Debt

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Debt

Note 9 – Debt

The Company had the following mortgage loans outstanding as of December 31, 2023 and December 31, 2022, respectively:

Mortgage Loans Secured By	Location	Original Loan Amount			Interest Rate		Maturity Date	12/31/2023			12/31/2022			Debt Service Coverage Ratios ("DSCR") Required
7-Eleven Corporation, Starbucks Corporation, and Pratt & Whitney Automation, Inc.	Washington, D.C., Tampa, FL, and Huntsville, AL	$	11,287,500	(a)	4.17%		3/6/2030	$	10,757,239		$	10,957,829		1.25
General Services Administration-Navy & Vacant Unit	Norfolk, VA		8,260,000		3.50%		9/30/2024		7,341,804			7,578,304		1.25
PRA Holdings, Inc.	Norfolk, VA		5,216,749		3.50%		10/23/2024		4,562,722			4,728,462		1.25
Sherwin Williams Company	Tampa, FL		1,286,664		3.72%	(b)	8/10/2028		1,286,664			1,286,664		1.20
General Services Administration-FBI	Manteo, NC		928,728	(c)	3.85%	(d)	3/31/2032		913,958			928,728		1.50
Irby Construction	Plant City , FL		928,728	(c)	3.85%	(d)	3/31/2032		913,958			928,728		1.50
La-Z-Boy Inc.	Rockford, IL		2,100,000		3.85%	(d)	3/31/2032		2,066,604			-		1.50
Best Buy Co., Inc.	Grand Junction, CO		2,552,644	(c)	3.85%	(d)	3/31/2032		2,512,050			2,552,644		1.50
Fresenius Medical Care Holdings, Inc.	Chicago, IL		1,727,108	(c)	3.85%	(d)	3/31/2032		1,699,642			1,727,108		1.50
Starbucks Corporation	Tampa, FL		1,298,047	(c)	3.85%	(d)	3/31/2032		1,277,404			1,298,047		1.50
Kohl's Corporation	Tucson, AZ		3,964,745	(c)	3.85%	(d)	3/31/2032		3,901,694			3,964,745		1.50
City of San Antonio (PreK)	San Antonio, TX		6,444,000	(e)	7.47%	(b)	8/10/2028		6,416,362			-		1.50
Dollar General Market	Bakersfield, CA		2,428,000	(e)	7.47%	(b)	8/10/2028		2,417,587			-		1.50
Dollar General	Big Spring, TX		635,000	(e)	7.47%	(b)	8/10/2028		632,277			-		1.50
Dollar General	Castalia, OH		556,000	(e)	7.47%	(b)	8/10/2028		553,615			-		1.50
Dollar General	East Wilton, ME		726,000	(e)	7.47%	(b)	8/10/2028		722,886			-		1.50
Dollar General	Lakeside, OH		567,000	(e)	7.47%	(b)	8/10/2028		564,568			-		1.50
Dollar General	Litchfield, ME		624,000	(e)	7.47%	(b)	8/10/2028		621,324			-		1.50
Dollar General	Mount Gilead, OH		533,000	(e)	7.47%	(b)	8/10/2028		530,714			-		1.50
Dollar General	Thompsontown, PA		556,000	(e)	7.47%	(b)	8/10/2028		553,615			-		1.50
Dollar Tree Stores, Inc.	Morrow, GA		647,000	(e)	7.47%	(b)	8/10/2028		644,225			-		1.50
exp U.S. Services Inc.	Maitland, FL		2,950,000	(e)	7.47%	(b)	8/10/2028		2,937,348			-		1.50
General Services Administration	Vacaville, CA		1,293,000	(e)	7.47%	(b)	8/10/2028		1,287,454			-		1.50
Walgreens	Santa Maria, CA		3,041,000	(e)	7.47%	(b)	8/10/2028		3,027,958			-		1.50
		$	60,550,913					$	58,143,672		$	35,951,259
							Less Debt Discount, net		(383,767	)		-
							Less Debt Issuance Costs, net	$	(942,595	)	$	(717,381	)
									56,817,310			35,233,878

(a) Loan subject to prepayment penalty

(b) Fixed via interest rate swap

(c) One loan in the amount of $11.4 million secured by six properties and allocated to each property based on each property's appraised value.

(d) Adjustment effective April 1, 2027 equal to 5-year Treasury plus 2.5% and subject to a floor of 3.85%

(e) One loan in the amount of $21.0 million secured by 13 properties and allocated to each property based on each property's appraised value.

The Company amortized debt issuance costs to interest expense during the twelve months ended December 31, 2023 and 2022 of $146,745 and $118,930, respectively. The Company paid debt issuance costs for the twelve months ended December 31, 2023 and 2022 of $371,959 and $342,647, respectively.

Each mortgage loan requires the Company to maintain certain debt service coverage ratios as noted above. In addition, two mortgage loans, one encumbered by six properties and requiring a 1.50 DSCR, and another stand alone mortgage loan requiring a 1.50 DSCR, require the Company to maintain a 54% loan to fair market stabilized value ratio. Fair market stabilized value shall be determined by the lender by reference to acceptable guides and indices or appraisals from time to time at its discretion. As of December 31, 2023, the Company was in compliance with all covenants with the exception of one project level DSCR covenant for 2510 Walmer Ave. Our Bayport Credit Union loan covenant requires project level, property level and portfolio level DSCR minimum testing. At the project-level, 2510 Walmer Ave tested at a 1.17:1 DSCR, compared with the 1.25:1 project level minimum DSCR, driven by its vacancy since January 2023. According to the governing loan document, failing to meet DSCR coverage requirements is a technical default triggering the risk of forfeiture of the property, accelerating the repayment of the remaining outstanding balance of the loan at the lender's discretion. All other DSCR covenants tested compliant and the lender has indicated no intention of action. Additionally, a new lease was executed for 2510 Walmer Ave. on March 28, 2024 and will restore the property to full occupancy upon commencement.

On April 1, 2022, the Company entered into two mortgage loan agreements with an aggregate balance of $13.5 million to refinance seven of the Company's properties. The loan agreements consist of one loan in the amount of $11.4 million secured by six properties and allocated to each property based on each property's appraised value, and one loan in the amount of $2.1 million on the property previously held in the tenancy-in-common investment at an interest rate of 3.85% from April 1, 2022 through and until March 31, 2027. In conjunction with the LC2 Investment to purchase the remaining interest in the tenancy-in-common interest discussed above, the Company assumed the original $2.1 million loan on the property with a remaining balance of $2,079,178 and recognized a discount of $383,767. Effective April 1, 2027 and through the maturity date of March 31, 2032, the interest rate adjusts to the 5-year Treasury plus 2.5% and is subject to a floor of 3.85%. The Company’s CEO entered into a guarantee agreement pursuant to which he guaranteed the payment obligations under the promissory notes if they become due as a result of certain “bad-boy” provisions, individually and on behalf of the Operating Partnership. During the twelve months ended December 31, 2022, the Company incurred a loss on debt extinguishment of $144,029 related to the write off of unamortized debt issuance costs previously incurred on refinanced mortgage loans including a prepayment penalty incurred of $21,000.

On August 10, 2023, GIP13, LLC, a Delaware limited liability company and wholly owned subsidiary of GIP SPE ("GIP Borrower"), entered into a Loan Agreement with Valley pursuant to which Valley made a loan to the Company in the amount of $21.0 million to finance the acquisition of the Modiv Portfolio. The outstanding principal amount of the loan bears interest at an annual rate for each 30-day interest period equal to the compounded average of the secured overnight financing rate published by Federal Reserve Bank of New York for the thirty-day period prior to the last day of each 30-day interest rate for the applicable interest rate period plus 3.25%, with interest payable monthly after each 30-day interest period. However, the Company entered into an interest rate swap to fix the interest rate at 7.47% per annum. Payments of interest and principal in the amount of approximately $156,000 are due and payable monthly, with all remaining principal and accrued but unpaid interest due and payable on a maturity date of August 10, 2028. The loan may generally be prepaid at any time without penalty in whole or in part, provided that there is no return of loan fees and prepaid financing fees. The loan is secured by first mortgages and assignments of rents in the properties comprising the Modiv Portfolio and eight other properties held by subsidiaries of GIP SPE that had outstanding loans with Valley. All of the mortgaged properties cross collateralize the loan, and the loan is guaranteed by the Operating Partnership and the subsidiaries of the Company that hold the properties that comprise the Modiv Portfolio. The loan agreement also provides for customary events of default and other customary affirmative and negative covenants that are applicable to GIP Borrower and its subsidiaries, including reporting covenants and restrictions on investments, additional indebtedness, liens, sales of properties, certain mergers, and certain management changes. The Company's President and CEO also entered into a personal, full recourse guarantee with a $7,500,000 cap.

The Company’s President and CEO also has personally guaranteed the repayment of the $10.8 million due under the 7-11 - Washington, DC; Starbucks-South Tampa, FL; and Pratt & Whitney-Huntsville, AL loan as well as the $1.3 million loan secured by the Company's Sherwin-Williams - Tampa, FL mortgage loan. In addition, the Company’s President and CEO has also provided a guaranty of the Borrower’s nonrecourse carveout liabilities and obligations in favor of the lender for the GSA & MAERSK and PRA Holdings, Inc. - Norfolk, VA mortgage loans ("Bayport loans") with an aggregate principal amount of $11.9 million.

During the twelve months ended December 31, 2023 and December 31, 2022, the Company incurred a guaranty expense to the Company's President and CEO of $290,316 and $128,901 of which $177,347 and $128,901 remained payable as of December 31, 2023 and 2022, respectively.

On May 9, 2022, the Operating Partnership amended the current Commitment Letter with American Momentum Bank, by entering into a new commitment letter, to increase the available borrowings under the facility from $25.0 million to $50.0 million to be used for the acquisition of income producing real estate properties under the same terms as provided by the agreement entered into on October 26, 2021. The new Commitment Letter will become effective contingent upon the Company completing a future capital raise of $25.0 million or more, and prior to such time, the current Commitment Letter will remain in place. On September 9, 2022, the Company and AMB combined the prior AMB commitment letters entered into in October 2021 and May 2022 into a single Commitment Letter, and have amended the rate index used for borrowing to be a variable rate equal to the 30-Day CME Term SOFR Rate, plus a margin of 2.40%, adjusted monthly, subject to a floor interest

rate of 3.25% per year. All other terms under the prior commitment letters remained materially the same. As of December 31, 2023 and December 31, 2022, the Company did not have an outstanding balance on the facility. As of December 28, 2023, the Commitment Letter had expired.

On August 9, 2022 the Company and Operating Partnership entered a Redemption Agreement with a unit holder. As such, the Company recorded an Other payable - related party in the amount of $2,912,300 upon execution of the Redemption Agreement entered into July 20, 2022 and has made payments to date totaling $1,102,460 with a remaining balance of $1,809,840 and $2,587,300 outstanding as of December 31, 2023 and 2022.

On October 14, 2022, the Company entered into a loan transaction that is evidenced by a secured non-convertible promissory note to Brown Family Enterprises, LLC, a preferred equity partner and therefore a related party, for $1,500,000 that is due on October 14, 2024, and bears a fixed interest rate of 9%, simple interest. Interest is payable monthly. The loan may be repaid without penalty at any time. The loan is secured by the Operating Partnership’s equity interest in its current direct subsidiaries that hold real estate assets pursuant to the terms of a security agreement between the Operating Partnership and Brown Family Enterprises, LLC. On July 21, 2023, the Company amended and restated the promissory note to reflect an increase in the loan to $5.5 million and extend the maturity date thereof from October 14, 2024 to October 14, 2026. Except for the increase in the amount of the Loan and Note and the extension of the maturity date thereof, no changes were made to the original note.

Minimum required principal payments on the Company’s debt for subsequent years ending December 31 are as follows:

	Mortgage Loans		Other Payable - Related Party		Loan Payable - Related Party		Total as of December 31, 2023
2024		12,780,776		1,809,840		-		14,590,616
2025		926,633		-		-		926,633
2026		976,467		-		5,500,000		6,476,467
2027		1,033,322		-		-		1,033,322
2028		21,341,791		-		-		21,341,791
Thereafter		21,084,683		-		-		21,084,683
	$	58,143,672	$	1,809,840	$	5,500,000	$	65,453,512