Modiv(MDV) - 2024 Q4 - Annual Report

Financial Performance - Funds from Operations (FFO) for the year ended December 31, 2024, was $16.802 million, compared to$10.175 million in 2023, reflecting an increase in operating performance [244]. - Adjusted Funds From Operations (AFFO) for 2024 was $14.988 million, slightly up from$14.673 million in 2023, indicating stable operating performance [244]. - Total rental income for the year ended December 31, 2024 was $46.5 million, a decrease of$0.4 million or 1% compared to $46.9 million in 2023, primarily due to the sale of properties [263]. - The company reported net cash provided by operating activities of$18.241 million in 2024, an increase from $16.579 million in 2023 [256]. - Interest income increased to$0.5 million in 2024 from $0.3 million in 2023, primarily due to higher interest rates on cash and proceeds from property sales [270]. - Dividend income decreased to$0.1 million in 2024 from $0.5 million in 2023, reflecting reduced dividends from GIPR preferred stock [271]. - Interest expense rose to$16.2 million in 2024 from $13.8 million in 2023, driven by increased interest rates and larger outstanding balances [273]. - The gain on sale of real estate investments was$3.4 million for the year ended December 31, 2024, compared to a loss of $1.7 million for 2023 [269]. Investment Strategy - The company’s primary investment objectives include providing attractive growth in Adjusted Funds from Operations (AFFO) and sustainable cash distributions [209]. - The company’s focus for future acquisitions is on critical industrial manufacturing properties with long-term leases to tenants [206]. - The company plans to acquire an industrial property for$6.1 million, with an initial cap rate of 8.00%, expected to close by March 14, 2025 [234]. - The percentage of Annual ABR from industrial core properties increased from 76% in 2023 to 78% in 2024, reflecting a strategic shift towards industrial manufacturing properties [247]. - In 2024, the company acquired one industrial manufacturing property and sold two non-core properties, resulting in 78% of the portfolio being industrial properties and 22% non-core properties as of December 31, 2024 [249]. Liquidity and Capital Structure - The company reported a leverage ratio of 47.6% as of December 31, 2024, with an aggregate of $250.0 million in new swap agreements fixing the Secured Overnight Financing Rate (SOFR) at 2.45$30.0 million of borrowing capacity available under its Credit Facility, which may be utilized for attractive investment opportunities [218]. - The company expects to maintain adequate liquidity to meet cash requirements for the next 12 months and beyond, funded by internally generated funds [219]. - The company’s Credit Facility includes a $280.0 million line of credit, with a$30.0 million revolving line of credit and a $250.0 million term loan [222]. - The company had$30.0 million in unused capacity on its Revolver as of the date of the Annual Report, which can be utilized for real estate investments and repositioning properties [230]. - The company is expected to incur $3.0 million in tenant improvements in 2025, funded from cash on hand and operating cash flow [238]. Property Management and Operations - The company successfully negotiated lease extensions for six properties during the years ended December 31, 2024, and 2023, despite potential future declines in rental rates and economic conditions [214]. - The company has two leases expiring on July 31, 2025, for properties leased to Costco and Solar Turbines, which may impact future cash flows [213]. - The weighted average lease term (WALT) for the company's properties was approximately 13.8 years as of December 31, 2024 [247]. - General and administrative expenses decreased by$0.3 million or 5% year-over-year, totaling $6.3 million in 2024 compared to$6.6 million in 2023 [264]. - Stock compensation expense significantly decreased by $9.6 million or 86$1.6 million in 2024 compared to $11.2 million in 2023 [265]. - Depreciation and amortization expense increased by$1.0 million or 7% year-over-year, totaling $16.6 million in 2024 compared to$15.6 million in 2023 [266]. - Property expenses decreased by $1.5 million or 30$3.6 million in 2024 compared to $5.2 million in 2023 [267]. Portfolio Management - The company disposed of 14 non-core properties in 2023 for aggregate contract sales prices of$47.5 million, resulting in net proceeds of $44.4 million and a net loss on sales of$1.7 million [236]. - The company sold 14 properties in August 2023 and two properties in the first quarter of 2024, reflecting its ongoing portfolio transformation strategy [261]. - The total investments in real estate property as of December 31, 2024 were $393.488 million for industrial core properties and$108.200 million for non-core properties [252]. Market Conditions and Risks - The company anticipates potential impacts from inflation and interest rates, which may affect future operating results and liquidity [210][211]. - The company monitors real estate properties for impairment indicators, which may involve significant management judgment and assumptions [277]. - The company allocates purchase prices of acquired properties based on estimated fair values, impacting revenue and expense recognition timing [276]. - The company is classified as a smaller reporting company, thus not applicable for certain market risk disclosures [280].