EX-99.2 3 ny20005857x1_ex99-2.htm EXHIBIT 99.2
Exhibit 99.2
 
 
NYSE: MDV

QUARTERLY SUPPLEMENTAL DATA
 
September 30, 2022
 
Modiv Inc.
Supplemental Information - Third Quarter 2022

Table of Contents
  
     
About the Data
3
     
Company Overview
4
     
Financial Results
  
 
Statements of Operations - Last Five Quarters
5
 
Statements of Comprehensive (Loss) Income - Last Five Quarters
6
 
Earnings Per Share - Last Five Quarters
7
 
FFO and AFFO - Last Five Quarters
8
 
Adjusted EBITDA - Last Five Quarters
9
 
Leverage Ratio
10
Balance Sheets and Capitalization
  
 
Capitalization
11
 
Balance Sheets
12
 
Debt Overview
13
 
Credit Facility and Mortgage Notes Covenants
14
     
Real Estate
  
 
Acquisitions
15
 
Dispositions
16
 
Top 10 Tenants
17
 
Property Type
17
 
Industry Diversification
18
 
Geographic Diversification
19
 
Lease Expirations
20
     
Appendix
  
 
Disclosures Regarding Non-GAAP and Other Metrics
21

2
About the Data
 
This data and other information described herein are as of and for the three months ended September 30, 2022 unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with Modiv Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, including the financial statements and management's discussion and analysis of financial condition and results of operations.
 
Forward Looking Statements
 
Information set forth herein contains forward-looking statements, which reflect our current views regarding our business, financial performance, growth prospects and strategies, market opportunities, and market trends. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words. All of the forward-looking statements herein are subject to various risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results, performance, and achievements could differ materially from those expressed in or by the forward-looking statements and may be affected by a variety of risks and other factors. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from such forward-looking statements. These factors include, but are not limited to, risks and uncertainties related to the COVID-19 pandemic and its related impacts on us and our tenants, general economic conditions, including but not limited to impacts of the Russian war against Ukraine, supply-chain disruptions, increases in the rate of inflation and interest rates, local real estate conditions, tenant financial health, and property acquisitions and the timing of these acquisitions. These and other risks, assumptions, and uncertainties are described in our filings with the SEC, which are available on the SEC’s website at www.sec.gov. You are cautioned not to place undue reliance on any forward-looking statements included herein. All forward-looking statements are made as of the date of this document and the risk that actual results, performance, and achievements will differ materially from the expectations expressed or referenced herein will increase with the passage of time. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.

3
Company Overview
 
Modiv Inc. (NYSE:MDV) (“Modiv”, the “Company”, “we”, “us” and “our”) is an internally managed real estate investment trust (“REIT”) that acquires, owns and manages a diversified portfolio of predominantly single-tenant net-lease real estate properties. The Company primarily invests in industrial and retail properties that are mission critical to tenants. Driven by innovation and an investor-first focus, Modiv is committed to providing investors with Monthly Dividends. As of September 30, 2022, Modiv had a $545 million real estate portfolio (based on estimated fair value) comprised of 3.2 million square feet of aggregate leasable area. For more information, please visit: www.modiv.com.
 
Management Team:
Independent Directors:
   
Aaron S. Halfacre
Adam S. Markman
Chief Executive Officer and Director
Chairman of the Board
   
Raymond J. Pacini
Asma Ishaq
Chief Financial Officer and Secretary
  
   
Sandra G. Sciutto
Curtis B. McWilliams
Chief Accounting Officer
  
   
John C. Raney
Thomas H. Nolan, Jr.
Chief Legal Officer
  
   
William R. Broms
Kimberly Smith
Chief Investment Officer
  
   
 
Connie Tirondola
 
Investor Inquiries:
Megan McGrath, Financial Profiles, Inc.
Mmcgrath@finprofiles.com
310-622-8248
 
Transfer Agent:
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
800-736-3001

4
Modiv Inc.
Condensed Consolidated Statements of Operations - Last Five Quarters
(Unaudited)

   
Three Months Ended
  
   
September 30,
2022
    
June 30,
2022
    
March 31,
2022
    
December 31,
2021
    
September 30,
2021
  
Rental income (a)
  
$
10,212,418
    
$
10,394,118
    
$
9,648,649
    
$
7,899,149
    
$
10,241,690
  
                                         
Expenses:
                                        
General and administrative
    
1,838,388
      
1,615,182
      
2,106,183
      
2,186,563
      
2,930,578
  
Stock compensation
    
549,240
      
679,747
      
511,865
      
629,539
      
743,609
  
Depreciation and amortization
    
3,598,592
      
3,682,681
      
3,300,492
      
3,449,407
      
3,814,503
  
Interest expense
    
2,514,838
      
1,197,154
      
1,568,175
      
1,874,867
      
1,831,545
  
Property expenses (b)
    
2,063,892
      
1,965,885
      
2,764,592
      
1,580,629
      
1,658,437
  
Impairment of goodwill and intangible assets (c)
    
—
      
—
      
17,320,857
      
3,767,190
      
—
  
Total expenses
    
10,564,950
      
9,140,649
      
27,572,164
      
13,488,195
      
10,978,672
  
                                         
Other operating income (loss):
                                        
Gain on sale of real estate investments
    
4,671,284
      
1,002,101
      
7,400,777
      
3,271,289
      
4,242,771
  
Operating income (loss)
    
4,318,752
      
2,255,570
      
(10,522,738
)
    
(2,317,757
)
    
3,505,789
  
                                         
Other income (expense):
                                        
Interest income
    
1,665
      
1,763
      
13,435
      
19,958
      
1,270
  
Income from investment in unconsolidated entity
    
64,358
      
66,868
      
95,464
      
53,337
      
75,403
  
Loss on early extinguishment of debt (d)
    
—
      
—
      
(1,725,318
)
    
—
      
—
  
Other (a)
    
65,992
      
66,143
      
65,993
      
65,993
      
65,993
  
Other (expense) income, net
    
132,015
      
134,774
      
(1,550,426
)
    
139,288
      
142,666
  
                                         
Net income (loss)
    
4,450,767
      
2,390,344
      
(12,073,164
)
    
(2,178,469
)
    
3,648,455
  
Less: net income (loss) attributable to noncontrolling interest in Operating Partnership
    
528,540
      
219,214
      
(1,928,029
)
    
—
      
—
  
Net income (loss) attributable to Modiv Inc.
    
3,922,227
      
2,171,130
      
(10,145,135
)
    
(2,178,469
)
    
3,648,455
  
Preferred stock dividends (e)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(143,403
)
Net income (loss) attributable to common stockholders
  
$
3,000,352
    
$
1,249,255
    
$
(11,067,010
)
  
$
(3,100,344
)
  
$
3,505,052
  
                                         
Earnings (loss) per share attributable to common stockholders
                                        
Basic
  
$
0.40
    
$
0.17
    
$
(1.47
)
  
$
(0.41
)
  
$
0.47
  
Diluted
  
$
0.35
    
$
0.14
    
$
(1.47
)
  
$
(0.41
)
  
$
0.40
  
                                         
Weighted-average number of common shares outstanding
                                        
Basic
    
7,449,968
      
7,478,973
      
7,533,158
      
7,531,167
      
7,531,559
  
Diluted (f)
    
10,180,543
      
10,221,490
      
7,533,158
      
7,531,167
      
8,750,875
  
                                         
Distributions declared per common share (g)
  
$
0.2875
    
$
0.2875
    
$
0.3875
    
$
0.2875
    
$
0.2625
  

(a)
Rental income includes tenant reimbursements for property expenses. During the three months ended September 30, 2021, the Company reclassified $65,993 related to asset management fees earned on the Company's 72.71% tenant-in-common interest (“TIC Interest”) in an industrial property in Santa Clara, California to conform with the December 31, 2021 and later presentation.
 
(b)
Property expenses for the third quarter of 2022 include increased property taxes, repair and maintenance and property management fees compared with the comparable quarter of 2021, primarily related to the growth of our portfolio. These expenses are largely offset by tenant reimbursements included in rental income. Property expenses for the first quarter of 2022 also include $587,000 in write-offs of costs related to our proposed acquisition of 10 properties leased to Walgreens which we abandoned due to inability to obtain the mortgage servicer's approval prior to the contract termination date of February 18, 2022 and changes in market conditions.
 
(c)
Goodwill, which relates to the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock is materially below our historical net asset value and the book value of our equity. The impairment of intangible assets in the fourth quarter of 2021 relates to the Company’s decision to terminate its crowdfunding operations.
 
(d)
Loss on early extinguishment of debt for the first quarter of 2022 includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit facility with the 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 and the related write-off of unrealized valuation losses of $788,016.
 
(e)
On September 17, 2021, the Company sold 2,000,000 shares of its 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value in an underwritten public offering at $25.00 per share.
 
(f)
Diluted shares outstanding in the second and third quarters of 2022 and the third quarter of 2021 include Class C, Class M, Class P and Class R OP Units since the Company reported net income for those quarters. Diluted shares outstanding for periods when the Company reported a net loss do not include the OP Units since they would be anti-dilutive.
 
(g)
The Company increased the annual distribution rate on its common stock from $1.05 per share to $1.15 per share effective October 1, 2021. Distributions declared during the first quarter of 2022 include a one-time 13th distribution for 2021 of $0.10 per share for stockholders of record on January 6, 2022.

5
Modiv Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) - Last
Five Quarters
(Unaudited)

   
Three Months Ended
  
   
September 30,
2022
    
June 30,
2022
    
March 31,
2022
    
December 31,
2021
    
September 30,
2021
  
Net income (loss)
  
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
  
$
(2,178,469
)
  
$
3,648,455
  
Other comprehensive  income:
                                        
Unrealized holding gain on interest rate swap designated as a cash flow hedge (a)
    
4,255,906
      
—
      
—
      
—
      
—
  
Comprehensive income (loss)
    
8,706,673
      
2,390,344
      
(12,073,164
)
    
(2,178,469
)
    
3,648,455
  
Net income (loss) attributable to noncontrolling interest in Operating Partnership
    
528,540
      
219,214
      
(1,928,029
)
    
—
      
—
  
Other comprehensive income attributable to noncontrolling interest in Operating Partnership:
                                        
Unrealized holding gain on interest rate swap designated as a cash flow hedge
    
637,429
      
—
      
—
      
—
      
—
  
Comprehensive income (loss) attributable noncontrolling interest in Operating Partnership
    
1,165,969
      
219,214
      
(1,928,029
)
    
—
      
—
  
Comprehensive income (loss) attributable to Modiv Inc.
  
$
7,540,704
    
$
2,171,130
    
$
(10,145,135
)
  
$
(2,178,469
)
  
$
3,648,455
  

(a)
Reflects the change in fair value of the hedged derivative instrument for the three months ended September 30, 2022 that was designated as a cash flow hedge for financial accounting purposes beginning July 1, 2022.

6
Modiv Inc.
Earnings (Loss) Per Share - Last Five Quarters
(Unaudited)

   
Three Months Ended
  
   
September 30,
2022
    
June 30,
2022
    
March 31,
2022
    
December 31,
2021
    
September 30,
2021
  
Numerator - Basic:
                              
Net income (loss)
  
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
  
$
(2,178,469
)
  
$
3,648,455
  
Net (income) loss attributable to noncontrolling interest in Operating Partnership
    
(528,540
)
    
(219,214
)
    
1,928,029
      
—
      
—
  
Preferred stock dividends
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(143,403
)
Net income (loss) attributable to common stockholders
  
$
3,000,352
    
$
1,249,255
    
$
(11,067,010
)
  
$
(3,100,344
)
  
$
3,505,052
  
                                         
Numerator - Diluted:
                                        
Net income (loss)
  
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
  
$
(2,178,469
)
  
$
3,648,455
  
Less: preferred stock dividends
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(143,403
)
Net income (loss) attributable to common stockholders
  
$
3,528,892
    
$
1,468,469
    
$
(12,995,039
)
  
$
(3,100,344
)
  
$
3,505,052
  
                                         
Denominator:
                                        
Weighted average shares outstanding - basic
    
7,449,968
      
7,478,973
      
7,533,158
      
7,531,167
      
7,531,559
  
Operating Partnership Units - Class C (a)
    
1,312,382
      
1,312,382
      
—
      
—
      
—
  
Operating Partnership Units - other (b)
    
1,418,193
      
1,430,135
      
—
      
—
      
1,219,316
  
Weighted average shares outstanding - diluted
    
10,180,543
      
10,221,490
      
7,533,158
      
7,531,167
      
8,750,875
  
                                         
Earnings (loss) per share attributable to common stockholders:
                                        
Basic
  
$
0.40
    
$
0.17
    
$
(1.47
)
  
$
(0.41
)
  
$
0.47
  
Diluted
  
$
0.35
    
$
0.14
    
$
(1.47
)
  
$
(0.41
)
  
$
0.40
  


(a)
The Company issued 1,312,382 Class C OP Units in connection with its January 18, 2022 acquisition of a KIA auto dealership property in an “UPREIT” transaction. These units were not included in the computation of Diluted EPS for the quarter ended March 31, 2022 because their effect would be anti-dilutive.
 
(b)
During the three months ended March 31, 2022 and December 31, 2021, the weighted average dilutive effect of 1,347,958 and 1,213,173 shares, respectively, related to Operating Partnership units were excluded from the computation of Diluted EPS because their effect would be anti-dilutive. There were no other outstanding securities or commitments to issue common stock that would have a dilutive effect for the periods then ended.

7
Modiv Inc.
FFO and AFFO - Last Five Quarters
(Unaudited)

   
Three Months Ended
  
   
September 30,
2022
    
June 30,
2022
    
March 31,
2022
    
December 31,
2021
    
September 30,
2021
  
Net income (loss) (in accordance with GAAP)
  
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
  
$
(2,178,469
)
  
$
3,648,455
  
Preferred stock dividends
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(921,875
)
    
(143,403
)
Net income (loss) attributable to common stockholders and Class C OP Units
    
3,528,892
      
1,468,469
      
(12,995,039
)
    
(3,100,344
)
    
3,505,052
  
FFO adjustments:
                                        
Add:   Depreciation and amortization
    
3,598,592
      
3,682,681
      
3,300,492
      
3,290,588
      
3,342,713
  
Amortization of lease incentives
    
176,296
      
75,655
      
71,394
      
53,203
      
86,694
  
Depreciation and amortization for unconsolidated investment in a real estate property
    
192,551
      
190,468
      
190,468
      
189,439
      
182,324
  
Less:   Gain on sale of real estate investments, net
    
(4,671,284
)
    
(1,002,101
)
    
(7,400,777
)
    
(3,271,289
)
    
(4,242,771
)
FFO attributable to common stockholders and Class C OP Units
    
2,825,047
      
4,415,172
      
(16,833,462
)
    
(2,838,403
)
    
2,874,012
  
AFFO adjustments:
                                        
Add:   Amortization of corporate intangibles (a)
    
—
      
—
      
—
      
158,819
      
471,790
  
 Impairment of goodwill and intangible assets (a)
    
—
      
—
      
17,320,857
      
3,767,190
      
—
  
 Stock compensation (b)
    
549,240
      
679,747
      
511,865
      
629,542
      
743,609
  
 Deferred financing costs (c)
    
101,783
      
101,781
      
1,266,725
      
162,200
      
7,393
  
 Non-recurring loan prepayment penalties
    
—
      
—
      
615,336
      
—
      
—
  
 Swap termination costs
    
—
      
—
      
733,000
      
—
      
—
  
 Amortization of above-market lease intangibles
    
43,763
      
32,456
      
32,456
      
32,456
      
32,454
  
Acquisition fees and due diligence expenses, including abandoned pursuit costs (d)
    
44,863
      
4,639
      
586,669
      
(16,100
)
    
474,429
  
Less:   Deferred rents
    
(237,164
)
    
(699,053
)
    
(110,505
)
    
1,138,991
      
(247,716
)
Unrealized gain on interest rate swaps
    
59,000
      
(589,997
)
    
(788,016
)
    
(285,982
)
    
(166,338
)
Amortization of below-market lease intangibles
    
(258,652
)
    
(349,810
)
    
(363,074
)
    
(363,074
)
    
(364,573
)
Other adjustments for unconsolidated investment in a real estate property
    
(188
)
    
(188
)
    
(188
)
    
(6,191
)
    
(12,195
)
AFFO attributable to common stockholders and Class C OP Units (e)
  
$
3,127,692
    
$
3,594,747
    
$
2,971,663
    
$
2,379,448
    
$
3,812,865
  
                                         
Weighted average shares outstanding:
                                        
Basic
    
7,449,968
      
7,478,973
      
7,533,158
      
7,531,167
      
7,531,559
  
Fully diluted (f) (g)
    
10,180,543
      
10,221,490
      
10,193,498
      
8,744,340
      
8,750,875
  
FFO per share:
                                        
Basic
  
$
0.38
    
$
0.59
    
$
(2.23
)
  
$
(0.38
)
  
$
0.38
  
Fully diluted
  
$
0.28
    
$
0.43
    
$
(2.23
)
  
$
(0.38
)
  
$
0.33
  
AFFO per share:
                                        
Basic
  
$
0.42
    
$
0.48
    
$
0.39
    
$
0.32
    
$
0.51
  
Fully diluted (e)
  
$
0.31
    
$
0.35
    
$
0.29
    
$
0.27
    
$
0.44
  

(a)
Intangible assets reflected the Company’s investment in its crowdfunding platform which was impaired in the fourth quarter of 2021 due to the Company’s decision to terminate its crowdfunding operations. Goodwill, which relates to the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock was materially below our historical net asset value and the book value of our equity.
 
(b)
Stock compensation expense includes (i) amortization of the Class P OP Units granted to the Company’s Chief Executive Officer and Chief Financial Officer on December 31, 2019; (ii) amortization of the Class R OP Units granted to all of the Company’s employees, including the Chief Executive Officer and Chief Financial Officer, on January 25, 2021; and (iii) stock granted to the Company’s independent directors each quarter as partial consideration for their service as directors.
 
(c)
Deferred financing costs for the first quarter of 2022 primarily reflect non-cash write-offs of such costs upon refinancing 20 mortgages with the KeyBank credit facility and mortgage repayments related to four asset sales.
 
(d)
Abandoned pursuit costs for the first quarter of 2022 primarily reflect the Company’s decision not to extend the February 18, 2022 termination date for its agreement to purchase a portfolio of 10 properties leased to Walgreens, which the Company abandoned due to inability to obtain the mortgage servicer's approval prior to the contract termination date and changes in market conditions.
 
(e)
The $467,055 decrease in AFFO for the third quarter of 2022 compared with the second quarter of 2022 primarily reflects a $755,000 increase in interest expense on our revolving credit facility due to rising interest rates, partially offset by a $462,000 decrease in deferred rents.
 
(f)
The increase in Diluted shares outstanding beginning in the first quarter of 2022 primarily reflects the issuance of 1,312,382 Class C interests in our operating partnership (OP Units”) as partial consideration for the acquisition of a retail property located on Interstate 405 in Carson, CA, leased to a KIA auto dealership.
 
(g)
Includes the Class C, Class M, Class P and Class R OP Units to compute the weighted average number of shares for each of the three quarters ended in 2022 presented above and the Class M, Class P and Class R OP Units to compute the weighted average number of shares for each of the two quarters ended in 2021 presented above.

8
Modiv Inc.
Adjusted EBITDA - Last Five Quarters
(Unaudited)

   
Three Months Ended
  
   
September 30,
2022
    
June 30,
2022
    
March 31,
2022
    
December 31,
2021
    
September 30,
2021
  
Net income (loss)
  
$
4,450,767
    
$
2,390,344
    
$
(12,073,164
)
  
$
(2,178,469
)
  
$
3,648,455
  
                                         
Add:   Depreciation and amortization
    
3,598,592
      
3,682,681
      
3,300,492
      
3,449,407
      
3,814,503
  
Depreciation and amortization for unconsolidated investment in a real estate property
    
192,551
      
190,468
      
190,468
      
189,439
      
182,324
  
Interest expense
    
2,514,838
      
1,197,155
      
1,568,175
      
1,874,867
      
1,831,545
  
Loss on early extinguishment of debt (a)
    
—
      
—
      
1,725,318
      
—
      
—
  
Interest expense on unconsolidated investment in real estate property
    
98,624
      
98,135
      
97,645
      
100,257
      
100,788
  
Impairment of goodwill and intangible assets (b)
    
—
      
—
      
17,320,857
      
3,767,190
      
—
  
Stock compensation
    
549,240
      
679,747
      
511,865
      
629,542
      
743,609
  
Write-off of due diligence costs related to abandoned acquisition of 10 properties leased to Walgreens
    
—
      
—
      
587,000
      
—
      
—
  
Less:  Gain on sale of real estate investments
    
(4,671,284
)
    
(1,002,101
)
    
(7,400,777
)
    
(3,271,289
)
    
(4,242,771
)
Adjusted EBITDA
  
$
6,733,328
    
$
7,236,429
    
$
5,827,879
    
$
4,560,944
    
$
6,078,453
  
                                         
Annualized adjusted EBITDA
  
$
26,933,311
    
$
28,945,716
    
$
23,311,516
    
$
18,243,776
    
$
24,313,812
  
                                         
Net debt:
                                        
Debt
  
$
201,365,536
    
$
201,425,173
    
$
165,509,220
    
$
183,033,756
    
$
182,146,897
  
Debt of unconsolidated investment in real estate property (c)
    
9,544,130
      
9,599,182
      
9,653,689
      
9,709,710
      
9,764,171
  
Cash and restricted cash
    
(5,726,888
)
    
(11,705,449
)
    
(25,344,063
)
    
(58,407,520
)
    
(54,710,887
)
Cash of unconsolidated investment in real estate property (c)
    
(341,007
)
    
(585,357
)
    
(458,948
)
    
(502,041
)
    
(487,490
)
   
$
204,841,771
    
$
198,733,549
    
$
149,359,898
    
$
133,833,905
    
$
136,712,691
  
                                         
Net debt / Adjusted EBITDA
    
7.6x

   
6.9x

   
6.4x

   
7.3x

   
5.6x


(a)
Loss on early extinguishment of debt includes non-recurring charges for (i) $1,164,998 in non-cash write-offs of deferred financing costs upon refinancing 20 mortgages and the prior credit facility with the KeyBank credit facility and 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.
 
(b)
Goodwill, which relates to the 2019 acquisition of our former sponsor’s crowdfunding platform, was impaired in the first quarter of 2022 in accordance with GAAP given that the market value of the Company’s common stock is materially below our historical net asset value and the book value of our equity. The impairment of intangible assets in the fourth quarter of 2021 relates to the Company’s decision to terminate its crowdfunding operations.
 
(c)
Includes the Company's 72.71% pro rata share of the tenant-in-common's mortgage note payable and cash.

9
Modiv Inc.
Leverage ratio
(Unaudited)
 
In connection with entering into the KeyBank credit facility on January 18, 2022, the Company modified the calculation of its leverage ratio to conform with the definition in the KeyBank credit facility as set forth below.

   
September 30,
2022
    
December 31, 2021 (d)
  
Total Asset Value
            
Cash and cash equivalents (a)
  
$
5,726,888
    
$
58,407,520
  
Borrowing base value (b)
    
425,311,049
      
362,497,305
  
Other real estate value (c)
    
90,670,000
      
130,670,000
  
Pro-rata share of unconsolidated investment
    
28,567,029
      
28,728,063
  
Total asset value
  
$
550,274,966
    
$
580,302,888
  
                 
Indebtedness
                
Credit facility revolver
  
$
6,775,000
    
$
55,775,000
  
Credit facility term loan
    
150,000,000
      
100,000,000
  
Mortgage debt (c)
    
44,590,536
      
66,833,439
  
Pro-rata share of unconsolidated investment
    
9,544,130
      
9,709,710
  
Total indebtedness
  
$
210,909,666
    
$
232,318,149
  
                 
Leverage Ratio
    
38
%
    
40
%

(a)
The decrease in cash and cash equivalents primarily reflects the use of cash to fund a portion of the acquisitions during the first nine months of 2022.
 
(b)
The increase in the borrowing base value reflects the additions of (i) an industrial property acquired in January 2022 and leased to Kalera, Inc.; (ii) eight industrial properties acquired in April 2022 which are leased to Lindsay; and (iii) the Producto and Valtir acquisitions in July and August  2022. These additions were partially offset by the three office properties sold in June, August and September 2022.
 
(c)
The decrease in other real estate value and mortgage debt reflects the four property dispositions in February 2022.
 
(d)
The December borrowing base value reflects a pro forma adjustment to include acquisition of the KIA auto dealership property on January 18, 2022 and the credit facility amounts reflect pro forma adjustments to reflect debt balances as of the January 18, 2022 closing of the facility, including borrowing to fund a portion of the KIA auto dealership property acquisition.

10
Modiv Inc.
Capitalization as of September 30, 2022
(Unaudited)


PREFERRED EQUITY
      
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock
  
$
50,000,000
  
% of Total Capitalization
    
13
%
         
COMMON EQUITY
        
Shares of Class C Common Stock
    
7,464,781
  
OP Units (Class M, Class P, Class R and Class C)
    
2,818,689
  
Total Class C Common Stock and OP Units
    
10,283,470
  
Price Per Share / Unit at September 30, 2022
  
$
14.60
  
IMPLIED EQUITY MARKET CAPITALIZATION
  
$
150,138,662
  
% of Total Capitalization
    
37
%
         
DEBT
        
Mortgage Debt
        
Costco Property
  
$
18,850,000
  
Taylor Fresh Foods Property
    
12,350,000
  
Sutter Health Property
    
13,390,536
  
Total Mortgage Debt
  
$
44,590,536
  
KeyBank Credit Facility
        
Revolver (a)
  
$
6,775,000
  
Term Loan (a)
    
150,000,000
  
Total Credit Facility
  
$
156,775,000
  
TOTAL DEBT
  
$
201,365,536
  
% of Total Capitalization
    
50
%
% of Total Debt - Floating Rate Debt (b)
    
3
%
% of Total Debt - Fixed Rate Debt (b)
    
97
%
% of Total Debt
    
100
%
ENTERPRISE VALUE
        
Total Capitalization
  
$
401,504,198
  
Less: Cash and Cash Equivalents
    
(5,726,888
)
Enterprise Value
  
$
395,777,310
  

(a)
In April 2022, the Company borrowed $44,000,000 to fund the acquisition of an eight-property portfolio of industrial properties leased to Lindsay Precast, LLC (the “Lindsay Acquisition”), drew the remaining $50,000,000 available under the Term loan commitment and reduced the Revolver to $14,775,000 in connection with the swap purchase described below. During the third quarter of 2022, the Company borrowed $28,000,000 to fund the Producto and Valtir  acquisitions in July 2022 and made $28,000,000 in principal payments on the Revolver in September with cash generated by office property sales during the quarter to reduce interest expense.
 
(b)
On May 10, 2022, we purchased a five-year swap at 2.258% on our $150,000,000 term loan that results in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. As part of this transaction, we sold a one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Agreement, the interest rate will continue to vary based on our leverage ratio.

11
Modiv Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
   
September 30,
2022
    
December 31, 2021
  
Assets
            
Real estate investments:
            
Land
  
$
107,564,295
    
$
61,005,402
  
Buildings and improvements
    
337,335,727
      
250,723,446
  
Equipment
    
4,429,000
      
—
  
Tenant origination and absorption costs
    
20,074,123
      
22,027,054
  
Total investments in real estate property
    
469,403,145
      
333,755,902
  
Accumulated depreciation and amortization
    
(44,025,915
)
    
(37,611,133
)
Total investments in real estate property, net
    
425,377,230
      
296,144,769
  
Unconsolidated investment in a real estate property
    
9,988,498
      
9,941,338
  
Total real estate investments, net
    
435,365,728
      
306,086,107
  
Real estate investments held for sale, net
    
—
      
31,510,762
  
Total real estate investments
    
435,365,728
      
337,596,869
  
Cash and cash equivalents
    
5,726,888
      
55,965,550
  
Restricted cash
    
—
      
2,441,970
  
Receivable from sale of early termination of lease
    
—
      
1,836,767
  
Tenant receivables
    
8,433,895
      
5,996,919
  
Above-market lease intangibles, net
    
1,939,305
      
691,019
  
Prepaid expenses and other assets
    
6,387,245
      
5,856,255
  
Interest rate swap derivative
    
4,786,903
      
—
  
Assets related to real estate investments held for sale
    
—
      
788,296
  
Goodwill
    
—
      
17,320,857
  
Total assets
  
$
462,639,964
    
$
428,494,502
  
Liabilities and Equity
                
Mortgage notes payable, net
  
$
44,530,130
    
$
152,223,579
  
Mortgage notes payable related to real estate investments held for sale, net
    
—
      
21,699,912
  
Total mortgage notes payable, net
    
44,530,130
      
173,923,491
  
Credit facility revolver
    
6,775,000
      
—
  
Credit facility term loan, net
    
148,913,350
      
8,022,000
  
Accounts payable, accrued and other liabilities
    
9,658,378
      
11,844,881
  
Below-market lease intangibles, net
    
9,910,280
      
11,102,940
  
Interest rate swap derivatives
    
—
      
788,016
  
Liabilities related to real estate investments held for sale
    
—
      
383,282
  
Total liabilities
    
219,787,138
      
206,064,610
  
                 
Commitments and contingencies
                
                 
7.375% Series A cumulative redeemable perpetual preferred stock, $0.001 par value, 2,000,000 shares authorized, issued and outstanding as of September 30, 2022 and December 31, 2021
    
2,000
      
2,000
  
Class C common stock $0.001 par value, 300,000,000 shares authorized, 7,697,926 shares issued and 7,464,781 shares outstanding as of September 30, 2022, respectively, and 7,426,636 shares issued and outstanding as of December 31, 2021
    
7,698
      
7,427
  
Class S common stock $0.001 par value, 100,000,000 shares authorized, no and 63,768 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
    
—
      
64
  
Additional paid-in-capital
    
277,079,074
      
273,441,831
  
Treasury stock, at costs, 233,145 shares and no shares as of September 30, 2022 and December 31, 2021, respectively
    
(3,957,752
)
    
—
  
Cumulative distributions and net losses
    
(115,634,474
)
    
(101,624,430
)
Accumulated other comprehensive income
    
3,618,477
      
—
  
Total Modiv Inc. equity
    
161,115,023
      
171,826,892
  
Noncontrolling interests in the Operating Partnership
    
81,737,803
      
50,603,000
  
Total equity
    
242,852,826
      
222,429,892
  
Total liabilities and equity
  
$
462,639,964
    
$
428,494,502
  

12
Modiv Inc.
Debt Overview
(Unaudited)

   
Outstanding Balance
                    
Collateral
  
September 30, 2022
    
December 31, 2021
    
Contractual Interest
Rate
    
Effective
Interest Rate
    
Loan
Maturity
  
Mortgage Notes:
                              
Costco property
  
$
18,850,000
    
$
18,850,000
      
4.85
%
    
4.85
%
  
1/1/30
  
Taylor Fresh Foods property
    
12,350,000
      
12,350,000
      
3.85
%
    
3.85
%
  
11/1/29
  
Sutter Health property
    
13,390,536
      
13,597,120
      
4.50
%
    
4.50
%
  
3/9/24
  
Various mortgage notes repaid on January 18, 2022 (a)
    
—
      
108,178,317
    
Various
    
Various
    
Various
  
     
44,590,536
      
152,975,437
                        
Plus unamortized mortgage premium
    
145,527
      
204,281
                        
Less unamortized deferred financing costs
    
(205,933
)
    
(956,139
)
                      
Mortgage notes payable, net
    
44,530,130
      
152,223,579
                        
                                       
KeyBank Credit Facility:
                                      
Revolver (a)
    
6,775,000
      
—
    
(b)
    
(b)
    
1/18/26
  
Term loan (a)
    
150,000,000
      
—
    
(c)
    
(c)
    
1/18/27
  
Bank of California Credit Facility (a)
    
—
      
8,022,000
    
(d)
    
(d)
    
n/a
  
Total Credit Facility
    
156,775,000
      
8,022,000
                          
Less unamortized deferred financing costs
    
(1,107,750
)
    
(100,080
)
                        
     
155,667,250
      
7,921,920
                          
Total debt, net
  
$
200,197,380
    
$
160,145,499
                          

(a)
On January 18, 2022, the Company refinanced 20 mortgage notes and its prior credit facility with the KeyBank Credit Facility. During the second quarter of 2022, the Company borrowed $44,000,000 to fund the Lindsay Acquisition, drew the remaining $50,000,000 available under the Term loan commitment and reduced the Revolver to $6,775,000 in June 2022 to reduce interest expense. During the third quarter of 2022, the Company borrowed $28,000,000 to fund the Producto and Valtir acquisitions in July 2022 and made $28,000,000 in principal payments on the Revolver in September with cash generated by office property sales during the quarter to reduce interest expense.
 
(b)
The interest rate on the Revolver is based on the Company's leverage ratio at the end of the prior quarter. With our leverage ratio at 38% as of June 30, 2022, the spread over the Secured Overnight Financing Rate (‘‘SOFR’’), including a 10 basis point credit adjustment, is 165 basis points and the interest rate on the Revolver was 4.7125% as of September 30, 2022. Following the Federal Reserve Bank’s November 2, 2022 increase in the target range for federal funds by 75 basis points, the interest rate on the Revolver is approximately 5.46%. We also pay an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment.
 
(c)
On May 10, 2022, we purchased a five-year swap at 2.258% on the $150,000,000 term loan that results in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. As part of this transaction, we agreed to a one-time option to terminate the swap on December 31, 2024, which reduced the swap rate. Under our Credit Facility, the interest rate will continue to vary based on our leverage ratio.
 
(d)
Under the terms of the prior credit facility with Bank of California, the Company paid a variable rate of interest on outstanding amounts equal to one percentage point over the prime rate published in The Wall Street Journal, provided that the interest rate in effect on any one day was not less than 4.75% per annum.

13
Modiv Inc.
Covenants
Credit Facility and Mortgage Notes Covenants
 
The following is a summary of key financial covenants for the Company’s credit facility and mortgage notes, as defined and calculated per the terms of the facility's credit agreement and the mortgage notes' governing documents, respectively, which are included in the Company's filings with the U.S. Securities and Exchange Commission. These calculations, which are not based on U.S. GAAP measurements are presented to demonstrate that as of September 30, 2022, the Company believes it is in compliance with the covenants.
 
Unsecured Credit Facility Covenants
  
Required
    
September 30,
2022
  
Maximum leverage ratio
  
<60%
   
38%

Minimum fixed charge coverage ratio
  
>1.50x
      
1.76
  
Maximum secured indebtedness ratio
  
40%

   
8%

Minimum consolidated tangible net worth
  
$210,241,835
    

$286,878,741
  
Minimum investment grade tenants in borrowing base
  
30%

   
40%

Weighted average lease term (years)
  
7
      
13
  

Mortgage Notes Key Covenants
  
Debt service coverage ratio
    
September 30,
2022
  
Costco property
  
N.A.
    
N.A.
  
Taylor Fresh Foods property
    
1.5
      
3.4
  
Sutter Health property
    
1.4
      
2.4
  

14
Modiv Inc.
Real Estate Acquisitions
(Unaudited)
 
The following table summarizes the Company’s property acquisition activity during each of last five quarters ended September 30, 2022.

Q3 2022                      
Tenant and Location
  
Property
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
%
                                                       
Q4 2021                      
Tenant and Location
  
Property
Type
  
Area (Square Feet)
    
Lease
Terms
(Years)
    
Annual Rent Increase
    
Acquisition Price
    
Initial Cap Rate
    
Weighted Average Cap Rate
  
Arrow Tru-Line, Archbold, OH
  
Industrial
    
206,155
      
20.0
      
2.0
%
  
$
11,460,000
      
6.7
%
    
8.1
%
                                                       
Q3 2021                      
Tenant and Location
  
Property Type
  
Area (Square Feet)
    
Lease Terms (Years)
    
Annual Rent Increase
    
Acquisition Price
    
Initial Cap Rate
    
Weighted Average Cap Rate
  
Raising Cane’s, San Antonio, TX
  
Retail
    
3,853
      
6.6
      
2.0
%
  
$
3,607,424
      
6.3
%
    
7.1
%

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

15
Modiv Inc.
Real Estate Dispositions
(Unaudited)
 
The following table summarizes the Company’s property disposition activity during each of last five quarters ended September 30, 2022.
 
Q3 2022
                         
Tenant and Location
  
Property
Type
  
Area (Square Feet)
    
Acquisition Price
    
Disposition Price
    
Net Book Value
    
Disposition Costs
    
Gain on Sale
    
Cap Rate
  
Williams Sonoma, Summerlin, NV
  
Office
    
35,867
    
$
7,211,012
    
$
9,300,000
    
$
7,260,636
    
$
335,748
    
$
1,703,616
      
7.4
%
Wyndham, Summerlin, NV
  
Office
    
41,390
      
10,116,502
      
12,900,000
      
9,299,903
      
632,429
      
2,967,668
      
7.4
%
         
77,257
      
17,327,514
      
22,200,000
      
16,560,539
      
968,177
      
4,671,284
      
7.4
%
                                                             
Q2 2022
                                
Tenant and Location
  
Property
Type
  
Area (Square Feet)
    
Acquisition Price
    
Disposition Price
    
Net Book Value
    
Disposition Costs
    
Gain on Sale
    
Cap Rate
  
EMCOR, Cincinnati, OH
  
Office
    
39,385
    
$
6,138,538
    
$
6,525,000
    
$
5,343,541
    
$
179,358
    
$
1,002,101
      
7.8
%
                                                             
Q1 2022
                                
Tenant and Location
  
Property
Type
  
Area (Square Feet)
    
Acquisition Price
    
Disposition Price
    
Net Book Value
    
Disposition Costs
    
Gain on Sale
    
Cap Rate
  
Bon Secours, Richmond, VA
  
Office
    
72,890
    
$
10,842,907
    
$
10,200,000
    
$
9,768,252
    
$
252,344
    
$
179,404
      
8.1
%
Omnicare, Richmond, VA
  
Flex
    
51,800
      
7,324,370
      
8,760,000
      
6,478,621
      
218,489
      
2,062,890
      
6.8
%
Texas Health, Dallas, TX
  
Office
    
38,794
      
7,689,924
      
7,040,000
      
6,711,271
      
168,352
      
160,377
      
7.9
%
Accredo, Orlando, FL
  
Office
    
63,000
      
10,710,500
      
14,000,000
      
8,552,619
      
449,275
      
4,998,106
      
7.3
%
         
226,484
    
$
36,567,701
    
$
40,000,000
    
$
31,510,763
    
$
1,088,460
    
$
7,400,777
      
7.5
%
                                                             
Q4 2021
                                
Tenant and Location
  
Property
Type
  
Area (Square Feet)
    
Acquisition Price
    
Disposition Price
    
Net Book Value
    
Disposition Costs
    
Gain on Sale
    
Cap Rate
  
Harley Davidson, Bedford, TX
  
Retail
    
70,960
    
$
13,178,286
    
$
15,270,000
    
$
11,608,682
    
$
390,029
    
$
3,271,289
      
6.2
%
                                                             
Q3 2021
                                
Tenant and Location
  
Property
Type
  
Area(Square Feet)
    
Acquisition Price
    
Disposition Price
    
Net Book Value
    
Disposition Costs
    
Gain on Sale
    
Cap Rate
  
Dana. Cedar Park, TX
  
Industrial
    
45,465
    
$
9,452,169
    
$
10,000,000
    
$
5,375,746
    
$
381,483
    
$
4,242,771
      
7.7
%

16
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
  
Retail
  
$
3,965,866
      
11
%
    
72,623
      
2
%
Lindsay
  
Industrial
    
3,765,259
      
11
%
    
618,195
      
19
%
Sutter Health
  
Office
    
2,625,767
      
7
%
    
106,592
      
3
%
Costco Wholesale
  
Office
    
2,344,733
      
7
%
    
97,191
      
4
%
AvAir
  
Industrial
    
2,307,204
      
7
%
    
162,714
      
5
%
3M

Industrial
    
1,850,648
      
5
%
    
410,400
      
13
%
Valtir
  
Industrial
    
1,804,722
      
5
%
    
293,612
      
9
%
Taylor Fresh Foods
  
Industrial
    
1,632,761
      
5
%
    
216,727
      
7
%
FUJIFILM Dimatix (a)
  
Industrial
    
1,618,910
      
5
%
    
91,740
      
3
%
Cummins
  
Office
    
1,503,088
      
4
%
    
87,230
      
3
%
Total Top 10 Tenants
      
$
23,418,958
      
67
%
    
2,157,024
      
68
%

(a)
Reflects our 72.71% tenant-in-common interest (“TIC Interest”).
 
Modiv Inc.
Property Type
(Unaudited)
 
Property
  
Number of Properties
    
ABR
    
ABR as a
Percentage of
Total
Portfolio
    
Area (Square Feet)
    
Square Feet as
a Percentage
of Total Portfolio
  
Industrial, including TIC Interest
    
26
    
$
18,689,188
      
54
%
    
2,434,373
      
77
%
Retail
    
13
      
6,559,083
      
19
%
    
234,029
      
7
%
Office
    
8
      
9,595,321
      
27
%
    
508,710
      
16
%
Total Properties
    
47
    
$
34,843,592
      
100
%
    
3,177,112
      
100
%
 
17
Modiv Inc.
Tenant Industry Diversification
(Unaudited)
 
Industry
  
Number of Properties
    
ABR
    
ABR as a Percentage of Total Portfolio
    
Area (Square Feet)
    
Square Feet as a Percentage of Total Portfolio
  
Automobile & Components
    
2
    
$
4,254,034
      
12
%
    
148,623
      
5
%
Transportation
    
5
      
4,111,926
      
12
%
    
456,326
      
14
%
General Retailers
    
11
      
3,774,797
      
11
%
    
204,744
      
6
%
Precast Concrete
    
8
      
3,765,259
      
11
%
    
618,195
      
20
%
Manufacturing
    
5
      
3,556,732
      
10
%
    
430,395
      
14
%
Health Care Equipment & Services
    
1
      
2,625,767
      
8
%
    
106,592
      
3
%
Food, Beverage & Tobacco
    
2
      
2,207,716
      
6
%
    
295,584
      
9
%
Technology Hardware & Equipment
    
2
      
2,199,297
      
6
%
    
130,240
      
4
%
Defense
    
2
      
2,114,208
      
6
%
    
153,633
      
5
%
Materials
    
1
      
1,850,648
      
5
%
    
410,400
      
13
%
Commercial & Professional Services
    
2
      
1,554,499
      
4
%
    
70,567
      
2
%
Consumer Services
    
1
      
924,000
      
3
%
    
50,000
      
2
%
Pharmaceuticals, Biotechnology & Life Sciences
    
1
      
642,722
      
2
%
    
20,800
      
1
%
Energy
    
1
      
445,417
      
1
%
    
26,036
      
1
%
Consumer Durables and Apparel
    
1
      
254,698
      
1
%
    
40,110
      
1
%
Government
    
1
      
322,719
      
1
%
    
11,014
      
—
%
Hotel & Restaurant
    
1
      
239,153
      
1
%
    
3,853
      
—
%
Total
    
47
    
$
34,843,592
      
100
%
    
3,177,112
      
100
%
 
18
Modiv Inc.
Tenant Geographic Diversification
(Unaudited)
 
State
  
Number of Properties
    
ABR
    
ABR as a Percentage of Total Portfolio
      
Area (Square Feet)
    
Square Feet as a Percentage of Total Portfolio
  
California
    
13
    
$
13,017,202
      
38
%
      
600,395
      
19
%
Arizona
    
2
      
3,939,965
      
11
%
      
379,441
      
12
%
Ohio
    
7
      
3,118,528
      
9
%
      
644,021
      
20
%
Florida
    
3
      
2,673,359
      
8
%
      
237,329
      
8
%
Washington
    
1
      
2,344,733
      
7
%
      
97,191
      
3
%
Illinois
    
1
      
1,850,647
      
5
%
      
410,400
      
13
%
Tennessee
    
1
      
1,503,088
      
4
%
      
87,230
      
3
%
Texas
    
4
      
1,471,927
      
4
%
      
95,766
      
3
%
North Carolina
    
2
      
1,361,924
      
4
%
      
134,576
      
4
%
South Carolina
    
2
      
876,124
      
3
%
      
129,909
      
4
%
Colorado
    
3
      
831,323
      
2
%
      
98,994
      
4
%
Minnesota
    
1
      
574,956
      
2
%
      
78,857
      
2
%
Utah
    
1
      
498,272
      
1
%
      
72,498
      
2
%
New York
    
2
      
386,539
      
1
%
      
72,373
      
2
%
Maine
    
2
      
205,400
      
1
%
      
18,126
      
1
%
Georgia
    
1
      
103,607
      
—
%
      
10,906
      
—
%
Pennsylvania
    
1
      
85,998
      
—
%
      
9,100
      
—
%
Total
    
47
    
$
34,843,592
      
100
%
      
3,177,112
      
100
%
 
19
Modiv Inc.
Lease Expirations
(Unaudited)
 
 
10 Years and Thereafter Lease Expirations
 
As of September 30, 2022
  
Year
  
Number of
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
  
October to December 2022
    
—
      
—
      
—
%
    
—
%
  
$
—
      
—
%
    
—
%
2023
    
3
      
142,146
      
4.5
%
    
4.5
%
    
988,283
      
2.8
%
    
2.8
%
2024
    
1
      
87,230
      
2.8
%
    
7.3
%
    
1,503,088
      
4.3
%
    
7.1
%
2025
    
4
      
235,489
      
7.4
%
    
14.7
%
    
5,716,829
      
16.4
%
    
23.5
%
2026
    
5
      
280,740
      
8.9
%
    
23.6
%
    
4,764,388
      
13.7
%
    
37.2
%
2027
    
1
      
64,637
      
2.0
%
    
25.6
%
    
893,472
      
2.6
%
    
39.8
%
2028
    
2
      
22,680
      
0.7
%
    
26.3
%
    
572,891
      
1.6
%
    
41.4
%
2029
    
3
      
134,714
      
4.2
%
    
30.5
%
    
2,350,335
      
6.8
%
    
48.2
%
2030
    
5
      
45,278
      
1.4
%
    
31.9
%
    
463,363
      
1.3
%
    
49.5
%
2031
    
—
      
—
      
—
%
    
31.9
%
    
—
      
—
%
    
49.5
%
2032
    
2
      
177,204
      
5.6
%
    
37.5
%
    
2,676,204
      
7.7
%
    
57.2
%
Thereafter
    
21
      
1,986,994
      
62.5
%
    
100.0
%
    
14,914,739
      
42.8
%
    
100.0
%
Total
    
47
      
3,177,112
      
100.0
%
          
$
34,843,592
      
100.0
%
        

20
Modiv Inc.
Disclosures Regarding Non-GAAP and Other Metrics
Notice Involving Non-GAAP Financial Measures
 
In addition to U.S. GAAP financial measures, this supplemental report contains and may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are provided below.
 
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
 
In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts (“Nareit”) promulgated a measure known as FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures and preferred distributions. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.
 
Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation, deferred rent, amortization of in-place lease valuation intangibles, acquisition-related costs, deferred financing fees, asset impairment write-downs, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-off transaction costs and other one-time transactions.
 
We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. We believe that AFFO is a beneficial indicator of our ongoing portfolio performance and ability to sustain our current distribution level. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or our future ability to pay our dividends. By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.
 
For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, FFO and AFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.
21
Neither the SEC, Nareit, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure. Furthermore, as described in the notes to our unaudited condensed consolidated financial statements, the conversion ratios for units of Class M limited partnership interest in the Operating Partnership, units of Class P limited partnership interest in the Operating Partnership and units of Class R limited partnership interest (“Class R OP Units”) in the Operating Partnership can increase if the specified performance hurdles are achieved.
 
Adjusted EBITDA
 
We define Adjusted EBITDA as GAAP net income or loss adjusted to exclude depreciation and amortization, gains or losses from the sales of depreciable property, extraordinary items, provisions for impairment on investment in real estate and goodwill and intangibles, interest expense and non-cash items such as non-cash compensation expenses. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA is not a measure of financial performance under GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA as an alternative to net income or cash flows from operating activities determined in accordance with GAAP.
 
Net Debt
 
We define Net Debt as gross debt less cash and cash equivalents and restricted cash.
 
Leverage Ratio
 
We define our Leverage Ratio as total debt as a percentage of the aggregate fair value of our real estate properties, including our proportionate interest in real estate owned by unconsolidated entities, plus our cash and cash equivalents.
 
Annualized Base Rent (“ABR”)
 
ABR represents contractual annual base rent for the next 12 months.
 
Initial Cap Rate
 
We define “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property.
 
Weighted Average Cap Rate
 
We define “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property.



22