Modiv, Inc. (NYSE:MDV) Q3 2022 Earnings Conference Call November 14, 2022 12:00 PM ET Company Participants Margaret Boyce - IR Aaron Halfacre - CEO Ray Pacini - CFO Conference Call Participants Gaurav Mehta - EF Hutton Rob Stevenson - Janney James Allen Villard - Ladenburg Thalmann Operator Good day, and welcome to Modiv's Third Quarter 2022 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions]. On today's call, management will provide prepared remarks ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (State or other jurisdiction of incorporation or organization) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to____________ Commission file number: 001-40814 MODIV INC. (E ...

MODIVII' Confidential EARNINGS PRESENTATION Q2 2022 DISCLOSURE Certain statements contained in this presentation and the accompanying oral presentation, other than historical facts, may be considered forward-looking statements within the meaning of the Securities Act of 1933, as amended, Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our beliefs, assumptions and expectations of the fu ...

Financial Data and Key Metrics Changes - Adjusted funds from operations (AFFO) increased by 18% to $3.6 million in Q2 2022, compared to $3 million in Q2 2021 [22] - Total revenues grew by 14% to $10.4 million in Q2 2022, up from $9.1 million in the same quarter last year [23] - Year-to-date AFFO increased by 25% to $6.6 million, or $0.64 per diluted share, from $5.3 million, or $0.59 per diluted share, in the first half of 2021 [22] - General and administrative (G&A) costs decreased to $1.6 million in Q2 2022 from $1.9 million in Q2 2021 [24] Business Line Data and Key Metrics Changes - The company completed $162 million in acquisitions year-to-date at an 8.2% blended weighted average cap rate [11] - Disposed of four office properties for total proceeds of $47 million, excluding a pending disposition [11][27] - The portfolio now consists of 48 properties, with 26 industrial properties representing approximately 51% of the portfolio based on annual base rent [28] Market Data and Key Metrics Changes - The company noted a slowdown in the real estate transaction market due to volatility in interest rates and inflation, with a cautious approach to acquisitions [9] - Cap rates for deals have seen a significant increase, with many opportunities presenting cap rates in the 7% range [46] Company Strategy and Development Direction - The company is focused on exiting non-core office properties and shifting towards industrial and select retail assets [11] - Management emphasized the importance of patience and discipline in their investment strategy, particularly in the current volatile market [9][12] - The company aims to increase its portfolio's resilience by focusing on longer leases and sustainable industries [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term strategy despite current market volatility, anticipating a pickup in deal volume as market conditions stabilize [17] - The company reaffirmed its 2022 AFFO guidance in the range of $1.26 to $1.36 per diluted share, with expectations to exceed the $50 million acquisition target [33] Other Important Information - The company declared dividends for common shares of approximately $0.096 for July, August, and September, representing an annualized dividend yield of over 7.4% [32] - The leverage ratio as of June 30, 2022, was 38%, with a target of 40% or lower in the long term [30] Q&A Session Summary Question: Can you provide insights on the transaction market and cap rate movements? - Management noted that cap rates were in the mid to high fives in Q4 2021, moving to low sixes in Q1 2022, and observed a significant jump to the 7% range in Q2 2022 [42][46] Question: Why is the cap rate on the Valtir acquisition over 9%? - The higher cap rate was attributed to the properties being less critical and in a more tired condition, but located in areas with potential for development [50][51] Question: What premium can be expected for manufacturing industrial properties over big box warehouses? - Management indicated a significant premium for manufacturing properties, as they do not focus on distribution assets, which tend to have tighter cap rates [55][56] Question: What are the company's thoughts on retail acquisitions moving forward? - The company remains selective in retail acquisitions, having made significant purchases but not currently finding compelling opportunities in smaller retail assets [67]

PART I [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company's total assets increased to **$456.3 million** as of June 30, 2022, from **$428.5 million** at year-end 2021, primarily driven by real estate acquisitions. For the six months ended June 30, 2022, the company reported a net loss of **$9.7 million**, largely due to a **$17.3 million** goodwill impairment, compared to a net loss of **$1.9 million** in the prior-year period. Despite the net loss, cash flow from operations increased to **$5.1 million** from **$3.1 million** year-over-year [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | June 30, 2022 ($) | December 31, 2021 ($) | | :--- | :--- | :--- | | Total real estate investments | $427.1 million | $337.6 million | | Total assets | $456.3 million | $428.5 million | | Total mortgage notes payable, net | $44.6 million | $173.9 million | | Credit facility term loan, net | $148.9 million | $0 | | Total liabilities | $219.1 million | $206.1 million | | Total equity | $237.1 million | $222.4 million | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | Six Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | :--- | :--- | | Rental income | $10.4 million | $9.1 million | $20.0 million | $18.1 million | | Impairment of goodwill | $0 | $0 | $17.3 million | $0 | | Net income (loss) | $2.4 million | $(1.0 million) | $(9.7 million) | $(1.9 million) | | Net income (loss) per share - Basic | $0.17 | $(0.13) | $(1.31) | $(0.25) | | Net income (loss) per share - Diluted | $0.14 | $(0.13) | $(1.31) | $(0.25) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Metric | Six Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5.1 million | $3.1 million | | Net cash (used in) provided by investing activities | $(58.4 million) | $14.6 million | | Net cash provided by (used in) financing activities | $6.6 million | $(15.7 million) | | Net (decrease) increase in cash | $(46.7 million) | $2.0 million | [Business and Organization](index=13&type=section&id=Note%201.%20Business%20and%20Organization) - Modiv is an internally-managed REIT that became self-managed on December 31, 2019. The company holds its investments primarily through the Modiv Operating Partnership, LP, in which it held an approximate **72% interest** as of June 30, 2022[31](index=31&type=chunk)[32](index=32&type=chunk) - As of June 30, 2022, the company's portfolio consisted of **43 real estate properties** totaling approximately **2.9 million square feet**. The portfolio is diversified by property type: **48% industrial**, **19% retail**, and **33% office**, based on annual base rent[33](index=33&type=chunk) - The company's Class C common stock began trading on the NYSE under the symbol "MDV" on February 11, 2022. In connection with the listing, all Class S common stock was converted into Class C common stock[30](index=30&type=chunk)[36](index=36&type=chunk) - On February 15, 2022, the board authorized a share repurchase program of up to **$20 million** through December 31, 2022. From February 15 to June 30, 2022, the company repurchased **187,430 shares** for a total of **$3.3 million**[41](index=41&type=chunk)[42](index=42&type=chunk) [Real Estate Investments](index=22&type=section&id=Note%203.%20Real%20Estate%20Investments) Real Estate Acquisitions (Six Months Ended June 30, 2022) | Property Type | Number of Properties | Total Acquisition Price ($) | | :--- | :--- | :--- | | Industrial | 9 | $63.1 million | | Retail | 1 | $69.4 million | | **Total** | **10** | **$132.5 million** | Real Estate Dispositions (Six Months Ended June 30, 2022) | Property Type | Number of Properties | Contract Sale Price ($) | Gain on Sale ($) | | :--- | :--- | :--- | :--- | | Office | 4 | $37.8 million | $6.3 million | | Flex | 1 | $8.8 million | $2.1 million | | **Total** | **5** | **$46.5 million** | **$8.4 million** | - As of June 30, 2022, the company had significant asset concentration in two tenants. The KIA property in Carson, CA represented **15.1% of total assets**, and the eight Lindsay properties represented **12.0% of total assets**[103](index=103&type=chunk) - The company executed lease extensions for three properties during the first six months of 2022 with tenants Cummins, ITW Rippey, and Williams Sonoma, resulting in an average lease term increase of **3.7 years** and an average annual rent increase of **1.9%**[107](index=107&type=chunk) [Goodwill](index=29&type=section&id=Note%205.%20Goodwill) - The company recorded a full impairment of goodwill, resulting in a non-cash charge of **$17.3 million** for the six months ended June 30, 2022. The carrying value of goodwill was reduced to zero[121](index=121&type=chunk) - The impairment was triggered by a decline in the company's stock price following its NYSE listing, which caused its market capitalization to fall below the book value of its equity as of March 31, 2022[121](index=121&type=chunk) [Debt](index=31&type=section&id=Note%207.%20Debt) - On January 18, 2022, the company entered into a new **$250 million credit facility**, consisting of a **$100 million four-year revolver** and a **$150 million five-year term loan**[135](index=135&type=chunk) - Proceeds from the new credit facility were used to repay **20 property mortgages** aggregating **$153.4 million**, significantly reducing the number of individual mortgage notes from **23** at year-end 2021 to **3** at June 30, 2022[141](index=141&type=chunk)[128](index=128&type=chunk) - As of June 30, 2022, the company was in compliance with all debt covenants, which include a minimum fixed charge coverage of **1.50x** and maximum leverage of **60% of the borrowing base**[138](index=138&type=chunk)[147](index=147&type=chunk) - The company entered into a five-year interest rate swap effective May 31, 2022, to fix the interest rate on the **$150 million Term Loan** at **3.858%**[136](index=136&type=chunk)[151](index=151&type=chunk) [Equity and Distributions](index=36&type=section&id=Note%209.%20Preferred%20Stock%20and%20Common%20Stock) - The company has **2,000,000 shares** of **7.375% Series A Cumulative Redeemable Perpetual Preferred Stock** outstanding, which pay a cumulative dividend of **$1.84375 per share annually**[156](index=156&type=chunk)[161](index=161&type=chunk) - In February 2022, the company completed a listed offering of **40,000 shares** of Class C common stock at **$25.00 per share**, with the primary purpose of providing liquidity to existing stockholders[169](index=169&type=chunk) - The board declared quarterly dividends of **$0.9 million** on its Series A Preferred Stock for both Q1 and Q2 2022[168](index=168&type=chunk) [Subsequent Events](index=42&type=section&id=Note%2014.%20Subsequent%20Events) - In July and August 2022, the company acquired **six industrial properties** in two separate sale-leaseback transactions for a total purchase price of approximately **$28.7 million**[201](index=201&type=chunk)[202](index=202&type=chunk) - On July 12, 2022, the company entered into an agreement to sell its Williams Sonoma-leased property in Las Vegas for **$9.3 million**, with the sale scheduled to close by August 26, 2022[204](index=204&type=chunk) - Between July 1 and August 9, 2022, the company repurchased an additional **32,713 shares** of its Class C common stock for **$0.5 million** under its share repurchase program[200](index=200&type=chunk) - The company drew a total of **$28 million** on its revolver in July 2022 to fund the Producto and Valtir acquisitions[205](index=205&type=chunk) [Management's Discussion and Analysis (MD&A)](index=44&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's transition to a publicly-listed REIT and its strategy of focusing on industrial properties while divesting office assets. The new **$250 million credit facility** established in January 2022 provided significant liquidity and enabled a major debt refinancing. Results for the first half of 2022 were marked by strong rental income growth from acquisitions, offset by a significant non-cash goodwill impairment charge. Management highlights the growth in Adjusted Funds from Operations (AFFO) as a key performance indicator, which increased to **$0.64 per diluted share** for the first half of 2022 from **$0.59** in the prior year period [Overview and Strategy](index=44&type=section&id=MD%26A%20-%20Overview%20and%20Strategy) - The company's primary business is acquiring, financing, and owning single-tenant net-lease industrial, retail, and office properties, with a focus on strategically important and mission-critical assets[220](index=220&type=chunk) - The investment strategy is focused on acquiring a diversified portfolio of income-generating commercial real estate, with a current emphasis on increasing allocations to the industrial sector and decreasing allocations to the office sector[228](index=228&type=chunk)[229](index=229&type=chunk) - As of June 30, 2022, the portfolio consisted of **43 operating properties**, was **100% occupied**, and had a weighted average remaining lease term of approximately **10.5 years**[221](index=221&type=chunk)[222](index=222&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=MD%26A%20-%20Liquidity%20and%20Capital%20Resources) - The primary source of liquidity is the **$250 million credit facility** established in January 2022, which was used to repay approximately **$153.4 million** in existing mortgages and the prior line of credit[233](index=233&type=chunk)[238](index=238&type=chunk) - The company's leverage ratio was **38%** as of June 30, 2022. The board has approved a maximum leverage of **55% of asset value**, but the long-term target is **40% or lower**[241](index=241&type=chunk) - The company has an active share repurchase program, having repurchased **220,143 shares** for **$3.8 million** between its inception in February 2022 and August 9, 2022[250](index=250&type=chunk) - An "UPREIT" transaction was completed for the KIA property acquisition, where the seller received **1,312,382 Class C OP Units** valued at **$25.00 per unit**[251](index=251&type=chunk) [Results of Operations](index=55&type=section&id=MD%26A%20-%20Results%20of%20Operations) Comparison of Q2 2022 vs. Q2 2021 | Metric | Q2 2022 ($) | Q2 2021 ($) | Change ($) | Change % | | :--- | :--- | :--- | :--- | :--- | | Rental Income | $10.4 million | $9.1 million | +$1.3 million | +14% | | General & Admin | $1.6 million | $1.9 million | -$0.3 million | -16% | | Interest Expense | $1.2 million | $2.1 million | -$0.9 million | -43% | | Net Income (Loss) | $2.4 million | $(1.0 million) | +$3.4 million | N/A | Comparison of H1 2022 vs. H1 2021 | Metric | H1 2022 ($) | H1 2021 ($) | Change ($) | Change % | | :--- | :--- | :--- | :--- | :--- | | Rental Income | $20.0 million | $18.1 million | +$1.9 million | +11% | | Goodwill Impairment | $17.3 million | $0 | +$17.3 million | N/A | | Net Income (Loss) | $(9.7 million) | $(1.9 million) | -$7.8 million | N/A | | Gain on Sale | $8.4 million | $0.3 million | +$8.1 million | +2799% | - The increase in rental income was primarily driven by acquisitions made in late 2021 and H1 2022, partially offset by property dispositions[266](index=266&type=chunk)[277](index=277&type=chunk) - The net loss for H1 2022 was driven by the **$17.3 million non-cash goodwill impairment charge** recognized in Q1 2022[284](index=284&type=chunk) [Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)](index=52&type=section&id=MD%26A%20-%20FFO%20and%20AFFO) FFO and AFFO Per Share (Diluted) | Metric | Q2 2022 ($) | Q2 2021 ($) | H1 2022 ($) | H1 2021 ($) | | :--- | :--- | :--- | :--- | :--- | | FFO per Share | $0.43 | $0.26 | $(1.65) | $0.56 | | AFFO per Share | $0.35 | $0.34 | $0.64 | $0.59 | - Management uses FFO and AFFO as supplemental non-GAAP measures to evaluate operating performance. AFFO is considered a beneficial indicator of ongoing portfolio performance and the ability to sustain distributions[258](index=258&type=chunk) - The significant negative FFO per share in H1 2022 is a direct result of the **$17.3 million goodwill impairment**, which is added back for the AFFO calculation[262](index=262&type=chunk) [Distributions](index=59&type=section&id=MD%26A%20-%20Distributions) - The company pays monthly distributions on its common stock. For 2022, the rate is **$0.095833 per share per month**, equivalent to an annualized rate of **$1.15 per share**[296](index=296&type=chunk)[198](index=198&type=chunk) - Quarterly dividends of **$0.9 million** were declared and paid on the Series A Preferred Stock[292](index=292&type=chunk) Distribution Sources (Six Months Ended June 30, 2022) | Metric | Amount ($) | | :--- | :--- | | Total Distributions Declared | $5.1 million | | Cash Flows from Operating Activities | $5.1 million | | Distributions Paid from Cash | $3.5 million | | Reinvested Distributions | $2.2 million | [Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2022. They concluded that these controls were effective at a reasonable assurance level. No material changes to the internal control over financial reporting were identified during the quarter - Based on an evaluation as of June 30, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[326](index=326&type=chunk) - There were no changes in internal control over financial reporting during the second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, internal controls[327](index=327&type=chunk) PART II [Risk Factors and Legal Proceedings](index=66&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes to the risk factors previously disclosed in its 2021 Annual Report on Form 10-K. Additionally, the company is not a party to any legal proceedings that are expected to have a material adverse effect on its business or financial condition - There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2021[329](index=329&type=chunk) - The company is not a party to any legal proceeding, nor is it aware of any pending or threatened litigation that could have a material adverse effect on its business[176](index=176&type=chunk)[328](index=328&type=chunk) [Share Repurchases and Unregistered Sales](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company was active in its share repurchase program during the second quarter of 2022, buying back **136,567 shares** of its common stock for a total of **$2.4 million**. The average price paid per share was **$17.58**. No unregistered shares were issued during the quarter Share Repurchase Activity (Q2 2022) | Month | Shares Repurchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | April 2022 | 86,252 | $18.45 | | May 2022 | 22,775 | $16.81 | | June 2022 | 27,540 | $15.51 | | **Total** | **136,567** | **$17.58** | - The board authorized a **$20 million share repurchase program** on February 15, 2022, effective through December 31, 2022[332](index=332&type=chunk) - No unregistered shares were issued during the three months ended June 30, 2022[331](index=331&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to____________ Commission file number: 001-40814 MODIV INC. (Exact name of registrant as specified in its charter) Maryland 47-41 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ________________________________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-40814 ____________________________________________________ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to____________ Commission file number: 001-40814 MODIV INC. (Exact name of registrant as specified in its charter) Maryland 4 ...

PART I - FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Modiv Inc.'s unaudited financial statements for June 2021 reflect decreased total assets and a significantly improved net loss compared to the prior year [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows total assets decreased by June 2021, primarily due to reduced real estate investments, with corresponding shifts in liabilities and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total real estate investments | $344,456 | $364,045 | | Cash and cash equivalents | $7,866 | $8,248 | | **Total assets** | **$389,555** | **$407,433** | | Total mortgage notes payable, net | $185,958 | $185,014 | | **Total liabilities** | **$211,100** | **$217,181** | | **Total equity** | **$168,041** | **$182,887** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations shows a significant reduction in net loss for H1 2021, primarily due to the absence of prior-year impairment charges, despite a decrease in rental income Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Rental income | $9,173 | $9,277 | $18,214 | $20,331 | | Total expenses | $10,250 | $11,608 | $21,093 | $71,511 | | Impairment of goodwill and intangible assets | $0 | $0 | $0 | $34,572 | | **Net loss** | **($1,002)** | **($2,210)** | **($1,905)** | **($51,033)** | | **Net loss per share** | **($0.13)** | **($0.28)** | **($0.25)** | **($6.39)** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations remained stable, while investing activities significantly shifted to a cash source due to property sales, and financing activities primarily funded share repurchases and debt repayments Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,083 | $3,383 | | Net cash provided by (used in) investing activities | $14,624 | ($3,694) | | Net cash used in financing activities | ($15,711) | ($2,547) | | **Net increase (decrease) in cash** | **$1,997** | **($2,858)** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business organization, accounting policies, and financial activities, including a 1:3 reverse stock split, property sales, PPP loan forgiveness, and subsequent portfolio changes - The company effected a **1:3 reverse stock split** of its Class C and Class S common stock on February 1, 2021[33](index=33&type=chunk)[57](index=57&type=chunk) - The company terminated its public Follow-on Offering on January 27, 2021, and commenced a private offering for accredited investors on February 1, 2021, which was subsequently terminated on August 12, 2021[47](index=47&type=chunk) - As of June 30, 2021, the portfolio comprised **38 properties** (12 retail, 14 office, 12 industrial) totaling approximately **2.3 million square feet**[36](index=36&type=chunk) - In Q1 2021, the company sold three retail properties for total proceeds of **$13.7 million**, resulting in a gain of **$289,642**[116](index=116&type=chunk) - A **$517,000** Paycheck Protection Program (PPP) loan was forgiven in February 2021 and recorded as other income[163](index=163&type=chunk) - Subsequent to quarter-end, the company sold its Cedar Park, Texas property for **$10 million** and acquired a restaurant property in San Antonio, Texas for **$3.6 million**[207](index=207&type=chunk)[209](index=209&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses performance, noting decreased rental income but a significantly narrowed net loss due to the absence of prior-year impairment charges, while focusing on liquidity through property sales and debt management [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is driven by property sales, debt, and equity offerings, with H1 2021 seeing increased share repurchases, a new credit facility, and a leverage ratio of **49%** - The company's leverage ratio was **49%** as of June 30, 2021, against a maximum policy of **55%** of tangible assets[253](index=253&type=chunk) - A new **$22 million** credit facility was established with Banc of California on March 29, 2021, replacing a prior facility[256](index=256&type=chunk) - During H1 2021, the company sold three retail properties for net proceeds of **$10.7 million** and refinanced six mortgage notes[259](index=259&type=chunk)[260](index=260&type=chunk) - Share repurchases increased to approximately **$13.0 million** in H1 2021 from **$10.0 million** in H1 2020, while capital raised from offerings decreased by **67%** to **$4.6 million**[263](index=263&type=chunk) [Funds from Operations and Adjusted Funds from Operations](index=54&type=section&id=Funds%20from%20Operations%20and%20Adjusted%20Funds%20from%20Operations) FFO significantly recovered to **$5.4 million** in H1 2021 from a prior-year loss, while AFFO was **$5.2 million**, reflecting improved operational performance FFO and AFFO (in thousands, except per share data) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net loss | ($1,905) | ($51,033) | | **FFO** | **$5,351** | **($42,449)** | | **AFFO** | **$5,234** | **$6,408** | | FFO Per Share, Fully Diluted | $0.60 | ($4.62) | | AFFO Per Share, Basic | $0.69 | $0.80 | [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Operational results show a **10%** decrease in rental income due to property sales, a **25%** increase in G&A expenses, and a **40%** decrease in interest expense, alongside impairment reversals and gains from property sales and PPP loan forgiveness Key Operational Changes - H1 2021 vs H1 2020 (in thousands) | Item | H1 2021 | H1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Rental Income | $18,214 | $20,331 | (10%) | | General & Administrative | $6,159 | $4,924 | 25% | | Interest Expense | $3,880 | $6,464 | (40%) | | Impairment of Real Estate | ($401) | $9,507 | N/A | | Impairment of Goodwill/Intangibles | $0 | $34,572 | (100%) | [Distributions](index=60&type=section&id=Distributions) Total distributions of **$4.0 million** were declared in H1 2021, fully funded by net rental income, with the daily distribution rate increased effective October 1, 2021 Distributions Declared (in thousands) | Period | Total Distributions Declared | Cash Paid | Reinvested | | :--- | :--- | :--- | :--- | | Q1 2021 | $1,992 | $891 | $1,131 | | Q2 2021 | $1,977 | $835 | $1,131 | - All distributions declared in 2021 and 2020 were funded from net rental income received, with no use of offering proceeds[310](index=310&type=chunk) - The daily distribution rate was increased to **$0.00315070** effective October 1, 2021[310](index=310&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - The company is a smaller reporting company and is not required to provide this disclosure[333](index=333&type=chunk) [Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2021[335](index=335&type=chunk) - No material changes to internal control over financial reporting occurred during the three months ended June 30, 2021[336](index=336&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference, detailing a lawsuit against the company's former advisor, to which the company is not a party, now compelled to arbitration - A lawsuit was filed against the company's former advisor by a former employee; the company is not a party, and the matter has been compelled to arbitration[190](index=190&type=chunk)[337](index=337&type=chunk) [Risk Factors](index=66&type=section&id=Item%201A.%20Risk%20Factors) A new material risk factor concerns the transition away from LIBOR, which could adversely affect financial instruments and increase hedging difficulty - A key risk is the uncertainty surrounding the replacement of LIBOR, which is scheduled to be discontinued, potentially affecting financial obligations and creating operational and hedging risks[338](index=338&type=chunk)[339](index=339&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Q2 2021 saw unregistered sales of Class C and S common stock, including **28,724** shares for **$671,673** via a private offering, alongside the repurchase of **115,552** shares for approximately **$2.8 million** - In Q2 2021, the company sold **28,724** shares of Class C common stock for **$671,673** through its private offering to accredited investors[344](index=344&type=chunk) Share Repurchases - Q2 2021 | Month | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2021 | 39,079 | $22.96 | | May 2021 | 35,533 | $24.56 | | June 2021 | 40,940 | $24.56 | | **Total** | **115,552** | | [Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section indexes all exhibits filed with or incorporated by reference into the Quarterly Report on Form 10-Q, including corporate governance documents and officer certifications - The report includes various exhibits, such as Articles of Amendment, Amended and Restated Bylaws, Distribution Reinvestment Plans, Share Repurchase Programs, and Sarbanes-Oxley Act certifications[357](index=357&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to____________ Commission file number: 000-55776 MODIV INC. (Exact name of registrant as specified in its charter) Maryland 47-41 ...