Generation me Properties(GIPR) - 2024 Q4 - Annual Results

Annual Highlights Generation Income Properties reported a net loss of $8.44 million in FY2024 despite revenue growth to $9.8 million, with Core FFO at $179 thousand and Core AFFO at $373 thousand Key Financial Results (FY 2024 vs FY 2023) | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $9.8 million | $7.6 million | +28.9% | | Net Loss Attributable to Common Shareholders | ($8.44 million) | ($6.2 million) | Increased Loss | | Basic & Diluted Loss Per Share | ($1.64) | ($2.46) | Loss per share decreased | | Core FFO | $179 thousand | $534 thousand | -66.5% | | Core AFFO | $373 thousand | $706 thousand | -47.2% | - The property portfolio is 99% leased and occupied, with tenants being 100% rent paying and approximately 60% of annualized rent from investment-grade credit ratings[5] - The company's largest tenants, General Service Administration, Dollar General, and the City of San Antonio, contribute about 39% of the portfolio's annualized base rent[5] - Liquidity is limited, with total cash and cash equivalents at $647 thousand as of December 31, 2024, against total mortgage loans of $56.3 million[5] Letter from the CEO CEO David Sobelman addresses the all-time low stock price, attributing it to the dividend suspension, and outlines a 2025 plan to return to profitability and reinstate the dividend Stock Price and Dividend Policy The CEO links the company's all-time low stock price to the 2024 dividend suspension, prioritizing profitability for reinstatement - The CEO acknowledges the stock price is at an all-time low, primarily due to the absence of a dividend, which the market expects from REIT investments[6][9] - The dividend was suspended in 2024 because it was not fully covered by company profits, prioritizing long-term financial health[9][12] - Restoring the dividend is a top priority, contingent on achieving or nearing profitability with a sustainable payout model[13][16] Accomplishments in 2024 Despite challenges, the company added new investment-grade tenants, executed lease and debt extensions, acquired a Best Buy property, and raised $2.5 million in capital - Added new high-quality tenants, including Auburn University (S&P: AA) and the Armed Services YMCA[23] - Completed lease extensions with Fresenius Dialysis and Dollar Tree, and acquired a Best Buy property at an effective 8.1% cap rate[23] - Raised $2.5 million in capital via common LP units with a redemption value of $7.15/unit, avoiding dilution to common shareholders[23] - Successfully extended the expiration date of two loans to 2029 and an equity partner's redemption date from 2025 to 2027[23] Subsequent Events Subsequent to year-end, on February 6, 2025, GIPR closed an UPREIT transaction for three properties, valued at over $11 million, increasing GAV to $115 million - On February 6, 2025, the company closed an UPREIT contribution transaction involving three properties for a gross price of just over $11 million[18] - This transaction increased the company's Gross Asset Value (GAV) to approximately $115 million[18] Capital Strategy The company's capital strategy targets a minimum 150-basis point spread between its cost of capital and acquisition cap rates, leveraging a $14 million preferred equity investment for growth - GIPR's strategy targets a minimum 150-basis point spread between its cost of capital and acquisition cap rates[25] - The company utilized a $14 million preferred equity investment from Loci Capital to purchase a 13-property portfolio from Modiv Industrial in August 2023[26] - This transaction allowed GIPR to double in size, executed with the belief that expensive debt and equity could be recapitalized as financial markets stabilized[27] The Plan for 2025 The 2025 strategic plan focuses on balance sheet improvement and dividend reinstatement through debt refinancing, capital recycling, UPREIT transactions, and expense reduction - The company is focused on refinancing expensive debt and replacing preferred equity with less expensive capital to improve profitability[28][29] - A key strategy is to 'Recycle Capital' by selling underperforming or non-core assets and reinvesting proceeds into new assets, debt paydown, or operations[30][32] - GIPR has developed a large pipeline of potential UPREIT transactions, viewing it as a primary growth mechanism in the current market[33] - The company plans to decrease General and Administrative expenses and raise new capital at the operating partnership level, aiming to reinstate the dividend[35][36][37] Financial Statements The 2024 consolidated financial statements show a wider net loss of $8.44 million, or ($1.64) per share, despite revenue growth to $9.76 million, primarily due to increased operating expenses Consolidated Balance Sheets As of December 31, 2024, total assets slightly decreased to $106.6 million, with a notable drop in cash, while total liabilities remained stable and stockholders' equity increased to $5.8 million Selected Balance Sheet Data (As of Dec 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $612,939 | $3,117,446 | | Net real estate investments | $91,362,786 | $97,406,605 | | Total Assets | $106,563,790 | $108,691,416 | | Mortgage loans, net | $58,340,234 | $56,817,310 | | Total Liabilities | $73,710,451 | $74,170,048 | | Total Stockholders' Equity | $5,795,933 | $3,665,198 | Consolidated Statements of Operations For FY2024, total revenue grew 28% to $9.76 million, but total expenses rose 34% to $14.89 million, resulting in a wider net loss of $8.44 million Selected Statement of Operations Data (Year ended Dec 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total revenue | $9,762,636 | $7,632,600 | | Total expenses | $14,894,980 | $11,088,848 | | Operating loss | ($5,132,344) | ($3,456,248) | | Net loss attributable to common shareholders | ($8,444,487) | ($6,192,262) | | Basic & Diluted Loss Per Share | ($1.64) | ($2.46) | Reconciliation of Non-GAAP Measures This section reconciles GAAP net loss to non-GAAP real estate metrics, showing increased NOI to $7.1 million but significant declines in Core FFO to $179 thousand and Core AFFO to $373 thousand for FY2024 Reconciliation to Net Operating Income (NOI) The company reconciles its GAAP net loss of $4.87 million for FY2024 to a Net Operating Income (NOI) of $7.09 million, an increase from $5.93 million in 2023 NOI Reconciliation (Year ended Dec 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net income (loss) | ($4,872,888) | ($4,441,465) | | Adjustments (G&A, D&A, Interest, etc.) | $11,961,900 | $10,374,865 | | Net Operating Income (NOI) | $7,089,012 | $5,933,400 | Reconciliation to FFO and Related Measures For FY2024, core operational profitability declined significantly, with Core FFO at $179 thousand and Core AFFO at $373 thousand, down from $534 thousand and $706 thousand respectively in 2023 FFO and Related Measures (Year ended Dec 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Funds From Operations (FFO) | ($403,014) | $5,525 | | Core Funds From Operations (Core FFO) | $179,346 | $534,272 | | Adjusted Funds From Operations (AFFO) | ($42,692) | $213,969 | | Core Adjusted Funds From Operations (Core AFFO) | $372,920 | $705,540 | Explanation of Non-GAAP Measures The company uses non-GAAP measures like FFO, Core FFO, and Core AFFO as widely accepted industry metrics to provide a clearer view of operating performance and aid investor comparisons - The company uses non-GAAP measures like FFO and AFFO because they are widely accepted industry standards for comparing REIT operating performance[55] - FFO is computed according to NAREIT standards, excluding real estate depreciation and gains/losses on sales, to provide a better measure of operational trends[57][59] - Core FFO and Core AFFO further remove non-cash expenses and other items not directly related to real estate operations, used by management for corporate goal formulation[58]