GENERATION INCOME PROPERTIES, INC.
For the period ended Dec 31, 2024. Filed Mar 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 28, 2025
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-K
Period ended 2023-12-31; filed 2024-04-08.
0000950170-24-042640
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0000950170-25-046959
Item 7. 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 110 previous paragraphs and 121 current paragraphs.
63 unchanged; 29 reworded; 28 added; 17 removed; 1 previous and 1 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 (28)
Current report
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report
Acquisitions
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
Capital Activity and Distributions
Current report
On July 24, 2024, the Operating Partnership of Generation Income Properties, Inc., 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 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.
Current report
Corporate and Administrative
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 the Company's new independent registered public accounting firm to audit and review the Company’s financial statements.
Current report
Debt Financing
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
Results of Operations
Current report
General and administrative expense increased by $375,137, or approximately 22%, year over year as the Company engaged incremental professional services support for audit, tax, financial reporting and other professional services. Approximately, $300,000 of the increase comprises nonrecurring or transaction specific expenditures.
Current report
Building expenses increased by $974,424, or approximately 57%, resulting from full year operations during 2024 versus five months of the integrated Modiv properties in 2023. Key expenditures increased as follows, property taxes approximately $548,000, repairs, maintenance and janitorial approximately $315,000, and utilities approximately $78,000 year over year.
Current report
Compensation costs decreased by $312,203, or approximately 23% as management optimized staffing levels and overhead to align with the Company's scale.
Current report
Net cash provided by operations was $1,022,362 and $12,345 during the twelve months ended December 31, 2024 and 2023, respectively. The change is primarily due to operating the Modiv portfolio for twelve months compared with only five months during the periods ended December 31, 2024 and 2023, respectively. The increase in operating cash also reflects the Company's optimization of timing for settling working capital accounts. We expect our cash flows from continuing operations during the upcoming fiscal cycle to be similar to our current year cash flows.
Current report
CRITICAL ACCOUNTING ESTIMATES
Current report
Should events or a change in circumstances indicate that the carrying amount of an asset may not be recoverable and potential impairment losses may be necessary, management performs the following procedures:
Current report
Perform a recoverability test utilizing the undiscounted future cash flows of the property over the anticipated holding period to determine if the carrying value of the asset is recoverable.
Current report
Perform a fair value analysis if future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property.
Current report
Record a provision for impairment reducing the book value to estimated fair value, to the proportion that the estimated fair value is less than the current book value.
Current report
Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures, and property sales capitalization rates. If a property is held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell.
Current report
The Company did not record any impairments on its investments in real estate for the two years included in our consolidated financial statements. The Company performed, timely, the first two steps of the impairment assessment outlined above: analysis of impairment indicators and undiscounted cash flows for properties with impairment indicators.
Current report
Purchase Price Allocations
Current report
In an acquisition of multiple properties, we must also allocate the purchase price among the properties. The allocation of the purchase price is based on our assessment of estimated fair value of the land, building and improvements, and identified intangible assets and liabilities and is often based upon local market factors. Where applicable, any assumed mortgages are recorded at their estimated fair values. The use of different assumptions in the allocation of the purchase price of the acquired properties and liabilities assumed could affect the timing of recognition of the related revenue and expenses.
Current report
Cash Projections for Going Concern Uncertainty Assessment
Current report
Estimating future cash flows requires significant assumptions regarding projected Company operations, investments and financing activities. We review operations, investment pipeline and financing activity monthly and update forecast cash needs assumptions, accordingly. Inputs include timing, amounts, required obligations, stakeholder impact, and scenario range of sensitivity. Identified variances are used to reassess assumptions and adjust cash projections where necessary. The use of different assumptions in cash projections could affect the Company's future financial position, acquisition of assets, or retirement of liabilities.
Removed paragraphs (17)
Previous report
Portfolio Acquisition
Previous report
On August 10, 2023, we and our Operating Partnership entered into an Agreement of Purchase and Sale with Modiv Inc., now known as Modiv Industrial, Inc., a Maryland corporation (“Modiv”) and certain of its indirect subsidiaries(together with Modiv, the “Seller”), pursuant to which we purchased a portfolio of 13 properties from the Seller (the “Portfolio Purchase”) for a purchase price of $42.0 million, excluding estimated transaction costs and expenses of $1.9 million consisting of $30.0 million in cash and 2,400,000 shares of a new series of preferred stock designated as Series A Redeemable Preferred Stock (the "Series A Preferred Stock"), par value $0.01 per share. We funded the cash portion of the purchase price and the transaction expenses with a combination of cash on hand, $21.0 million in new secured mortgage debt, and a $12.0 million preferred equity investment by LC2-NNN Pref, LLC, a Florida limited liability company and affiliate of Loci Capital Partners (“LC2”), as summarized below:
Previous report
We, through a newly formed subsidiary, entered into a loan agreement with Valley National Bank in the amount of $21.0 million, which is secured by the Portfolio Purchase and eight other properties held by subsidiaries of GIP VB SPE, LLC, a Delaware limited liability company (“GIP SPE”) that had outstanding loans with Valley National Bank. All of the mortgaged properties cross collateralize the loan, and the loan is guaranteed by the Operating Partnership and the subsidiaries of GIP Borrower that hold the properties that comprise the Portfolio Purchase. Payments of interest and principal in the amount of approximately $156,000 are due and payable monthly, with all remaining principal and accrued but unpaid interest due and payable on a maturity date of August 10, 2028. To secure a fixed interest rate on this new debt, we entered into an interest rate swap agreement fixing the interest rate to 7.47%. Our Chief Executive Officer, David Sobelman, entered into a guarantee agreement for $7.5 million pursuant to which he guaranteed the payment obligations under the promissory notes if they become due as a result of certain “bad-boy” provisions, individually and on behalf of the Operating Partnership.
Previous report
On August 10, 2023, we, through GIP SPE entered into an agreement (the “Amended and Restated LLC Agreement”) whereas LC2 purchased a preferred equity interest (the "Preferred Interest") in GIP SPE, providing proceeds of an initial capital contribution of $12.0 million, together with a commitment to make an additional $2.1 million contribution upon the acquisition of our tenant-in-common investment. The Company completed the acquisition of such tenant-in-common interest on September 7, 2023, for a purchase price of $1.3 million and LC2 made the additional $2.1 million capital contribution on September 11, 2023. The Preferred Interest has a cumulative accruing distribution preference of 15.5% per year, compounded monthly (the “Preferred Return”), a portion of which in the amount of 5% per annum, compounded monthly, is deemed to be a "Current Preferred Return", and the remainder of which in the amount of 10.5% per annum (compounded monthly) is deemed to be the “Accrued Preferred Return.” We must redeem the Preferred Interest by August 10, 2025, with two options to extend for an additional 12 months upon payment of an extension fee and an increased preferred rate of return of 18%. LC2 also received a 1% equity fee at closing and will receive a .5% equity fee upon redemption of the Preferred Interest . LC2 will have approval rights to major decisions as defined by the Amended and Restated LL Agreement. See Note 6 “Non-Controlling Interests – LC2-NNN Pref, LLC” to our consolidated financial statements for more information.
Previous report
On August 10, 2023, we filed Articles Supplementary (the "Articles Supplementary"), with the State Department of Assessments and Taxation of the State of Maryland, to our Articles of Amendment and Restatement, as amended, classifying and designating 2,400,000 shares of our authorized capital stock as shares of Series A Redeemable Preferred Stock. We issued 2,400,000 shares of Series A Preferred Stock to Modiv on August 10, 2023, to fund a portion of the purchase price of the Portfolio Purchase. As set forth in the Articles Supplementary, the Series A Preferred Stock ranks, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up, senior to all classes or series of our common stock, par value $0.01 per share (the “Common Stock”). Holders of Series A Preferred Stock, when, as and if authorized by our board of directors and declared by us out of funds legally available for the payment of dividends, are entitled to cumulative cash dividends at the rate of 9.5% per annum of the $5.00 liquidation preference per share, equivalent to a fixed annual amount of $0.475 per share, which shall increase to a rate of 12.0% of the $5.00 liquidation preference per share per annum, equivalent to a fixed annual amount of $0.60 per share, beginning on September 15, 2024. Dividends are payable monthly in arrears on or about the 15th day of each month, beginning on September 15, 2023. Dividends will accrue and be cumulative from and including August 10, 2023, the first date on which shares of the Series A Preferred Stock were issued. See Note 7 “Equity – Preferred Stock - Series A Preferred Stock” to our consolidated financial statements included in this report for more information regarding the terms of our Series A Preferred Stock. As discussed below all 2,400,000 Series A Preferred Stock were exchanged for common stock subsequent to December 31, 2023.
Previous report
In connection with the Portfolio Purchase as described above, we redeemed the following redeemable non-controlling interests:
Previous report
The Brown Family Trust entered into an agreement to redeem Brown Family Trust's preferred equity interest of $500,000 and a distribution of $1,250 paid on August 10, 2023.
Previous report
Irby Prop Partners' preferred equity interests of $950,000 and a distribution of $90,070 paid on August 10, 2023.
Previous report
Richard Hornstrom's preferred equity interest of $650,000 and a distribution of $57,780 paid on August 10, 2023.
Previous report
Dividend Declaration
Previous report
Series A Preferred Stock Redemption
Previous report
General and administrative expense increased by $86,147, or 5%, driven by increases in audit fees, insurance, and partially offset by reductions in stock issuance costs and professional services.
Previous report
Building expenses increased by $491,008, or 41%, due to the acquisition of 13 properties from Modiv in August 2023.
Previous report
Compensation costs remained flat, with the exception of a one-time payment of approximately $58,000 paid to the former CFO, who departed in November 2023.
Previous report
Net cash provided by operations was $12,345 and $583,884 during the twelve months ended December 31, 2023 and 2022, respectively. The change is primarily due to the year over year increases in Accounts receivable, Escrow deposits and other assets, and Prepaid expenses driven by the doubling of the property portfolio in August 2023.
Previous report
CRITICAL ACCOUNTING POLICIES
Previous report
Pursuant to the relief for emerging growth companies under the JOBS Act, our independent registered public accounting firm is not required to file an attestation report on our internal controls over financial reporting and is exempt from the mandatory auditor rotation rules.
Reworded paragraphs (29)
Previous wording
Creditworthy Tenants. Approximately 68% of our portfolio’s annualized rent as of December 31, 2023 was derived from tenants that have (or whose parent company has) an investment grade credit rating from a recognized credit rating agency of “BBB-” or better. Our largest tenants are the General Service Administration, Dollar General, and the City of San Antonio, who collectively contributed approximately 39% of our portfolio’s annualized base rent as of December 31, 2023.
Current wording
Creditworthy Tenants. Approximately 60% of our portfolio’s annualized rent as of December 31, 2024 was derived from tenants that have (or whose parent company has) an investment grade credit rating from a recognized credit rating agency of “BBB-” or better. Our largest tenants are the General Service Administration, Dollar General, and the City of San Antonio, who collectively contributed approximately 39% of our portfolio’s annualized base rent as of December 31, 2024.
Previous wording
Contractual Rent Growth. 84% of the leases in our current portfolio (based on annualized base rent as of December 31, 2023) provide for increases in contractual base rent during future years of the current term or during the lease extension periods.
Current wording
Contractual Rent Growth. 93% of the leases in our current portfolio (based on annualized base rent as of December 31, 2024) provide for increases in contractual base rent during future years of the current term or during the lease extension periods.
Previous wording
Tenant terminated the lease and vacated on January 31, 2024.
Current wording
Prior tenant terminated the lease and vacated on January 31, 2024, space was relet to a new tenant in August 2024.
Previous wording
On January 3, 2024, 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 January 15, 2024, February 15, 2024 and March 15, 2024. January and February distributions were paid on January 30, 2024, February 29, 2024 and March 29, 2024, respectively. Because we have not yet generated a cumulative profit, distributions have been made from proceeds from prior capital raises.
Current wording
On July 3, 2024 we announced that our Board of Directors had voted to suspend the Company's dividend for shareholders of record of our common stock.
Previous wording
On February 8, 2023, the Operating Partnership entered into Amended and Restated Limited Liability Company Agreements for GIPVA 2510 Walmer Ave, LLC ("GIPVA 2510") and GIPVA 130 Corporate Blvd, LLC ("GIPVA 130"), in which the Operating Partnership, as the sole member of GIPVA 2510 and GIPVA 130, admitted a new preferred member, Brown Family Enterprises, LLC, through the issuance of preferred membership interests in the form of Class A Preferred Units of GIPVA 2510 and GIPVA 130. GIPVA 2510 and GIPVA 130 (the “Virginia SPEs”) hold the Company’s Norfolk, Virginia properties. In addition, both of the Virginia SPEs and Brown Family Enterprises, LLC entered into Unit Purchase Agreements in which GIPVA 2510 issued and sold 180,000 Class A Preferred Units at a price of $10.00 per unit for an aggregate price of $1,800,000, and GIPVA 130 issued and sold 120,000 Class A Preferred Units at a price of $10.00 per unit for an aggregate price of $1,200,000. The Operating Partnership is the general manager of the subsidiary while Brown Family Enterprises, LLC is a preferred equity member. Pursuant to the agreement, the Company is required to pay the preferred equity member a 7% IRR paid on a monthly basis and will share in 16% of the equity in each of the Virginia SPEs upon a capital transaction resulting in distributable proceeds. After 24 months, Brown Family Enterprises, LLC has the right to redeem the preferred equity at redemption value. Because of the redemption right, the non-controlling interest is presented as temporary equity at an aggregated redemption value of $3,000,000 as of December 31, 2023.
Current wording
On February 8, 2023, the Operating Partnership entered into new Amended and Restated Limited Liability Company Agreements for the Norfolk, Virginia properties, GIPVA 2510 Walmer Ave, LLC ("GIPVA 2510") and GIPVA 130 Corporate Blvd, LLC ("GIPVA 130"), in which the Operating Partnership, as the sole member of GIPVA 2510 and GIPVA 130, admitted a new preferred member, Brown Family Enterprises, LLC, through the issuance of preferred membership interests in the form of Class A Preferred Units of GIPVA 2510 and GIPVA 130. GIPVA 2510 and GIPVA 130 (the “Virginia SPEs”) hold the Company’s Norfolk, Virginia properties. In addition, both of the Virginia SPEs and Brown Family Enterprises, LLC entered into Unit Purchase Agreements in which GIPVA 2510 issued and sold 180,000 Class A Preferred Units at a price of $10.00 per unit for an aggregate price of $1,800,000, and GIPVA 130 issued and sold 120,000 Class A Preferred Units at a price of $10.00 per unit for an aggregate price of $1,200,000. The Operating Partnership is the general manager of the subsidiary while Brown Family Enterprises, LLC is a preferred equity member. Pursuant to the agreement, the Company is required to pay the preferred equity member a 7% IRR paid on a monthly basis and will share in 16% of the equity in each of the Virginia SPEs upon a capital transaction resulting in distributable proceeds. Brown Family Enterprises, LLC has the right to redeem the preferred equity at redemption value. On July 25, 2024, we entered into First Amendments to the Second Amended and Restated Limited Liability Company Agreements, dated as of February 8, 2023, for each of these entities revising the redemption date from February 8, 2025 to February 8, 2027. Because of the redemption right, the non-controlling interest is presented as temporary equity at an aggregated redemption value of $3,000,000 as of December 31, 2024.
Previous wording
For Twelve months ended December 31, 2023, total revenue from operations was $7,632,600 as compared to $5,432,462 for the twelve months ended December 31, 2022. Revenue increased by $2,200,138 for the twelve-months ended December 31, 2022 from the Modiv acquisition in August 2023.
Current wording
For twelve months ended December 31, 2024, total revenue from operations was $9,762,636 as compared to $7,632,600 for the twelve months ended December 31, 2023. The revenue increase of $2,130,036 for the twelve-months ended December 31, 2024, resulted from having a full year versus five months of operating the properties acquired in the Modiv acquisition during 2024 and 2023, respectively.
Previous wording
Depreciation and amortization increased by $1,427,594, or 68%, from the acquisition of 13 properties from Modiv in August 2023.
Current wording
Depreciation and amortization increased by $1,226,634, or 35%, resulting from full year operations during 2024 versus five months of the integrated Modiv properties in 2023.
Previous wording
Interest expense, net increased by $1,124,169, or 69%, due to interest on mortgage loans secured by the 13 property portfolio acquired from Modiv in August 2023. Additionally, during the twelve months ended December 31, 2023, we incurred a guaranty fee expense of $290,416 payable to our President and CEO of which $177,347 remained payable as of December 31, 2023.
Current wording
Interest expense, net increased by $1,542,140, or 56%, resulting from full year operations during 2024 versus five months of the integrated Modiv properties in 2023. Additionally, during the twelve months ended December 31, 2024, we incurred a guaranty fee expense of $387,056 payable to our President and CEO of which $206,219 remained payable as of December 31, 2024.
Previous wording
For the twelve months ended December 31, 2023 and 2022, we generated a net loss of $4,441,465 and 2,747,178, respectively.
Current wording
For the twelve months ended December 31, 2024 and 2023, we generated a net loss of $4,872,888 and 4,441,465, respectively.
Previous wording
For the twelve months ended December 31, 2023 and 2022, our share of earnings on our investment in tenancy in common and accounted for under the equity method generated income of $32,773 and $37,298, respectively. On September 7, 2023, the Company purchased the remaining tenancy-in-common ("TIC") interest and assumed control of the property.
Current wording
For the twelve months ended December 31, 2024 and 2023, our share of earnings on our investment in tenancy in common and accounted for under the equity method generated income of $0 and $32,773, respectively. On September 7, 2023, the Company purchased the remaining tenancy-in-common ("TIC") interest and assumed control of the property. As of December 31, 2024, the Company owns the full interest in the property and the TIC interest is no longer exists.
Previous wording
For the twelve months ended December 31, 2023 and 2022, net income attributable to non-controlling interest was $1,275,797 and $490,462, respectively. The increase is primarily attributable to LC2-NNN Pref, LLC's $14,100,000 preferred equity investment in conjunction with the Modiv acquisition in August 2023.
Current wording
For the twelve months ended December 31, 2024 and 2023, net income attributable to non-controlling interest was $3,476,599 and $1,275,797, respectively. The increase is primarily attributable to LC2-NNN Pref, LLC's $14,100,000 preferred equity investment in conjunction with the Modiv acquisition in August 2023, including servicing current and deferred interests as detailed in Preferred Equity.
Previous wording
For the twelve months ended December 31, 2023 and 2022, we generated a net loss attributable to our common shareholders of $6,192,262 and $3,237,640, respectively.
Current wording
For the twelve months ended December 31, 2024 and 2023, we generated a net loss attributable to our common shareholders of $8,444,487 and $6,192,262, 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 December 31, 2023, we had total cash (unrestricted and restricted) of $3,151,946, properties with a cost basis of $104,912,421 and outstanding debt of $56,817,310.
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 December 31, 2024, we had total cash (unrestricted and restricted) of $647,439, properties with a cost basis of $102,310,974 and outstanding debt of $56,817,310. We have implemented plans, which have alleviated going concern uncertainty and are disclosed in Note 1 to our annual financial statements. Below is a description of some of our more significant capital raise activities intended to improve our liquidity:
Previous wording
On April 1, 2022, we entered into two mortgage loan agreements with an aggregate balance of $13.5 million to refinance seven of our properties. The loan agreements consist of one loan in the amount of $11.4 million secured by six properties and allocated to each property based on each property's appraised value, and one loan in the amount of $2.1 million on the property previously held in the tenancy-in-common investment at an interest rate of 3.85% from April 1, 2022 through and until March 31, 2027. In conjunction with the LC2 Investment to purchase the remaining interest in the tenancy-in-common interest discussed above, we assumed the original $2.1 million loan on the property with a balance as of December 31, 2023 of $2,066,604 and recognized a discount of $383,767. Effective April 1, 2027 and through the maturity date of March 31, 2032, the interest rate adjusts to the 5-year Treasury plus 2.5% and is subject to a floor of 3.85%. Our CEO entered into a guarantee agreement pursuant to which he guaranteed the payment obligations under the promissory notes if they become due as a result of certain “bad-boy” provisions, individually and on behalf of the Operating Partnership.
Current wording
On April 1, 2022, we entered into two mortgage loan agreements with an aggregate balance of $13.5 million to refinance seven of our properties. The loan agreements consist of one loan in the amount of $11.4 million secured by six properties and allocated to each property based on each property's appraised value, and one loan in the amount of $2.1 million on the property previously held in the tenancy-in-common investment at an interest rate of 3.85% from April 1, 2022 through and until March 31, 2027. In conjunction with the LC2 Investment to purchase the remaining interest in the tenancy-in-common interest discussed above, we assumed the original $2.1 million loan on the property with a balance as of December 31, 2024 of $2,014,851. Effective April 1, 2027 and through the maturity date of March 31, 2032, the interest rate adjusts to the 5-year Treasury plus 2.5% and is subject to a floor of 3.85%. Our CEO entered into a guarantee agreement pursuant to which he guaranteed the payment obligations under the promissory notes if they become due as a result of certain “bad-boy” provisions, individually and on behalf of the Operating Partnership.
Previous wording
On August 9, 2022, we entered a Redemption Agreement with a unit holder. As such, we recorded an Other payable - related party in the amount of $2,912,300 upon execution of the Redemption Agreement entered into July 20, 2022 and have made installment payments to date of $1,102,460 with a remaining balance of $1,809,840 outstanding as of December 31, 2023.
Current wording
On August 9, 2022, we entered a Redemption Agreement with a unit holder. As such, the Company recorded an Other payable - related party in the amount of $2,912,300 upon execution of the Redemption Agreement entered into July 20, 2022 and has paid the note in full as of December 31, 2024. Remaining balances of $0 and $1,809,840 were outstanding as of December 31, 2024 and 2023, respectively.
Previous wording
On August 10, 2023, we entered into a $21.0 million loan agreement with Valley National Bank ("Valley") to finance the acquisition of the Modiv Portfolio. The outstanding principal amount of the loan bears interest at an annual rate for each 30-day interest period equal to the compounded average of the secured overnight financing rate published by Federal Reserve Bank of New York for the thirty-day period prior to the last day of each 30-day interest rate for the applicable interest rate period plus 3.25%, with interest payable monthly after each 30-day interest period. However, we entered into an interest rate swap to fix the interest rate at 7.47% per annum. Payments of interest and principal in the amount of approximately $156,000 are due and payable monthly, with all remaining principal and accrued but unpaid interest due and payable on a maturity date of August 10, 2028. The loan may generally be prepaid at any time without penalty in whole or in part, provided that there is no return of loan fees and prepaid financing fees. The loan is secured by first mortgages and assignments of rents in the properties comprising the Modiv Portfolio and eight other properties held by subsidiaries of GIP SPE that had outstanding loans with Valley. All of the mortgaged properties cross collateralize the loan, and the loan is guaranteed by the Operating Partnership and the subsidiaries that hold the properties subject to the acquisition of the Modiv Portfolio. The loan agreement requires a minimum debt-service coverage ratio 1.50:1 on a trailing twelve-month basis, tested as of December 31, 2024 and annually thereafter. Our President and CEO also entered into a personal, full recourse guarantee with a $7,500,000 cap.
Current wording
On August 10, 2023, we entered into a $21.0 million loan agreement with Valley National Bank ("Valley") to finance the acquisition of the Modiv Portfolio. The outstanding principal amount of the loan bears interest at an annual rate for each 30-day interest period equal to the compounded average of the secured overnight financing rate published by Federal Reserve Bank of New York for the thirty-day period prior to the last day of each 30-day interest rate for the applicable interest rate period plus 3.25%, with interest payable monthly after each 30-day interest period. However, we entered into an interest rate swap to fix the interest rate at 7.47% per annum. Payments of interest and principal in the amount of approximately $156,000 are due and payable monthly, with all remaining principal and accrued but unpaid interest due and payable on a maturity date of August 10, 2028. The loan may generally be prepaid at any time without penalty in whole or in part, provided that there is no return of loan fees and prepaid financing fees. The loan is secured by first mortgages and assignments of rents in the properties comprising the Modiv Portfolio and eight other properties held by subsidiaries of GIP SPE that had outstanding loans with Valley. All of the mortgaged properties cross collateralize the loan, and the loan is guaranteed by the Operating Partnership and the subsidiaries that hold the properties subject to the acquisition of the Modiv Portfolio. The loan agreement requires a minimum debt-service coverage ratio 1.50:1 on a trailing twelve-month basis, tested as of December 31, 2024 and annually thereafter. Our President and CEO also entered into a personal, full recourse guarantee with a $7,500,000 cap. We were in compliance with all covenants with the exception of one property-level debt service coverage ratio ("DSCR") covenant for 15091 SW Alabama 20, LLC. In January 2024, Pratt and Whitney Automation vacated the property at the end of their lease and the property remained vacant for six months, thereafter. In August 2024, the Company entered into a lease with Auburn University for approximately 50 percent of the property's leasable space. During the six months of physical and economic vacancy, the property's mortgage DSCR was below the required 1.25 threshold resulting in a covenant deviation.
Previous wording
As of December 31, 2023 and December 31, 2022, we had accounts payable, accrued expenses and insurance payable totaling $1,813,231 and $714,354, respectively. Outstanding indebtedness consisted of the following as of December 31, 2023 and December 31, 2022:
Current wording
As of December 31, 2024 and December 31, 2023, we had accounts payable, accrued expenses and insurance payable totaling $2,023,338 and $1,813,231, respectively. Outstanding indebtedness consisted of the following as of December 31, 2024 and December 31, 2023:
Previous wording
Net cash used in investing was $33,314,974 and $13,281,248 for the twelve months ended December 31, 2023 and 2022, respectively. The change is primarily due to the acquisition of the Modiv portfolio in August 2023.
Current wording
Net cash used in investing was $5,773,323 and $33,314,974 for the twelve months ended December 31, 2024 and 2023, respectively. The year over year change is primarily due to the acquisition of the 13 property Modiv portfolio in August 2023 compared with the single property acquisition of Best Buy Ames, IA in August 2024.
Previous wording
Net cash provided by financing activities was $32,701,579 and $5,826,284 for the twelve months ended December 31, 2023 and 2022, respectively. The change is primarily due to the acquisition of the Modiv portfolio in August 2023.
Current wording
Net cash provided by financing activities was $2,246,453 and $32,701,579 for the twelve months ended December 31, 2024 and 2023, respectively. The change is primarily due to the financing scale for acquisition of the 13 property Modiv portfolio in August 2023 compared with the acquisition of a single property, Best Buy Ames, IA in August 2024.
Previous wording
As a company primarily involved in owning income generating real estate assets, management considers the following accounting policies critical as they reflect our more significant judgments and estimates used in the preparation of our financial statements and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.
Current wording
As a company primarily involved in owning income generating real estate assets, management considers the following accounting estimates to be critical as they involve our more significant judgments and a significant level of estimation uncertainty. These critical accounting estimates are important for understanding and evaluating our reported financial results and financial condition and are reasonably likely to have a material impact on our future results of operations and financial condition. The judgments we make in selecting the estimation methods and significant assumptions, and their inherent estimation uncertainty, affect the reported amounts of assets and liabilities, and our disclosure of contingent assets and liabilities, as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimation methods or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies in our business may utilize different estimates that may impact the comparability of our results of operations and financial condition to theirs.
Previous wording
Investments in Real Estate.
Current wording
Impairment Assessment on Investments in Real Estate
Previous wording
Acquisitions of real estate are recorded at cost. The Company assigns the purchase price of real estate to tangible and intangible assets and liabilities based on fair value. Tangible assets consist of land, buildings, site improvements and tenant improvements. Intangible assets and liabilities consist of the value of in-place leases and above or below market leases assumed with the acquisition. At the time of acquisition, the Company assesses whether the purchase of the real estate falls within the definition of a business under Accounting Standards Codification (“ASC”) 805 and to date has concluded that all asset transactions are asset acquisitions. Therefore, each acquisition has been recorded at the purchase price whereas assets and liabilities, inclusive of closing costs, are allocated to land, building, site improvements, tenant improvements and intangible assets and liabilities based upon their relative fair values at the date of acquisition.
Current wording
Acquisitions of real estate are recorded at cost. The Company assigns the purchase price of real estate to tangible and intangible assets and liabilities based on fair value. Tangible assets consist of land, buildings, site improvements and tenant improvements.
Previous wording
The fair value of the in-place leases is estimated as the cost to replace the leases including loss of rent, commissions and legal fees. The in-place leases are amortized over the remaining term of the leases as amortization expense. The fair value of the above- or below- market lease is estimated as the present value of the difference between the contractual amount to be paid pursuant to the in-place lease and the estimated current market lease rate expected over the remaining non-cancelable life of the lease. The capitalized above or below market lease values are amortized as a decrease or increase to rental income over the remaining term of the lease inclusive of the renewal option periods that are considered probable at acquisition.
Current wording
During real estate acquisitions, management makes significant assumptions in determining the fair value of assets acquired and liabilities assumed. We typically allocate the cost of real estate acquired, inclusive of transaction costs, to: (1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values. Intangible assets and liabilities consist of above-market or below-market lease value and the value of in-place leases, as applicable. The fair value of the in-place leases is estimated as the cost to replace the leases including loss of rent, commissions and legal fees. The in-place leases are amortized over the remaining term of the leases as amortization expense. The fair value of the above- or below- market lease is estimated as the present value of the difference between the contractual amount to be paid pursuant to the in-place lease and the estimated current market lease rate expected over the remaining non-cancelable life of the lease. The capitalized above or below market lease values are amortized as a decrease or increase to rental income over the remaining term of the lease inclusive of the renewal option periods that are considered probable at acquisition.
Previous wording
In general, under the JOBS Act a company is an emerging growth company if its initial public offering (“IPO”) of common equity securities was effected after December 8, 2011 and the company had less than $1.07 billion of total annual gross revenues during its last completed fiscal year. We currently qualify as an emerging growth company, but will no longer qualify after the earliest of:
Current wording
In general, under the JOBS Act a company is an emerging growth company if its initial public offering (“IPO”) of common equity securities was effected after December 8, 2011 and meets certain qualification criteria. We currently qualify as an emerging growth company, but will no longer qualify after the earliest of:
Previous wording
the last day of the fiscal year during which we have annual total gross revenues of $1.07 billion or more;
Current wording
the last day of the fiscal year during which we have annual total gross revenues of $1.235 billion or more;
Previous wording
the last day of the fiscal year following the fifth anniversary of the first sale of our common equity securities in an offering registered under the Securities Act;
Current wording
the last day of the fiscal year following the fifth anniversary of the first sale of our common equity securities in an offering registered under the Securities Act, which for us is September 2026;
Previous wording
As an emerging growth company, we are eligible to include audited financial statements required for only two fiscal years and limited executive compensation information.
Current wording
As an emerging growth company, we are eligible to not obtain an auditor attestation on our internal control over financial reporting and to provide limited executive compensation information.
Previous wording
In addition, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standard. The decision by companies to “opt out” of the extended transition period for complying with new or revised accounting standards is irrevocable. We are not electing to opt out of the JOBS Act extended accounting transition period. We intend to take advantage of the extended transition period provided under the JOBS Act for complying with new or revised accounting standards.
Current wording
In addition, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standard. The decision by companies to “opt out” of the extended transition period for complying with new or revised accounting standards is irrevocable. We did not opt out of the JOBS Act extended accounting transition period. We intend to take advantage of any of the extended transition periods provided by the Financial Accounting Standards Board ("FASB") for complying with new or revised accounting standards.
Previous wording
To the extent we take advantage of the reduced disclosure requirements afforded by the JOBS Act, investors may be less likely to invest in us or may view our shares as a riskier investment than a similarly situated company that does not take advantage of these provisions.
Current wording
To the extent we take advantage of the reduced disclosure requirements for EGCs, investors may be less likely to invest in us or may view our shares as a riskier investment than a similarly situated company that does not take advantage of these provisions.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Results of Operations for the Years Ended December 31, 2024 and 2023
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Tenant has the right to terminate the lease on August 31, 2024 subject to certain conditions.