Try our mobile app

Published: 2023-05-15 00:00:00 ET
<<<  go to MDV company page
EX-99.2 3 brhc20052879_ex99-2.htm EXHIBIT 99.2
Exhibit 99.2
 
NYSE: MDV
 




QUARTERLY SUPPLEMENTAL DATA
 
 
March 31, 2023

Modiv Inc.
Supplemental Information - First Quarter 2023

Table of Contents
  
     
About the Data
3
     
Company Overview
4
     
Financial Results
  
 
Consolidated Statements of Operations - Last Five Quarters
5
 
Property Portfolio - Statements of Operations - First Quarter of 2023
6
 
Consolidated Statements of Comprehensive (Loss) Income - Last Five Quarters
7
 
(Loss) Earnings Per Share - Last Five Quarters
8
 
FFO and AFFO - Last Five Quarters
9
 
Property Portfolio - FFO and AFFO - First Quarter of 2023
10
 
Adjusted EBITDA - Last Five Quarters
12
 
Leverage Ratio
13
Balance Sheets and Capitalization
  
 
Capitalization
14
 
Consolidated Balance Sheets
15
 
Property Portfolio - Balance Sheets - First Quarter of 2023
16
 
Debt Overview
17
 
Credit Facility and Mortgage Notes Covenants
18
     
Real Estate
  
 
Real Estate Acquisitions
19
 
Real Estate Dispositions
20
 
Top 10 Tenants
21
 
Property Type
21
 
Tenant Industry Diversification
22
 
Tenant Geographic Diversification
23
 
Lease Expirations
24
     
Appendix
  
 
Disclosures Regarding Non-GAAP and Other Metrics
25

2
About the Data
 
This data and other information described herein are as of and for the three months ended March 31, 2023 unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with Modiv Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 13, 2023 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, including the financial statements and management's discussion and analysis of financial condition and results of operations, filed on May 15, 2023.
 
Forward-Looking Statements
 
Information set forth herein contains forward-looking statements, which reflect our current views regarding our business, financial performance, growth prospects and strategies, market opportunities, and market trends. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words. All of the forward-looking statements herein are subject to various risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results, performance, and achievements could differ materially from those expressed in or by the forward-looking statements and may be affected by a variety of risks and other factors. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from such forward-looking statements. These factors include, but are not limited to, risks and uncertainties related to the COVID-19 pandemic and its related impacts on us and our tenants, general economic conditions, including but not limited to impacts of the Russian war against Ukraine, supply-chain disruptions, increases in the rate of inflation and interest rates, local real estate conditions, tenant financial health, and property acquisitions and dispositions and the timing of any acquisitions and dispositions. These and other risks, assumptions, and uncertainties are described in our filings with the SEC, which are available on the SEC’s website at www.sec.gov. You are cautioned not to place undue reliance on any forward-looking statements included herein. All forward-looking statements are made as of the date of this document and the risk that actual results, performance, and achievements will differ materially from the expectations expressed or referenced herein will increase with the passage of time. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.
 
3
Company Overview
Modiv Inc. (NYSE:MDV) (“Modiv”, the “Company”, “we”, “us” and “our”) is an internally managed real estate investment trust (“REIT”) that acquires, owns and manages a portfolio of single-tenant net-lease real estate. The Company actively acquires critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation's supply chains. Driven by an investor-first focus, the Modiv name reflects its commitment to providing investors with MOnthly DIVidends. As of May 15, 2023, Modiv had a $634 million real estate portfolio (based on estimated fair value) comprised of 4.3 million square feet of aggregate leasable area. For more information, please visit: www.modiv.com.
 
Modiv strives towards a “best-in-class” corporate governance structure through a board of directors and management team with decades of institutional real estate industry experience.
 
Management Team:
  
Independent Directors:
     
Aaron S. Halfacre
  
Adam S. Markman
Chief Executive Officer and Director
  
Chairman of the Board
     
Raymond J. Pacini
  
Asma Ishaq
Chief Financial Officer and Secretary
    
     
Sandra G. Sciutto
  
Curtis B. McWilliams
Chief Accounting Officer
    
     
John C. Raney
  
Thomas H. Nolan, Jr.
Chief Legal Officer
    
     
William R. Broms
  
Kimberly Smith
Chief Investment Officer
    
     
   
Connie Tirondola
     
 
Investor Inquiries:
Margaret Boyce, Financial Profiles, Inc.
mboyce@finprofiles.com
310-622-8247
 
Transfer Agent:
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
800-736-3001

4
Modiv Inc.
Consolidated Statements of Operations - Last Five Quarters

(Unaudited)
 
   
Three Months Ended
  
   
March 31,
2023
    
December 31,
2022
    
September 30,
2022
    
June 30,
2022
    
March 31,
2022
  
Rental income (a)
  
$
10,311,182
    
$
13,804,540
    
$
10,303,402
    
$
10,144,477
    
$
9,569,613
  
                                         
Expenses:
                                        
General and administrative (b)
    
1,908,055
      
2,252,304
      
1,838,388
      
1,615,182
      
2,106,183
  
Stock compensation expense
    
660,169
      
660,171
      
549,240
      
679,747
      
511,865
  
Depreciation and amortization
    
3,272,061
      
4,347,809
      
3,598,592
      
3,682,681
      
3,300,492
  
Interest expense (c)
    
4,018,792
      
2,826,490
      
2,514,838
      
1,197,154
      
1,568,175
  
Property expenses (d)
    
1,706,843
      
1,537,691
      
1,415,621
      
1,434,214
      
2,159,865
  
Impairment of real estate investment property (e)
    
3,499,438
      
2,080,727
      
—
      
—
      
—
  
Impairment of goodwill
    
—
      
—
      
—
      
—
      
17,320,857
  
Total expenses
    
15,065,358
      
13,705,192
      
9,916,679
      
8,608,978
      
26,967,437
  
                                         
Gain on sale of real estate investments
    
—
      
669,185
      
3,932,029
      
720,071
      
6,875,086
  
Operating (loss) income
    
(4,754,176
)
    
768,533
      
4,318,752
      
2,255,570
      
(10,522,738
)
                                         
Other income (expense):
                                        
Interest income
    
53,695
      
5,047
      
1,665
      
1,763
      
13,435
  
Income from unconsolidated investment in a real estate property
    
55,567
      
51,312
      
64,358
      
66,868
      
95,464
  
Loss on early extinguishment of debt (f)
    
—
      
—
      
—
      
—
      
(1,725,318
)
Other
    
65,993
      
(104,157
)
    
65,992
      
66,143
      
65,993
  
Other income (expense), net
    
175,255
      
(47,798
)
    
132,015
      
134,774
      
(1,550,426
)
                                         
Net (loss) income
    
(4,578,921
)
    
720,735
      
4,450,767
      
2,390,344
      
(12,073,164
)
Less: net (loss) income attributable to noncontrolling interest in Operating Partnership
    
(816,199
)
    
(42,508
)
    
528,540
      
219,214
      
(1,928,029
)
Net (loss) income attributable to Modiv Inc.
    
(3,762,722
)
    
763,243
      
3,922,227
      
2,171,130
      
(10,145,135
)
Preferred stock dividends
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
Net (loss) income attributable to common stockholders
  
$
(4,684,597
)
  
$
(158,632
)
  
$
3,000,352
    
$
1,249,255
    
$
(11,067,010
)
                                         
Net (loss) income per share attributable to common stockholders
                                        
                                         
Basic
  
$
(0.62
)
  
$
(0.02
)
  
$
0.40
    
$
0.17
    
$
(1.47
)
Diluted
  
$
(0.62
)
  
$
(0.02
)
  
$
0.35
    
$
0.14
    
$
(1.47
)
Weighted-average number of common shares outstanding
                                        
Basic
    
7,532,452
      
7,487,728
      
7,449,968
      
7,478,973
      
7,533,158
  
Diluted (g)
    
7,532,452
      
7,487,728
      
10,180,543
      
10,221,490
      
7,533,158
  
                                         
Distributions declared per common share (h)
  
$
0.2875
    
$
0.2875
    
$
0.2875
    
$
0.2875
    
$
0.3875
  
 
(a)
Rental income includes tenant reimbursements for property expenses and the fourth quarter of 2022 includes an early termination fee of $3,781,929 received from Sutter Health.
 
(b)
General and administrative expenses in the fourth quarter of 2022 include a $500,000 accrual for estimated costs of relocating our corporate offices to Reno, Nevada.
 
(c)
Interest expense in the first quarter of 2023 includes a $1,722,184 unrealized loss on swap valuations and a $746,853 increase over the first quarter of 2022 in interest expense incurred in excess of derivative cash settlements.
 
(d)
Property expenses are largely offset by tenant reimbursements included in rental income.
 
(e)
The impairment charge for the first quarter of 2023 relates to an office property located in Nashville, Tennessee leased to Cummins, Inc through February 29, 2024. We determined that an impairment charge was triggered by expectations of a shortened holding period and estimated the property's fair value based upon current market comparables. The impairment charge for the fourth quarter of 2022 relates to an office property located in Rocklin, California to reflect the net realizable value as a result of its reclassification to asset held for sale. The sale of this property is scheduled to close by May 31, 2023.
 
(f)
Loss on early extinguishment of debt for the first quarter of 2022 includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit facility with the KeyBank credit facility and mortgage repayments related to four asset sales; (ii) $615,336 of mortgage prepayment fees; and (iii) $733,000 of swap termination fees related to four of the mortgages refinanced with the KeyBank credit facility which were more than offset by the related write-off of unrealized valuation gains of $788,016.
 
(g)
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 outstanding in the second and third quarters of 2022 include Class C, Class M, Class P and Class R OP Units since we reported net income for those quarters.
 
(h)
Distributions declared during the first quarter of 2022 include a one-time 13th distribution for 2021 of $0.10 per share paid to stockholders of record on December 31, 2021 based on how many days they held their shares during 2021.
 
5
Modiv Inc.
Property Portfolio - Statements of Operations - First Quarter of 2023

(Unaudited)
   
Three Months Ended March 31, 2023
  
   
Industrial
Core
    
Tactical
Non-Core (1)
    
Other
Non-Core (2)
    
Non-Property
& Other (3)
    
Consolidated
  
Rental income
  
$
5,756,815
    
$
2,778,344
    
$
1,776,023
    
$
—
    
$
10,311,182
  
                                         
Expenses:
                                        
General and administrative
    
—
      
—
      
—
      
1,908,055
      
1,908,055
  
Stock compensation expense
    
—
      
—
      
—
      
660,169
      
660,169
  
Depreciation and amortization
    
1,924,868
      
806,415
      
540,778
      
—
      
3,272,061
  
Interest expense (4)
    
2,003,879
      
875,509
      
491,305
      
648,099
      
4,018,792
  
Property expenses
    
424,379
      
387,953
      
894,511
      
—
      
1,706,843
  
Impairment of real estate investment property
    
—
      
—
      
3,499,438
      
—
      
3,499,438
  
Total expenses
    
4,353,126
      
2,069,877
      
5,426,032
      
3,216,323
      
15,065,358
  
                                         
Operating income (loss)
    
1,403,689
      
708,467
      
(3,650,009
)
    
(3,216,323
)
    
(4,754,176
)
                                         
Other income:
                                        
Interest income
    
—
      
—
      
—
      
53,695
      
53,695
  
Income from unconsolidated investment in a real estate property
    
55,567
      
—
      
—
      
—
      
55,567
  
Other (5)
    
—
      
—
      
—
      
—
      
—
  
Total other income
    
—
      
—
      
—
      
65,993
      
65,993
  
     
55,567
      
—
      
—
      
119,688
      
175,255
  
                                         
Net income (loss)
    
1,459,256
      
708,467
      
(3,650,009
)
    
(3,096,635
)
    
(4,578,921
)
Less: net loss attributable to noncontrolling interest in Operating Partnership
    
—
      
—
      
—
      
(816,199
)
    
(816,199
)
Net income (loss) attributable to Modiv Inc.
    
1,459,256
      
708,467
      
(3,650,009
)
    
(2,280,436
)
    
(3,762,722
)
Preferred stock dividends
    
—
      
—
      
—
      
(921,875
)
    
(921,875
)
Net income (loss) attributable to common stockholders
  
$
1,459,256
    
$
708,467
    
$
(3,650,009
)
  
$
(3,202,311
)
  
$
(4,684,597
)
 
(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 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 $25.00 per share; (ii) our recently executed 12 year lease to the State of California's Office of Emergency Services (OES) into one of our existing assets located in Rancho Cordova, California that includes an attractive purchase option by the tenant which we believe has a favorable probability of being executed upon in the next 24 months; 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 flex/R&D and multi-family.
 
(2)
Other non-core assets includes 11 legacy retail properties and five legacy office properties. We define legacy assets as those inherited through prior mergers and acquisitions activity and such assets that were acquired by different management teams utilizing different investment objectives or underwriting criteria. Of the 16 assets, one office property was classified as held for sale as of March 31, 2023 and is scheduled to close by May 31, 2023. We are considering opportunities for the disposition of the remaining 15 properties.
 
(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 can include stock compensation expense, general and administrative, interest rate hedges, and other comprehensive items.
 
(4)
Non-Property & Other interest expense includes a net unrealized loss on interest rate swap valuation of $1,722,184 partially offset by derivative cash settlements of $1,074,085.
 
(5)
Other income reflects management fees earned for managing the TIC Interest.
 
6
Modiv Inc.
Consolidated Statements of Comprehensive (Loss) Income - Last Five Quarters

(Unaudited)
 
   
Three Months Ended
  
   
March 31,
2023
    
December 31,
2022
    
September 30,
2022
    
June 30,
2022
    
March 31,
2022
  
Net (loss) income
  
$
(4,578,921
)
  
$
720,735
    
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
Other comprehensive (loss) income: cash flow adjustment
                                        
Unrealized holding (loss) gain on interest rate swap designated as a cash flow hedge (a)
    
—
      
(216,200
)
    
4,255,906
      
—
      
—
  
Amortization of unrealized holding gain on interest rate swap (b)
    
250,311
      
—
      
—
      
—
      
—
  
Comprehensive (loss) income
    
(4,328,610
)
    
504,535
      
8,706,673
      
2,390,344
      
(12,073,164
)
Net (loss) income attributable to noncontrolling interest in Operating Partnership
    
(816,199
)
    
(42,508
)
    
528,540
      
219,214
      
(1,928,029
)
Other comprehensive (loss) income attributable to noncontrolling interest in Operating Partnership:
                                        
Unrealized holding (loss) gain on interest rate swap designated as a cash flow hedge (a)
    
—
      
(34,942
)
    
637,429
      
—
      
—
  
Amortization of unrealized holding gain on interest rate swap (b)
    
37,141
      
—
      
—
      
—
      
—
  
Comprehensive (loss) income attributable to noncontrolling interest in Operating Partnership
    
(779,058
)
    
(77,450
)
    
1,165,969
      
219,214
      
(1,928,029
)
Comprehensive (loss) income attributable to Modiv Inc.
  
$
(3,549,552
)
  
$
581,985
    
$
7,540,704
    
$
2,171,130
    
$
(10,145,135
)
 
(a)
Reflects the change in fair value of the hedged derivative instrument for the six months ended December 31, 2022 that was designated as a cash flow hedge for financial accounting purposes beginning July 1, 2022.
(b)
Due to the $150 million Term Loan swap's failure to qualify as a cash flow hedge for the quarterly period ended March 31, 2023, 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 the quarter ended March 31, 2023 because the swap was deemed ineffective due to the potential for a reduced term of the swap that could result from the one-time cancellation option on December 31, 2024 as compared with the maturity of the Term Loan. If there is a significant drop in interest rates in the future, this interest rate swap derivative could potentially qualify again as a cash flow hedge.

7
Modiv Inc.
(Loss) Earnings Per Share - Last Five Quarters

(Unaudited)
 
   
Three Months Ended
  
   
March 31,
2023
    
December 31,
2022
    
September 30,
2022
    
June 30,
2022
    
March 31,
2022
  
Numerator - Basic:
                              
Net (loss) income
  
$
(4,578,921
)
  
$
720,735
    
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
Net loss (income) attributable to noncontrolling interest in Operating Partnership
    
816,199
      
42,508
      
(528,540
)
    
(219,214
)
    
1,928,029
  
Preferred stock dividends
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
Net (loss) income attributable to common stockholders
  
$
(4,684,597
)
  
$
(158,632
)
  
$
3,000,352
    
$
1,249,255
    
$
(11,067,010
)
                                         
Numerator - Diluted:
                                        
Net (loss) income
  
$
(4,578,921
)
  
$
720,735
    
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
Less: preferred stock dividends
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
Net (loss) income attributable to common stockholders
  
$
(5,500,796
)
  
$
(201,140
)
  
$
3,528,892
    
$
1,468,469
    
$
(12,995,039
)
                                         
Denominator:
                                        
Weighted average shares outstanding - basic
    
7,532,452
      
7,487,728
      
7,449,968
      
7,478,973
      
7,533,158
  
Operating Partnership Units - Class C (a)
    
—
      
—
      
1,312,382
      
1,312,382
      
—
  
Operating Partnership Units - other (b)
    
—
      
—
      
1,418,193
      
1,430,135
      
—
  
Weighted average shares outstanding - diluted
    
7,532,452
      
7,487,728
      
10,180,543
      
10,221,490
      
7,533,158
  
                                         
(Loss) income per share attributable to common stockholders:
                                        
Basic
  
$
(0.62
)
  
$
(0.02
)
  
$
0.40
    
$
0.17
    
$
(1.47
)
Diluted
  
$
(0.62
)
  
$
(0.02
)
  
$
0.35
    
$
0.14
    
$
(1.47
)
 
(a)
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 March 31, 2023, December 31, 2023 and March 31, 2022 because their effect would be anti-dilutive.
 
(b)
During the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, the weighted average dilutive effect of 1,506,307, 1,395,759 and 1,347,958 shares, respectively, related to other 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.
 
8
Modiv Inc.
FFO and AFFO - Last Five Quarters

(Unaudited)
 
   
Three Months Ended
  
   
March 31,
2023
    
December 31,
2022
    
September 30,
2022
    
June 30,
2022
    
March 31,
2022
  
Net (loss) income (in accordance with GAAP)
  
$
(4,578,921
)
  
$
720,735
    
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
Preferred stock dividends
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
Net (loss) income attributable to common stockholders and Class C OP Units
    
(5,500,796
)
    
(201,140
)
    
3,528,892
      
1,468,469
      
(12,995,039
)
FFO adjustments:
                                        
Depreciation and amortization of real estate properties
    
3,272,061
      
4,347,809
      
3,598,592
      
3,682,681
      
3,300,492
  
Amortization of lease incentives
    
88,570
      
88,752
      
176,296
      
75,655
      
71,394
  
Depreciation and amortization for unconsolidated investment in a real estate property
    
194,173
      
203,554
      
192,551
      
190,468
      
190,468
  
Impairment of real estate investment property
    
3,499,438
      
2,080,727
      
—
      
—
      
—
  
Gain on sale of real estate investments, net
    
—
      
(669,185
)
    
(3,932,029
)
    
(720,071
)
    
(6,875,086
)
FFO attributable to common stockholders and Class C OP Units
    
1,553,446
      
5,850,517
      
3,564,302
      
4,697,202
      
(16,307,771
)
AFFO adjustments:
                                        
Impairment of goodwill
    
—
      
—
      
—
      
—
      
17,320,857
  
Non-recurring corporate relocation costs
    
—
      
500,000
      
—
      
—
      
—
  
Stock compensation (a)
    
660,169
      
660,170
      
549,240
      
679,747
      
511,865
  
Deferred financing costs (b)
    
195,212
      
179,641
      
101,783
      
101,781
      
1,266,725
  
Non-recurring loan prepayment penalties
    
—
      
—
      
—
      
—
      
615,336
  
Swap termination costs
    
—
      
—
      
—
      
—
      
733,000
  
Due diligence expenses, including abandoned pursuit costs (c)
    
342,542
      
25,051
      
44,863
      
4,639
      
586,669
  
Deferred rents
    
(1,175,359
)
    
(643,784
)
    
(976,419
)
    
(981,083
)
    
(636,196
)
Unrealized (loss) gain on interest rate swaps
    
1,722,184
      
505,263
      
59,000
      
(589,997
)
    
(788,016
)
Amortization of (below) above market lease intangibles
    
(196,283
)
    
(142,626
)
    
(214,889
)
    
(317,354
)
    
(330,618
)
Other adjustments for unconsolidated investment in a real estate property
    
11,819
      
5,815
      
(188
)
    
(188
)
    
(188
)
AFFO attributable to common stockholders and Class C OP Units (d)
  
$
3,113,730
    
$
6,940,047
    
$
3,127,692
    
$
3,594,747
    
$
2,971,663
  
                                         
Weighted average shares outstanding:
                                        
Basic
    
7,532,452
      
7,487,728
      
7,449,968
      
7,478,973
      
7,533,158
  
Fully diluted (e)
    
10,351,141
      
10,195,869
      
10,180,543
      
10,221,490
      
10,193,498
  
FFO per share:
                                        
Basic
  
$
0.21
    
$
0.78
    
$
0.48
    
$
0.63
    
$
(2.16
)
Fully diluted
  
$
0.15
    
$
0.57
    
$
0.35
    
$
0.46
    
$
(2.16
)
AFFO per share:
                                        
Basic
  
$
0.41
    
$
0.93
    
$
0.42
    
$
0.48
    
$
0.39
  
Fully diluted (d)
  
$
0.30
    
$
0.68
    
$
0.31
    
$
0.35
    
$
0.29
  
 
(a)
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 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.
 
(b)
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.
 
(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. Abandoned pursuit costs for the first quarter of 2022 primarily reflect the write-off of due diligence costs incurred for a portfolio of 10 properties leased to Walgreens, which we abandoned due to inability to obtain the mortgage servicer's approval prior to the contract termination date and changes in market conditions.
 
(d)
AFFO for the fourth quarter of 2022 includes an early termination fee of $3,751,984 received from Sutter Health.
 
(e)
Includes the Class C, Class M, Class P and Class R OP Units to compute the weighted average number of shares for each of the five quarters ended March 31, 2023 presented above.
 
9
Modiv Inc.
Property Portfolio - FFO and AFFO - First Quarter of 2023

(Unaudited)
   
Three Months Ended March 31,
  
   
Industrial
Core
    
Tactical
Non-Core (1)
    
Other
Non-Core (2)
    
Non-Property
& Other (3)
    
Consolidated
  
Net income (loss) (in accordance with GAAP)
  
$
1,459,256
    
$
708,467
    
$
(3,650,009
)
  
$
(3,096,635
)
  
$
(4,578,921
)
Preferred stock dividends
    
—
      
—
      
—
      
(921,875
)
    
(921,875
)
Net income (loss) attributable to common stockholders and Class C OP Unit holders
    
1,459,256
      
708,467
      
(3,650,009
)
    
(4,018,510
)
    
(5,500,796
)
FFO adjustments:
                                        
Depreciation and amortization of real estate properties
    
1,924,868
      
806,415
      
540,778
      
—
      
3,272,061
  
Amortization of lease incentives
    
17,177
      
—
      
71,393
      
—
      
88,570
  
Depreciation and amortization for unconsolidated investment in a real estate property
    
194,173
      
—
      
—
      
—
      
194,173
  
Impairment of real estate investment property
    
—
      
—
      
3,499,438
      
—
      
3,499,438
  
FFO attributable to common stockholders and Class C OP Unit holders
    
3,595,474
      
1,514,882
      
461,600
      
(4,018,510
)
    
1,553,446
  
AFFO adjustments:
                                        
Stock compensation
    
—
      
—
      
—
      
660,169
      
660,169
  
Deferred financing costs
    
144,269
      
14,519
      
36,424
      
—
      
195,212
  
Due diligence expenses, including abandoned pursuit costs
    
—
      
—
      
—
      
—
      
—
  
Deferred rents
    
13,673
      
83
      
328,786
      
—
      
342,542
  
Unrealized loss (gain) on interest rate swap valuation
    
(579,161
)
    
(604,781
)
    
8,583
      
—
      
(1,175,359
)
Amortization of (below) above market lease intangibles, net
    
—
      
—
      
—
      
1,722,184
      
1,722,184
  
Other adjustments for unconsolidated investment in a real estate property
    
(207,712
)
    
—
      
11,429
      
—
      
(196,283
)
AFFO attributable to common stockholders and Class C OP Unit holders
    
11,819
      
—
      
—
      
—
      
11,819
  
   
$
2,978,362
    
$
924,703
    
$
846,822
    
$
(1,636,157
)
  
$
3,113,730
  

Weighted average shares outstanding:
                              
Basic
    
7,532,452
      
7,532,452
      
7,532,452
      
7,532,452
      
7,532,452
  
Fully diluted (4)
    
10,351,141
      
10,351,141
      
10,351,141
      
10,351,141
      
10,351,141
  
                                         
FFO Per Share:
                                        
Basic
  
$
0.48
    
$
0.20
    
$
0.06
    
$
(0.53
)
  
$
0.21
  
Fully Diluted (5)
  
$
0.35
    
$
0.15
    
$
0.04
    
$
(0.39
)
  
$
0.15
  
                                         
AFFO Per Share:
                                        
Basic
  
$
0.40
    
$
0.12
    
$
0.11
    
$
(0.22
)
  
$
0.41
  
Fully Diluted (5)
  
$
0.29
    
$
0.09
    
$
0.08
    
$
(0.16
)
  
$
0.30
  
 
10
(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 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 $25.00 per share; (ii) our recently executed 12 year lease to the State of California's Office of Emergency Services (OES) into one of our existing assets located in Rancho Cordova, California that includes an attractive purchase option by the tenant which we believe has a favorable probability of being executed upon in the next 24 months; and (iii) our property leased to located in Costco 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 flex/R&D and multi-family.
 
(2)
Other non-core assets includes 11 legacy retail properties and five legacy office properties. We define legacy assets as those inherited through prior mergers and acquisitions activity and such assets that were acquired by different management teams utilizing different investment objectives or underwriting criteria. Of the 16 assets, one office property was classified as held for sale as of March 31, 2023 and is scheduled to close by May 31, 2023. We are considering opportunities for disposition of the remaining 15 properties.
 
(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 can include stock compensation expense, general and administrative, interest rate hedges, and other comprehensive items.
 
(4)
Weighted average fully diluted shares outstanding includes the following:
 

 (i)
7,532,452 shares of Class C common stock;
 

 (ii)
1,312,382 Class C OP Units issued on January 18, 2022 in connection with the acquisition of the KIA auto dealership property discussed above. This does not include the 287,516 Class C OP Units issued in April 2023 in conjunction with our acquisition of the property in Reading, Pennsylvania leased to Summit Steel & Manufacturing, LLC.
 

 (iii)
1,189,964 shares of Class C common stock that would result from conversion of 657,949.5 Class M OP Units and 56,029 Class P OP Units assuming a conversion ratio of 1.6667 shares of our Class C Common Stock for each Class M OP Unit and Class P OP Unit outstanding; and
 

 (iv)
316,343 shares of Class C common stock that would result from conversion of Class R OP Units. This does not include 474,515 additional performance-based Class R OP Units that are eligible to be issued by March 31, 2024.
 
(5)
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.
 
11
Modiv Inc.
Adjusted EBITDA - Last Five Quarters

(Unaudited)
 
   
Three Months Ended
  
   
March 31,
2023
    
December 31,
2022
    
September 30,
2022
    
June 30,
2022
    
March 31,
2022
  
Net (loss) income (in accordance with GAAP)
  
$
(4,578,921
)
  
$
720,735
    
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
Depreciation and amortization of real estate properties
    
3,272,061
      
4,347,809
      
3,598,592
      
3,682,681
      
3,300,492
  
Depreciation and amortization for unconsolidated investment in a real estate property
    
194,173
      
203,554
      
192,551
      
190,468
      
190,468
  
Interest expense (a)
    
4,018,792
      
2,826,490
      
2,514,838
      
1,197,155
      
1,568,175
  
Loss on early extinguishment of debt (b)
    
—
      
—
      
—
      
—
      
1,725,318
  
Interest expense on unconsolidated investment in real estate property
    
95,486
      
98,073
      
98,624
      
98,135
      
97,645
  
Impairment of real estate investment property (c)
    
3,499,438
      
2,080,727
      
—
      
—
      
—
  
Impairment of goodwill
    
—
      
—
      
—
      
—
      
17,320,857
  
Stock compensation
    
660,169
      
660,171
      
549,240
      
679,747
      
511,865
  
Due diligence expenses, including abandoned pursuit costs
    
342,542
      
25,051
      
44,863
      
4,639
      
586,669
  
Gain on sale of real estate investments
    
—
      
(669,185
)
    
(3,932,029
)
    
(720,071
)
    
(6,875,086
)
Adjusted EBITDA (d)
  
$
7,503,740
    
$
10,293,425
    
$
7,517,446
    
$
7,523,098
    
$
6,353,239
  
                                         
Annualized adjusted EBITDA
    
30,014,960
    
$
41,173,700
    
$
30,069,784
    
$
30,092,392
    
$
25,412,956
  
                                         
Net debt:
                                        
Debt
  
$
214,436,983
    
$
197,515,009
    
$
201,365,536
    
$
201,425,173
    
$
165,509,220
  
Debt of unconsolidated investment in real estate property (e)
    
9,429,343
      
9,487,515
      
9,544,131
      
9,599,182
      
9,653,689
  
Cash and restricted cash
    
(13,280,104
)
    
(8,608,649
)
    
(5,726,888
)
    
(11,705,449
)
    
(25,344,063
)
Cash of unconsolidated investment in real estate property (e)
    
(420,947
)
    
(218,424
)
    
(341,007
)
    
(585,357
)
    
(458,948
)
   
$
210,165,275
    
$
198,175,450
    
$
204,841,772
    
$
198,733,549
    
$
149,359,898
  
                                         
Net debt / Adjusted EBITDA
    
7.0
x
    
4.8
x
    
6.8
x
    
6.6
x
    
5.9
x
 
(a)
Interest expense in the first quarter of 2023 includes a $1,722,184 unrealized loss on swap valuations and a $746,853 increase over the first quarter of 2022 in interest expense incurred in excess of derivative cash settlements.
 
(b)
Loss on early extinguishment of debt includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit facility with the KeyBank credit facility and mortgage repayments related to four asset sales; (ii) $615,336 of mortgage prepayment fees; and (iii) $733,000 of swap termination fees related to refinancing four mortgages with the KeyBank credit facility and the related write-off of unrealized valuation losses of $788,016.
 
(c)
The impairment charge for the first quarter of 2023 relates to an office property located in Nashville, Tennessee leased to Cummins, Inc through February 29, 2024. We determined that an impairment charge was triggered by expectations of a shortened holding period and estimated the property's fair value based upon current market comparables. The impairment charge for the fourth quarter of 2022 relates to an office property located in Rocklin, California to reflect net realizable value as a result of its reclassification to asset held for sale. The sale of this property is scheduled to close by May 31, 2023.
 
(d)
Adjusted EBITDA for the fourth quarter of 2022 includes an early termination fee of $3,781,929 received from Sutter Health.
 
(e)
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.
 
12
Modiv Inc.
Leverage Ratio

(Unaudited)
 
We calculate our leverage ratio in conformance with the definition used in our KeyBank credit facility as set forth below.
 
   
March 31,
2023
    
December 31,
2022 (d)
  
Total Asset Value
            
Cash and cash equivalents
  
$
13,280,104
    
$
8,608,649
  
Borrowing base value
    
403,178,973
      
408,598,973
  
Other real estate value (a)
    
114,673,362
      
97,340,000
  
Pro-rata share of unconsolidated investment in a real estate property
    
28,785,118
      
28,582,595
  
Total asset value
  
$
559,917,557
    
$
543,130,217
  
                 
Indebtedness
                
Credit facility revolver
  
$
—
    
$
3,000,000
  
Credit facility term loan
    
170,000,000
      
150,000,000
  
Mortgage debt
    
44,436,983
      
44,515,009
  
Pro-rata share of unconsolidated investment in a real estate property
    
9,429,343
      
9,487,515
  
Total indebtedness
  
$
223,866,326
    
$
207,002,524
  
 
                
Leverage Ratio
    
40
%
    
38
%
 
(a)
The increase in other real estate value primarily reflects first quarter acquisitions which had not been added to the Borrowing Base as of March 31, 2023.
 
13
Modiv Inc.
Capitalization as of March 31, 2023

(Unaudited)


PREFERRED EQUITY
      
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock
  
$
50,000,000
  
% of Total Capitalization
    
13
%
         
COMMON EQUITY
        
Shares of Class C Common Stock
    
7,568,322
  
OP Units (Class M, Class P, Class R and Class C)
    
2,818,689
  
Total Class C Common Stock and OP Units
    
10,387,011
  
Price Per Share / Unit at March 31, 2023
  
$
10.63
  
IMPLIED EQUITY MARKET CAPITALIZATION
  
$
110,413,927
  
% of Total Capitalization
    
30
%
         
DEBT
        
Mortgage Debt
        
Costco Property
  
$
18,850,000
  
Taylor Fresh Foods Property
    
12,350,000
  
OES Property
    
13,236,983
  
Total Mortgage Debt
  
$
44,436,983
  
KeyBank Credit Facility
        
Revolver
  
$
—
  
Term Loan (a) & (b)
    
170,000,000
  
Total Credit Facility
  
$
170,000,000
  
TOTAL DEBT
  
$
214,436,983
  
% of Total Capitalization
    
57
%
% of Total Debt - Floating Rate Debt
    
—
%
% of Total Debt - Fixed Rate Debt (a) & (b)
    
100
%
% of Total Debt
    
100
%
ENTERPRISE VALUE
        
Total Capitalization
  
$
374,850,910
  
Less: Cash and Cash Equivalents
    
(13,280,104
)
Enterprise Value
  
$
361,570,806
  
 
(a)
On May 10, 2022, we purchased a five-year swap at 2.258% on our $150,000,000 term loan that results in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. As part of this transaction, we sold a one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio.
 
(b)
On October 26, 2022, we purchased another five-year swap at 3.440% on our $100,000,000 term loan commitment that will result in a fixed interest rate of 5.04% when our leverage ratio is less than or equal to 40%. As part of this transaction, we sold a one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio.

14
Modiv Inc.
Consolidated Balance Sheets

(Unaudited)
 
   
March 31,
2023
    
December 31, 2022
  
Assets
            
Real estate investments:
            
Land
  
$
103,919,101
    
$
103,657,237
  
Buildings and improvements
    
338,027,128
      
329,867,099
  
Equipment
    
4,429,000
      
4,429,000
  
Tenant origination and absorption costs
    
20,085,465
      
19,499,749
  
Total investments in real estate property
    
466,460,694
      
457,453,085
  
Accumulated depreciation and amortization
    
(50,024,383
)
    
(46,752,322
)
Total investments in real estate property, net
    
416,436,311
      
410,700,763
  
Unconsolidated investment in a real estate property
    
9,997,292
      
10,007,420
  
Total real estate investments excluding real estate investments held for sale, net
    
426,433,603
      
420,708,183
  
Real estate investments held for sale, net
    
5,255,725
      
5,255,725
  
Total real estate investments, net
    
431,689,328
      
425,963,908
  
Cash and cash equivalents
    
13,280,104
      
8,608,649
  
Tenant receivables
    
8,653,550
      
7,263,202
  
Above-market lease intangibles, net
    
1,808,483
      
1,850,756
  
Prepaid expenses and other assets
    
5,904,737
      
6,100,937
  
Interest rate swap derivative
    
3,485,684
      
4,629,702
  
Assets related to real estate investments held for sale
    
15,939
      
12,765
  
Total assets
  
$
464,837,825
    
$
454,429,919
  
Liabilities and Equity
                
Mortgage notes payable, net
  
$
44,338,481
    
$
44,435,556
  
Credit facility revolver
    
—
      
3,000,000
  
Credit facility term loan, net
    
168,140,752
      
148,018,164
  
Accounts payable, accrued and other liabilities
    
7,338,674
      
7,649,806
  
Below-market lease intangibles, net
    
9,724,717
      
9,675,686
  
Interest rate swap derivatives
    
1,327,342
      
498,866
  
Liabilities related to real estate investments held for sale
    
51,918
      
117,881
  
Total liabilities
    
230,921,884
      
213,395,959
  
                 
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, 2023 and 2022
    
2,000
      
2,000
  
Class C common stock, $0.001 par value, 300,000,000 shares authorized, 7,822,940 shares issued and 7,568,322 shares outstanding as of March 31, 2023 and 7,762,506 shares issued and 7,512,353 shares outstanding as of December 31, 2022
    
7,823
      
7,762
  
Class S common stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022
    
—
      
—
  
Additional paid-in-capital
    
279,565,984
      
278,339,020
  
Treasury stock, at cost, 254,618 and 250,153 shares held as of March 31, 2023 and December 31, 2022, respectively
    
(4,211,300
)
    
(4,161,618
)
Cumulative distributions and net losses
    
(124,790,431
)
    
(117,938,876
)
Accumulated other comprehensive income
    
3,289,446
      
3,502,616
  
Total Modiv Inc. equity
    
153,863,522
      
159,750,904
  
Noncontrolling interests in the Operating Partnership
    
80,052,419
      
81,283,056
  
Total equity
    
233,915,941
      
241,033,960
  
Total liabilities and equity
  
$
464,837,825
    
$
454,429,919
  

15
Modiv Inc.
Property Portfolio - Balance Sheets - First Quarter of 2023

(Unaudited)
   
March 31, 2023
  
   
Industrial
Core
    
Tactical Non-
Core (1)
    
Other Non-
Core (2)
    
Non-Property
& Other (3)
    
Consolidated
  
Assets
                              
Real estate investments:
                              
Land
  
$
48,979,265
    
$
43,387,936
    
$
11,551,900
    
$
—
    
$
103,919,101
  
Buildings and improvements
    
206,243,721
      
83,114,194
      
48,669,213
      
—
      
338,027,128
  
Equipment
    
4,429,000
      
—
      
—
      
—
      
4,429,000
  
Tenant origination and absorption costs
    
11,104,811
      
4,500,352
      
4,480,302
      
—
      
20,085,465
  
Total investments in real estate property
    
270,756,797
      
131,002,482
      
64,701,415
      
—
      
466,460,694
  
Accumulated depreciation and amortization
    
(28,022,301
)
    
(11,132,934
)
    
(10,869,148
)
    
—
      
(50,024,383
)
Total investments in real estate property excluding real estate investments held for sale, net, net
    
242,734,496
      
119,869,548
      
53,832,267
      
—
      
416,436,311
  
Unconsolidated investment in a real estate property
    
9,997,292
      
—
      
—
      
—
      
9,997,292
  
Total real estate investments, net
    
252,731,788
      
119,869,548
      
53,832,267
      
—
      
426,433,603
  
Real estate investments held for sale, net
    
—
      
—
      
5,255,725
      
—
      
5,255,725
  
Total real estate investments, net
    
252,731,788
      
119,869,548
      
59,087,992
      
—
      
431,689,328
  
Cash and cash equivalents
    
—
      
—
      
—
      
13,280,104
      
13,280,104
  
Tenant receivables
    
5,672,664
      
2,261,779
      
719,107
      
—
      
8,653,550
  
Above-market lease intangibles, net
    
1,372,269
      
—
      
436,214
      
—
      
1,808,483
  
Prepaid expenses and other assets (4)
    
1,673,671
      
39,652
      
2,011,993
      
2,179,421
      
5,904,737
  
Interest rate swap derivative
    
—
      
—
      
—
      
3,485,684
      
3,485,684
  
Assets related to real estate investments held for sale
    
—
      
—
      
15,939
      
—
      
15,939
  
Total assets
  
$
261,450,392
    
$
122,170,979
    
$
62,271,245
    
$
18,945,209
    
$
464,837,825
  
Liabilities and Equity
                                        
Mortgage notes payable, net
  
$
12,218,789
    
$
32,119,692
    
$
—
    
$
—
    
$
44,338,481
  
Credit facility term loan
    
109,291,489
      
30,265,335
      
28,583,928
      
—
      
168,140,752
  
Accounts payable, accrued and other liabilities
    
1,860,919
      
980,213
      
743,011
      
3,754,531
      
7,338,674
  
Below-market lease intangibles, net
    
9,558,900
      
—
      
165,817
      
—
      
9,724,717
  
Interest rate swap derivatives
    
—
      
—
      
—
      
1,327,342
      
1,327,342
  
Liabilities related to real estate investments held for sale
    
—
      
—
      
51,918
      
—
      
51,918
  
Total liabilities
    
132,930,097
      
63,365,240
      
29,544,674
      
5,081,873
      
230,921,884
  
                                         
Commitments and contingencies
                                        
                                         
Total Modiv Inc. equity, net of due to affiliates
    
128,520,295
      
58,805,739
      
32,726,571
      
(66,189,083
)
    
153,863,522
  
Noncontrolling interests in the Operating Partnership
    
—
      
—
      
—
      
80,052,419
      
80,052,419
  
Total equity
    
128,520,295
      
58,805,739
      
32,726,571
      
13,863,336
      
233,915,941
  
Total liabilities and equity
  
$
261,450,392
    
$
122,170,979
    
$
62,271,245
    
$
18,945,209
    
$
464,837,825
  
 
(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 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 $25.00 per share; (ii) our recently executed 12 year lease to the State of California's Office of Emergency Services (OES) into one of our existing assets located in Rancho Cordova, California that includes an attractive purchase option by the tenant which we believe has a favorable probability of being executed upon in the next 24 months; 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 flex/R&D and multi-family.
 
(2)
Other non-core assets includes 11 legacy retail properties and five legacy office properties. We define legacy assets as those inherited through prior mergers and acquisitions activity and such assets that were acquired by different management teams utilizing different investment objectives or underwriting criteria. Of the 16 assets, one office property was classified as held for sale as of March 31, 2023 and is scheduled to close by May 31, 2023. We are considering opportunities for disposition of the remaining 15 properties.
 
(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 can include stock compensation expense, general and administrative, interest rate hedges, and other comprehensive items.
 
(4)
Non-Property & Other prepaid expenses and other assets include deferred financing fees on our Revolver and prepaid directors and officers insurance.
 
16
Modiv Inc.
Debt Overview

(Unaudited)
 
   
Outstanding Balance
                  
Collateral
  
March 31,
2023
    
December 31,
2022
    
Contractual Interest
Rate
    
Effective
Interest Rate
  
Loan
Maturity
Mortgage Notes:
                              
Costco property
  
$
18,850,000
    
$
18,850,000
      
4.85%

   
4.85%

1/1/2030
Taylor Fresh Foods property
    
12,350,000
      
12,350,000
      
3.85%

   
3.85%

11/1/2029
OES property
    
13,236,983
      
13,315,009
      
4.50%

   
4.50%

3/9/2024
     
44,436,983
      
44,515,009
                      
Plus unamortized mortgage premium
    
92,962
      
119,245
                      
Less unamortized deferred financing costs
    
(191,464
)
    
(198,698
)
                    
Mortgage notes payable, net
    
44,338,481
      
44,435,556
                      
                                        
KeyBank Credit Facility (a):
                                      
Revolver
    
—
      
3,000,000
    
(b)
    
(b)
  
1/18/2026
Term loan
    
170,000,000
      
150,000,000
    
(c)
    
(c)
  
1/18/2027
Total Credit Facility
    
170,000,000
      
153,000,000
                      
Less unamortized deferred financing costs
    
(1,859,248
)
    
(1,981,836
)
                    
     
168,140,752
      
151,018,164
                      
Total debt, net
  
$
212,479,233
    
$
195,453,720
                      
 
(a)
Our Credit Facility which aggregates $400,000,000 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 May 12, 2023, the $250,000,000 Term Loan is fully drawn and the Revolver has no outstanding balance.
 
(b)
The interest rate on the Revolver is based on our leverage ratio at the end of the prior quarter. With our leverage ratio at 38% as of December 31, 2022, the spread over the Secured Overnight Financing Rate (‘‘SOFR’’), including a 10 basis point credit adjustment, is 165 basis points and the interest rate on the Revolver was 6.713% as of May 12, 2023, however there was no outstanding balance. We also pay an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment.
 
(c)
To mitigate the risk of rising interest rates, 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 one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. On October 26, 2022, we purchased another five-year swap at 3.440% on our $100,000,000 term loan commitment which results in a fixed interest rate of 5.04% when our leverage ratio is less than or equal to 40%. As part of this transaction, we sold a one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio.
 
17
Modiv Inc.
Covenants

Credit Facility and Mortgage Notes Covenants
 
The following is a summary of key financial covenants for our credit facility and mortgage notes, as defined and calculated per the terms of the facility's credit agreement and the mortgage notes' governing documents, respectively, which are included in our filings with the U.S. Securities and Exchange Commission. These calculations, which are not based on U.S. GAAP measurements are presented to demonstrate that as of March 31, 2023, we believe we are in compliance with the covenants.
 
Unsecured Credit Facility Covenants
  
Required
    
March 31,
2023
  
Maximum leverage ratio
  
<60%
      
40%

Minimum fixed charge coverage ratio
  
>1.50x
      
1.90x

Maximum secured indebtedness ratio
    
40%

   
8%

Minimum consolidated tangible net worth
  
$
211,233,527
    
$
285,397,023
  
Minimum investment grade tenants in borrowing base
    
30%

   
42%

Weighted average lease term (years)
    
7
      
13
  
                 
Mortgage Notes Key Covenants
  
Debt service
coverage ratio
    
March 31,
2023
  
Costco property
  
N.A.
    
N.A.
  
Taylor Fresh Foods property
    
1.5
      
2.9
  
OES property
    
1.4
      
1.9
  

18
Modiv Inc.
Real Estate Acquisitions

(Unaudited)
 
The following table summarizes our property acquisition activity during each of last five quarters ended March 31, 2023:
 
Q1 2023
Tenant and Location
Property
Type
  
Area
(Square Feet)
    
Lease
Terms
(Years)
    
Annual
Rent
Increase
    
Acquisition
Price
    
Initial Cap
Rate
    
Weighted
Average
Cap Rate
  
Plastic Products
Industrial
    
148,012
      
5.8
      
3.0
%
  
$
6,368,776
      
7.5
%
    
9.2
%
Stealth Manufacturing
Industrial
    
55,988
      
20.0
      
2.5
%
    
5,500,000
      
7.7
%
    
9.8
%
       
204,000
                    
$
11,868,776
              
9.5
%
 
Q4 2022
Tenant and Location
  
Property
Type
  
Area
(Square Feet)
    
Lease
Terms
(Years)
    
Annual Rent
Increase
    
Acquisition
Price
    
Initial Cap
Rate
    
Weighted
Average
Cap Rate
  
None
        
—
      
—
      
—
%
  
$
—
      
—
%
    
—
%
 
Q3 2022
  
Tenant and Location
Property
Type
  
Area
(Square Feet)
    
Lease
Terms
(Years)
    
Annual
Rent Increase
    
Acquisition
Price
    
Initial Cap
Rate
    
Weighted
Average
Cap Rate
  
Producto, two properties acquired in upstate New York
Industrial
    
72,373
      
20.0
      
2.0
%
  
$
5,343,862
      
7.21
%
    
8.8
%
Valtir, four properties acquired in Ohio, South Carolina, Texas and Utah
Industrial
    
293,612
      
20.0
(a)
    
2.3
%
    
23,375,000
      
7.70
%
    
9.7
%
       
365,985
                    
$
28,718,862
              
9.5
%

Q2 2022
Tenant and Location
Property
Type
  
Area
(Square Feet)
    
Lease
Terms
(Years)
    
Annual Rent
Increase
    
Acquisition
Price
    
Initial Cap
Rate
    
Weighted
Average
Cap Rate
  
Lindsay Precast, eight properties acquired in Colorado (3), Ohio (2), North Carolina, South Carolina and Florida
Industrial
    
618,195
      
25.0
      
2.0
%
  
$
56,150,000
      
6.65
%
    
8.5
%

Q1 2022
  
Tenant and Location
Property
Type
  
Area
(Square Feet)
    
Lease
Terms
(Years)
    
Annual Rent
Increase
    
Acquisition
Price
    
Initial Cap
Rate
    
Weighted
Average
Cap Rate
  
KIA, Carson, CA
Retail
    
72,623
      
25.0
      
2.0
%
  
$
69,275,000
      
5.7
%
    
7.3
%
Kalera, Saint Paul, MN
Industrial
    
78,857
      
20.0
      
2.5
%
    
8,079,000
      
7.0
%
    
8.9
%
       
151,480
                    
$
77,354,000
              
8.1
%

(a)
The South Carolina and Ohio properties have a 25-year master lease and the Texas and Utah properties have a 15-year master lease.

19
Modiv Inc.
Real Estate Dispositions

(Unaudited)
 
The following table summarizes our property disposition activity during each of last five quarters ended March 31, 2023.
 
Q1 2023
Tenant and Location
  
Property
Type
  
Area (Square
Feet)
    
Acquisition
Price
    
Disposition
Price
    
Net Book
Value
    
Disposition
Costs
    
Gain on Sale
    
Cap Rate
  
None
        
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
      
—
%

Q4 2022
Tenant and Location
  
Property
Type
  
Area (Square
Feet)
    
Acquisition
Price
    
Disposition
Price
    
Net Book
Value
    
Disposition
Costs
    
Gain on Sale
    
Cap Rate
  
Raising Cane's, San Antonio, TX
  
Retail
    
3,853
    
$
3,644,221
    
$
4,313,045
    
$
3,504,097
    
$
139,763
    
$
669,185
      
5.7
%

Q3 2022
Tenant and Location
  
Property
Type
  
Area (Square
Feet)
    
Acquisition
Price
    
Disposition
Price
    
Net Book
Value
    
Disposition
Costs
    
Gain on Sale
    
Cap Rate
  
Williams Sonoma, Summerlin, NV
  
Office
    
35,867
    
$
7,211,012
    
$
9,300,000
    
$
7,339,316
    
$
335,748
    
$
1,624,936
      
7.4
%
Wyndham, Summerlin, NV
  
Office
    
41,390
      
10,116,502
      
12,900,000
      
9,960,478
      
632,429
      
2,307,093
      
7.4
%
         
77,257
    
$
17,327,514
    
$
22,200,000
    
$
17,299,794
    
$
968,177
    
$
3,932,029
      
7.4
%

Q2 2022
Tenant and Location
  
Property
Type
  
Area (Square
Feet)
    
Acquisition
Price
    
Disposition
Price
    
Net Book
Value
    
Disposition
Costs
    
Gain on Sale
    
Cap Rate
  
EMCOR, Cincinnati, OH
  
Office
    
39,385
    
$
6,138,538
    
$
6,525,000
    
$
5,625,571
    
$
179,358
    
$
720,071
      
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
    
$
9,919,061
    
$
252,344
    
$
28,595
      
8.1
%
Omnicare, Richmond, VA
  
Flex
    
51,800
      
7,324,370
      
8,760,000
      
6,650,887
      
218,489
      
1,890,624
      
6.8
%
Texas Health, Dallas, TX
  
Office
    
38,794
      
7,689,924
      
7,040,000
      
6,784,168
      
168,352
      
87,480
      
7.9
%
Accredo, Orlando, FL
  
Office
    
63,000
      
10,710,500
      
14,000,000
      
8,682,338
      
449,275
      
4,868,387
      
7.3
%
         
226,484
    
$
36,567,701
    
$
40,000,000
    
$
32,036,454
    
$
1,088,460
    
$
6,875,086
      
7.5
%

20
Modiv Inc.
Top 10 Tenants
(Unaudited)
 
Tenant
  
Industry
  
ABR
    
ABR as a
Percentage of
Total Portfolio
    
Area
(Square Feet)
    
Square Feet as
a Percentage
of Total
Portfolio
  
KIA of Carson
  
Tactical Non-Core
  
$
4,184,271
      
12
%
    
72,623
      
2
%
Lindsay
  
Industrial Core
    
3,802,601
      
11
%
    
618,195
      
18
%
Costco Wholesale
  
Tactical Non-Core
    
2,381,180
      
7
%
    
97,191
      
3
%
AvAir
  
Industrial Core
    
2,330,163
      
7
%
    
162,714
      
5
%
3M

Industrial Core
    
1,862,190
      
5
%
    
410,400
      
12
%
Valtir
  
Industrial Core
    
1,824,972
      
5
%
    
293,612
      
9
%
Taylor Fresh Foods
  
Industrial Core
    
1,645,007
      
5
%
    
216,727
      
6
%
FUJIFILM Dimatix (a)
  
Industrial Core
    
1,642,923
      
5
%
    
91,740
      
3
%
Cummins
  
Non-Core
    
1,399,315
      
4
%
    
87,230
      
3
%
Northrop Grumman
  
Industrial Core
    
1,280,614
      
4
%
    
106,592
      
3
%
Total Top 10 Tenants
      
$
22,353,236
      
65
%
    
2,157,024
      
64
%
 
(a)
Reflects our approximate 72.71% tenant-in-common interest (“TIC Interest”).

Modiv Inc.
Property Type
(Unaudited)
 
Property
  
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
    
29
    
$
21,234,259
      
61
%
    
2,744,979
      
81
%
Tactical Non-Core (1)
    
3
      
8,186,799
      
23
%
    
276,406
      
8
%
Non-Core
    
16
      
5,530,141
      
16
%
    
355,061
      
11
%
Total Properties
    
48
    
$
34,951,199
      
100
%
    
3,376,446
      
100
%
 
Pro-Forma Property Type (2)
Property
  
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
    
36
    
$
28,063,731
      
67
%
    
3,692,509
      
86
%
Tactical Non-Core (1)
    
3
      
8,186,799
      
20
%
    
276,406
      
7
%
Non-Core
    
16
      
5,530,141
      
13
%
    
314,951
      
7
%
Total Properties
    
55
    
$
41,780,671
      
100
%
    
4,283,866
      
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 in January 2022. This acquisition was structured as an UPREIT transaction resulting in a favorable equity issuance of $32,809,550 in Class C OP Units at a cost basis of $25.00 per share; (ii) our recently executed 12 year lease with the State of California’s Office of Emergency Services (OES) for one of our existing assets located in Rancho Cordova, California that includes an attractive purchase option by the tenant which we believe has a favorable probability of being executed upon in next 24 months; 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 flex/R&D and multi-family.
 
(2)
Reflects the acquisitions of properties subsequent to March 31, 2023 located in: (i) Gap, Pennsylvania leased to Lindsay Precast, LLC; (ii) Reading, Pennsylvania leased to Summit Steel and Manufacturing, LLC; (iii) Roscoe, Illinois leased to Pacific Bearing Company; (iv) Lansing, Michigan leased to Cameron Tool Company, LLC; (v) Detroit Lakes and Plymouth, Minnesota and Ashland, Ohio leased to S.J. Electro Systems, LLC; and (vi) Alleyton, Texas leased to Titan Production Equipment, LLC.
 
21
Modiv Inc.
Tenant Industry Diversification
(Unaudited)
 
Industry
  
Number of
Properties
    
ABR
    
ABR as a
Percentage of
Total Portfolio
    
Area
(Square Feet)
    
Square Feet as
a Percentage
of Total
Portfolio
  
Automobile & Components
    
2
    
$
4,980,589
      
14
%
    
148,623
      
4
%
Manufacturing
    
7
      
4,390,515
      
13
%
    
633,582
      
19
%
Transportation
    
5
      
4,155,134
      
12
%
    
456,326
      
14
%
General Retailers
    
12
      
3,827,710
      
11
%
    
244,854
      
7
%
Precast Concrete
    
8
      
3,802,601
      
11
%
    
618,195
      
18
%
Technology Hardware & Equipment
    
2
      
2,231,973
      
6
%
    
130,240
      
4
%
Food, Beverage & Tobacco
    
2
      
2,227,090
      
6
%
    
295,584
      
9
%
Defense
    
2
      
2,139,039
      
6
%
    
153,633
      
5
%
Materials
    
1
      
1,862,190
      
5
%
    
410,400
      
12
%
Government
    
2
      
1,597,225
      
5
%
    
117,606
      
3
%
Commercial & Professional Services
    
2
      
1,579,680
      
4
%
    
70,567
      
2
%
Consumer Services
    
1
      
924,000
      
3
%
    
50,000
      
1
%
Pharmaceuticals, Biotechnology & Life Sciences
    
1
      
649,125
      
2
%
    
20,800
      
1
%
Energy
    
1
      
584,328
      
2
%
    
26,036
      
1
%
Total
    
48
    
$
34,951,199
      
100
%
    
3,376,446
      
100
%

22
Modiv Inc.
Tenant Geographic Diversification

(Unaudited)
 
State
  
Number of
Properties
    
ABR
    
ABR as a
Percentage of
Total Portfolio
    
Area (Square
Feet)
    
Square Feet as
a Percentage
of Total
Portfolio
  
California
    
13
    
$
12,355,459
      
35
%
    
600,395
      
18
%
Arizona
    
2
      
3,975,169
      
11
%
    
379,441
      
11
%
Ohio
    
7
      
3,147,869
      
9
%
    
644,021
      
19
%
Florida
    
3
      
2,705,863
      
8
%
    
237,329
      
7
%
Washington
    
1
      
2,381,179
      
7
%
    
97,191
      
3
%
Illinois
    
1
      
1,862,190
      
5
%
    
410,400
      
12
%
Minnesota
    
3
      
1,496,989
      
4
%
    
282,044
      
8
%
Tennessee
    
1
      
1,399,315
      
4
%
    
87,230
      
3
%
North Carolina
    
2
      
1,377,670
      
4
%
    
134,576
      
4
%
Texas
    
3
      
1,235,270
      
4
%
    
91,913
      
3
%
South Carolina
    
2
      
885,404
      
3
%
    
129,909
      
4
%
Colorado
    
3
      
839,568
      
2
%
    
98,994
      
4
%
Utah
    
1
      
503,857
      
2
%
    
72,498
      
2
%
New York
    
2
      
390,392
      
1
%
    
72,373
      
2
%
Maine
    
2
      
205,400
      
1
%
    
18,126
      
—
%
Georgia
    
1
      
103,607
      
—
%
    
10,906
      
—
%
Pennsylvania
    
1
      
85,998
      
—
%
    
9,100
      
—
%
Total
    
48
    
$
34,951,199
      
100
%
    
3,376,446
      
100
%

23
Modiv Inc.
Lease Expirations

(Unaudited)
 
10 Years and Thereafter Lease Expirations
 
As of March 31, 2023
  
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 2023 (1)
    
1
      
40,110
      
1.2
%
    
1.2
%
    
—
      
—
%
    
—
%
2024
    
2
      
163,230
      
4.8
%
    
6.0
%
    
1,840,633
      
5.3
%
    
5.3
%
2025
    
4
      
154,933
      
4.6
%
    
10.6
%
    
3,718,240
      
10.6
%
    
15.9
%
2026
    
5
      
280,740
      
8.3
%
    
18.9
%
    
4,834,094
      
13.8
%
    
29.7
%
2027
    
1
      
64,637
      
1.9
%
    
20.8
%
    
904,572
      
2.6
%
    
32.3
%
2028
    
2
      
166,839
      
4.9
%
    
25.7
%
    
844,360
      
2.4
%
    
34.7
%
2029
    
3
      
134,714
      
4.0
%
    
29.7
%
    
2,371,475
      
6.8
%
    
41.5
%
2030
    
5
      
45,278
      
1.3
%
    
31.0
%
    
463,363
      
1.3
%
    
42.8
%
2031
    
—
      
—
      
—
%
    
31.0
%
    
—
      
—
%
    
42.8
%
2032
    
2
      
177,204
      
5.3
%
    
36.3
%
    
2,699,163
      
7.7
%
    
50.5
%
2033
    
—
      
—
      
—
%
    
—
%
    
—
      
—
%
    
—
%
Thereafter
    
23
      
2,148,761
      
63.7
%
    
100.0
%
    
17,275,299
      
49.5
%
    
100.0
%
Total
    
48
      
3,376,446
      
100.0
%
          
$
34,951,199
      
100.0
%
        
 
(1)
Reflects one retail property held for sale formerly leased to Gap for which the lease term expired in February 2023. The sale of this property is scheduled to close by May 31, 2023.
 
24
Modiv Inc.
Disclosures Regarding Non-GAAP and Other Metrics
 
Notice Involving Non-GAAP Financial Measures
 
In addition to U.S. GAAP financial measures, this supplemental report contains and may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are provided below.
 
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
 
In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts (“Nareit”) promulgated a measure known as FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures and preferred distributions. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.
 
Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation, deferred rent, amortization of in-place lease valuation intangibles, acquisition-related costs, deferred financing fees, asset impairment write-downs, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, and write-offs of 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. 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. 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.

25
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 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.


26