||
Operating income (loss) | 8,027,198 | 1,617,428 | 326,264 | (3,311,910 | ) | 6,658,980 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | — | — | — | 123,839 | 123,839 | |||||||||||||||
Dividend income | — | — | — | 108,373 | 108,373 | |||||||||||||||
Income from unconsolidated investment in a real estate property | 73,854 | — | — | — | 73,854 | |||||||||||||||
Interest expense, including unrealized gain on interest rate swaps and net of derivative settlements (4) | (4,014,099 | ) | (1,121,538 | ) | (131,606 | ) | 2,960,094 | (2,307,149 | ) | |||||||||||
Decrease in fair value of investment in common stock | — | — | — | (20,574 | ) | (20,574 | ) | |||||||||||||
Other expense, net | (3,940,245 | ) | (1,121,538 | ) | (131,606 | ) | 3,171,732 | (2,021,657 | ) | |||||||||||
Net income (loss) | 4,086,953 | 495,890 | 194,658 | (140,178 | ) | 4,637,323 | ||||||||||||||
Less: net income attributable to noncontrolling interest in Operating Partnership | — | — | — | (912,864 | ) | (912,864 | ) | |||||||||||||
Net income (loss) attributable to Modiv Industrial, Inc. | 4,086,953 | 495,890 | 194,658 | (1,053,042 | ) | 3,724,459 | ||||||||||||||
Preferred stock dividends | — | — | — | (921,875 | ) | (921,875 | ) | |||||||||||||
Net income (loss) attributable to common stockholders | $ | 4,086,953 | $ | 495,890 | $ | 194,658 | $ | (1,974,917 | ) | $ | 2,802,584 |
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(1) | We categorize Tactical Non-Core Assets as those assets that offer compelling value-add or opportunistic investment characteristics when measured over a near-term or interim holding period. We currently hold three such assets: (i) our tactical non-core acquisition of a leading KIA auto dealership located in a prime location in Los Angeles County acquired in January 2022, which was structured as an UPREIT transaction resulting in a favorable equity issuance of $32,809,550 Class C OP Units at a cost basis of $25 per share; (ii) our 12 year lease to the State of California's Office of Emergency Services (OES) executed in January 2023 for one of our existing assets located in Rancho Cordova, California that includes an attractive purchase option by the tenant; we expect to hear in the near-term if OES plans to exercise their option since the option period begins on May 1, 2024; and (iii) our property leased to Costco located in Issaquah, Washington until July 31, 2025, which offers compelling redevelopment opportunities following Costco's lease expiration given its higher density infill location and the fact that the land is zoned to allow for multi-family development. On April 1, 2024, we entered into an amendment to the January 11, 2024 purchase and sale agreement with KB Home, a national homebuilder for the sale of this property, for a revised sale price of $25,300,000 reflecting an agreement to reduce the sales price due to City of Issaquah’s setback requirements resulting in a reduced number of townhomes planned for the property. KB Home completed its due diligence on April 26, 2024 and deposited $1,407,500 into escrow on May1, 2024, bringing the total non-refundable deposit to $1,432,500. Completing the sale remains subject to the buyer obtaining development approvals and the sale would not close until 15 days following the earlier of (a) buyer obtaining all necessary development approvals, or (b) tenant vacating the property, but not prior to February 1, 2025, and not later than August 15, 2025 unless extended. The amendment to the purchase and sale agreement provides that the buyer can extend the outside closing date up to three times for 60 days for each extension. The nonrefundable extension fee for the first extension is $300,000 with 50% applicable to the purchase price. The nonrefundable extension fees for the second and third extensions are $200,000 and $300,000, respectively, and none of these extension fees will be applicable to the purchase price. The buyer is not affiliated with the Company or its affiliates. |
(2) | Other non-core assets include one remaining legacy office property leased to Solar Turbines in San Diego and the Cummins office property in Nashville, Tennessee that was sold in February 2024. We define legacy assets as those assets inherited through prior mergers and acquisitions that were acquired by different management teams utilizing different investment objectives and underwriting criteria. |
(3) | We do not allocate non-property expenses across our property-specific segments; therefore, we report these expenses separately under the Non-Property & Other caption in the table above. Such expenses and income include stock compensation expense, general and administrative, unrealized gains and losses on valuation of interest rate swaps, and other comprehensive items. |
(4) | Non-Property & Other's interest expense, including unrealized loss on interest rate swaps and net of derivative settlements in the first quarter of 2024 includes $1,036,270 of unrealized gain on interest rate swaps and $1,670,732 of derivative cash settlements received. |
(5) | Other income reflects management fees earned for managing the TIC Interest. |
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Modiv Industrial, Inc.
Consolidated Statements of Comprehensive (Loss) Income - Last Five Quarters
(Unaudited)
Three Months Ended | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||
Net income (loss) | $ | 4,637,323 | $ | (1,842,051 | ) | $ | (6,905,242 | ) | $ | 4,629,953 | $ | (4,578,921 | ) | |||||||
Other comprehensive (loss): cash flow hedge adjustment | ||||||||||||||||||||
Add: Amortization of unrealized holding gain on interest rate swap (a) | (253,092 | ) | (258,655 | ) | (253,092 | ) | (253,093 | ) | (250,311 | ) | ||||||||||
Comprehensive income (loss) | 4,384,231 | (2,100,706 | ) | (7,158,334 | ) | 4,376,860 | (4,829,232 | ) | ||||||||||||
Net (income) loss attributable to noncontrolling interest in Operating Partnership | (912,864 | ) | 546,967 | 1,368,896 | (649,643 | ) | 816,199 | |||||||||||||
Other comprehensive loss attributable to noncontrolling interest in Operating Partnership: cash flow hedge adjustment | ||||||||||||||||||||
Add: Amortization of unrealized holding gain on interest rate swap (a) | 62,184 | 44,959 | 44,264 | 44,341 | 37,141 | |||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interest in Operating Partnership | (850,680 | ) | 591,926 | 1,413,160 | (605,302 | ) | 853,340 | |||||||||||||
Comprehensive income (loss) attributable to Modiv Industrial, Inc. | $ | 3,533,551 | $ | (1,508,780 | ) | $ | (5,745,174 | ) | $ | 3,771,558 | $ | (3,975,892 | ) |
(a) | Due to the $150 million Term Loan swap's failure to qualify as a cash flow hedge for each of the quarterly periods ended March 31, 2024, the unrealized gain on interest rate swap derivative on the consolidated balance sheet is being amortized on a straight-line basis, as a reduction to interest expense, through the maturity date of the Term Loan. The interest rate swap derivative instrument failed to qualify as a cash flow hedge during each of the quarterly periods presented because the swap was deemed ineffective due to the one-time cancellation option on December 31, 2024 as compared with the maturity of the Term Loan. The Company has begun, and intends to further explore various alternatives available to extend or restructure both of its swap cancellation options. |
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Modiv Industrial, Inc.
Earnings (Loss) Per Share - Last Five Quarters
(Unaudited)
Three Months Ended | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||
Numerator - Basic: | ||||||||||||||||||||
Net income (loss) | $ | 4,637,323 | $ | (1,842,051 | ) | $ | (6,905,242 | ) | $ | 4,629,953 | $ | (4,578,921 | ) | |||||||
Less: net (income) loss attributable to noncontrolling interest in Operating Partnership | (912,864 | ) | 546,967 | 1,368,896 | (649,643 | ) | 816,199 | |||||||||||||
Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | ||||||||||
Net income (loss) attributable to common stockholders | $ | 2,802,584 | $ | (2,216,959 | ) | $ | (6,458,221 | ) | $ | 3,058,435 | $ | (4,684,597 | ) | |||||||
Numerator - Diluted: | ||||||||||||||||||||
Net income (loss) | $ | 4,637,323 | $ | (1,842,051 | ) | $ | (6,905,242 | ) | $ | 4,629,953 | $ | (4,578,921 | ) | |||||||
Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | ||||||||||
Net income (loss) attributable to common stockholders and noncontrolling interests | $ | 3,715,448 | $ | (2,763,926 | ) | $ | (7,827,117 | ) | $ | 3,708,078 | $ | (5,500,796 | ) | |||||||
Denominator: | ||||||||||||||||||||
Weighted average shares outstanding - basic (a) | 8,568,353 | 7,621,871 | 7,548,052 | 7,532,106 | 7,532,452 | |||||||||||||||
Operating Partnership Units - Class C (a)(b)(c) | 2,790,905 | — | — | 1,599,898 | — | |||||||||||||||
Operating Partnership Units - Classes M, P and R (d) | — | — | — | 1,506,307 | — | |||||||||||||||
Weighted average shares outstanding - diluted | 11,359,258 | 7,621,871 | 7,548,052 | 10,638,311 | 7,532,452 | |||||||||||||||
Earnings (loss) per share attributable to common stockholders: | ||||||||||||||||||||
Basic | $ | 0.33 | $ | (0.29 | ) | $ | (0.86 | ) | $ | 0.41 | $ | (0.62 | ) | |||||||
Earnings (loss) per share attributable to common stockholders and noncontrolling interests: | ||||||||||||||||||||
Diluted | $ | 0.33 | $ | (0.29 | ) | $ | (0.86 | ) | $ | 0.35 | $ | (0.62 | ) |
(a) | An aggregate of 1,980,822 of Classes M, P and R Units automatically converted to Class C OP Units during the first quarter of 2024. An aggregate of 1,566,109 units of the 3,350,720 outstanding Class C OP Units were exchanged for Class C common stock during the first quarter of 2024. |
(b) | We issued 1,312,382 Class C OP Units at an agreed upon value of $25.00 per unit in connection with our 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 quarters ended December 31, 2023, September 30, 2023 and March 31, 2023 and because their effect would be anti-dilutive. Half of these Class C OP Units or 656,191 units were exchanged for Class C common stock during the first quarter of 2024. |
(c) | The weighted average Class C OP Units of 1,599,898 for the quarters ended March 31, 2024 and June 30, 2023 included the weighted effect of 287,516 units issued in April 2023 in conjunction with our acquisition in an “UPREIT” transaction of the property in Reading, Pennsylvania leased to Summit Steel & Manufacturing, LLC. |
(d) | During the three months ended December 31, 2023, September 30, 2023 and March 31, 2023, the weighted average dilutive effect of 1,980,822, 1,506,307 and 1,506,307 shares, respectively, related to Classes M, P and R Operating Partnership units were excluded from the computation of Diluted EPS because their effect would be anti-dilutive. There were no other outstanding securities or commitments to issue common stock that would have a dilutive effect for the periods then ended. |
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Modiv Industrial, Inc.
FFO and AFFO - Last Five Quarters
(Unaudited)
Three Months Ended | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||
Net income (loss) (in accordance with GAAP) | $ | 4,637,323 | $ | (1,842,051 | ) | $ | (6,905,242 | ) | $ | 4,629,953 | $ | (4,578,921 | ) | |||||||
Preferred stock dividends | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | (921,875 | ) | ||||||||||
Net income (loss) attributable to common stockholders and Class C OP Unit holders | 3,715,448 | (2,763,926 | ) | (7,827,117 | ) | 3,708,078 | (5,500,796 | ) | ||||||||||||
FFO adjustments: | ||||||||||||||||||||
Depreciation and amortization of real estate properties | 4,133,501 | 4,147,570 | 4,175,209 | 3,956,334 | 3,272,061 | |||||||||||||||
Amortization of lease incentives | (3,786 | ) | (63,956 | ) | 40,397 | 88,570 | 88,570 | |||||||||||||
Depreciation and amortization for unconsolidated investment in a real estate property | 188,919 | 188,889 | 187,479 | 186,069 | 194,173 | |||||||||||||||
Impairment of real estate investment property | — | 888,186 | — | — | 3,499,438 | |||||||||||||||
Loss (gain) on sale of real estate investments, net | (3,187,806 | ) | — | 1,708,801 | — | — | ||||||||||||||
FFO attributable to common stockholders and Class C OP Unit holders | 4,846,276 | 2,396,763 | (1,715,231 | ) | 7,939,051 | 1,553,446 | ||||||||||||||
AFFO adjustments: | ||||||||||||||||||||
Stock compensation (b) | 1,378,502 | 1,381,001 | 8,469,867 | 660,170 | 660,169 | |||||||||||||||
Deferred financing costs | 221,496 | 210,604 | 165,709 | 195,213 | 195,212 | |||||||||||||||
Due diligence expenses, including abandoned pursuit costs (c) | — | — | 1,208 | 3,848 | 342,542 | |||||||||||||||
Amortization of deferred rents | (1,671,798 | ) | (1,704,137 | ) | (1,772,403 | ) | (1,580,358 | ) | (1,175,359 | ) | ||||||||||
Unrealized loss (gain) on interest rate swap valuation | (1,289,362 | ) | 3,400,138 | (795,425 | ) | (3,708,598 | ) | 1,722,185 | ||||||||||||
Amortization of (below) above market lease intangibles, net | (211,599 | ) | (211,600 | ) | (204,011 | ) | (195,901 | ) | (196,282 | ) | ||||||||||
Decrease (increase) in fair value of investment in common/preferred stock | 20,574 | (978,658 | ) | (440,000 | ) | — | — | |||||||||||||
Other adjustments for unconsolidated investment in a real estate property | 23,825 | 17,821 | 11,819 | 11,819 | 11,819 | |||||||||||||||
AFFO attributable to common stockholders and Class C OP Unit holders (d) | $ | 3,317,914 | $ | 4,511,932 | $ | 3,721,533 | $ | 3,325,244 | $ | 3,113,732 | ||||||||||
Weighted Average Shares Outstanding: | ||||||||||||||||||||
Basic | 8,568,353 | 7,621,871 | 7,548,052 | 7,532,106 | 7,532,452 | |||||||||||||||
Fully diluted (d) (e) | 11,359,258 | 11,202,591 | 11,128,772 | 10,638,311 | 10,351,141 | |||||||||||||||
FFO Per Share: | ||||||||||||||||||||
Basic | $ | 0.57 | $ | 0.31 | $ | (0.23 | ) | $ | 1.05 | $ | 0.21 | |||||||||
Fully diluted | $ | 0.43 | $ | 0.21 | $ | (0.23 | ) | $ | 0.75 | $ | 0.15 | |||||||||
AFFO Per Share: | ||||||||||||||||||||
Basic | $ | 0.39 | $ | 0.59 | $ | 0.49 | $ | 0.44 | $ | 0.41 | ||||||||||
Fully diluted | $ | 0.29 | $ | 0.40 | $ | 0.33 | $ | 0.31 | $ | 0.30 |
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(a) | Stock compensation expense in the third quarter of 2023 included a one-time non-cash catch-up adjustment of $7,822,197 related to our determination that at that time it was probable that we would achieve our performance target for FFO of $1.05 per diluted share for the year ended December 31, 2023, exclusive of the dilutive effect of the performance units and related stock compensation expense. Our FFO per fully diluted share excluding the dilutive impact of the performance units and the related stock compensation expense was $1.77 for the year ended December 31, 2023. The $0.72 of FFO per diluted share in excess of the performance target of $1.05 per diluted share exceeded the target by 69%. As a result of achieving our performance target of FFO of $1.05 per diluted share (excluding the performance units), our Class R OP Units automatically converted based on a conversion ratio of 2.5 Class C OP Units for each Class R OP Unit for a total of 790,857 Class C OP Units, some of which were then exchanged for the Company's Class C Common Stock as of March 31, 2024. Stock compensation expense of $733,332 for the performance units was recorded for the fourth quarter of 2023 and the first quarter of 2024 to recognize the final vesting periods. |
(b) | Stock compensation expense includes (i) amortization of the value of Class P OP Units granted to our Chief Executive Officer and Chief Financial Officer on December 31, 2019; (ii) amortization of the value of the time-based Class R OP Units granted to all of our employees, including the Chief Executive Officer and Chief Financial Officer, on January 25, 2021; and (iii) stock granted to our independent directors each quarter as partial consideration for their service as directors. |
(c) | Abandoned pursuit costs for the first quarter of 2023 primarily reflect the write-off of due diligence costs incurred during 2022 and 2023 for a potential acquisition of a portfolio of industrial manufacturing properties that we abandoned due to changes in market conditions. |
(d) | The weighted average Class C OP Units for the first quarter of 2024 and the second, third and fourth quarters of 2023 included the weighted effect of 287,516 units issued in April 2023 in conjunction with our acquisition in an “UPREIT” transaction of the property in Reading, Pennsylvania leased to Summit Steel & Manufacturing, LLC. |
(e) | Includes the Class C, Class M, Class P and Class R OP Units to compute the weighted average number of shares during the first quarter of 2024 and for each of the four quarters ended December 31, 2023 presented above, including the performance portion of the Class R OP Units for the quarters ended September 30, 2023, December 31, 2023 and March 31, 2024. |
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Modiv Industrial, Inc.
Property Portfolio - FFO and AFFO - First Quarter of 2024
(Unaudited)
Three Months Ended March 31, 2024 | ||||||||||||||||||||
Industrial Core | Tactical Non-Core (1) | Other Non-Core (1) | Non-Property & Other (1) | Consolidated | ||||||||||||||||
Net income (loss) (in accordance with GAAP) | $ | 4,086,953 | $ | 495,890 | $ | 194,658 | $ | (140,178 | ) | $ | 4,637,323 | |||||||||
Preferred stock dividends | — | — | — | (921,875 | ) | (921,875 | ) | |||||||||||||
Net income (loss) attributable to common stockholders and Class C OP Unit holders | 4,086,953 | 495,890 | 194,658 | (1,062,053 | ) | 3,715,448 | ||||||||||||||
FFO adjustments: | ||||||||||||||||||||
Depreciation and amortization of real estate properties | 3,279,932 | 808,902 | 44,667 | — | 4,133,501 | |||||||||||||||
Amortization of lease incentives | (3,786 | ) | — | — | — | (3,786 | ) | |||||||||||||
Depreciation and amortization for unconsolidated investment in a real estate property | 188,919 | — | — | — | 188,919 | |||||||||||||||
Gain on sale of real estate investments, net | (3,178,860 | ) | — | (8,946 | ) | — | (3,187,806 | ) | ||||||||||||
FFO attributable to common stockholders and Class C OP Unit holders | 4,373,158 | 1,304,792 | 230,379 | (1,062,053 | ) | 4,846,276 | ||||||||||||||
AFFO adjustments: | ||||||||||||||||||||
Stock compensation | — | — | — | 1,378,502 | 1,378,502 | |||||||||||||||
Deferred financing costs | 174,661 | 41,096 | 5,739 | — | 221,496 | |||||||||||||||
Amortization of deferred rents | (1,105,220 | ) | (580,439 | ) | 13,861 | — | (1,671,798 | ) | ||||||||||||
Unrealized gain on interest rate swap valuation | — | — | — | (1,289,362 | ) | (1,289,362 | ) | |||||||||||||
Amortization of (below) above market lease intangibles, net | (211,599 | ) | — | — | — | (211,599 | ) | |||||||||||||
Decrease in fair value of investment in common stock | — | — | — | 20,574 | 20,574 | |||||||||||||||
Other adjustments for unconsolidated investment in a real estate property | 23,825 | — | — | — | 23,825 | |||||||||||||||
AFFO attributable to common stockholders and Class C OP Unit holders | $ | 3,254,825 | $ | 765,449 | $ | 249,979 | $ | (952,339 | ) | $ | 3,317,914 | |||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 8,568,353 | 8,568,353 | 8,568,353 | 8,568,353 | 8,568,353 | |||||||||||||||
Fully diluted (2)(3) | 11,359,258 | 11,359,258 | 11,359,258 | 11,359,258 | 11,359,258 | |||||||||||||||
FFO Per Share: | ||||||||||||||||||||
Basic | $ | 0.51 | $ | 0.15 | $ | 0.03 | $ | (0.12 | ) | $ | 0.57 | |||||||||
Fully diluted (2)(3) | $ | 0.39 | $ | 0.11 | $ | 0.02 | $ | (0.09 | ) | $ | 0.43 | |||||||||
AFFO Per Share: | ||||||||||||||||||||
Basic | $ | 0.38 | $ | 0.09 | $ | 0.03 | $ | (0.11 | ) | $ | 0.39 | |||||||||
Fully diluted (2)(3) | $ | 0.28 | $ | 0.07 | $ | 0.02 | $ | (0.08 | ) | $ | 0.29 |
(1) | See Footnotes (1), (2), (3) and (4) of Property Portfolio Statement - Statement of Operations - First Quarter of 2024. |
(2) | Weighted average fully diluted shares outstanding includes the following: |
(i) | 8,568,353 shares of Class C Common Stock; and |
(ii) | 2,790,905 Operating Partnership Units. |
(3) | For the intraperiod allocation, we treat all component per share amounts as fully-diluted to correspond with the consolidated FFO and AFFO results reflected above. |
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Modiv Industrial, Inc.
Adjusted EBITDA - Last Five Quarters
(Unaudited)
Three Months Ended | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||
Net income (loss) (in accordance with GAAP) | $ | 4,637,323 | $ | (1,842,051 | ) | $ | (6,905,242 | ) | $ | 4,629,953 | $ | (4,578,921 | ) | |||||||
Depreciation and amortization of real estate properties | 4,133,501 | 4,147,570 | 4,175,209 | 3,956,334 | 3,272,061 | |||||||||||||||
Depreciation and amortization for unconsolidated investment in a real estate property | 188,919 | 188,889 | 187,479 | 186,069 | 194,173 | |||||||||||||||
Interest expense (income), including unrealized gain or loss on interest rate swaps and net of derivative settlements (a) | 2,307,149 | 7,045,059 | 2,922,918 | (179,931 | ) | 4,018,792 | ||||||||||||||
Interest expense on unconsolidated investment in real estate property | 94,234 | 95,801 | 96,375 | 95,932 | 95,485 | |||||||||||||||
Impairment of real estate investment property (b) | — | 888,186 | — | — | 3,499,438 | |||||||||||||||
Stock compensation | 1,378,502 | 1,381,001 | 8,469,867 | 660,170 | 660,169 | |||||||||||||||
Due diligence expenses, including abandoned pursuit costs | — | — | 1,208 | 3,848 | 342,542 | |||||||||||||||
Gain (loss) on sale of real estate investments, net | (3,187,806 | ) | — | 1,708,801 | — | — | ||||||||||||||
Decrease (increase) in fair value of investment in common/preferred stock | 20,574 | (978,658 | ) | (440,000 | ) | — | — | |||||||||||||
Adjusted EBITDA | $ | 9,572,396 | $ | 10,925,797 | $ | 10,216,615 | $ | 9,352,375 | $ | 7,503,739 | ||||||||||
Annualized adjusted EBITDA | $ | 38,289,580 | $ | 43,703,188 | $ | 40,866,460 | $ | 37,409,500 | $ | 30,014,956 | ||||||||||
Net debt: | ||||||||||||||||||||
Debt | $ | 281,153,337 | $ | 281,200,000 | $ | 284,284,849 | $ | 294,361,357 | $ | 214,436,983 | ||||||||||
Debt of unconsolidated investment in real estate property (c) | 9,197,045 | 9,256,466 | 9,315,322 | 9,372,615 | 9,429,343 | |||||||||||||||
Cash and restricted cash | (18,404,990 | ) | (3,129,414 | ) | (5,641,610 | ) | (9,912,109 | ) | (13,280,104 | ) | ||||||||||
Cash of unconsolidated investment in real estate property (c) | (350,269 | ) | (350,937 | ) | (387,278 | ) | (494,250 | ) | (420,947 | ) | ||||||||||
$ | 271,595,123 | $ | 286,976,115 | $ | 287,571,283 | $ | 293,327,613 | $ | 210,165,275 | |||||||||||
Net debt / Adjusted EBITDA | 7.1 | x | 6.6 | x | 7.0 | x | 7.8 | x | 7.0 | x |
(a) | Includes unrealized gains (losses) on swap valuations of $1,036,270, $(3,658,794), $542,332, $3,708,597 and $(1,722,184) in the first quarter of 2024 and each of the quarters ended December 31, 2023, respectively. |
(b) | The impairment charges for the first and fourth quarters of 2023 relate to an office property located in Nashville, Tennessee leased to Cummins, Inc. through February 29, 2024 that was sold on February 28, 2024. We determined that an impairment charge in the first quarter of 2023 was triggered by expectations of a shortened holding period and estimated the property's fair value based upon market comparables at the time. The additional charge in the fourth quarter of 2023 was based on the sale agreement executed on December 15, 2023 reflecting the excess of the property's carrying value over the property's contracted sale price less estimated selling costs for the sale. |
(c) | Includes our approximate 72.71% pro rata share of the tenant-in-common's mortgage note payable and cash of our unconsolidated investment in real estate property. |
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Table of Contents
Modiv Industrial, Inc.
Leverage Ratio
(Unaudited)
We calculate our leverage ratio in conformance with the definition used in our KeyBank credit facility as set forth below.
As of | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
Total Asset Value | ||||||||
Cash and cash equivalents | $ | 18,404,990 | $ | 3,129,414 | ||||
Borrowing base value (a) | 482,245,137 | 471,126,446 | ||||||
Other real estate value | 76,220,000 | 102,340,000 | ||||||
Pro-rata share of unconsolidated investment in a real estate property | 28,401,787 | 28,402,455 | ||||||
Total asset value | $ | 605,271,914 | $ | 604,998,315 | ||||
Indebtedness | ||||||||
Credit facility term loan | $ | 250,000,000 | $ | 250,000,000 | ||||
Mortgage debt | 31,153,337 | 31,200,000 | ||||||
Pro-rata share of unconsolidated investment in a real estate property | 9,197,045 | 9,256,466 | ||||||
Total indebtedness | $ | 290,350,382 | $ | 290,456,466 | ||||
Leverage Ratio | 48 | % | 48 | % |
(a) | The increase in borrowing base properties reflects the addition of the property leased to OES following repayment of the mortgage in December 2023, partially offset by the two properties sold in January and February of 2024. |
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Table of Contents
Modiv Industrial, Inc.
Capitalization as of March 31, 2024
(Unaudited)
PREFERRED EQUITY | ||||
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock | $ | 50,000,000 | ||
% of Total Capitalization | 9 | % | ||
COMMON EQUITY | ||||
Shares of Class C Common Stock | 9,389,295 | |||
OP Units (Class M, Class P, Class R and Class C) | 2,014,610 | |||
Total Class C Common Stock and OP Units | 11,403,905 | |||
Price Per Share / Unit at March 31, 2024 | $ | 16.79 | ||
IMPLIED EQUITY MARKET CAPITALIZATION | $ | 191,471,565 | ||
% of Total Capitalization | 37 | % | ||
DEBT | ||||
Mortgage Debt | ||||
Costco Property | $ | 18,803,337 | ||
Taylor Fresh Foods Property | 12,350,000 | |||
Total Mortgage Debt | $ | 31,153,337 | ||
KeyBank Credit Facility | ||||
Revolver | $ | — | ||
Term Loan (a) & (b) | 250,000,000 | |||
Total Credit Facility | $ | 250,000,000 | ||
TOTAL DEBT | $ | 281,153,337 | ||
% of Total Capitalization | 54 | % | ||
% of Total Debt - Floating Rate Debt | — | % | ||
% of Total Debt - Fixed Rate Debt (a) (b) & (c) | 100 | % | ||
% of Total Debt | 100 | % | ||
ENTERPRISE VALUE | ||||
Total Capitalization | $ | 522,624,902 | ||
Less: Cash and Cash Equivalents | (18,404,990 | ) | ||
Enterprise Value | $ | 504,219,912 |
(a) | On May 10, 2022, we purchased a five-year swap at 2.258% on our $150,000,000 term loan that results in a fixed interest rate of 4.058% based on our leverage ratio of 48% as of March 31, 2024. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio. The counter-party has a one-time right of cancellation on December 31, 2024. We are exploring various alternatives to extend or restructure the cancellation options on both of our existing swaps. |
(b) | On October 26, 2022, we purchased another five-year swap at 3.44% on our $100,000,000 term loan commitment that results in a fixed interest rate of 5.24% based on our leverage ratio of 48% as of March 31, 2024. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio. The counter-party has a one-time right of cancellation on December 31, 2024. |
(c) | The weighted average interest rate for the $281,153,337 Total Debt outstanding was 4.52% as of March 31, 2024. |
20
Table of Contents
Modiv Industrial, Inc.
Consolidated Balance Sheets
(Unaudited)
As of | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
Assets | ||||||||
Real estate investments: | ||||||||
Land | $ | 104,858,693 | $ | 104,858,693 | ||||
Buildings and improvements | 399,767,923 | 399,666,781 | ||||||
Equipment | 4,429,000 | 4,429,000 | ||||||
Tenant origination and absorption costs | 15,707,458 | 15,707,458 | ||||||
Total investments in real estate property | 524,763,074 | 524,661,932 | ||||||
Accumulated depreciation and amortization | (55,035,113 | ) | (50,901,612 | ) | ||||
Total real estate investments, net, excluding unconsolidated investment in real estate property and real estate investments held for sale, net | 469,727,961 | 473,760,320 | ||||||
Unconsolidated investment in a real estate property | 9,823,118 | 10,053,931 | ||||||
Total real estate investments, net, excluding real estate investments held for sale, net | 479,551,079 | 483,814,251 | ||||||
Real estate investments held for sale, net | — | 11,557,689 | ||||||
Total real estate investments, net | 479,551,079 | 495,371,940 | ||||||
Cash and cash equivalents | 18,404,990 | 3,129,414 | ||||||
Tenant deferred rent and other receivables | 14,557,947 | 12,794,568 | ||||||
Above-market lease intangibles, net | 1,295,459 | 1,313,959 | ||||||
Prepaid expenses and other assets | 5,121,043 | 4,173,221 | ||||||
Investment in preferred stock | — | 11,038,658 | ||||||
Interest rate swap derivatives | 3,533,656 | 2,970,733 | ||||||
Other assets related to real estate investments held for sale | — | 103,337 | ||||||
Total assets | $ | 522,464,174 | $ | 530,895,830 | ||||
Liabilities and Equity | ||||||||
Mortgage notes payable, net | $ | 30,990,813 | $ | 31,030,241 | ||||
Credit facility term loan, net | 248,631,103 | 248,508,515 | ||||||
Accounts payable, accrued and other liabilities | 3,851,814 | 4,469,508 | ||||||
Distributions payable | 2,014,711 | 12,174,979 | ||||||
Below-market lease intangibles, net | 8,638,505 | 8,868,604 | ||||||
Interest rate swap derivative | — | 473,348 | ||||||
Other liabilities related to real estate investments held for sale | — | 248,727 | ||||||
Total liabilities | 294,126,946 | 305,773,922 | ||||||
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 March 31, 2024 and December 31, 2023 with an aggregate liquidation value of $50,000,000 | 2,000 | 2,000 | ||||||
Class C common stock, $0.001 par value, 300,000,000 shares authorized, 9,732,805 shares issued and 9,389,295 shares outstanding as of March 31, 2024 and 8,048,110 shares issued and 7,704,600 shares outstanding as of December 31, 2023 | 9,733 | 8,048 | ||||||
Class S common stock, $0.001 par value, 100,000,000 shares authorized no shares issued and outstanding as of March 31, 2024 and December 31, 2023 | — | — | ||||||
Additional paid-in-capital | 336,284,720 | 292,617,486 | ||||||
Treasury stock, at cost, 343,510 shares held as of March 31, 2024 and December 31, 2023 | (5,290,780 | ) | (5,290,780 | ) | ||||
Cumulative distributions and net losses | (145,342,118 | ) | (145,551,586 | ) | ||||
Accumulated other comprehensive income | 2,335,701 | 2,658,170 | ||||||
Total Modiv Industrial, Inc. equity | 187,999,256 | 144,443,338 | ||||||
Noncontrolling interests in the Operating Partnership | 40,337,972 | 80,678,570 | ||||||
Total equity | 228,337,228 | 225,121,908 | ||||||
Total liabilities and equity | $ | 522,464,174 | $ | 530,895,830 |
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Modiv Industrial, Inc.
Property Portfolio - Balance Sheets - March 31, 2024
(Unaudited)
As of March 31, 2024 | ||||||||||||||||||||
Industrial Core | Tactical Non-Core (1) | Other Non-Core (1) | Non-Property & Other (2) | Consolidated | ||||||||||||||||
Assets | ||||||||||||||||||||
Real estate investments: | ||||||||||||||||||||
Land | $ | 58,986,797 | $ | 43,387,936 | $ | 2,483,960 | $ | — | $ | 104,858,693 | ||||||||||
Buildings and improvements | 311,928,409 | 83,137,949 | 4,701,565 | — | 399,767,923 | |||||||||||||||
Equipment | 4,429,000 | — | — | — | 4,429,000 | |||||||||||||||
Tenant origination and absorption costs | 10,882,884 | 4,500,352 | 324,222 | — | 15,707,458 | |||||||||||||||
Total investments in real estate property | 386,227,090 | 131,026,237 | 7,509,747 | — | 524,763,074 | |||||||||||||||
Accumulated depreciation and amortization | (39,697,586 | ) | (14,367,018 | ) | (970,509 | ) | — | (55,035,113 | ) | |||||||||||
Total real estate investments, net, excluding unconsolidated investment in real estate property | 346,529,504 | 116,659,219 | 6,539,238 | — | 469,727,961 | |||||||||||||||
Unconsolidated investment in a real estate property | 9,823,118 | — | — | — | 9,823,118 | |||||||||||||||
Total real estate investments, net | 356,352,622 | 116,659,219 | 6,539,238 | — | 479,551,079 | |||||||||||||||
Cash and cash equivalents | — | — | — | 18,404,990 | 18,404,990 | |||||||||||||||
Tenant deferred rent and other receivables | 9,916,712 | 4,602,599 | 38,636 | — | 14,557,947 | |||||||||||||||
Above-market lease intangibles, net | 1,295,459 | — | — | — | 1,295,459 | |||||||||||||||
Prepaid expenses and other assets | 2,339,721 | 132,056 | 86,604 | 2,562,662 | 5,121,043 | |||||||||||||||
Interest rate swap derivatives | — | — | — | 3,533,656 | 3,533,656 | |||||||||||||||
Total assets | $ | 369,904,514 | $ | 121,393,874 | $ | 6,664,478 | $ | 24,501,308 | $ | 522,464,174 | ||||||||||
Liabilities and Equity | ||||||||||||||||||||
Mortgage notes payable, net | $ | 12,238,788 | $ | 18,752,025 | $ | — | $ | — | $ | 30,990,813 | ||||||||||
Credit facility term loan, net | 196,877,434 | 45,093,329 | 6,660,340 | — | 248,631,103 | |||||||||||||||
Accounts payable, accrued and other liabilities | 1,572,116 | 890,155 | 107,340 | 1,282,203 | 3,851,814 | |||||||||||||||
Distributions payable | — | — | — | 2,014,711 | 2,014,711 | |||||||||||||||
Below-market lease intangibles, net | 8,638,505 | — | — | — | 8,638,505 | |||||||||||||||
Total liabilities | 219,326,843 | 64,735,509 | 6,767,680 | 3,296,914 | 294,126,946 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Total Modiv Industrial, Inc. equity, net of due to affiliates | 150,577,671 | 56,658,365 | (103,202 | ) | (19,133,578 | ) | 187,999,256 | |||||||||||||
Noncontrolling interests in the Operating Partnership | — | — | — | 40,337,972 | 40,337,972 | |||||||||||||||
Total equity | 150,577,671 | 56,658,365 | (103,202 | ) | 21,204,394 | 228,337,228 | ||||||||||||||
Total liabilities and equity | $ | 369,904,514 | $ | 121,393,874 | $ | 6,664,478 | $ | 24,501,308 | $ | 522,464,174 |
(1) | See Footnotes (1) and (2) of Property Portfolio Statement - Statement of Operations - First Quarter of 2024. |
(2) | Non-Property & Other's prepaid expenses and other assets include deferred financing fees on our Revolver and prepaid directors and officers insurance. |
22
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Modiv Industrial, Inc.
Debt Overview
(Unaudited)
Outstanding Balance | |||||||||||||
As of | |||||||||||||
Collateral | March 31, 2024 | December 31, 2023 | Interest Rate | Loan Maturity | |||||||||
Mortgage Notes: | |||||||||||||
Costco property | $ | 18,803,337 | $ | 18,850,000 | 4.85 | %(b) | 1/1/2030 | ||||||
Taylor Fresh Foods property | 12,350,000 | 12,350,000 | 3.85 | %(b) | 11/1/2029 | ||||||||
31,153,337 | 31,200,000 | ||||||||||||
Less unamortized deferred financing costs | (162,524 | ) | (169,759 | ) | |||||||||
Mortgage notes payable, net | 30,990,813 | 31,030,241 | |||||||||||
KeyBank Credit Facility (a): | |||||||||||||
Revolver | — | — | 7.16 | %(c) | 1/18/2026 | ||||||||
Term loan | 250,000,000 | 250,000,000 | 4.53 | %(d) | 1/18/2027 | ||||||||
Total Credit Facility | 250,000,000 | 250,000,000 | |||||||||||
Less unamortized deferred financing costs | (1,368,897 | ) | (1,491,485 | ) | |||||||||
248,631,103 | 248,508,515 | ||||||||||||
Total debt, net | $ | 279,621,916 | $ | 279,538,756 | 4.52 | %(e) |
(a) | Our $400,000,000 Credit Facility is comprised of a $150,000,000 Revolver and a $250,000,000 Term Loan. The Credit Facility includes an accordion option that allows us to request additional Revolver and Term Loan lender commitments up to a total of $750,000,000. As of the filing date of this Supplemental Data, the $250,000,000 Term Loan is fully drawn and the Revolver has zero outstanding balance. |
(b) | Contractual fixed rate. |
(c) | The interest rate on the Revolver is based on our leverage ratio at the end of the prior quarter. With our leverage ratio at 48% as of March 31, 2024, the spread over the Secured Overnight Financing Rate (‘‘SOFR’’), including a 10 basis point credit adjustment, is 185 basis points and the interest rate on the Revolver was 7.1625% as of March 31, 2024, although we had no outstanding borrowings under the Revolver. We also pay an annual unused fee of up to 25 basis points on the Revolver, based on the daily amount of the unused commitment. |
(d) | To mitigate the risk of rising interest rates, on May 10, 2022, we purchased a five-year swap at fixing SOFR at 2.258% on the $150,000,000 term loan that results in a fixed interest rate of 4.058% based on our leverage ratio of 48% as of December 31, 2023. On October 26, 2022, we purchased another five-year swap fixing SOFR at 3.44% on our $100,000,000 term loan commitment which results in a fixed interest rate of 5.24% based on our leverage ratio of 48% as of December 31, 202. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio. The weighted average interest rate on the Term Loan was 4.43% as of March 31, 2024. We are exploring various alternatives to extend or restructure the cancellation options on both of our existing swaps. |
(e) | The weighted average interest rate for the $281,153,337 Total Debt outstanding was 4.52% as of March 31, 2024. |
23
Table of Contents
Modiv Industrial, Inc.
Covenants
Credit Facility and Mortgage Notes Covenants
The following is a summary of key financial covenants for our credit facility and mortgage notes, as defined and calculated per the terms of the facility's credit agreement and the mortgage notes' governing documents, respectively, which are included in our filings with the U.S. Securities and Exchange Commission. These calculations, which are not based on U.S. GAAP measurements are presented to demonstrate that as of March 31, 2024, we are in compliance with the covenants.
Unsecured Credit Facility Covenants | Required | March 31, 2024 | ||||||
Maximum leverage ratio | <60% | 48 | % | |||||
Minimum fixed charge coverage ratio | >1.50x | 1.94 | x | |||||
Maximum secured indebtedness ratio | 40 | % | 5 | % | ||||
Minimum consolidated tangible net worth | $ | 214,641,729 | $ | 283,372,341 | ||||
Weighted average lease term (years) | 7 | 16 |
Mortgage Notes Key Covenants | Debt service coverage ratio | March 31, 2024 | ||||||
Costco property | N.A. | N.A. | ||||||
Taylor Fresh Foods property | 1.5 | 3.4 |
24
Table of Contents
Modiv Industrial, Inc.
Real Estate Acquisitions
(Unaudited)
The following table summarizes our property acquisition activity from January 1, 2023 through March 31, 2024:
Tenant and Location | Property Type | Acquisition Date | Area (Square Feet) | Lease Term (Years) | Annual Rent Increase | Acquisition Price | Initial Cap Rate | Weighted Average Cap Rate | ||||||||||||||||||||
Plastic Products, Princeton, MN | Industrial | January 2023 | 148,012 | 5.8 | 3.0 | % | 6,368,776 | 7.5 | % | 9.2 | % | |||||||||||||||||
Stealth Manufacturing, Savage MN | Industrial | March 2023 | 55,175 | 20.0 | 2.5 | % | 5,500,000 | 7.7 | % | 9.8 | % | |||||||||||||||||
Lindsay Precast, Gap, PA (a) | Industrial | April 2023 | 137,086 | 24.0 | 2.2 | % | 18,343,624 | 7.5 | % | 10.1 | % | |||||||||||||||||
Summit Steel, Reading, PA | Industrial | April 2023 | 116,560 | 20.0 | 2.9 | % | 11,200,000 | 7.3 | % | 9.7 | % | |||||||||||||||||
PBC Linear, Roscoe, IL | Industrial | April 2023 | 219,287 | 20.0 | 2.5 | % | 20,000,000 | 7.8 | % | 9.4 | % | |||||||||||||||||
Cameron Tool, Lansing, MI | Industrial | May 2023 | 93,085 | 20.0 | 2.5 | % | 5,721,174 | 8.5 | % | 10.9 | % | |||||||||||||||||
S.J. Electro Systems, Minnesota (2) and Texas | Industrial | May 2023 | 159,680 | 17.0 | 2.8 | % | 15,975,000 | 7.5 | % | 9.4 | % | |||||||||||||||||
Titan, Alleyton, TX | Industrial | May 2023 | 223,082 | 20.0 | 2.9 | % | 17,100,000 | 8.2 | % | 10.8 | % | |||||||||||||||||
Vistech, Piqua, OH | Industrial | July 2023 | 335,525 | 25.0 | 3.0 | % | 13,500,000 | 9.0 | % | 13.1 | % | |||||||||||||||||
SixAxis, Andrews, SC | Industrial | July 2023 | 213,513 | 25.0 | 2.8 | % | 15,440,000 | 7.5 | % | 10.5 | % | |||||||||||||||||
1,701,005 | $ | 129,148,574 |
(a) | Includes $1,800,000 funding provided for improvements to the previously acquired Lindsay property in Franklinton, North Carolina. |
25
Table of Contents
Modiv Industrial, Inc.
Real Estate Dispositions
(Unaudited)
The following table summarizes our property disposition activity from January 1, 2023 through March 31, 2024.
Tenant and Location | Property Type | Disposition Date | Area (Square Feet) | Disposition Price | Cap Rate | |||||||||||
Dollar General, Litchfield, ME | Retail | August 2023 | 9,026 | 1,247,974 | 7.5 | % | ||||||||||
Dollar General, Wilton, ME | Retail | August 2023 | 9,100 | 1,452,188 | 7.7 | % | ||||||||||
Dollar General, Thompsontown, PA | Retail | August 2023 | 9,100 | 1,111,831 | 7.7 | % | ||||||||||
Dollar General, Mt. Gilead, OH | Retail | August 2023 | 9,026 | 1,066,451 | 8.1 | % | ||||||||||
Dollar General, Lakeside, OH | Retail | August 2023 | 9,026 | 1,134,522 | 7.1 | % | ||||||||||
Dollar General, Castalia, OH | Retail | August 2023 | 9,026 | 1,111,831 | 7.1 | % | ||||||||||
Dollar General, Bakersfield, CA | Retail | August 2023 | 18,827 | 4,855,754 | 6.6 | % | ||||||||||
Dollar General, Big Spring, TX | Retail | August 2023 | 9,026 | 1,270,665 | 6.8 | % | ||||||||||
Dollar Tree, Morrow, GA | Retail | August 2023 | 10,906 | 1,293,355 | 8.0 | % | ||||||||||
PreK Education, San Antonio, TX | Retail | August 2023 | 50,000 | 12,888,169 | 7.2 | % | ||||||||||
Walgreens, Santa Maria, CA | Retail | August 2023 | 14,490 | 6,081,036 | 6.1 | % | ||||||||||
exp US Services, Maitland, FL | Office | August 2023 | 33,118 | 5,899,514 | 10.6 | % | ||||||||||
GSA (MSHA), Vacaville, CA | Office | August 2023 | 11,014 | 2,586,710 | 7.8 | % | ||||||||||
EMC Shop (formerly Gap), Rocklin, CA | Flex | August 2023 | 40,110 | 5,466,960 | 8.1 | % | ||||||||||
Levins, Sacramento, CA | Industrial | January 2024 | 76,000 | 7,075,000 | 7.5 | % | ||||||||||
Cummins, Nashville, TN | Office | February 2024 | 87,230 | 7,950,000 | N.A. | |||||||||||
405,025 | $ | 62,491,960 |
26
Table of Contents
Modiv Industrial, Inc.
Top 20 Tenants
(Unaudited)
Tenant | ABR | ABR as a Percentage of Total Portfolio | Area (Square Feet) | Square Feet as a Percentage of Total Portfolio | |||||||||||||
Lindsay | $ | 5,277,576 | 13 | % | 755,281 | 17 | % | ||||||||||
KIA of Carson | 3,982,356 | 10 | % | 72,623 | 2 | % | |||||||||||
Costco Wholesale | 2,454,073 | 6 | % | 97,191 | 2 | % | |||||||||||
State of CA OES | 2,458,473 | 6 | % | 106,592 | 2 | % | |||||||||||
AvAir | 2,376,766 | 6 | % | 162,714 | 4 | % | |||||||||||
3M | 1,885,467 | 5 | % | 410,400 | 9 | % | |||||||||||
Valtir | 1,866,034 | 5 | % | 293,612 | 7 | % | |||||||||||
FUJIFILM Dimatix (a) | 1,690,950 | 4 | % | 91,740 | 2 | % | |||||||||||
Taylor Fresh Foods | 1,669,682 | 4 | % | 216,727 | 5 | % | |||||||||||
Pacific Bearing | 1,560,000 | 4 | % | 219,287 | 5 | % | |||||||||||
Titan | 1,433,250 | 4 | % | 223,082 | 5 | % | |||||||||||
Northrup Grumman | 1,306,215 | 3 | % | 107,419 | 2 | % | |||||||||||
Vistech | 1,239,300 | 3 | % | 335,525 | 7 | % | |||||||||||
SJE | 1,225,528 | 3 | % | 159,680 | 4 | % | |||||||||||
SixAxis | 1,171,083 | 3 | % | 213,513 | 5 | % | |||||||||||
Husqvarna | 927,186 | 3 | % | 64,637 | 1 | % | |||||||||||
L3Harris | 884,702 | 2 | % | 46,214 | 1 | % | |||||||||||
Summit Steel | 838,960 | 2 | % | 116,560 | 3 | % | |||||||||||
Arrow-TruLine | 796,958 | 2 | % | 206,155 | 4 | % | |||||||||||
WSP USA | 756,627 | 2 | % | 37,449 | 1 | % | |||||||||||
Total Top 20 Tenants | $ | 35,801,186 | 90 | % | 3,936,401 | 88 | % |
(a) | Reflects our approximate 72.71% tenant-in-common interest (“TIC Interest”). |
27
Table of Contents
Modiv Industrial, Inc.
Property Type
(Unaudited)
Property Type | Number of Properties | ABR | ABR as a Percentage of Total Portfolio | Area (Square Feet) | Square Feet as a Percentage of Total Portfolio | |||||||||||||||
Industrial Core, including TIC Interest | 38 | $ | 30,056,361 | 75 | % | 4,166,797 | 93 | % | ||||||||||||
Tactical Non-Core (1) | 3 | 9,183,235 | 23 | % | 276,406 | 6 | % | |||||||||||||
Non-Core | 1 | 621,427 | 2 | % | 26,036 | 1 | % | |||||||||||||
Total Properties | 42 | $ | 39,861,023 | 100 | % | 4,469,239 | 100 | % |
(1) | We categorize Tactical Non-Core Assets as those assets that offer compelling value-add or opportunistic investment characteristics when measured over a near-term or interim holding period. We currently hold three such assets: (i) our tactical non-core acquisition of a leading KIA auto dealership located in a prime location in Los Angeles County acquired in January 2022; this acquisition was structured as an UPREIT transaction resulting in a favorable equity issuance of $32,809,550 of Class C OP Units at a cost basis of $25.00 per share; (ii) our 12 year lease with the State of California’s Office of Emergency Services (OES) for an existing asset located in Rancho Cordova, California that includes an attractive purchase option by the tenant; we expect to hear in the near-term if OES plans to exercise their option since the option period begins on May 1, 2024; and (iii) our property leased to Costco located in Issaquah, Washington which offers compelling redevelopment opportunities following Costco’s lease expiration given its higher density infill location and the fact that the land is zoned for additional uses to include multi-family. In January 2024, we entered into a purchase and sale agreement with KB Home, a national homebuilder for the sale of this property, for a sale price of $28,650,000. On April 1, 2024, we entered into an amendment to the January 11, 2024 purchase and sale agreement for a revised sale price of $25,300,000 reflecting an agreement to reduce the sales price due to City of Issaquah’s setback requirements resulting in a reduced number of townhomes planned for the property. KB Home completed its due diligence on April 26, 2024 and deposited $1,407,500 into escrow on May 1, 2024, bringing the total non-refundable deposit to $1,432,500. Completing the sale remains subject to the buyer obtaining development approvals and the sale will not close until 15 days following the earlier of (a) buyer obtaining all necessary development approvals, or (b) tenant vacating the property, but not prior to February 1, 2025, and not later than August 15, 2025 unless extended. The amendment to the purchase and sale agreement provides that the buyer can extend the outside closing date up to three times for 60 days for each extension. The nonrefundable extension fee for the first extension is $300,000 with 50% applicable to the purchase price. The nonrefundable extension fees for the second and third extensions are $200,000 and $300,000, respectively, and none of these extension fees will be applicable to the purchase price. The buyer is not affiliated with the Company or its affiliates. |
28
Table of Contents
Modiv Industrial, Inc.
Tenant Industry Diversification
(Unaudited)
Industry | Number of Properties | ABR | ABR as a Percentage of Total Portfolio | Area (Square Feet) | Square Feet as a Percentage of Total Portfolio | |||||||||||||||
Infrastructure | 18 | $ | 10,296,848 | 26 | % | 1,459,535 | 33 | % | ||||||||||||
Automotive | 3 | 6,006,421 | 15 | % | 501,233 | 11 | % | |||||||||||||
Aerospace/Defense | 3 | 4,567,683 | 12 | % | 316,347 | 7 | % | |||||||||||||
Industrial Products | 3 | 4,372,654 | 11 | % | 694,324 | 16 | % | |||||||||||||
Metals | 5 | 2,465,386 | 6 | % | 450,263 | 10 | % | |||||||||||||
Government | 1 | 2,458,473 | 6 | % | 106,592 | 2 | % | |||||||||||||
Retailer | 1 | 2,454,073 | 6 | % | 97,191 | 2 | % | |||||||||||||
Technology | 2 | 2,297,582 | 6 | % | 130,240 | 3 | % | |||||||||||||
Energy | 2 | 2,054,677 | 5 | % | 249,118 | 6 | % | |||||||||||||
Agriculture/Food Production | 2 | 1,669,682 | 4 | % | 295,584 | 7 | % | |||||||||||||
Medical | 1 | 662,107 | 2 | % | 20,800 | — | % | |||||||||||||
Plastics | 1 | 555,437 | 1 | % | 148,012 | 3 | % | |||||||||||||
Total | 42 | $ | 39,861,023 | 100 | % | 4,469,239 | 100 | % |
Modiv Industrial, Inc.
Tenant Geographic Diversification
(Unaudited)
State | Number of Properties | ABR | ABR as a Percentage of Total Portfolio | Area (Square Feet) | Square Feet as a Percentage of Total Portfolio | |||||||||||||||
California | 8 | $ | 11,951,609 | 30 | % | 439,954 | 10 | % | ||||||||||||
Ohio | 6 | 4,778,401 | 12 | % | 1,016,742 | 23 | % | |||||||||||||
Arizona | 2 | 4,046,447 | 10 | % | 379,441 | 8 | % | |||||||||||||
Illinois | 2 | 3,445,467 | 9 | % | 629,687 | 14 | % | |||||||||||||
Washington | 1 | 2,454,072 | 6 | % | 97,191 | 2 | % | |||||||||||||
Pennsylvania | 2 | 2,096,157 | 5 | % | 253,646 | 6 | % | |||||||||||||
South Carolina | 3 | 2,076,069 | 5 | % | 343,422 | 8 | % | |||||||||||||
Florida | 2 | 1,898,177 | 5 | % | 204,211 | 4 | % | |||||||||||||
Texas | 2 | 1,663,547 | 4 | % | 255,969 | 6 | % | |||||||||||||
Minnesota | 5 | 1,636,883 | 4 | % | 377,450 | 8 | % | |||||||||||||
North Carolina | 2 | 1,547,432 | 4 | % | 134,576 | 3 | % | |||||||||||||
Colorado | 3 | 856,937 | 2 | % | 98,994 | 2 | % | |||||||||||||
Utah | 1 | 515,194 | 2 | % | 72,498 | 2 | % | |||||||||||||
Michigan | 1 | 496,431 | 1 | % | 93,085 | 2 | % | |||||||||||||
New York | 2 | 398,200 | 1 | % | 72,373 | 2 | % | |||||||||||||
Total | 42 | $ | 39,861,023 | 100 | % | 4,469,239 | 100 | % |
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Modiv Industrial, Inc.
Lease Expirations
(Unaudited)
10 Years and Thereafter Lease Expirations
As of March 31, 2024 |
Year | Number of Leases Expiring | Leased Square Footage Expiring | Percentage of Leased Square Footage Expiring | Cumulative Percentage of Leased Square Footage Expiring | Annualized Base Rent Expiring | Percentage of Annualized Base Rent Expiring | Cumulative Percentage of Annualized Base Rent Expiring | |||||||||||||||||||||
April to December 2024 (1) | — | — | — | % | — | % | $ | — | — | % | — | % | ||||||||||||||||
2025 | 3 | 144,027 | 3.2 | % | 3.2 | % | 3,737,608 | 9.4 | % | 9.4 | % | |||||||||||||||||
2026 | 3 | 236,608 | 5.3 | % | 8.5 | % | 3,753,792 | 9.4 | % | 18.8 | % | |||||||||||||||||
2027 | 1 | 64,637 | 1.5 | % | 10.0 | % | 927,186 | 2.3 | % | 21.1 | % | |||||||||||||||||
2028 | 1 | 148,012 | 3.3 | % | 13.3 | % | 555,437 | 1.4 | % | 22.5 | % | |||||||||||||||||
2029 | 2 | 84,714 | 1.9 | % | 15.2 | % | 1,491,334 | 3.7 | % | 26.2 | % | |||||||||||||||||
2030 | — | — | — | % | 15.2 | % | — | — | % | 26.2 | % | |||||||||||||||||
2031 | — | — | — | % | 15.2 | % | — | — | % | 26.2 | % | |||||||||||||||||
2032 | 1 | 162,714 | 3.7 | % | 18.9 | % | 2,376,766 | 6.0 | % | 32.2 | % | |||||||||||||||||
2033 | 1 | 216,727 | 4.8 | % | 23.7 | % | 1,669,682 | 4.2 | % | 36.4 | % | |||||||||||||||||
Thereafter | 30 | 3,411,800 | 76.3 | % | 100.0 | % | 25,349,218 | 63.6 | % | 100.0 | % | |||||||||||||||||
Total | 42 | 4,469,239 | 100.0 | % | $ | 39,861,023 | 100.0 | % |
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Modiv Industrial, 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, deferred rent, amortization of stock-based compensation, amortization of in-place lease valuation intangibles, deferred financing fees, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, and write-offs of due diligence costs for abandoned pursuits. 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. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income or loss or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.
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Neither the SEC, Nareit, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure. Furthermore, as described in the notes to our unaudited condensed consolidated financial statements, the conversion ratios for units of Class M limited partnership interest in the Operating Partnership, units of Class P limited partnership interest in the Operating Partnership and units of Class R limited partnership interest (“Class R OP Units”) in the Operating Partnership can increase if the specified performance hurdles are achieved. The increased conversion ratio for the Class R OP Units is reflected in the fully-diluted weighted average shares outstanding above.
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 and write-offs of due diligence costs for abandoned pursuits We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA is not a measure of financial performance under GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA as an alternative to net income or cash flows from operating activities determined in accordance with GAAP.
Net Debt
We define Net Debt as gross debt less cash and cash equivalents and restricted cash.
Leverage Ratio
We define our “leverage ratio” as total debt as a percentage of the aggregate fair value of our real estate properties, including our proportionate interest in real estate owned by unconsolidated entities, plus our cash and cash equivalents.
Annualized Base Rent (“ABR”)
ABR represents contractual annual base rent for the next 12 months.
Initial Cap Rate
We define “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property.
Weighted Average Cap Rate
We define “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property.
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