GENERATION INCOME PROPERTIES INC
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
GIPR$0.25-2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-15.
0000950170-24-097282
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0000950170-24-127178
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 101 current paragraphs.
66 unchanged; 24 reworded; 9 added; 0 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
This section is not used
Current report
On July 19, 2024, we determined that MaloneBailey LLP (“MaloneBailey”) would no longer serve as the Company’s independent registered public accounting firm and would be dismissed effective as of July 19, 2024. The decision to change independent registered public accounting firms was approved by the Board of Directors and the Audit Committee of the Company on July 19, 2024.
Current report
On July 19, 2024, we ratified the appointment of CohnReznick LLP (“CohnReznick”) as its new independent registered public accounting firm to audit and review the Company’s financial statements.
Current report
On July 24, 2024, the Operating Partnership of Generation Income Properties, Inc. (the “Company”), entered into a Fifth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “LPA Amendment”), pursuant to which the Company, as the general partner of the Operating Partnership, issued partnership interests to LMB Owenton I LLC (“Contributor”) in the form of Series B-1 Preferred Units (the “Series B-1 Preferred Units”).
Current report
Also on July 24, 2024, the Operating Partnership and the Contributor entered into a Contribution and Exchange Agreement (the “Contribution Agreement”) pursuant to which the Contributor contributed 155,185 Common Units in exchange for 155,185 Series B-1 Preferred Units. If and when determined by the Company, as general partner of the Operating Partnership, in its sole discretion, holders of the Series B-1 Preferred Units will be paid cash distributions in the amount of $0.117 per Series B-1 Preferred Unit per quarter, subject to prior payment of any preferred return on senior preferred units of the Operating Partnership. The Contributor will have the right to cause the Operating Partnership to redeem the Series B-1 Preferred Units after two (2) years for either (i) cash in an amount equal to $7.15 per Series B-1 Preferred Unit or (ii) a number of shares of common stock of the Company equal to the number of Series B-1 Preferred Units being redeemed multiplied by 1.00, plus, in each case, an amount equal to all dividends accrued and unpaid thereon.
Current report
On August 29, 2024, we acquired a 30,465 square foot retail property in Ames, Iowa for $5.5 million occupied by Best Buy with a remaining lease of approximately 6 years at an annual base rent of $405,470. Future minimum rent reflected in the above table, accordingly.
Current report
We modified terms for two secured mortgage loans set to expire in September 2024 and October 2024. As of September 30, 2024 the principal balances of the modified secured loans were $7.2 million and $4.4 million at 6.15% annual interest with maturity dates extended to August 2029.
Current report
(f)Debt has been modified to mature in August 2029
Current report
The table above presents FFO in accordance with the most current available NAREIT guidance and in alignment with current industry standards. Presentations of FFO in our prior filings and announcements did not include Loss on held for sale asset valuation as an add-back in calculating FFO, but the data for three and nine months ended September 30, 2023 set forth above has been revised to include Loss on held for sale asset valuation as an add-back.
Reworded paragraphs (24)
Previous wording
We are an internally managed, Maryland corporation focused on acquiring retail, office and industrial real estate located in major U.S. markets. We initiated operations during the year ended December 31, 2015 and have elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ending December 31, 2021. Substantially all of the Company’s assets are held by, and operations are conducted through, the Operating Partnership and the Operating Partnership’s direct and indirect subsidiaries. The Company is the general partner of the Operating Partnership and as of June 30, 2024 owned 95.3% of the outstanding common units of the Operating Partnership. The Company formed a Maryland entity GIP REIT OP Limited LLC in 2018 that owns 0.001% of the Operating Partnership.
Current wording
We are an internally managed, Maryland corporation focused on acquiring retail, office and industrial real estate located in major U.S. markets. We initiated operations during the year ended December 31, 2015 and have elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ending December 31, 2021. Substantially all of the Company’s assets are held by, and operations are conducted through, the Operating Partnership and the Operating Partnership’s direct and indirect subsidiaries. The
Previous wording
On April 4, 2024, May 3, 2024, and June 3, 2024, respectively, we announced that our Board of Directors authorized a distribution of $0.039 per share monthly cash distribution for shareholders of record of our common stock as of April 15, 2024, May 15, 2024 and June 15, 2024, respectively. Distributions for April, May and June 2024 were paid on April 30, May 30, and June 28, 2024, respectively. The Operating Partnership common unit holders received the same distribution. On July 3, 2024, the Company announced that its Board of Directors determined to suspend the Company’s regular dividend, commencing with the monthly dividends that would have been paid in July 2024.
Current wording
On July 3, 2024 we announced that our Board of Directors had voted to suspend the Company's dividend for shareholder of record of our common stock.
Previous wording
Operating results for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023:
Current wording
Operating results for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023:
Previous wording
During the three and six months ended June 30, 2024, total revenue from operations were 2,259,234 and $4,692,407, respectively, as compared to $1,328,878 and 2,665,917 for the three and six months ended June 30, 2023, respectively. Revenue increased by $930,356 and $2,026,490 during the three and six months ended June 30, 2024, respectively, compared with the three and six months ended June 30, 2023. The overall revenue increase was driven by the integration of the 13 property portfolio acquired from Modiv in August 2023.
Current wording
During the three and nine months ended September 30, 2024, total revenue from operations were 2,400,282 and $7,092,690, respectively, as compared to $1,844,148 and 4,510,065 for the three and nine months ended September 30, 2023, respectively. Revenue increased by $556,134 and $2,582,625 during the three and nine months ended September 30, 2024, respectively, compared with the three and nine months ended September 30, 2023. The overall revenue increase was driven by the integration of the 13 property portfolio acquired from Modiv in August 2023.
Previous wording
During the three and six months ended June 30, 2024, we incurred total operating expenses of $3,729,846 and $7,363,672, respectively, as compared to $1,986,715 and $4,022,509, respectively, for the three and six months ended June 30, 2023. Operating expenses increased overall by $1,743,131 and $3,341,163, respectively, as follows:
Current wording
During the three and nine months ended September 30, 2024, we incurred total operating expenses of $3,769,715 and $11,133,386 respectively, as compared to $3,060,715 and $7,082,645, respectively, for the three and nine months ended September 30, 2023. Operating expenses increased overall by $709,578 and $4,050,740, respectively, as follows:
Previous wording
General, administrative and organizational costs increased by $245,667 and $351,317 driven by an increase in accounting, audit and tax fees during the three and six months ended June 30, 2024, respectively.
Current wording
General, administrative and organizational costs increased by $47,027 and $398,344 driven by an increase in accounting, audit and tax fees during the three and nine months ended September 30, 2024, respectively.
Previous wording
Building expenses increased by $363,372 and $704,439 during the three and six months ended June 30, 2024, due to an overall increase driven by the integration of the acquired 13 property portfolio from Modiv in August 2023, compared to the portfolio in operation during the three and six months ended June 30, 2023.
Current wording
Building expenses increased by $297,703 and $1,002,142 during the three and nine months ended September 30, 2024, due to an overall increase driven by the integration of the acquired 13 property portfolio from Modiv in August 2023, compared to the portfolio in operation during the three and nine months ended September 30, 2023.
Previous wording
Depreciation and amortization increased by $622,232 and $1,291,286 during the three and six months ended June 30, 2024, driven by the integration of the since acquired 13 property portfolio from Modiv compared with the portfolio in operation during the three and six months ended June 30, 2023.
Current wording
Depreciation and amortization increased by $86,662 and $1,377,948 during the three and nine months ended September 30, 2024, driven by the integration of the since acquired 13 property portfolio from Modiv compared with the portfolio in operation during the three and nine months ended September 30, 2023.
Previous wording
Interest expense, net increased by $556,389 and $1,107,920 during the three and six months ended June 30, 2024 due to Company's borrowing of approximately $21 million of mortgage debt secured by the acquired 13 property portfolio. An additional incremental increase is the result of the guaranty fee expense to the Company's CEO of $96,360 and $192,712 recorded to interest expense during the three and six months ended June 30, 2024, respectively. Guaranty fee expense incurred and recorded to interest expense during the three and six months ended June 30, 2023 was $55,652 and $116,145, respectively.
Current wording
Interest expense, net increased by $327,984 and $1,435,904 during the three and nine months ended September 30, 2024 due to Company's borrowing of approximately $21 million of mortgage debt secured by the acquired 13 property portfolio. An additional incremental increase is the result of the guaranty fee expense to the Company's CEO of $96,652 and $304,245 incurred during the three and nine months ended September 30, 2024, respectively.
Previous wording
Compensation costs decreased by $44,528 and $$113,800, respectively, primarily due to savings in salary expense and for accounting and administrative staff.
Current wording
Compensation costs decreased by $49,798 and $163,598, respectively, primarily due to savings in salary expense and for accounting and administrative staff.
Previous wording
During the three and six months ended June 30, 2024 and 2023, we generated a net loss of $1,461,488 and $752,397 and $3,340,584 and 1,942,750, respectively.
Current wording
During the three and nine months ended September 30, 2024 and 2023, we generated a net loss of $2,103,549 and $1,213,265 and $5,444,133 and 3,156,015, respectively.
Previous wording
During the three and six months ended June 30, 2024 and 2023, net income attributable to non-controlling interest was $800,234 and $129,065 and $1,746,358 and $256,279, respectively. The variance is attributable to additional redeemable non-controlling interests established during the second half of fiscal year 2023 to facilitate acquisitions, namely the acquisition of the 13 property Modiv portfolio in August 2023.
Current wording
During the three and nine months ended September 30, 2024 and 2023, net income attributable to non-controlling interest was $866,047 and $425,637 and $2,612,405 and $681,916, respectively. The variance is attributable to additional redeemable non-controlling interests established during the second half of fiscal year 2023 to facilitate acquisitions, namely the acquisition of the 13 property Modiv portfolio in August 2023.
Previous wording
During the three and six months ended June 30, 2024 and 2023, we generated a net loss attributable to our shareholders of $2,261,722 and $881,462 and $5,181,943 and 2,199,029, respectively.
Current wording
During the three and nine months ended September 30, 2024 and 2023, we generated a net loss attributable to our shareholders of $2,969,596 and $1,828,902 and $8,151,537 and 4,027,931, respectively.
Previous wording
We require capital to fund our investment activities and operating expenses. Our capital sources may include net proceeds from offerings of our equity securities, cash flow from operations and borrowings under credit facilities. As of June 30, 2024, we had total cash (unrestricted and restricted) of $2,587,734, properties with a gross cost basis of $96,686,513 and outstanding mortgage loans with a principal balance of $57,504,073.
Current wording
We require capital to fund our investment activities and operating expenses. Our capital sources may include net proceeds from offerings of our equity securities, cash flow from operations and borrowings under credit facilities. As of September 30, 2024, we had total cash (unrestricted and restricted) of $1,581,610, properties with a gross cost basis of $102,307,436 and outstanding mortgage loans with a principal balance of $59,707,772, excluding assets held for sale for $5.75 million.
Previous wording
On June 27, 2024, the Operating Partnership and an accredited investor entered into a Unit Purchase Agreement (the “June 2024 Unit Purchase Agreement”) pursuant to which the Operating Partnership issued and sold to the investor 500,000 Series A Preferred Units at a price of $5.00 per unit for an aggregate purchase price of two million five hundred thousand dollars ($2,500,000) in cash. Under the terms of the Series A Preferred Units, the investor will be paid cumulative cash distributions in the amount of $0.325 per Series A Preferred Unit per year, payable monthly in arrears, on or about the 15th day of each month. Each of the investor and the Operating Partnership will have the right to cause the Operating Partnership to redeem the Series A Preferred Units after two (2) years for cash in an amount equal to $5.15 per Series A Preferred Unit plus any accrued but unpaid Series A Preferred Return, provided that the Operating Partnership may (with the prior written consent of the investor) cause the redemption orice to be satisfied by the issuance of a number of shares of common stock of the Company equal to the number of Series A Preferred Units being redeemed multiplied by 1.03 plus any accrued but unpaid Series A Preferred Return. If the Operating Partnership fails to declare and pay the Series A Preferred Return for a period of three consecutive months, the investor may exercise the foregoing redemption right within the 30-day period following such failure.
Current wording
On June 27, 2024, the Operating Partnership and an accredited investor entered into a Unit Purchase Agreement (the “June 2024 Unit Purchase Agreement”) pursuant to which the Operating Partnership issued and sold to the investor 500,000 Series A Preferred Units at a price of $5.00 per unit for an aggregate purchase price of two million five hundred thousand dollars ($2,500,000) in cash. Under the terms of the Series A Preferred Units, the investor will be paid cumulative cash distributions in the amount of $0.325 per Series A Preferred Unit per year, payable monthly in arrears, on or about the 15th day of each month. Each of the investor and the Operating Partnership will have the right to cause the Operating Partnership to redeem the Series A Preferred Units after two (2) years for cash in an amount equal to $5.15 per Series A Preferred Unit plus any accrued but unpaid Series A Preferred Return, provided that the Operating Partnership may (with the prior written consent of the investor) cause the redemption price to be satisfied by the issuance of a number of shares of common stock of the Company equal to the number of Series A Preferred Units being redeemed multiplied by 1.03 plus any accrued but unpaid Series A Preferred Return. If the Operating Partnership fails to declare and pay the Series A Preferred Return for a period of three consecutive months, the investor may exercise the foregoing redemption right within the 30-day period following such failure.
Previous wording
Our President and CEO has also personally guaranteed the repayment of the $10.7 million due under the 7-11 - Washington, DC; Starbucks - South Tampa, FL; and vacant - Huntsville, AL loan as well as the $1.3 million loan secured by the Company's Sherwin-Williams - Tampa, FL property. In addition, our President and CEO has also provided a guaranty of the Company’s nonrecourse carveout liabilities and obligations in favor of the lender for the GSA and PRA Holdings, Inc. - Norfolk, VA mortgage loans ("Bayport loans") with an aggregate principal amount of $11.7 million.
Current wording
Our President and CEO has also personally guaranteed the repayment of the $10.6 million due under the 7-11 - Washington, DC; Starbucks - South Tampa, FL; and vacant - Huntsville, AL loan as well as the $1.3 million loan secured by the Company's Sherwin-Williams - Tampa, FL property. In addition, our President and CEO has also provided a guaranty of the Company’s nonrecourse carveout liabilities and obligations in favor of the lender for the GSA and PRA Holdings, Inc. - Norfolk, VA mortgage loans ("Bayport loans") with an aggregate principal amount of $11.6 million.
Previous wording
During the three and six months ended June 30, 2024, we incurred a guaranty fee expense to our President and CEO of $96,360 and 192,712, respectively, recorded to interest expense. A guaranty fee expense of $55,652 and $116,145 was incurred during the three and six months ended June 30, 2023, respectively.
Current wording
During the three and nine months ended September 30, 2024, we incurred a guaranty fee expense to our President and CEO of $102,023 and $304,245, respectively, recorded to interest expense. A guaranty fee expense of $81,022 and $196,304 was incurred during the three and six months ended September 30, 2023, respectively.
Previous wording
As a result of our recurring losses, our projected cash needs, and our current liquidity, substantial doubt exists about the Company’s ability to continue as a going concern one year after the date that these financial statements are issued. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s plan to improve the Company’s liquidity and profitability. Our current and anticipated liquidity is less than the principal balance of these obligations. As a result of our recurring losses, our projected cash needs, and our current liquidity, substantial doubt exists about the Company’s ability to provide sufficient liquidity to meet future funding commitments for at least the next 12 months.
Current wording
For the nine months ended September 30, 2024, the Company generated positive operating cash flows of $783,511 and had cash on hand of $1.58 million as of September 30, 2024. As a result of our recurring losses, our projected cash needs, and our current liquidity, substantial doubt exists about the Company’s ability to continue as a going concern one year after the date that these financial statements are issued. In August 2024 the Company modified terms for two secured mortgage loans set to expire in September 2024 and October 2024. As of September 30, 2024, the principal balances of the modified secured loans were $7.2 million and $4.4 million at 6.15% annual interest with maturity dates extended to August 2029. The Company’s ability to continue as a going concern is contingent upon continued successful execution of management’s plan to improve the Company’s liquidity and profitability.
Previous wording
We amortized debt issuance costs during the three and six months ended June 30, 2024 and 2023 to interest expense of approximately $47,780 and $28,865 and $95,560 and $57,730, respectively. The Company did not pay any debt issuance costs during the six months ended June 30, 2024 and 2023.
Current wording
We amortized debt issuance costs during the three and nine months ended September 30, 2024 and 2023 to interest expense of approximately $60,532 and $46,260 and $156,091 and $103,990, respectively. The Company paid debt issuance costs of $0 and $376,877 during the three and nine months ended September 30, 2024 and 2023.
Previous wording
Each mortgage loan requires the Company to maintain certain debt service coverage ratios as noted above. In addition, two mortgage loans, one encumbered by six properties and requiring a 1.50 DSCR, and another stand alone mortgage loan requiring a 1.50 DSCR, require the Company to maintain a 54% loan to fair market stabilized value ratio. Fair market stabilized value shall be determined by the lender by reference to acceptable guides and indices or appraisals from time to time at its discretion. As of June 30, 2024, we were in compliance with all covenants, with the exception of one project level DSCR covenant for 2510 Walmer Ave. Our Bayport Credit Union loan covenant requires project level, property level and portfolio level DSCR minimum testing. At the project-level, 2510 Walmer Ave tested at a 1.17:1 DSCR, compared with the 1.25:1 project level minimum DSCR, driven by its vacancy since January 2023. According to the governing loan document, failing to meet DSCR coverage requirements is a technical default triggering the risk of forfeiture of the property, accelerating the repayment of the remaining outstanding balance of the loan at the lender's discretion. All other DSCR covenants tested compliant and the lender has indicated no intention of action. Additionally, a new lease was executed for 2510 Walmer Ave. on March 28, 2024 and the the property has been restored to full occupancy as of May 1, 2024.
Current wording
Each mortgage loan requires the Company to maintain certain debt service coverage ratios as noted above. In addition, two mortgage loans, one encumbered by six properties and requiring a 1.50 DSCR, and another stand alone mortgage loan requiring a 1.50 DSCR, require the Company to maintain a 54% loan to fair market stabilized value ratio. Fair market stabilized value shall be determined by the lender by reference to acceptable guides and indices or appraisals from time to time at its discretion. As of September 30, 2024, we were in compliance with all covenants.
Previous wording
Due to the redemption right, the Preferred Interest is presented as temporary equity at redemption value of $14,100,000 plus accrued but unpaid preferred interest of $1,817,478 as of June 30, 2024.
Current wording
Due to the redemption right, the Preferred Interest is presented as temporary equity at redemption value of $14,100,000 plus accrued but unpaid preferred interest of $2,280,471 as of September 30, 2024.
Previous wording
Net cash provided by operating activities was $226,605 and net cash used in operating activities was $528,151 for the six months ended June 30, 2024 and 2023, respectively. The change is due to the doubling of the number of the Company's income generating assets through the 13 property Modiv acquisition.
Current wording
Net cash provided by operating activities was $783,511 and net cash provided by operating activities was $18,537 for the nine months ended September 30, 2024 and 2023, respectively. The change is due to the doubling of the number of the Company's income generating assets through the 13 property Modiv acquisition.
Previous wording
Net cash used in investing activities during the three and six months ended June 30, 2024 was $0. Net cash used in investing activities was $188,854 during the six months ended June 30, 2023 related to an escrow deposit for a property purchase.
Current wording
Net cash used in investing activities during the three and nine months ended September 30, 2024 was $5,960,893. Net cash used in investing activities was $33,314,973 during the nine months ended September 30, 2023 related to an escrow deposit for a property purchase.
Previous wording
Net cash used in financing activities was $790,817 and $896,099 for the six months ended June 30, 2024 and 2023, respectively. The change is due to several factors comprising the increase of mortgage principal repayments driven by the Modiv acquisition in August 2023, the increase in distributions to non-controlling interests, and dividend payments on both preferred and common stock.
Current wording
Net cash provided by financing activities was $3,607,045 and $33,916,112 for the nine months ended September 30, 2024 and 2023, respectively. The change is due to several factors comprising the increase of mortgage principal repayments driven by the Modiv acquisition in August 2023, the increase in distributions to non-controlling interests, and dividend payments on both preferred and common stock.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Company is the general partner of the Operating Partnership and as of September 30, 2024 owned 95.3% of the outstanding common units of the Operating Partnership. The Company formed a Maryland entity GIP REIT OP Limited LLC in 2018 that owns 0.001% of the Operating Partnership.
Current report — wording carried from elsewhere
On July 25, 2024, the Operating Partnership entered into First Amendments to the Second Amended and Restated Limited Liability Company Agreements, dated as of February 8, 2023, for each of the Norfolk, Virginia properties, GIPVA 2510 Walmer Ave, LLC and GIPVA 130 Corporate Blvd, LLC to revise the redemption date of Brown Family Enterprises, LLC membership interests from February 8, 2025 to February 8, 2027.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Tenant has the right to terminate the lease on August 31, 2024 subject to certain conditions.
Previous report — wording carried elsewhere
On June 27, 2024, the Operating Partnership and an accredited investor entered into a Unit Purchase Agreement (the “June 2024 Unit Purchase Agreement”) pursuant to which the Operating Partnership issued and sold to the investor 500,000 Series A Preferred Units at a price of $5.00 per unit for an aggregate purchase price of two million five hundred thousand dollars ($2,500,000) in cash. Under the terms of the Series A Preferred Units, the investor will be paid cumulative cash distributions in the amount of $0.325 per Series A Preferred Unit per year, payable monthly in arrears, on or about the 15th day of each month. Each of the investor and the Operating Partnership will have the right to cause the Operating Partnership to redeem the Series A Preferred Units after two (2) years for cash in an amount equal to $5.15 per Series A Preferred Unit plus any accrued but unpaid Series A Preferred Return, provided that the Operating Partnership may (with the prior written consent of the investor) cause the redemption orice to be satisfied by the issuance of a number of shares of common stock of the Company equal to the number of Series A Preferred Units being redeemed multiplied by 1.03 plus any accrued but unpaid Series A Preferred Return. If the Operating Partnership fails to declare and pay the Series A Preferred Return for a period of three consecutive months, the investor may exercise the foregoing redemption right within the 30-day period following such failure.