Modiv Inc. (“Modiv” or the “Company”) (NYSE:MDV), an internally
managed real estate investment trust (“REIT”) that acquires, owns,
and manages a portfolio of single-tenant net-lease real estate
properties, today announced operating results for the fourth
quarter and full year ended December 31, 2022.
Highlights for the full year ended December 31, 2022:
- Revenue of $46.2 million increased 22% year-over-year
- Annual AFFO increased 45% year-over-year to $16.6 million, or
$1.63 per diluted share, exceeding the Company’s 2022 annual AFFO
guidance of $1.26 - $1.36 per diluted share
Highlights for the fourth quarter ended December 31,
2022:
- Revenue of $14.4 million increased 63% year-over-year
- Quarterly AFFO of $6.9 million, or $0.68 per diluted share,
compared with $2.4 million or $0.27 per diluted share in the
year-ago quarter
Recent Business Developments
- In December 2022, the Company signed a new 12-year lease for
its property in Rancho Cordova, California with the State of
California that included an option for the tenant to purchase. The
property was most recently occupied by Sutter Health which agreed
to an early termination fee and paid Modiv $3.8 million in December
2022.
- On December 30, 2022, the Company sold a retail property in San
Antonio, Texas, leased to Raising Cane’s for a sale price of $4.3
million, representing a 5.66% exit cap rate. On January 26, 2023,
the Company redeployed the proceeds to acquire an industrial
manufacturing property in Princeton, Minnesota, leased to Plastic
Products Company, Inc., for a purchase price of $6.4 million,
representing an initial cap rate of 7.51% and a weighted average
cap rate of 9.20%.
- In January 2023, the Company signed a two-year lease extension
with Solar Turbines, which has occupied the property located in San
Diego, California since 2008. This is the third lease extension
executed by the tenant and this renewal includes a 14% increase in
the first year rental rate followed by another 3% increase in the
second year.
- Our Net Asset Value (NAV) per fully diluted share as of
December 31, 2022 was $27.72, based on the appraisal of the
Company’s portfolio conducted by Cushman & Wakefield. Given
Modiv’s closing price of $11.76 as of February 22, 2023, the
Company’s stock is trading at a 58% discount to NAV and 36%
discount to the depreciated GAAP book value of $18.49 per
share.
- Declared monthly dividends per common share of $0.09583,
equivalent to an annual rate of $1.15 per share; represents a
dividend yield of 9.8% based on the $11.76 closing price of the
Company’s common stock on February 22, 2023.
Management Commentary
“Our team successfully navigated our first full year as a public
company in what was undoubtedly the worst decline in public REIT
valuations experienced since 2008. When you measure the fundamental
results that are in the direct control of our management team,
Modiv experienced a tremendous year of execution including:
acquiring over $162 million of properties; significantly growing
AFFO and exceeding guidance; obtaining research coverage from
multiple investment banks; and completing an IPO that provided full
liquidity to our legacy common stockholders,” said Aaron Halfacre,
Chief Executive Officer of Modiv.
“On top of that, we grew and strengthened our portfolio in 2022.
We materially increased our ownership of durable industrial
properties while decreasing our exposure to office assets by nearly
30%, our weighted average lease term or WALT increased from 6.3
years to 11.9 years, and with careful expense management we reduced
our G&A expense by $1.9 million. Additionally, we lowered our
cost of capital by restructuring our debt at low fixed rates and
expanded our credit facility. These tangible results showcase our
ability to execute our strategic plan and I am very confident about
our prospects in 2023,” concluded Halfacre.
Fourth Quarter and Full Year 2022 Financial Overview
Total Revenues
Total revenue for the fourth quarter was $14.4 million, a
year-over-year increase of $5.6 million reflecting growth in the
Company’s portfolio and the early termination fee revenue paid by
Sutter Health related to our property in Rancho Cordova,
California. Excluding the $3.8 million early termination fee
revenue, fourth quarter revenue increased $1.8 million, or 20%
year-over-year.
Total revenue for the full year 2022 was $46.2 million, an
increase from full year 2021 of $8.3 million, reflecting growth in
the Company’s portfolio and early termination fee revenue.
Excluding the early termination fee revenue, 2022 annual revenue
increased $4.5 million, or 12% year-over-year, due primarily to
rental income from 16 acquisitions, partially offset by the sale of
eight non-core properties in 2022.
Operating Results
Net loss attributable to common stockholders for the fourth
quarter was $(0.2) million, or $(0.02) per basic and diluted share,
compared to net loss attributable to common stockholders of $(3.1)
million, or $(0.41) per basic and diluted share in the prior-year
period. The $2.9 million decrease in net loss attributable to
common stockholders reflected the $3.8 million early termination
fee, which was offset by a $1.7 million decrease in gain on sale of
real estate investments.
Net loss attributable to common stockholders for 2022 was $(7.0)
million, or $(0.93) per basic and diluted share, compared to net
loss attributable to common stockholders of $(1.5) million, or
$(0.20) per basic and diluted share in the prior year. The $5.5
million increase in net loss attributable to common stockholders
reflects a $17.3 million write off of goodwill and a $1.7 million
loss on early extinguishment of debt during the first quarter of
2022, along with a $2.0 million increase in property expenses for
the year (partially offset by tenant reimbursements included in
revenue). These increases in expenses were partially offset by the
$8.3 million increase in revenue discussed above, a $6.1 million
increase in gains on sale of real estate and a $1.9 million
decrease in general and administrative expenses.
Adjusted Funds from Operations (AFFO)
Quarterly AFFO was $6.9 million, or $0.68 per diluted share,
compared with AFFO of $2.4 million, or $0.27 per diluted share in
the fourth quarter of 2021. The $4.5 million increase in AFFO was
primarily attributable to the $3.8 million early termination fee
discussed above, while AFFO per diluted share reflects an increase
in fully diluted shares outstanding from our dividend reinvestment
program and the issuance of 1.3 million Class C OP units (at $25.00
per unit) in connection with the January 2022 acquisition of a KIA
auto dealership property in Carson, California.
AFFO for the year ended December 31, 2022 was $16.6 million, or
$1.63 per diluted share, compared with AFFO of $11.4 million, or
$1.30 per diluted share in 2021. The $5.2 million increase in AFFO
was primarily attributable to the increase in early termination fee
revenue and the decrease in general and administrative expenses
discussed above. Excluding the $3.8 million early termination fee
revenue for 2022, AFFO per diluted share was $1.26.
AFFO is a measure that is not calculated in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”). See the Reconciliation of Non-GAAP Measures later
in this press release.
Dividend Information
As previously announced, Modiv declared a monthly cash dividend
per common share of $0.09583 payable to common stockholders of
record as of January 31, 2023, February 28, 2023, and March 31,
2023, which will be paid on or about February 24, 2023, March 24,
2023, and April 25, 2023, respectively. The current monthly
dividend amount of $0.09583 per share represents an annualized
dividend rate of $1.15 per share of common stock, which represents
a yield of 9.8% based on the closing price of our common stock on
February 22, 2023.
Real Estate Portfolio Highlights
Investment Activity
On January 26, 2023, the Company acquired an industrial
manufacturing property in Princeton, Minnesota, for $6.4 million.
This property has a remaining lease term of 5.75 years and is
leased to Plastic Products Company, Inc. which is a custom
thermoplastic, metal and ceramic injection molder that has been in
business since 1962. The rent on this property will increase by 20%
on November 1, 2023, with annual increases of 3% thereafter. The
initial cap rate is 7.51% and the weighted average cap rate is
9.20%.
During 2022, the Company acquired a total of $162.7 million of
real estate properties including an opportunistic acquisition of
one retail property for $69.4 million, which is leased to a KIA
auto dealership and included $32.8 million of equity being issued
at $25.00 per share, and 15 industrial manufacturing properties for
a total of $93.3 million. The combined initial cap rate for the
industrial manufacturing properties was 7.0% and the weighted
average cap rate was 8.9%.
The Company defines “initial cap rate” for property acquisitions
as the initial annual cash rent divided by the purchase price of
the property. The Company defines “weighted average cap rate” for
property acquisitions as the average annual cash rent including
rent escalations over the lease term, divided by the purchase price
of the property. The vast majority of Modiv’s real estate leases
have annual rent escalations, which generally range from 2-3%.
Disposition Activity
On December 30, 2022, the Company completed the sale of its
retail property located in San Antonio, Texas that was leased to
Raising Cane’s for $4.3 million, which resulted in a $0.7 million
gain on sale for the fourth quarter of 2022. During 2022, the
Company completed the sale of six office properties, one flex
property and one retail property with total contract sales prices
of $73.0 million, generating net proceeds of $48.7 million and
gains on sale of $12.2 million. Modiv will continue its efforts to
sell non-core properties during 2023.
Portfolio
As of December 31, 2022, the Company’s portfolio consisted of 46
properties located in 17 states. The portfolio had approximately
3.2 million square feet of aggregate leasable space, which was 100%
leased to 28 different commercial tenants doing business in 16
separate industries. The portfolio includes 27 industrial
properties representing 59% of the portfolio, 12 retail properties
representing 20% of the portfolio, and 7 office properties
representing 21% of the portfolio (based on pro forma annual base
rent as of December 31, 2022). As part of the Company’s long-term
strategy to reduce office exposure, Modiv has decreased its office
allocation by nearly 30% since December 31, 2021.
Annualized base rent of the properties owned on December 31,
2022 (based on rates in effect on December 31, 2022) totaled $33.7
million and the portfolio’s weighted average lease term was 11.9
years as of December 31, 2022 compared with 6.3 years as of
December 31, 2021. Approximately 48% of the Company’s tenants have
(or whose parent company has) an investment-grade credit rating
from a recognized credit rating agency of “BBB-” or better.
Balance Sheet and Liquidity
As of December 31, 2022, total cash and cash equivalents were
$8.6 million and the Company had $197.5 million of outstanding
indebtedness consisting of $44.5 million of mortgages and $153.0
million outstanding on the Company’s $400 million credit facility.
The Company’s leverage ratio was 38% as of December 31, 2022.
The Company’s credit facility is comprised of a $150 million
revolving credit facility and a $250 million term loan, of which
$100 million is expected to be drawn during the first four months
of 2023. The credit facility includes an accordion option that
allows the Company to request additional revolver and term loan
lender commitments up to a total of $750 million. The revolver
maturity is in January 2026 with options to extend for a total of
12 months, and the term loan’s maturity is in January 2027.
The credit facility is priced on a leverage-based grid that
fluctuates based on the Company’s actual leverage ratio at the end
of the prior quarter. Based on the December 31, 2022 balance sheet
and interest rate swap agreements entered into during 2022,
approximately 98% of the Company’s indebtedness holds a fixed
interest rate. The weighted average interest rate on the total debt
outstanding of $197.5 million as of December 31, 2022 was 4.03%
based on the 38% leverage ratio as of September 30, 2022 and
December 31, 2022.
2023 Annual Guidance
Modiv believes 2023 will be even more transformational than 2022
and has determined it to be prudent to publicly disclose the
following corporate goals for 2023 that may impact Modiv’s earnings
growth and share price over the balance of the year.
- 2023 acquisition volume of at least $100 million of industrial
manufacturing properties.
- Enhanced delineation and accelerated disposition of Modiv’s
non-core/legacy office and retail assets as the Company furthers
its goal to become a pure-play industrial manufacturing REIT.
- No material changes anticipated in G&A or property
expenses.
- The Company does not intend to issue equity at current low
share price levels and has no planned need for new debt sources
beyond our current credit facility capacity.
- Following inquiries recently received, Modiv will begin to
explore long-term and strategic investment proposals from large
institutional investors that have identified Modiv’s growth
potential and management capabilities. Barring any uniquely
compelling and accretive opportunities, Modiv has no current
knowledge of any actionable proposals and does not anticipate
providing further updates unless required.
Given this is a catalyst year for Modiv, the Company is not
providing specific 2023 AFFO guidance at this time.
Conference Call and Webcast
A conference call and audio webcast with analysts and investors
will be held on Thursday, February 23, 2023, at 11:00 a.m. Eastern
Time / 8:00 a.m. Pacific Time, to discuss the fourth quarter and
full year 2022 operating results and answer questions.
Live conference call: 1-877-514-3620 at 8:00 a.m. Pacific
Time, Thursday, February 23, 2023
Webcast: To listen to the webcast, either live or
archived, use this link
https://event.choruscall.com/mediaframe/webcast.html?webcastid=mAokDz4P
or visit the investor relations page of Modiv’s website at
www.modiv.com.
About Modiv
Modiv Inc. is an internally managed REIT that acquires, owns,
and manages a 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
December 31, 2022, Modiv had a $535 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.
Forward-looking Statements
Certain statements contained in this press release, other than
historical facts, may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements include, but are not limited to,
statements regarding our plans, strategies and prospects, both
business and financial. Such forward-looking statements are subject
to various risks and uncertainties, including but not limited to
those described under the section entitled “Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2021 filed with the SEC on March 23, 2022. Accordingly, there
are or will be important factors that could cause actual outcomes
or results to differ materially from those indicated in these
statements. These factors should not be construed as exhaustive and
should be read in conjunction with the other cautionary statements
that are included in this press release and in the Company’s other
filings with the SEC. Any forward-looking statements herein speak
only as of the time when made and are based on information
available to the Company as of such date and are qualified in their
entirety by this cautionary statement. The Company assumes no
obligation to revise or update any such statement now or in the
future, unless required by law.
Notice Involving Non-GAAP Financial Measures
In addition to U.S. GAAP financial measures, this press release
and the supplemental financial and operating report included in our
Form 8-K dated February 23, 2023 contain and may refer to certain
non-GAAP financial measures. These non-GAAP financial measures are
in addition to, not a substitute for or superior to, measures of
financial performance prepared in accordance with GAAP. These
non-GAAP financial measures should not be considered replacements
for, and should be read together with, the most comparable GAAP
financial measures. Reconciliations to the most directly comparable
GAAP financial measures and statements of why management believes
these measures are useful to investors are provided below.
MODIV INC. Consolidated Statements of Operations
For the Three and Twelve Months Ended December 31, 2022
(Unaudited) Three Months Ended December 31,
Twelve Months Ended December 31,
2022
2021
2022
2021
Rental income
$
14,372,106
$
8,831,534
$
46,174,267
$
37,889,831
Expenses: General and administrative
2,252,304
2,188,493
7,812,057
9,715,067
Stock compensation expense
660,171
629,538
2,401,022
2,744,881
Depreciation and amortization
4,347,809
3,449,407
14,929,574
15,266,936
Interest expense
2,826,490
1,874,867
8,106,658
7,586,197
Property expenses
2,105,257
1,578,700
8,899,626
6,880,993
Impairment (reversal of impairment) of real estate investment
property
2,080,727
-
2,080,727
(400,999
)
Impairment of goodwill and intangible assets
-
3,767,190
17,320,857
3,767,190
Total expenses
14,272,758
13,488,195
61,550,521
45,560,265
Operating loss: Gain on sale of real estate investments, net
669,185
2,338,904
12,196,371
6,136,588
Operating loss
768,533
(2,317,757
)
(3,179,883
)
(1,533,846
)
Other income (expense): Interest income
5,047
19,958
21,910
21,328
Income from unconsolidated investment in a real estate property
51,312
53,337
278,002
276,042
Gain on forgiveness of economic relief note payable
-
-
-
517,000
Loss on early extinguishment of debt
-
-
(1,725,318
)
-
Other
(104,157
)
65,993
93,971
283,971
Other (expense) income, net
(47,798
)
139,288
(1,331,435
)
1,098,341
Net income (loss)
720,735
(2,178,469
)
(4,511,318
)
(435,505
)
Less: net loss attributable to noncontrolling interest in Operating
Partnership
(42,508
)
-
(1,222,783
)
-
Net income (loss) attributable to Modiv Inc.
763,243
(2,178,469
)
(3,288,535
)
(435,505
)
Preferred stock dividends
(921,875
)
(921,875
)
(3,687,500
)
(1,065,278
)
Net loss attributable to common stockholders
$
(158,632
)
$
(3,100,344
)
$
(6,976,035
)
$
(1,500,783
)
Net loss per share attributable to common stockholders:
Basic and diluted
$
(0.02
)
$
(0.41
)
$
(0.93
)
$
(0.20
)
Weighted-average number of common shares outstanding: Basic
and diluted
7,487,728
7,531,167
7,487,204
7,544,834
Distributions declared per common stock
$
0.2875
$
0.2875
$
1.2500
$
1.0800
MODIV INC. Consolidated Balance Sheets
(Unaudited) As of December 31,
2022
2021
Assets Real estate investments:
Land
$
103,657,237
$
61,005,402
Building and improvements
329,867,099
251,246,290
Equipment
4,429,000
-
Tenant origination and absorption costs
19,499,749
21,504,210
Total investments in real estate property
457,453,085
333,755,902
Accumulated depreciation and amortization
(46,752,322
)
(37,611,133
)
Total investments in real estate property, net
410,700,763
296,144,769
Unconsolidated investment in a real estate property
10,007,420
9,941,338
Total real estate investments excluding real estate investments
held for sale, net
420,708,183
306,086,107
Real estate investments held for sale, net
5,255,725
31,510,762
Total real estate investments, net
425,963,908
337,596,869
Cash and cash equivalents
8,608,649
55,965,550
Restricted cash
-
2,441,970
Receivable from early termination of lease
-
1,836,767
Tenant receivables
8,859,329
5,996,919
Above-market lease intangibles, net
1,850,756
691,019
Prepaid expenses and other assets
6,100,937
5,856,255
Interest rate swap derivative
4,629,702
-
Assets related to real estate investments held for sale
12,765
788,296
Goodwill, net
-
17,320,857
Total assets
$
456,026,046
$
428,494,502
Liabilities and Equity
Mortgage notes payable, net
$
44,435,556
$
152,223,579
Mortgage notes payable related to real estate investments held for
sale, net
-
21,699,912
Total mortgage notes payable, net
44,435,556
173,923,491
Credit facility revolver
3,000,000
8,022,000
Credit facility term loan, net
148,018,164
-
Accounts payable, accrued and other liabilities
9,245,933
11,844,881
Below-market lease intangibles, net
9,675,686
11,102,940
Interest rate swap derivatives
498,866
788,016
Liabilities related to real estate investments held for sale
117,881
383,282
Total Liabilities
214,992,086
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 December
31, 2022 and 2021, respectively
2,000
2,000
Class C common stock, $0.001 par value, 300,000,000 shares
authorized; 7,762,506 shares issued and 7,512,353 shares
outstanding as of December 31, 2022, and 7,426,636 shares issued
and outstanding as of December 31, 2021
7,762
7,427
Class S common stock, $0.001 par value, 100,000,000 shares
authorized; no shares issued and outstanding as of December 31,
2022 and 63,768 shares issued and outstanding as of December 31,
2021
-
64
Additional paid-in-capital
278,349,384
273,441,831
Treasury stock, at cost, 250,153 shares as of December 31, 2022 and
no shares held as of December 31, 2021
(4,161,618
)
-
Cumulative distributions and net losses
(117,949,240
)
(101,624,430
)
Accumulated other comprehensive income
3,502,616
-
Total Modiv Inc. equity
159,750,904
171,826,892
Noncontrolling interest in the Operating Partnership
81,283,056
50,603,000
Total equity
241,033,960
222,429,892
Total liabilities and equity
$
456,026,046
$
428,494,502
MODIV INC. Reconciliation of Non-GAAP Measures For
the Three and Twelve Months Ended December 31, 2022
(Unaudited) Three Months Ended December 31,
Twelve Months Ended December 31,
2022
2021
2022
2021
Net income (loss) (in accordance with GAAP)
720,735
$
(2,178,469
)
$
(4,511,318
)
$
(435,505
)
Preferred stock dividends
(921,875
)
(921,875
)
(3,687,500
)
(1,065,278
)
Net loss attributable to common stockholders and Class C OP
Units
(201,140
)
(3,100,344
)
(8,198,818
)
(1,500,783
)
FFO adjustments: Add: Depreciation and amortization of real
estate properties
4,347,809
3,290,588
14,929,574
13,710,588
Amortization of lease incentives
88,752
53,203
412,098
245,438
Depreciation and amortization for unconsolidated investment in a
real estate property
203,554
189,439
777,041
735,335
Impairment of real estate investment
2,080,727
-
2,080,727
-
Less: Gain on sale of real estate investments, net
(669,185
)
(2,338,904
)
(12,196,371
)
(6,136,588
)
Reversal of impairment of real estate investments
-
-
-
(400,999
)
FFO attributable to common stockholders and Class C OP Units
5,850,517
(1,906,018
)
(2,195,749
)
6,652,991
AFFO adjustments: Add: Amortization of corporate intangibles
-
158,819
-
1,556,348
Impairment of goodwill and intangible assets
-
3,767,190
17,320,857
3,767,190
Non-recurring corporate relocation costs
500,000
-
500,000
-
Stock compensation
660,170
629,542
2,401,022
2,744,881
Deferred financing costs
179,641
162,200
1,649,929
369,286
Non-recurring loan prepayment penalties
-
-
615,336
-
Swap termination costs
-
-
733,000
23,900
Amortization of above-market lease intangibles
88,549
32,456
197,224
129,823
Due diligence expenses, including abandoned pursuit costs
25,051
(16,100
)
661,222
696,825
Less: Deferred rents
(643,784
)
206,606
(3,237,482
)
(1,478,818
)
Unrealized gains on interest rate swaps, net
505,263
(285,982
)
(813,750
)
(970,039
)
Amortization of below-market lease intangibles
(231,175
)
(363,074
)
(1,202,711
)
(1,462,797
)
Gain on forgiveness of economic relief note payable
-
-
-
(517,000
)
Other adjustments for unconsolidated investment in a real estate
property
5,815
(6,191
)
5,251
(62,776
)
AFFO attributable to common stockholders and Class C OP
Units
$
6,940,047
$
2,379,448
$
16,634,149
$
11,449,814
Weighted average shares outstanding: Basic
7,487,728
7,531,167
7,487,204
7,544,834
Fully Diluted (1)
10,195,869
8,744,340
10,225,850
8,780,131
FFO Per Share: Basic
$
0.78
$
(0.25
)
$
(0.29
)
$
0.88
Fully Diluted
$
0.57
$
(0.25
)
$
(0.29
)
$
0.76
AFFO Per Share Basic
$
0.93
$
0.32
$
2.22
$
1.52
Fully Diluted
$
0.68
$
0.27
$
1.63
$
1.30
(1) Includes the Class C, Class M, Class P and Class R OP
Units to compute the weighted average number of shares.
FFO is defined by the National Association of Real Estate
Investment Trusts (“Nareit”) as net income or loss computed in
accordance with GAAP, excluding extraordinary items, as defined by
GAAP, and gains and losses from sales of depreciable operating
property, plus real estate-related depreciation and amortization
(excluding amortization of deferred financing costs and
depreciation of non-real estate assets), and after adjustment for
unconsolidated partnerships, joint ventures, preferred
distributions and real estate impairments. Because FFO calculations
adjust for such items as depreciation and amortization of real
estate assets and gains and losses from sales of operating real
estate assets (which can vary among owners of identical assets in
similar conditions based on historical cost accounting and
useful-life estimates), they facilitate comparisons of operating
performance between periods and between other REITs. As a result,
we believe that the use of FFO, together with the required GAAP
presentations, provides a more complete understanding of our
performance relative to our competitors and a more informed and
appropriate basis on which to make decisions involving operating,
financing, and investing activities. It should be noted, however,
that other REITs may not define FFO in accordance with the current
Nareit definition or may interpret the current Nareit definition
differently than we do, making comparisons less meaningful.
Additionally, we use AFFO as a non-GAAP financial measure to
evaluate our operating performance. AFFO excludes non-routine and
certain non-cash items such as revenues in excess of cash received,
amortization of stock-based compensation, deferred rents,
amortization of in-place lease valuation intangibles, deferred
financing fees, gain or loss from the extinguishment of debt,
unrealized gains (losses) on derivative instruments, write-offs of
transaction costs and other one-time transactions. We also believe
that AFFO is a recognized measure of sustainable operating
performance by the REIT industry. Further, we believe AFFO is
useful in comparing the sustainability of our operating performance
with the sustainability of the operating performance of other real
estate companies. Management believes that AFFO is a beneficial
indicator of our ongoing portfolio performance and ability to
sustain our current distribution level. More specifically, AFFO
isolates the financial results of our operations. AFFO, however, is
not considered an appropriate measure of historical earnings as it
excludes certain significant costs that are otherwise included in
reported earnings. Further, since the measure is based on
historical financial information, AFFO for the period presented may
not be indicative of future results or our future ability to pay
our dividends.
By providing FFO and AFFO, we present information that assists
investors in aligning their analysis with management’s analysis of
long-term operating activities. For all of these reasons, we
believe the non-GAAP measures of FFO and AFFO, in addition to
income (loss) from operations, net income (loss) and cash flows
from operating activities, as defined by GAAP, are helpful
supplemental performance measures and useful to investors in
evaluating the performance of our real estate portfolio. However, a
material limitation associated with FFO and AFFO is that they are
not indicative of our cash available to fund distributions since
other uses of cash, such as capital expenditures at our properties
and principal payments of debt, are not deducted when calculating
FFO and AFFO. AFFO is useful in assisting management and investors
in assessing our ongoing ability to generate cash flow from
operations and continue as a going concern in future operating
periods. However, FFO and AFFO are not useful measures in
evaluating NAV because impairments are taken into account in
determining NAV but not in determining FFO and AFFO. Therefore, FFO
and AFFO should not be viewed as a more prominent measure of
performance than income (loss) from operations, net income (loss)
or cash flows from operating activities and each should be reviewed
in connection with GAAP measurements.
Neither the SEC, Nareit, nor any other applicable regulatory
body has opined on the acceptability of the adjustments
contemplated to adjust FFO in order to calculate AFFO and its use
as a non-GAAP performance measure. In the future, the SEC or Nareit
may decide to standardize the allowable exclusions across the REIT
industry, and we may have to adjust the calculation and
characterization of this non-GAAP measure.
MODIV INC.
Reconciliation of Non-GAAP Measures - Adjusted EBITDA For
the Three and Twelve Months Ended December 31, 2022
(Unaudited) Three Months Ended December 31,
Twelve Months Ended December 31,
2022
2021
2022
2021
Net income (loss) (in accordance with GAAP)
$
720,735
$
(2,178,469
)
$
(4,511,318
)
$
(435,505
)
Add: Depreciation and amortization
4,347,809
3,449,407
14,929,574
15,266,936
Depreciation and amortization for unconsolidated investment in a
real estate property
203,554
189,439
777,041
735,335
Interest expense
2,826,490
1,874,867
8,106,658
7,586,197
Loss on early extinguishment of debt
-
-
1,725,318
-
Interest expense on unconsolidated investment in real estate
property
98,073
100,257
392,477
552,144
Impairment (reversal of impairment) of real estate investment
property
2,080,727
-
2,080,727
(400,999
)
Impairment of goodwill and intangible assets
-
3,767,190
17,320,857
3,767,190
Stock compensation
660,171
629,538
2,401,022
2,744,881
Acquisition fees and due diligence costs, including abandoned
pursuit costs
25,051
(16,100
)
661,222
696,825
Less: Gain on sale of real estate investments, net
(669,185
)
(2,338,904
)
(12,196,371
)
(6,136,588
)
Adjusted EBITDA
$
10,293,425
$
5,477,225
$
31,687,207
$
24,376,416
Annualized Adjusted EBITDA
$
41,173,698
$
21,908,900
$
31,687,207
$
24,376,416
Net debt: Consolidated debt
$
197,515,009
$
183,033,756
$
197,515,009
$
183,033,756
Debt of unconsolidated investment in real estate property (a)
9,487,515
9,709,710
9,487,515
9,709,710
Consolidated cash and restricted cash
(8,608,649
)
(58,407,520
)
(8,608,649
)
(58,407,520
)
Cash of unconsolidated investment in real estate property (a)
(218,424
)
(502,041
)
(218,424
)
(502,041
)
$
198,175,450
$
133,833,905
$
198,175,450
$
133,833,905
Net debt / Adjusted EBITDA 4.8x 6.1x 6.3x 5.5x
(a) Reflects the Company's 72.71% pro rata share of the
tenant-in-common's mortgage note payable and cash.
We define Net Debt as gross debt less cash and cash equivalents
and restricted cash. We define Adjusted EBITDA as GAAP net income
or loss adjusted to exclude real estate related depreciation and
amortization, gains or losses from the sales of depreciable
property, extraordinary items, provisions for impairment on real
estate investments and goodwill, interest expense, non-cash items
such as non-cash compensation expenses and write-offs of
transaction costs and other one-time transactions. 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.
MODIV INC. Non-GAAP Measures - Net Asset Value Per
Share Estimated as of December 31, 2022 and Pro Forma
Estimate as of January 31, 2022 (Unaudited)
December 31, 2022 January 31, 2022 (a)
Estimated Per Share Pro Forma Per
Share Value NAV Value NAV
Assets Real estate
properties
$
503,700,000
$
48.76
$
463,054,000
$
45.73
Investments in unconsolidated entity: Santa Clara property
tenant-in-common interest (b)
19,768,921
1.91
18,894,790
1.87
Cash and cash equivalents
8,608,649
0.83
65,263,037
6.45
Interest rate swap derivative
4,629,702
0.45
-
-
Other assets
3,989,400
0.39
5,878,710
0.58
Total Assets
$
540,696,672
$
52.34
$
553,090,537
$
54.62
Liabilities
Mortgage notes payable
$
41,293,644
$
4.00
$
46,236,403
$
4.57
Credit facility
153,000,000
14.81
155,775,000
15.38
Accrued interest payable
285,392
0.03
272,481
0.03
Accrued dividends and distributions payable
1,768,068
0.17
1,028,074
0.10
Interest rate swap derivatives
498,866
0.05
-
-
Other liabilities
7,448,302
0.72
8,731,045
0.86
Total Liabilities
204,294,272
19.78
212,043,003
20.94
Series A preferred stock
50,000,000
4.84
50,000,000
4.94
Total estimated net asset value
$
286,402,400
$
27.72
$
291,047,534
$
28.74
Fully-diluted shares outstanding (c)
10,331,042
10,125,412
(a) The estimated pro forma NAV per share (unaudited) as of
January 31, 2022 reflected (i) the estimated asset values for 35
properties (excluding four assets held for sale) that were in our
portfolio on January 31, 2022, including two acquisitions completed
in January 2022, (ii) net cash received from four dispositions that
were pending as of January 31, 2022 and completed in February 2022,
(iii) borrowings under the credit facility provided by KeyBank
National Association (“KeyBank”) and repayment of 20 mortgages in
January 2022, and (iv) the estimated fair value of debt on the
three consolidated mortgages remaining after the closing of the
credit facility provided by KeyBank and the four dispositions
completed in February 2022. (b) Reflects the Company's 72.7%
interest in the equity of the Santa Clara property which includes
real estate valued at $30,910,000 and a mortgage with a fair value
of $12,097,225. (c) Fully-diluted shares outstanding as of
December 31, 2022 and January 31, 2022 includes the following:
i) 1,312,382 Class C OP Units issued on January 18,
2022 in connection with the acquisition of the KIA auto dealership
property; ii) 1,189,964 shares 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 the Company’s
Class C Common Stock for each Class M OP Unit and Class P OP Unit
outstanding; and iii) 316,343 shares and 101,855
shares, respectively, that would result from conversion of Class R
OP Units.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230223005289/en/
Investor Inquiries: Margaret Boyce, Financial Profiles,
Inc. mboyce@finprofiles.com 310-622-8247
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