Management Provides Forward-Looking
Thoughts
Modiv Industrial, Inc. (“Modiv Industrial”, “Modiv”, the
“Company”, “we” or “our”), (NYSE:MDV), the only public REIT
exclusively focused on acquiring industrial manufacturing real
estate, today announced operating results for the third quarter
ended September 30, 2023.
Key Financial Highlights:
- 21% year-over-year increase in revenue generating $12.5 million
compared with $10.3 million in the year-ago quarter.
- 19% year-over-year increase in AFFO netting $3.7 million
compared with $3.1 million in the year-ago quarter.
- $10 million reduction in leverage and a 14% reduction in net
debt to adjusted EBITDA from prior quarter results released in
August 2023.
- $5.4 million net proceeds from the sale of a non-core asset
located in Rocklin, California.
- Portfolio consists of 44 properties with a weighted average
lease term of 14.0 years and weighted average annual rental
increases of 2.48%.
“Another solid quarter of no-nonsense execution. Given the
increased market volatility and geo-political risk, we believe the
greater benefit inures to those that are thoughtful rather than
rash. With crystal balls becoming even more opaque, today’s
environment compels us to be incessantly focused on the execution
of the variables in our control. As such, it feels imprudent to
provide formal guidance for 2024 but reasonable for us to be
transparent as to our strategic thinking. The following business
outlook lists our activity and perspective on topics we suspect
will be germane to investors.
Business Outlook:
Acquisitions – Since our NYSE listing last year, we have
acquired over $214 million of industrial manufacturing assets,
arguably the most active buyer of this property type and at a
volume that is more commensurate with much larger REITs. As we
discussed recently in this Nareit podcast, we chose to be active in
the latter half of last year and the first half of this year.
Though we continue to look at every asset we can, we are finding
the majority of the current supply to be lacking in strategic
value, having an insufficient credit profile and/or being offered
with questionable pricing (that holds true for both too low and too
high cap rates). Given the lackluster inventory, coupled with tepid
markets, we don’t see ourselves being that acquisitive in the near
term. That could change if the broader capital markets improve or
if we find truly compelling opportunities.
As we take a calculated pause on single asset purchases, we are
spending a decent amount of time exploring portfolio consolidations
and intriguing M&A opportunities. In fact, over the past year,
we have underwritten and dialogued on five such opportunities
representing over $2.4 billion of aggregate value – all focused on
industrial manufacturing. Though the timing and pricing haven’t
been right as of yet, all of those opportunities remain on our
active radar.
We take the Buffett-esque view that, at this stage of the market
cycle, we can afford to stand over the plate looking for the fat
pitch without fear of strikes being called.
Dispositions – Similar to our acquisition volume, we have
been busy disposing of our non-industrial assets since we listed,
with over $120 million sold across 22 assets (including 10 office
properties). We are focused on recycling those assets that we do
not believe are a strategic long-term fit but at the same time we
are also not in a rush to throw away good AFFO just to clear these
assets off the books. Given that we still hold office assets and
office has become a six-letter curse word, one might think we would
be verklempt and, in turn, hasty in our retreat. We are not. We
are, however, patient and we draw this patience from the facts that
we have observed firsthand. For example, as it relates to our three
largest office properties: in the past year we have received three
unsolicited bids on our asset located in Issaquah, Washington; we
have been in conversations with the AA-rated tenant of our asset
located in Rancho Cordova, California, about their intent to begin
their lengthy government process to exercise their purchase option;
and we are reviewing flex conversion proposals we have received on
our asset located in Nashville, Tennessee. If parties are kicking
the tires of our office assets in today’s market, then that
suggests to us that interested parties will also likely kick the
tires at a later time when the market landscape has settled and
after we have collected more of our contractual rents.
We aren’t being stubborn or idealistic, but we are being
balanced and patient.
Equity – A study of REIT history shows us, time and time
again, that those REITs that are disciplined with their use of
equity and debt win over the long term as investors reward those
companies that can grow, yet also preserve, the capital entrusted
to them. There is no REIT in existence today that hasn’t, over the
course of its lifespan, accessed both equity and debt on a routine
basis. However, it is the amount and timing of each capital source
that creates a clear divide between those that are rewarded and
those that languish. There may be few, if any, examples of a REIT
of our size, with the acquisition volume we have delivered, who
have gone so long without accessing the equity markets. It is with
this knowledge that we have chosen a disciplined, yet arduous, path
forward over the past 21 months. We recognized early on that we
could remain both disciplined and opportunistic by accessing
affordable debt when it was still available last year while at the
same time recycling assets into higher yielding alternatives and by
strategically identifying UPREIT transactions that made sense
(factoid: we have issued over $37 million of OP units at a weighted
average price greater than $23 since the beginning of 2022).
Combined, these activities have allowed us to prolong our need
to access the market until such time that we see greater
receptivity to equity issuances and as our share price draws closer
to fair value. We believe we have upwards of $100 million of
additional assets, both the identified non-core properties and a
few industrial distribution properties, that we can recycle
advantageously into manufacturing properties while we wait for the
equity markets to regain their footing. We believe our investor
outreach efforts, which we discuss below, have helped raise
awareness of our historical mispricing and have recently closed the
value gap. Going forward, we will identify those opportunities
where issuing shares via our ATM makes sense from a price
standpoint but also to further our goal of increasing our tradeable
float. Though we have no present-day designs to access the equity
markets in the near term, we will be prepared to act efficiently
should the markets improve. Further, we believe that even small
amounts of capital can go far given our discipline and the math of
the denominator effect. By hypothetical example, a small raise of
just $15 million could generate $0.10 of unlevered AFFO per share
and, at today’s P/AFFO, result in a 7%+ increase in our share value
on top of our existing 7%+ dividend rate.
Yes, we will eventually access the equity markets but we feel no
pressure to do so prematurely or excessively.
Debt – Modiv Industrial now has less than $285 million of
indebtedness, 100% of which is fixed rate, with a weighted average
interest rate of 4.52% and a weighted average maturity of 3.6 years
with the earliest meaningful maturity not until 2027. Our debt to
asset ratio is 48%, our Debt to Adjusted EBITDA multiple is 6.7 and
our debt service coverage is 2.3x. These metrics are in line with,
or better than, our previously announced intentions over the past
two years and represent, to us, a thoughtful use of leverage at a
time when equity was unavailable.
Barring a compelling consolidation or M&A opportunity, we do
not see any further benefit in using additional debt and intend to
make single asset purchases on an unlevered basis. As such, it is
our intent to only use the capacity of our $150 million revolver in
those instances where there may be a short-term timing mismatch. We
recently paid down $10 million of mortgage debt and will be focused
on the gradual reduction of our leverage profile over the next
three years. The fruits of that focus will provide the opportunity
for price multiple expansion and a more favorable refinancing
posture when our loans are scheduled to mature.
Through our own prior career experiences, our entire management
team, as well as our board of directors, holds a very healthy
perspective on the use of debt which includes the beliefs that you
should never take on an amount that you cannot handle and that we
must never forget that in risky times it is normal to expect
embedded differences between lenders and borrowers to become more
prominent.
Like the flame from a hot stove, debt can be used to nourish an
enterprise or burn it – we are proactively turning down the
heat.
Strategic Partner – February of this year we informed the
public that we had received some inquiries from institutional
investors about making a strategic investment into Modiv.
Throughout the year we have also had numerous bankers pitch capital
ideas to us with most sounding very similar to the
“Madison-Plymouth” deal from a few years back. We elected not to
spend much time on these concepts as we were focused on our
acquisition pipeline and the portfolio sale of non-core assets to
Generation Income Properties, Inc (NASDAQ: GIPR). In early
September, we began to think more deeply about the concept of
accepting strategic partner capital and what we would want to
accomplish if we did.
Commonly, smaller REITs entertain such capital infusions either
due to financial necessity or some contrived urgency to get bigger
as soon as possible. Modiv doesn’t suffer from any financial
desperation, and we believe it is more intelligent to pursue
actions that make us a better company rather than simply a bigger
company. That said, we understand the benefits of scale
particularly as it relates to tradeable float, industry
consolidation opportunities and, over time, improved cost of
capital. As we currently see it, the litany of structured preferred
deals available to a REIT like us feel a lot like debt in sheep’s
clothing – giving the private equity sponsor equity-like upside
participation and leaving us with debt-like responsibility.
At Modiv we understand that we may owe our lenders, but we know
we must always serve our (equity) owners. As such, we have been
more inclined to explore truer economic joint venture arrangements
whereby we have better alignment of mutual interests and both
parties can achieve success. For a joint venture to work for us,
any strategic partner would need to be more than just money and we
would want to understand that they also believe in our investment
thesis of owning manufacturing assets, that they see long-term
upside value in our equity and that by associating with them we
benefit from a “halo effect” that helps introduce other future
investors to Modiv. Presently we are under numerous nondisclosure
agreements and are having exploratory talks with multiple potential
partners. At this stage, we can offer no outlook as to the
prospects of any future announcement. For those who are interested
or intrigued, please contact us.
We recognize that what we want from a joint venture might not at
all be what a potential strategic partner wants, and we are ok with
that – if it doesn’t happen, then we won’t force it. At the same
time, we also recognize that there is a vast amount of capital out
there with very few good ideas to invest in – we honestly believe
we are one of those good ideas.
Distributions – Based on Modiv’s most recent closing
price on November 10, 2023, our annual cash dividend of $1.15,
distributed in twelve monthly payments, is yielding 7.77% and we
are maintaining a dividend coverage ratio of over 110%. In our
short history we have made 87 consecutive distributions totaling
over $60 million. We feel comfortable with the current strength of
our dividend but feel it can always be stronger. At this juncture,
we do not see a near-term need to increase the cash distribution
rate but, as we previously disclosed, we do anticipate making a
meaningful in-kind distribution of GIPR shares as early as January
2024.
On November 9, 2023, GIPR obtained the necessary approval of its
stockholders to issue up to 3,000,000 shares of its common stock to
redeem the Series A Redeemable Preferred Stock that we received in
partial consideration for our sale of 13 legacy retail and office
assets to GIPR on August 10, 2023. The actual amount of GIPR shares
that could be issued to Modiv ranges from 2.2 million to a maximum
of 3.0 million, dependent upon the 60-day volume weighted average
price (VWAP) of GIPR’s common stock on the date when they might
choose to provide us notice of redemption. Net of any advanced
private-party sales made by us or any technical reasons that may
necessitate holding shares for future sale, the GIPR shares issued
to Modiv would be distributed to all holders of Modiv’s then
outstanding Class C Common Stock and Class C Operating Partnership
Units. Obviously, there is no guarantee that GIPR will submit a
redemption notice and even if they did, the amounts of any future
dividends could change and are subject to the approval by each
respective board of directors.
Based on our current projection, Modiv’s Class C Common Stock
and Class C Operating Partnership Units could potentially receive
anywhere from 0.24 to 0.32 of GIPR shares for every one share/unit
of MDV. Assuming the midpoint of that potential range, the implied
ratio would be approximately 0.28 GIPR shares and would represent a
potential dividend of ~$1.14 based on GIPR’s share price as of
November 10, 2023. When compared to our most recent closing price,
that potential ~$1.14 in-kind dividend would equal a 7.7% special,
one-time dividend rate. For those who don’t know, GIPR is also a
monthly dividend paying stock that currently pays an annualized
dividend of approximately $0.468 per share. So Modiv Class C
holders, over a twelve-month period, could potentially receive
$1.15 (MDV’s cash dividend) + ~$1.14 (GIPR shares) + ~$0.13 (GIPR’s
cash dividend) for a potential total of ~$2.42 – a greater than 16%
annualized dividend yield based on our most recent closing
price.
We will leave it to investors to decide, but we believe our
distribution rate, our growth rate and our upside potential make
for compelling financial reasons to own our shares.
Investor Outreach – On August 14, 2023, when we announced
our second quarter results and our name change to Modiv Industrial,
we also informed the public that we would, for the first time,
begin to actively seek to increase investor awareness. Our initial
outreach efforts have been focused on individual investors and the
financial advisors that advise them. In less than three months we
have already emailed over 30,000 potential investors and held over
2,000 phone conversations. Additionally, we rang the bell at the
New York Stock Exchange on September 29th and participated on a
recent Nareit podcast.
In total, these ongoing efforts have already resulted in a 59%
increase in our trading volume and a 26% positive relative
performance when compared to the FTSE Nareit All Equities Index for
the same time period. Though we are pleased with these results, we
recognize this activity requires a long-term continuous effort to
inform as many investors as possible through our candid and
transparent communication. We recognize that it will take us a long
time before we achieve any semblance of critical mass as pertains
to investor awareness.
We are not presently focused on the institutional investor
community and that is by design. We believe our audience today lies
with individual investors and we hope that as many willing
individual investors can buy our shares before we become a larger
REIT that is held by institutions. Even though we know many of the
portfolio managers at the leading REIT-dedicated investment shops
on a first name basis, we understand the reality of our size, and
more importantly, the limits that result. On more than one occasion
we have received positive institutional feedback which tells us
they are paying attention. We know that when they are ready, they
can make a reverse inquiry via our ATM or participate in any future
follow-on offerings. They know that we are patient and will, in the
meantime, keep our nose to grindstone. Despite not making any
formal efforts to attract the institutional crowd, we do have a
robust schedule of meetings scheduled for our participation at
Nareit’s REITWorld 2023 Investor Conference in Los Angeles, CA,
November 14-16, 2023.
We are a persistent (and candid) bunch, and we know we will find
our following in good time. With GRIT and GRIND, we will GET IT
DONE!” – Aaron Halfacre, CEO of Modiv Industrial.
Conference Call and Webcast
A conference call and audio webcast with analysts and investors
will be held on Monday, November 13, 2023, at 11:00 a.m. Eastern
Time / 8:00 a.m. Pacific Time, to discuss the third quarter 2023
operating results and answer questions.
Live conference call: 1-877-407-0789 at 8:00 a.m. Pacific
Time, Monday, November 13, 2023
Webcast: To listen to the webcast, either live or
archived, please use this link:
https://viavid.webcasts.com/starthere.jsp?ei=1643126&tp_key=7c99a456f0
or visit the investor relations page of Modiv’s website at
www.modiv.com.
About Modiv Industrial
Modiv Industrial, Inc. is an internally managed REIT that is
focused on single-tenant net-lease industrial manufacturing real
estate. The Company actively acquires critical industrial
manufacturing properties with long-term leases to tenants that fuel
the national economy and strengthen the nation’s supply chains.
Driven by an investor-first focus, Modiv Industrial has over $600
million real estate assets (based on estimated fair value)
comprising more than 4.5 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 forwardlooking 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, 2022 filed with the SEC on March 13, 2023. 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 November 13, 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.
AFFO is a measure that is not calculated in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”). See the Reconciliation of Non-GAAP Measures later
in this press release.
The Company defines “initial cap rate” for property acquisitions
as the initial annual cash rent divided by the purchase price of
the property. The Company defines “weighted average cap rate” for
property acquisitions as the average annual cash rent including
rent escalations over the lease term, divided by the purchase price
of the property.
MODIV INDUSTRIAL, INC. Consolidated Statements of
Operations For the Three and Nine Months Ended September 30,
2023 and 2022 (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Rental income
$
12,500,338
$
10,303,402
$
34,648,083
$
30,017,493
Operating expenses: General and administrative
1,735,104
1,838,388
5,240,935
5,559,753
Stock compensation expense
8,469,867
549,240
9,790,206
1,740,852
Depreciation and amortization
4,175,209
3,598,592
11,403,603
10,581,765
Property expenses
1,195,224
1,415,621
4,429,936
5,009,701
Impairment of real estate investment property
-
-
3,499,438
-
Impairment of goodwill
-
-
-
17,320,857
Total operating expenses
15,575,404
7,401,841
34,364,118
40,212,928
(Loss) gain on sale of real estate investments
(1,708,801
)
3,932,028
(1,708,801
)
11,527,185
Operating (loss) income
(4,783,867
)
6,833,589
(1,424,836
)
1,331,750
Other income (expense): Interest income
26,386
1,665
296,921
16,863
Dividend income
190,000
-
190,000
-
Income from unconsolidated investment in a real estate
property
79,164
64,358
207,506
226,690
Interest expense, net of derivative settlements and unrealized gain
on interest rate swaps
(2,922,918
)
(2,514,838
)
(6,761,779
)
(5,280,167
)
Increase in fair value of investment in preferred stock
440,000
-
440,000
-
Loss on early extinguishment of debt
-
-
-
(1,725,318
)
Other
65,993
65,993
197,978
198,129
Other expense, net
(2,121,375
)
(2,382,822
)
(5,429,374
)
(6,563,803
)
Net (loss) income
(6,905,242
)
4,450,767
(6,854,210
)
(5,232,053
)
Less: net loss (income) attributable to noncontrolling interest in
Operating Partnership
1,368,896
(528,540
)
1,535,452
1,180,275
Net (loss) income attributable to Modiv Industrial, Inc.
(5,536,346
)
3,922,227
(5,318,758
)
(4,051,778
)
Preferred stock dividends
(921,875
)
(921,875
)
(2,765,625
)
(2,765,625
)
Net (loss) income attributable to common stockholders
$
(6,458,221
)
$
3,000,352
$
(8,084,383
)
$
(6,817,403
)
Net (loss) income per share attributable to common
stockholders: Basic
$
(0.86
)
$
0.40
$
(1.07
)
$
(0.91
)
Diluted
$
(0.86
)
$
0.35
$
(1.07
)
$
(0.91
)
Weighted-average number of common shares outstanding: Basic
7,548,052
7,449,968
7,537,505
7,486,945
Diluted
7,548,052
10,180,543
7,537,505
7,486,945
Distributions declared per common stock
$
0.2875
$
0.2875
$
0.8625
$
0.9625
MODIV INDUSTRIAL, INC. Condensed Consolidated Balance
Sheets (Unaudited) As of September
30, December 31,
2023
2022
Assets Real estate investments:
Land
$
106,263,557
$
103,657,237
Building and improvements
402,036,084
329,867,099
Equipment
4,429,000
4,429,000
Tenant origination and absorption costs
15,929,385
19,499,749
Total investments in real estate property
528,658,026
457,453,085
Accumulated depreciation and amortization
(47,587,670
)
(46,752,322
)
Total investments in real estate property, net, excluding
unconsolidated investment in real estate property and real estate
investments held for sale, net
481,070,356
410,700,763
Unconsolidated investment in a real estate property
10,035,805
10,007,420
Total real estate investments, net, excluding real estate
investments held for sale, net
491,106,161
420,708,183
Real estate investments held for sale, net
8,628,186
5,255,725
Total real estate investments, net
499,734,347
425,963,908
Cash and cash equivalents
5,641,610
8,608,649
Tenant receivables
11,211,058
7,263,202
Above-market lease intangibles, net
1,332,458
1,850,756
Prepaid expenses and other assets
4,881,383
6,100,937
Investment in preferred stock
10,060,000
-
Interest rate swap derivatives
6,156,179
4,629,702
Other assets related to real estate investments held for sale
46,158
12,765
Total assets
$
539,063,193
$
454,429,919
Liabilities and Equity Mortgage
notes payable, net
$
34,118,748
$
44,435,556
Credit facility revolver
-
3,000,000
Credit facility term loan, net
248,385,927
148,018,164
Accounts payable, accrued and other liabilities
8,893,630
7,649,806
Below-market lease intangibles, net
9,098,703
9,675,686
Interest rate swap derivative
-
498,866
Liabilities related to real estate investments held for sale
162,349
117,881
Total Liabilities
300,659,357
213,395,959
Commitments and contingencies 7.375% Series A
cumulative redeemable perpetual preferred stock, $0.001 par value,
2,000,000 shares authorized, issued and outstanding as of September
30, 2023 and December 31, 2022
2,000
2,000
Class C common stock, $0.001 par value, 300,000,000 shares
authorized; 7,920,926 shares issued and 7,577,416 shares
outstanding as of September 30, 2023 and 7,762,506 shares issued
and 7,512,353 shares outstanding as of December 31, 2022
7,921
7,762
Class S common stock, $0.001 par value, 100,000,000 shares
authorized; no shares issued and outstanding as of September 30,
2023 and December 31, 2022
-
-
Additional paid-in-capital
289,837,352
278,339,020
Treasury stock, at cost, 343,510 and 250,153 shares held as of
September 30, 2023 and December 31, 2022, respectively
(5,290,780
)
(4,161,618
)
Cumulative distributions and net losses
(132,524,459
)
(117,938,876
)
Accumulated other comprehensive income
2,871,866
3,502,616
Total Modiv Industrial, Inc. equity
154,903,900
159,750,904
Noncontrolling interests in the Operating Partnership
83,499,936
81,283,056
Total equity
238,403,836
241,033,960
Total liabilities and equity
$
539,063,193
$
454,429,919
MODIV INDUSTRIAL, INC. Reconciliation of Non-GAAP
Measures - FFO and AFFO For the Three and Nine Months Ended
September 30, 2023 and 2022 (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net (loss) income (in accordance with GAAP)
$
(6,905,242
)
$
4,450,767
$
(6,854,210
)
$
(5,232,053
)
Preferred stock dividends
(921,875
)
(921,875
)
(2,765,625
)
(2,765,625
)
Net (loss) income attributable to common stockholders and Class
C OP Unit holders
(7,827,117
)
3,528,892
(9,619,835
)
(7,997,678
)
FFO adjustments: Depreciation and amortization of real
estate properties
4,175,209
3,598,592
11,403,603
10,581,765
Amortization of lease incentives
40,397
176,296
217,537
323,347
Depreciation and amortization for unconsolidated investment in a
real estate property
187,479
192,551
567,721
573,487
Impairment of real estate investment property
-
-
3,499,438
-
Loss (gain) on sale of real estate investments, net
1,708,801
(3,932,028
)
1,708,801
(11,527,185
)
FFO attributable to common stockholders and Class C OP Unit
holders
(1,715,231
)
3,564,303
7,777,265
(8,046,264
)
AFFO adjustments: Impairment of goodwill
-
-
-
17,320,857
Stock compensation
8,469,867
549,240
9,790,206
1,740,852
Deferred financing costs
165,709
101,783
556,134
1,470,289
Non-recurring loan prepayment penalties
-
-
-
615,336
Swap termination costs
-
-
-
733,000
Due diligence expenses, including abandoned pursuit costs
1,208
44,863
347,598
636,171
Deferred rents
(1,772,403
)
(976,420
)
(4,528,120
)
(2,593,698
)
Unrealized gain on interest rate swap valuation
(795,425
)
59,000
(2,781,838
)
(1,319,013
)
Amortization of (below) above market lease intangibles, net
(204,011
)
(214,889
)
(596,194
)
(862,861
)
Unrealized gain on investment in preferred stock
(440,000
)
-
(440,000
)
-
Other adjustments for unconsolidated investment in a real estate
property
11,819
(188
)
35,457
(564
)
AFFO attributable to common stockholders and Class C OP Unit
holders
$
3,721,533
$
3,127,692
$
10,160,508
$
9,694,105
Weighted average shares outstanding: Basic
7,548,052
7,449,968
7,537,505
7,486,945
Fully Diluted (1)
11,128,772
10,180,543
11,022,386
10,217,361
FFO Per Share: Basic
$
(0.23
)
$
0.48
$
1.03
$
(1.07
)
Fully Diluted
$
(0.23
)
$
0.35
$
0.71
$
(1.07
)
AFFO Per Share Basic
$
0.49
$
0.42
$
1.35
$
1.29
Fully Diluted
$
0.33
$
0.31
$
0.92
$
0.95
(1) Includes the Class C, Class M, Class P and Class R OP
Units (time vesting and performance) 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, and write-offs
of due diligence expenses for abandoned pursuits. We also believe
that AFFO is a recognized measure of sustainable operating
performance by the REIT industry. Further, we believe AFFO is
useful in comparing the sustainability of our operating performance
with the sustainability of the operating performance of other real
estate companies. Management believes that AFFO is a beneficial
indicator of our ongoing portfolio performance and ability to
sustain our current distribution level. More specifically, AFFO
isolates the financial results of our operations. AFFO, however, is
not considered an appropriate measure of historical earnings as it
excludes certain significant costs that are otherwise included in
reported earnings. Further, since the measure is based on
historical financial information, AFFO for the period presented may
not be indicative of future results or our future ability to pay
our dividends.
By providing FFO and AFFO, we present information that assists
investors in aligning their analysis with management’s analysis of
long-term operating activities. For all of these reasons, we
believe the nonGAAP measures of FFO and AFFO, in addition to income
(loss) from operations, net income (loss) and cash flows from
operating activities, as defined by GAAP, are helpful supplemental
performance measures and useful to investors in evaluating the
performance of our real estate portfolio. However, a material
limitation associated with FFO and AFFO is that they are not
indicative of our cash available to fund distributions since other
uses of cash, such as capital expenditures at our properties and
principal payments of debt, are not deducted when calculating FFO
and AFFO. AFFO is useful in assisting management and investors in
assessing our ongoing ability to generate cash flow from operations
and continue as a going concern in future operating periods.
Therefore, FFO and AFFO should not be viewed as a more prominent
measure of performance than income (loss) from operations, net
income (loss) or cash flows from operating activities and each
should be reviewed in connection with GAAP measurements.
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 INDUSTRIAL, INC. Reconciliation of Non-GAAP
Measures - Adjusted EBITDA For the Three and Nine Months
Ended September 30, 2023 and 2022 (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net (loss) income (in accordance with GAAP)
$
(6,905,242
)
$
4,450,767
$
(6,854,210
)
$
(5,232,053
)
Depreciation and amortization
4,175,209
3,598,592
11,403,603
10,581,765
Depreciation and amortization for unconsolidated investment in a
real estate property
187,479
192,551
567,721
573,487
Interest expense, net of derivative settlements and unrealized gain
on interest rate swaps
2,922,918
2,514,838
6,761,779
5,280,167
Loss on early extinguishment of debt
-
-
-
1,725,318
Interest expense on unconsolidated investment in real estate
property
96,375
98,624
287,793
294,404
Impairment of real estate investment property
-
-
3,499,438
-
Impairment of goodwill
-
-
-
17,320,857
Stock compensation expense
8,469,867
549,240
9,790,206
1,740,852
Due diligence expenses, including abandoned pursuit costs
1,208
44,863
347,598
636,171
Loss (gain) on sale of real estate investments, net
1,708,801
(3,932,028
)
1,708,801
(11,527,185
)
Adjusted EBITDA
$
10,656,615
$
7,517,446
$
27,512,730
$
21,393,783
Annualized Adjusted EBITDA
$
42,626,460
$
30,069,784
$
36,683,640
$
28,525,044
Net debt: Consolidated debt
$
284,284,849
$
201,365,536
$
284,284,849
$
201,365,536
Debt of unconsolidated investment in real estate property (a)
9,315,322
9,544,130
9,315,322
9,544,130
Consolidated cash and cash equivalents
(5,641,610
)
(5,726,888
)
(5,641,610
)
(5,726,888
)
Cash of unconsolidated investment in real estate property (a)
(387,278
)
(341,007
)
(387,278
)
(341,007
)
$
287,571,283
$
204,841,771
$
287,571,283
$
204,841,771
Net debt / Adjusted EBITDA 6.7x 6.8x 7.8x 7.2x
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231111244092/en/
Inquiries: management@modiv.com
Modiv Industrial (NYSE:MDV)
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