MODIV INDUSTRIAL, INC. (MDV)

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition, results of operations and cash flows together with the consolidated financial statements and related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. Also, see “Cautionary Note Regarding Forward-Looking Statements” preceding Part I of this Annual Report on Form 10-K and Part I, Item 1A. Risk Factors herein.

Management’s discussion and analysis of financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Overview

We are a Maryland corporation with issued and outstanding stock consisting of Series A Preferred Stock, listed on the NYSE under the symbol “MDV.PA,” and Class C Common Stock, listed on the NYSE under the symbol “MDV.” We currently own and manage single-tenant net-lease properties throughout the United States, which are primarily, but not exclusively, industrial properties. Our focus for future acquisitions is on critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation’s supply chains. We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2016. We believe that we have operated in conformity with the requirements for qualification as a REIT for U.S. federal income tax purposes. Since December 31, 2019, we have been internally managed.

Although we are not limited as to the form our investments may take, our investments in real estate will generally constitute acquiring fee title or interests in entities that own and operate real estate. We will make substantially all acquisitions of our real estate investments directly through the Operating Partnership or indirectly through limited liability companies or limited partnerships, including through other REITs, or through investments in joint ventures, partnerships, tenants-in-common, co-tenancies or other co-ownership arrangements with other owners of properties. We are the sole general partner of, and owned an approximate 89% and 83% interest in the Operating Partnership as of December 31, 2024 and February 28, 2025, respectively. The Operating Partnership’s limited partners are further described in Note 12 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K. We report with the SEC as a smaller reporting company under Rule 12b-2 of the Exchange Act.

Primary Investment Objectives

Our primary investment objectives are:

•to provide attractive growth in AFFO (as defined below) and sustainable cash distributions;

•to realize appreciation from proactive investment selection and management;

•to provide future opportunities for growth and value creation; and

•to provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to industrial manufacturing real estate.

We expect the trend of onshoring manufacturing to accelerate and we will continue to focus future acquisitions on industrial manufacturing properties, subject to market conditions and the availability of prices that we consider attractive. We can provide no assurance that we will achieve our investment objectives. See the Part I, Item 1A. Risk Factors section of this Annual Report on Form 10-K for additional information.

36

Recent Events and Uncertainties

There are continuing significant uncertainties in the market in which we operate related to inflation and interest rates, supply chain disruptions, potential tariffs and negative impacts associated with the violence and unrest in the Middle East, the ongoing Russian war against Ukraine and sanctions which have been implemented by the United States and other countries against Russia, China and Iran. Volatility in stock and bond markets and particularly the rapid rise in yields on U.S. Treasury securities during 2023 and 2024 may negatively impact our operating results, liquidity and sources of borrowings.

We, our tenants and operating partners are impacted by inflation and interest rates. While the rate of inflation has declined from historic highs, inflation remains somewhat elevated and there is continued uncertainty over the future rate of inflation. In January 2025, the Federal Reserve maintained the current federal funds rate after reducing rates three times in 2024. The Federal Reserve may continue to refrain from reducing interest rates to try to rein in inflation, which could lead to a recession and will negatively impact our future results due to higher borrowing costs on any future borrowing. In addition, sustained elevated inflation rates may negatively impact our longer term leases if contractual rent increases are not sufficient to keep up with market leases.

On December 31, 2024, the counterparties to the swap agreements exercised their one-time options to cancel the swap agreements (see Note 8 for more details). In January 2025, we entered into two new swap agreements, effective December 31, 2024, for $125.0 million each, for an aggregate of $250.0 million, corresponding to the Term Loan (as defined

below), which fixed the Secured Overnight Financing Rate (“SOFR”) for the year ending December 31, 2025 to 2.45%, resulting in a fixed rate of 4.25% based on our leverage ratio of 47.6% as of December 31, 2024. We paid aggregate premiums of $4.2 million to buy down the fixed rate below the prevailing market rate. The buydown premium is a derivative that will be recorded as an asset on our balance sheet as of January 31, 2025 and amortized over the 12 months ending December 31, 2025, increasing interest expense by approximately $1.1 million per quarter. We designated these pay-fixed, receive-floating interest rate swaps as cash flow hedges, which are expected to be effective through December 31, 2025. The derivatives will be marked to fair value each reporting period with any change in fair value being recorded through accumulated other comprehensive income as long as the derivatives are deemed effective.

Possible future declines in rental rates and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows from office properties. We have two leases expiring in the next 12 months: our office property in Issaquah, Washington leased to Costco, which expires on July 31, 2025 and is under contract to be sold to KB Home, as described in Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K, and our office property in San Diego, California leased to Solar Turbines that also expires on July 31, 2025. We also have two leases scheduled to expire in 2026: our industrial property in Santa Clara, California leased to Fujifilm Dimatix, Inc. that expires on March 16, 2026 and our industrial property in Melbourne, Florida leased to Northrop Grumman that expires on May 31, 2026.

Potential future declines in economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy and rental rates and cause declining values in our real estate portfolio, which could have the following negative effects on us: the values of our investments in commercial properties could decrease below the amounts paid for such investments; and/or revenues from our properties could decrease due to fewer tenants and/or lower rental rates, making it more difficult for us to make distributions or meet our debt service obligations. We successfully negotiated lease extensions for six properties during the years ended December 31, 2024 and 2023; however, changing circumstances may make future lease extensions more difficult.

The debt market remains sensitive to the macro environment, such as inflation, Federal Reserve policy, the impacts of increases in tariffs by the U.S. and other countries, market sentiment and regulatory factors affecting the banking and commercial mortgage-backed securities industries. Our Credit Facility (as defined below), includes floating interest rates based on SOFR and our leverage ratio as described below and although our swaps entered into in 2022 were cancelled on December 31, 2024, we entered into new swaps for 2025 which fix the rate of our Term Loan for one year. Our two mortgages with fixed rates do not mature until after September 2027. As a result of the interest rate swap agreements entered into for the year ending December 31, 2025, 100% of our consolidated indebtedness held a weighted average fixed interest rate of 4.27% as long as our leverage ratio is less than 50%.

Any future uncertainties in the capital markets may cause difficulty in refinancing debt obligations prior to maturity at terms as favorable as the terms of existing indebtedness. If we are not able to refinance our indebtedness on attractive terms, or at all, at the various maturity dates, we may be forced to dispose of some of our assets. Market conditions can change quickly, potentially negatively impacting the value of real estate investments.

37

Liquidity and Capital Resources

Generally, our cash requirements for property acquisitions, debt payments and refinancings, capital expenditures and other investments will be funded by bank borrowings through our Credit Facility (as defined below), mortgage indebtedness on our properties, real estate property sales, internally generated funds or offerings of shares of our Class C Common Stock.

Purchases of properties in the near-term will be funded primarily with proceeds from dispositions of remaining non-core properties, proceeds from our ATM program and cash on hand. In the future, we expect to sell additional shares of our Class C Common Stock, subject to market conditions and a recovery in the trading price of our Class C Common Stock. We are targeting leverage, over the long-term once we achieve scale, of 40% or lower of the aggregate fair value of our real estate properties plus our cash and cash equivalents; however, we increased our borrowing during 2023 in order to execute attractive acquisition opportunities resulting in leverage of 47.6% as of December 31, 2024. We have $30.0 million of borrowing capacity available under our Credit Facility which we may utilize in the near or medium-term if we identify attractive investment opportunities in advance of completing dispositions or raising additional equity, which could result in temporary increases in leverage.

We expect that our cash requirements for operating and interest expenses, dividends on our Series A Preferred Stock and distributions on our Class C Common Stock and OP Units will be funded by internally generated funds. We expect to have adequate liquidity to meet our cash requirements for the next 12 months and beyond.

ATM Program

On March 30, 2022, we filed a Registration Statement on Form S-3 (File No. 333-263985), and on May 27, 2022, we filed Amendment No. 1 to the Registration Statement on Form S-3, to issue and sell from time to time, together or separately, the following securities at an aggregate public offering price that will not exceed $200.0 million: Class C Common Stock, preferred stock, warrants, rights and units. The Form S-3, as amended, became effective on June 2, 2022 and we filed a prospectus supplement for our at-the-market offering of up to $50.0 million of its Class C Common Stock (the “ATM Offering”) on June 6, 2022 (the “ATM Prospectus”).

On November 13, 2023, we filed Supplement No. 1 to the ATM Prospectus to reflect the Amended and Restated At Market Issuance Sales Agreement, dated November 13, 2023, and the change in our corporate name. During the year ended December 31, 2024, 521,837 shares were sold at an average price of $16.16 per share and issued for $8.2 million, net of sale commissions of $0.2 million, of which 287,840 shares were sold at an average price of $16.16 per share and issued for $4.5 million, net of sale commissions, during the three months ended December 31, 2024. The resulting net proceeds from the ATM Offering for the year ended December 31, 2024 were $7.7 million after legal, accounting, investor relations and other offering costs of $0.5 million. As of December 31, 2024, we had $40.3 million of shares of Class C Common Stock available for future issuance under the ATM Offering.

Credit Facility and Mortgages

Our Operating Partnership entered into an agreement for a line of credit (the “Credit Agreement”) on January 18, 2022 with KeyBank and the other lending institutions party thereto (the “Lenders”), with KeyBank acting as agent for the Lenders (in such capacity, the “Agent”). The Credit Agreement currently provides a $280.0 million line of credit comprised of a $30.0 million revolving line of credit (“Revolver”), and a $250.0 million term loan (“Term Loan” and together with the Revolver, the “Credit Facility”), as further described in Note 7 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K. The Credit Facility is available for general corporate purposes, including, but not limited to, acquisitions, repayment of existing indebtedness, capital expenditures and general corporate purposes.

On February 26, 2025, we entered into an agreement with the Lenders to amend the Credit Agreement by (a) extending the maturity of the Revolver to January 18, 2027, which is coterminous with the maturity of the Term Loan, and (b) changing the definition of “Distributions” to exclude any repurchases of our Series A Preferred Stock that are funded by proceeds from the sale of our Class C Common Stock.

38

The Credit Facility is priced on a leverage-based grid that fluctuates based on our actual leverage ratio at the end of the prior quarter. With our leverage ratio of 47.6% as of December 31, 2024, the spread over SOFR, including a 10-basis point credit adjustment, is 185 basis points and the interest rate on the Revolver was 6.2250% as of February 28, 2025; however, there was no outstanding balance on the Revolver. We also pay an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment, and incurred total unused fees of $0.4 million for each of the years ended December 31, 2024 and 2023. On December 27, 2024, we exercised our right to reduce the Revolver to $30.0 million from $150.0 million in order to reduce annual unused fees to less than $0.1 million.

On May 10, 2022, we entered into a swap agreement, effective from May 31, 2022 to January 17, 2027, subject to our counterparty’s one-time cancellation option on December 31, 2024, to fix SOFR at 2.258% with respect to our original $150.0 million Term Loan. On October 26, 2022, we entered into a swap agreement, effective from November 30, 2022 to November 30, 2027, subject to our counterparty’s one-time cancellation option on December 31, 2024, to fix SOFR at 3.44% with respect to the $100.0 million expansion of our Term Loan. On the December 31, 2024, the counterparties to both swap agreements exercised their one-time options to cancel their respective swap agreements (see Note 8 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details). In January 2025, we entered into two new swap agreements, for $125.0 million each, for an aggregate of $250.0 million, corresponding to the Term Loan, to fix SOFR for the year ending December 31, 2025 at 2.45%, resulting in a fixed rate of 4.25% effective December 31, 2024, based on our leverage ratio of 47.6% as of December 31, 2024. (see Note 14 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details).

As of December 31, 2024 and 2023, the outstanding principal balance of our mortgage notes payable secured by two properties, including one held for sale property, was $30.9 million and $31.2 million, respectively. As of December 31, 2024 and 2023, the Term Loan outstanding principal balance was $250.0 million and there was no outstanding balance on the Revolver. As of December 31, 2024, our approximate 72.7% pro-rata share of the TIC Interest’s mortgage note payable of $12.4 million was $9.0 million, which is not included in our consolidated balance sheets in this Annual Report on Form 10-K.

The Credit Facility includes customary representations, warranties and covenants. The Credit Facility is secured by a pledge of all of the Operating Partnership’s equity interests in certain of the single-purpose, property-owning entities (the “Subsidiary Guarantors”) that are indirectly owned by us, and various cash collateral owned by the Operating Partnership and the Subsidiary Guarantors. In connection with the Credit Facility, we and each of our Subsidiary Guarantors entered into an Unconditional Guaranty of Payment and Performance in favor of the Agent, pursuant to which we and each of our Subsidiary Guarantors agreed to guarantee the full and prompt payment of the Operating Partnership’s obligations under the Credit Agreement.

While we intend for the Credit Facility to be an important source of financing, we may continue to use mortgage debt financing for certain real estate investments and acquisitions. This financing may be obtained at the time an asset is acquired or an investment is made or at such later time as determined to be appropriate. In addition, debt financing may be used from time-to-time for property improvements, lease inducements, tenant improvements and other working capital needs.

The $30.0 million unused capacity on our Revolver as of the date of this Annual Report on Form 10-K, subject to our borrowing base covenant, along with proceeds from any future offerings of shares of Class C Common Stock, can be used to invest in real estate and real estate-related investments or to re-lease and reposition our properties in accordance with our investment strategy and policies, including costs and fees associated with such investments, such as capital expenditures, tenant improvement costs and leasing costs. We also may use a portion of the proceeds from our equity offerings for payment of principal on our outstanding indebtedness and for general corporate purposes.

Compliance with All Debt Agreements

Pursuant to the terms of our Credit Facility and our two mortgage notes payable secured by certain of our properties, we and/or our subsidiary borrowers are subject to certain financial loan covenants. We and/or our subsidiary borrowers were in compliance with such financial loan covenants as of December 31, 2024.

Acquisitions and Dispositions of Real Estate Investments

We define “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property. We define “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property.

39

Acquisitions

The details of the one property and 12 properties we acquired during the years ended December 31, 2024 and 2023, respectively, are as follows (dollars in thousands):

During the year ended December 31, 2023, we acquired 12 industrial manufacturing real estate properties for an aggregate of $129.8 million, including closing costs, at a blended initial cap rate of 7.8% and a weighted average cap rate of 10.3%. These properties are located in Princeton, Savage, Detroit Lakes and Plymouth, Minnesota; Gap and Reading, Pennsylvania; Roscoe, Illinois; Lansing, Michigan; Ashland and Piqua, Ohio; Alleyton, Texas; and Andrews, South Carolina. The properties acquired had a weighted average lease term of approximately 20.6 years upon acquisition.

On or before March 14, 2025, following the completion of our exploration of a potential tenant build-to-suit opportunity, we will acquire an industrial property for $6.1 million, consisting of a $0.25 million cash deposit that has been distributed to the contributor, and at closing, approximately 344,118 Class C OP Units valued at $5.85 million, based on an agreed upon value of $17.00 per Class C OP Unit. The property is located in the Jacksonville, Florida metropolitan statistical area and is subject to an existing lease that expires on December 31, 2032, with annual rent escalations based on the consumer price index. The property contains an adjacent land parcel that has the potential to be developed into additional industrial space. We priced this transaction at an 8.00% initial cap rate based upon a rent increase that will occur on July 1, 2025.

In evaluating the above properties as potential acquisitions, including the determination of an appropriate purchase price to be paid for the properties, we considered a variety of factors, including the condition and financial performance of the properties, the terms of the existing leases and the creditworthiness of the tenants, property location, visibility and access, age of the properties, physical condition and curb appeal, neighboring property uses, local market conditions, including vacancy rates, area demographics, including trade area population and average household income and neighborhood growth patterns and economic conditions.

Dispositions

Our dispositions during the year ended December 31, 2024 were as follows (dollars in thousands):

For the year ended December 31, 2023, we sold 14 non-core real estate properties (11 retail and three office) comprised of 241,795 square feet for aggregate contract sales prices of $47.5 million, with net proceeds of $44.4 million (net of commissions and closing costs) and a net loss on sales of $1.7 million. See Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for further details of these dispositions.

On February 26, 2025,we completed the sale of our property that is located in Endicott, New York and is leased to New Vision Industries, LLC, a subsidiary of Producto Holdings LLC (“Producto”) for a sales price of $2.4 million. In connection with this sale, the lease for our property in Jamestown, New York with another Producto subsidiary was amended to increase the base rent by $2,500 per month.

40

Capital Expenditures and Tenant Improvements

Other than as discussed below, we do not have plans to incur any significant costs to renovate, improve or develop our properties. We believe that our properties are adequately insured. Pursuant to our lease agreements, as of December 31, 2024 and 2023, we had obligations to reimburse $3.0 million and $2.4 million, respectively, for future on-site and tenant improvements expected to be incurred by tenants. We expect that the related improvements will be completed during the 2025 calendar year and will be funded from cash on hand, operating cash flow, offerings of shares of our Class C Common Stock or borrowings under our Credit Facility.

In addition, we have identified approximately $0.5 million of capital expenditures that are expected to be completed in the next 12 months which are not recoverable from tenants with double-net leases. These improvements will be funded from cash on hand or operating cash flows. More information on our properties and investments can be found in Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Funds from Operations and Adjusted Funds from Operations

In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts (“Nareit”) promulgated a measure known as Funds from Operations (“FFO”). FFO is defined as net income or loss computed in accordance with GAAP, excluding gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated investments, preferred dividends and real estate impairments. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.

Additionally, we use Adjusted Funds From Operations (“AFFO”) as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as stock-based compensation, amortization of deferred rent, amortization of below/above market lease intangibles, amortization of deferred financing costs, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, and write-offs of due diligence expenses for abandoned pursuits. We also believe that AFFO is a recognized measure of sustainable operating performance in the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results. By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.

For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income or loss from operations, net income or loss and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income or loss from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

Neither the SEC, Nareit, nor any other applicable body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure.

41

The following are the calculations of FFO and AFFO for the years ended December 31, 2024 and 2023 (in thousands, except shares outstanding and per share data):

(1)    Fully diluted weighted average number of shares for 2023 includes the Class M OP Units which automatically converted to Class C OP Units on January 30, 2024, and Class P and Class R OP Units which automatically converted to Class C OP Units as of March 31, 2024, to compute the fully diluted weighted average number of shares.

42

Property Portfolio Information

Following the issuance of our publicly listed Series A Preferred Stock in September 2021, we began to significantly transform our portfolio in furtherance of our strategic plan to reduce our exposure to office properties and increase our WALT. The following is a summary of how we have transformed the composition of our real estate portfolio over time, resulting in a majority of our ABR produced by industrial properties, including the TIC Interest, as shown and described below.

Percentage of Annual ABR:

Following the public listing of our Class C Common Stock in February 2022, we began to focus strategically and exclusively on acquiring industrial manufacturing properties while at the same time continuing the tactical reduction of our non-core properties exposure. To that end, we acquired 15 industrial manufacturing properties and sold eight non-core properties during 2022.

In 2023, we acquired 12 more industrial manufacturing properties and made a significant step in transforming our portfolio in August 2023 when we sold 13 non-core properties to GIPR, comprised of 11 retail properties and two office properties (see Notes 3 and 5 to our accompanying unaudited condensed consolidated financial statements included in this Annual Report on Form 10-K for details), followed by the sale of another office property at the end of August 2023.

We continued our transformation in 2024 with the sale of two non-core properties in January and February and the acquisition of an industrial manufacturing property in July 2024. Industrial properties now comprise 78% of the portfolio ABR and 22% of ABR is attributable to non-core properties, as of December 31, 2024. Our goal is to have a portfolio consisting of 100% industrial manufacturing properties over the intermediate-term.

The following is a breakdown of our income by property type for the year ended December 31, 2024 (in thousands):

(1)    Industrial core properties include an approximate 72.7% TIC interest in the Santa Clara, California property.

(2)    Non-core properties include the following:

(i)    our non-core acquisition of a leading KIA retail property located in a prime location in Los Angeles County acquired in January 2022, which was structured as an OP Unit transaction resulting in a favorable equity issuance of $32.8 million represented by 1,312,382 Class C OP Units at a cost basis of $25 per share. We repurchased 656,191 of those units and 123,809 shares of Class C Common Stock from an affiliate of the seller at $14.80 per share on August 1, 2024 as described in Note 12 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K;

(ii)    our 12-year lease with OES executed in January 2023 for one of our legacy assets located in Rancho Cordova, California that includes a purchase option which OES may exercise until December 31, 2026. We have received preliminary indications from OES of interest in exercising the option. (We define legacy assets as those that were acquired by different management teams utilizing different investment objectives and underwriting criteria);

(iii)    our legacy property leased to Costco located in Issaquah, Washington which offers compelling redevelopment opportunities, following Costco’s lease expiration on July 31, 2025, given its higher density infill location and the fact that the land is zoned to allow for multi-family development. We entered into a purchase and sale agreement for the Costco property with KB Home, a national homebuilder, in January 2024 and the buyer has made $1.7 million of non-refundable deposits as of December 31, 2024 (see Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details of the pending sale); and

43

(iv)    two legacy office properties including a property leased to Solar Turbines that we expect to sell after we complete a parcel split to maximize its value and a property leased to Cummins that was sold on February 28, 2024 (see Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details of this sale).

The following is a breakdown of our assets by property type (in thousands):

(1)    See footnote (1) above

(2)    See footnote (2) above.

(3)    As part of our continued effort to increase balance sheet simplicity, management is currently exploring opportunities to acquire the minority interests in the property in which we hold the TIC Interest, which would result in consolidation of the asset, or to sell the TIC Interest.

We have one mortgage secured by an industrial core property and one mortgage secured by a non-core property. The equity of each special purpose subsidiary that owns our other properties is pledged as collateral under our Credit Facility or the properties are unencumbered. See details of mortgage debt in Note 7 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Distributions

The source of cash used to pay our distributions has been and is expected to continue to be internally generated funds from operations.

A table of distributions declared and paid is disclosed in Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Distribution Information.

We expect that our board of directors will continue to declare distributions based on a single record date as of the end of each month and to pay these distributions on a monthly basis. Distributions will be determined by our board of directors based on our financial condition and such other factors as our board of directors deems relevant. We have not established a minimum dividend or distribution level, and our charter does not require that we make dividends or distributions to our stockholders other than as necessary to meet REIT qualification standards. On November 4, 2024, our board of directors authorized a 1.7% increase in the annual distribution rate from $1.15 per share to $1.17 per share commencing with monthly distributions payable to common stockholders and Class C OP Unit holders of record beginning as of January 31, 2025.

44

Cash Flow Summary

The following table summarizes our cash flow activity for the years ended December 31, 2024 and 2023 (in thousands):

Cash Flows from Operating Activities

The net increase in cash provided by operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily reflects a decrease in property expenses which resulted from the August 2023 sale of properties subject to gross leases and an increase in distributions from unconsolidated investment in a real estate property, which resulted from an increase in available cash following completion of roof replacements. These were partially offset by an increase in interest expense, net of derivative cash receipts, year-over-year since the Term Loan was not fully drawn until April 2023.

Cash Flows from Investing Activities

The net cash provided by investing activities for the year ended December 31, 2024 primarily reflects the net proceeds from the sale of two real estate properties and a land parcel aggregating $15.0 million, partially offset by the cost of one acquisition and building additions aggregating $7.0 million. The net cash used in investing activities for the year ended December 31, 2023 primarily reflects funds used for acquisitions of 12 properties aggregating $122.8 million and additions to existing real estate properties of $4.8 million, offset in part by the net proceeds of $34.7 million from the sale of real estate properties.

Cash Flows from Financing Activities

The net cash used in financing activities for the year ended December 31, 2024 primarily reflects the net cost of repurchasing Class C OP Units and shares of Class C Common Stock for $11.5 million, our dividends and distributions paid to preferred and common stockholders and Class C OP Unit holders and monthly repayments of mortgage notes payable, partially offset by net proceeds from the sale of common stock under our ATM offering. The net cash provided by financing activities for the year ended December 31, 2023 primarily reflects our net borrowings of $97.0 million from the Credit Facility, partially offset by repayments of principal on a mortgage note payable, funds used to repurchase common stock and dividends and distributions paid to preferred and common stockholders and Class C OP Unit holders.

Results of Operations

Portfolio Information

Our wholly-owned investments in real estate properties as of December 31, 2024 and 2023, including one and two properties held for sale as of the years ended December 31, 2024 and 2023, respectively, and the 91,740 square foot industrial property underlying the TIC Interest for all balance sheet dates presented were as follows:

(1)    Includes the TIC Interest.

45

(2)    Includes one office property held for sale as of December 31, 2024 and two properties (one industrial and one office) held for sale as of December 31, 2023, which were sold on January 10, 2024 and February 28, 2024.

We acquired one operating property during 2024 and 12 operating properties during 2023, respectively. We sold two and 14 non-core properties during 2024 and 2023, respectively. The operating results of properties that were classified as held for sale as of December 31, 2024 and 2023 and the properties that were sold during 2024 and 2023 were included in the continuing results of operations in our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Our results of operations for the year ended December 31, 2024, may not be comparable to those expected for 2025 or in future periods.

Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023

Rental Income

Rental income for the years ended December 31, 2024 and 2023 was $46.5 million and $46.9 million, respectively, including tenant reimbursements of $2.0 million and $3.0 million, respectively. The decrease in rental income of $0.4 million, or 1%, year-over-year reflects the disposition of two properties during the first quarter of 2024 and 14 properties in August 2023, which included tenant reimbursements for modified gross leases and double-net leases. The decrease in rental income from sold properties was largely offset by rental income from 12 industrial manufacturing properties acquired in 2023 and one industrial manufacturing property acquired in July 2024. Pursuant to most of our current lease agreements, tenants are required to pay property operating expenses directly; however, some tenants reimburse all or a portion of the property operating expenses that they do not pay directly.

General and Administrative

General and administrative expenses were $6.3 million and $6.6 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $0.3 million, or 5%, year-over-year primarily reflects reduced employee compensation and investor relations costs, partially offset by non-recurring legal and transfer agent costs related to the distribution of GIPR’s common stock to our stockholders in January 2024.

Stock Compensation

Stock compensation expense was $1.6 million and $11.2 million for the years December 31, 2024 and 2023, respectively. The significant decrease of $9.6 million, or 86%, compared to 2023 primarily reflects the change in stock compensation expense for our Class P OP Units and Class R OP Units which vested at the end of March 2024. Stock compensation expense in 2024 includes $1.2 million for our Class P OP Units and Class R OP Units for the first quarter, of which $0.7 million related to our achievement of management’s performance target for FFO of $1.05 per diluted share for the year ended December 31, 2023. Stock compensation expense for these units was $10.9 million in 2023, which included a one-time, non-cash catch-up adjustment of $8.6 million for performance-based stock compensation expense based on our determination that it was probable that we would achieve management’s performance target for FFO of $1.05 per diluted share for the year ended December 31, 2023. Amortization of the stock compensation expense related to our Class P OP Units and Class R OP Units was completed effective with their automatic conversion to Class C OP Units on the last business day of March 2024. From April 1, 2024 through December 31, 2024, there were no other stock incentive awards outstanding. In addition to the portion of independent directors' fees that are paid in common stock, stock compensation expense in future periods will include amortization for the Class X OP Units granted on February 3, 2025 as described in Note 14 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Depreciation and Amortization

Depreciation and amortization expense was $16.6 million and $15.6 million for the years ended December 31, 2024 and 2023, respectively. The purchase price of properties acquired is allocated to tangible assets, identifiable intangibles and assumed liabilities, if any, and depreciated or amortized over their estimated useful lives. The increase of $1.0 million, or 7%, year-over-year primarily reflects a full year of depreciation of real estate properties acquired in the first seven months of 2023, and an increase due to an industrial manufacturing property acquired on July 15, 2024, partially offset by reductions due to properties sold in August 2023 and the first quarter of 2024, along with reductions in amortization of intangible lease assets for the year ended December 31, 2024, due to the disposition of properties with acquired leases rather than leases initiated by us.

46

Property Expenses

Property expenses were $3.6 million and $5.2 million for the years ended December 31, 2024 and 2023, respectively. These expenses primarily relate to property taxes and repairs and maintenance expenses, the majority of which are reimbursed by tenants and included in rental income. The decrease of $1.5 million, or 30%, year-over-year primarily reflects decreases in repairs and maintenance and property taxes related to 14 properties sold during August 2023, which included modified gross leases and double-net leases, offset in part by an increase in non-recoverable environmental insurance expenses.

Impairment of Real Estate Investment Property

There was no impairment for the year ended December 31, 2024. Impairment of real estate investment property amounted to $4.4 million for the year ended December 31, 2023 related to our property in Nashville, Tennessee, which was leased to Cummins Inc. The impairment charge represents the excess of the property’s carrying value over the property’s contracted sale price less estimated selling costs for the sale that was completed on February 28, 2024.

Gain (Loss) on Sale of Real Estate Investments, Net

The gain on sale of real estate investments of $3.4 million for the year ended December 31, 2024 relates to the aggregate gain on sale of two properties (one industrial property with a lease expiration at the end of 2024 and one office property), which were sold during the first quarter of 2024 and the gain on sale of a land parcel in September 2024 (see Note 3 to our accompanying consolidated financial statements included in this this Annual Report on Form 10-K for more details). The loss on sale of real estate investments of $1.7 million for the year ended December 31, 2023 includes the $1.9 million loss on sale of the 13 non-core properties sold to GIPR on August 10, 2023, partially offset by the $0.2 million gain on sale of the office property sold on August 31, 2023. The loss included the $2.4 million difference between the $12.0 million liquidation value and the $9.6 million fair value of our investment in GIPR’s newly-created Series A Redeemable Preferred Stock received on August 10, 2023 as a portion of the sale proceeds (see Note 5 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details).

Other (Expense) Income

Interest income was $0.5 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively. Interest income for 2024 primarily reflects interest earned on the proceeds from the sale of two properties (one industrial and one office) sold during the first two months of 2024 and higher interest rates earned on available cash and cash equivalents. Interest income for 2023 primarily reflects interest earned on cash proceeds from the April 2023 draws on the Term Loan, prior to utilizing such cash to acquire industrial manufacturing properties.

Dividend income was $0.1 million and $0.5 million for the years ended December 31, 2024 and 2023, respectively, reflecting dividends received on our investment in GIPR preferred stock for August through December 2023 and in January 2024, along with dividends received prior to the sale of 171,444 shares of common stock issued by GIPR and retained by us as described in Note 5 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Income from unconsolidated investment in a real estate property, which reflects our approximate 72.7% TIC Interest in the Santa Clara, California property’s results of operations, remained relatively constant at $0.3 million for the years ended December 31, 2024 and 2023.

Interest expense, including unrealized gain or loss on interest rate swaps and net of derivative settlements, was $16.2 million and $13.8 million for the years ended December 31, 2024 and 2023, respectively (see Note 7 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for details of the components of interest expense, net). The increase of $2.4 million, year-over-year primarily reflects (i) a $0.9 million increase in unrealized losses, net on valuation of interest rate swaps, and (ii) a $2.2 million net increase in interest expense and unused commitment fees incurred on our Credit Facility due to larger balances outstanding during 2024, since the Term Loan was not fully drawn until April 2023. This increase was partially offset by greater derivative cash settlements of $0.5 million and a reduction of $0.3 million in mortgage notes interest expense year-over-year as a result of paying off the mortgage on the property leased to OES in December 2023.

The year ended December 31, 2023 includes a gain of $1.4 million for the fair value adjustment of the GIPR preferred stock for the period from August 10, 2023 (when the GIPR preferred stock was acquired) through December 31, 2023.

47

Critical Accounting Policies and Estimates

The policies and estimates discussed below reflect those that management believes are or will be critical in affecting the preparation of our consolidated financial statements. We consider these policies critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain 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 consolidated 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 consolidated financial statements. Management evaluates these estimates based upon information currently available and on various assumptions that it believes are reasonable on an ongoing basis. Additionally, other companies may have utilized different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. See “Note 2 – Summary of Significant Accounting Policies” to our consolidated financial statements of this report on Form 10-K for additional discussion of our significant accounting policies.

Real Estate Investments

Real Estate Acquisition Valuation

In connection with our acquisition of properties, we allocate the purchase price, including transaction costs, to the tangible and intangible assets and liabilities acquired based on their respective estimated fair values. Tangible assets consist of land, buildings, fixtures and tenant improvements. Intangible assets consist of above- and below- market lease values and the value of in-place leases. Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, market land and building values, discount and capitalization rates, and future cash flows. The use of different assumptions could impact the timing of recognition of related revenues and expenses.

Impairment of Investment in Real Estate Properties

We monitor events and changes in circumstances that could indicate that the carrying amounts of real estate properties may not be recoverable. These indicators include, but are not limited to: changes in real estate market conditions, our ability to re-lease properties that are vacant, reclassification of properties to held for sale, and tenants in bankruptcy. Identification of such events may involve certain assumptions, estimates, and significant judgment. When indicators of potential impairment are present that indicate that the carrying amounts of real estate and related intangible assets may not be recoverable, management assesses whether the carrying value of the real estate properties will be recovered through the future undiscounted operating cash flows expected from the use of and eventual disposition of the property. The undiscounted operating cash flows are based on estimated market lease rates, property-operating expenses, carrying costs during lease-up periods, estimated hold periods, discount rates, and capitalization rates. If, based on the analysis, we do not believe that we will be able to recover the carrying value of the real estate properties, we will record an impairment charge to the extent the carrying value exceeds the estimated fair value of the real estate properties. The use of different assumptions could have a material impact on our results of operations.

Recent Accounting Pronouncements

See Note 2 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

48

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition, results of operations and cash flows together with the consolidated financial statements and related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. Also, see “Cautionary Note Regarding Forward-Looking Statements” preceding Part I of this Annual Report on Form 10-K and Part I, Item 1A. Risk Factors herein.

Management’s discussion and analysis of financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Overview

We are a Maryland corporation with issued and outstanding stock consisting of Series A Preferred Stock, listed on the NYSE under the symbol “MDV.PA,” and Class C Common Stock, listed on the NYSE under the symbol “MDV.” We currently own and manage single-tenant net-lease properties throughout the United States, which are primarily, but not exclusively, industrial properties. Our focus for future acquisitions is on critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation's supply chains. We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2016. We believe that we have operated in conformity with the requirements for qualification as a REIT for U.S. federal income tax purposes. Since December 31, 2019, we have been internally managed, as further described below in Note 12 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

34

Table of Contents

Following the January and February 2024 sales of the two properties that were held for sale as of December 31, 2023, our real estate investment portfolio consists of 42 properties, including the TIC Interest, as further described in Notes 3 and 4 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K. Our portfolio is distributed across 15 states and consists of 38 industrial properties which represent approximately 76% of the portfolio by ABR, one retail property which represents approximately 11% of the portfolio by ABR, and three office properties which represent approximately 13% of the portfolio by ABR. As of December 31, 2023, excluding the two properties that were held for sale, our ABR was $39,328,192 with a WALT of 14.1 years and 33% of our tenants by ABR are investment grade.

Although we are not limited as to the form our investments may take, our investments in real estate will generally constitute acquiring fee title or interests in entities that own and operate real estate. We will make substantially all acquisitions of our real estate investments directly through the Operating Partnership or indirectly through limited liability companies or limited partnerships, including through other REITs, or through investments in joint ventures, partnerships, tenants-in-common, co-tenancies or other co-ownership arrangements with other owners of properties. We are the sole general partner of, and owned an approximate 68% partnership interest in the Operating Partnership on December 31, 2023. The Operating Partnership’s limited partners include holders of several classes of units with various vesting and enhancement terms as further described in Note 12 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K. We report with the SEC as a smaller reporting company under Rule 12b-2 of the Exchange Act.

Primary Investment Objectives

Our primary investment objectives are:

•to provide attractive growth in AFFO and sustainable cash distributions;

•to realize appreciation from proactive investment selection and management;

•to provide future opportunities for growth and value creation; and

•to provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to industrial manufacturing real estate.

We expect the trend of onshoring manufacturing to accelerate and we will continue to focus future acquisitions on industrial manufacturing properties, subject to market conditions and the availability of prices that we consider attractive. We can provide no assurance that we will achieve our investment objectives. See the Part I, Item 1A. Risk Factors section of this Annual Report on Form 10-K for additional information.

Recent Events and Uncertainties

There are continuing significant uncertainties in the market in which we operate related to inflation and interest rates, supply chain disruptions, and negative impacts associated with the violence and unrest in the Middle East, the ongoing Russian war against Ukraine and sanctions which have been implemented by the United States and other countries against Russia. Volatility in stock and bond markets and particularly the rapid rise in yields on U.S. Treasury securities during 2022 and 2023, the ripple effect of bank failures in the first half of 2023 and increasing bank regulations, may negatively impact our operating results, liquidity and sources of borrowings.

We, our tenants and operating partners are impacted by inflation and rising interest rates. While the rate of inflation has been declining over the last few months, inflation remains above the Federal Reserve's 2% target and there is significant uncertainty over the future rate of inflation. Depending on the future course of inflation, the Federal Reserve may refrain from reducing interest rates to try to rein in inflation, which could lead to a recession and will negatively impact our future results due to higher borrowing costs on any future floating rate borrowing. As of December 31, 2023, 100% of our $281,200,000 outstanding debt is at fixed rates with a weighted average rate of 4.52% as a result of the swap agreements entered into in May 2022 and October 2022. In addition, sustained elevated inflation rates may negatively impact our longer term leases if contractual rent increases are not sufficient to keep up with market leases.

Possible future declines in rental rates and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows from office properties. Following the January and February 2024 sales of the two properties held for sale leased by Levins and Cummins, respectively, we have no leases expiring in the next 12 months.

35

Table of Contents

Potential future declines in economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio, which could have the following negative effects on us: the values of our investments in commercial properties could decrease below the amounts paid for such investments; and/or revenues from our properties could decrease due to fewer tenants and/or lower rental rates, making it more difficult for us to make distributions or meet our debt service obligations. We successfully negotiated lease extensions for three and two properties during 2022 and 2023, respectively; however, changing circumstances may make future lease extensions more difficult.

The debt market remains sensitive to the macro environment, such as inflation, Federal Reserve policy, bank failures in the first half of 2023, the impacts of the COVID-19 pandemic on office properties, market sentiment and regulatory factors affecting the banking and commercial mortgage-backed securities industries. In January 2022, we refinanced all but four of our properties (including the TIC Interest) with proceeds from our Credit Facility (as defined below), which includes floating rates based on the Secured Overnight Financing Rate (“SOFR”) and our leverage ratio as described below. The mortgage on our Rancho Cordova, California property, which is leased to the State of California's Office of Emergency Services (“OES”) and was scheduled to mature on March 9, 2024, was fully repaid in December 2023 and the other three mortgages do not mature until after September 2027. All of the remaining mortgages are at fixed rates. As a result of the interest rate swap agreements entered into during 2022, 100% of our consolidated indebtedness as of December 31, 2023, held a weighted average fixed interest rate of 4.52%.

Any future uncertainties in the capital markets may cause difficulty in refinancing debt obligations prior to maturity at terms as favorable as the terms of existing indebtedness. If we are not able to refinance our indebtedness on attractive terms, or at all, at the various maturity dates, we may be forced to dispose of some of our assets. Market conditions can change quickly, potentially negatively impacting the value of real estate investments.

Liquidity and Capital Resources

Generally, our cash requirements for property acquisitions, debt payments and refinancings, capital expenditures and other investments will be funded by bank borrowings through our Credit Facility, mortgage indebtedness on our properties, real estate property sales, internally generated funds or offerings of shares of our Class C Common Stock.

Purchases of properties in the near-term will be funded primarily with proceeds from dispositions of remaining non-core properties, proceeds from our ATM program and cash on hand. In the future, we expect to sell additional shares of our Class C Common Stock, subject to market conditions and a recovery in the trading price of our Class C Common Stock. We are targeting leverage, over the long-term once we achieve scale, of 40% or lower of the aggregate fair value of our real estate properties plus our cash and cash equivalents; however, we increased our borrowing during 2023 in order to execute attractive acquisition opportunities resulting in leverage of 48% as of December 31, 2023. We have $150 million of borrowing capacity available under our Credit Facility (defined below) which we may utilize in the near or medium-term if we identify attractive investment opportunities in advance of completing dispositions or raising additional equity, which could result in temporary increases in leverage.

Our cash requirements for operating and interest expenses, dividends on our Series A Preferred Stock and distributions on our Class C Common Stock will be funded by internally generated funds. We expect to have adequate liquidity to meet our cash requirements for the next 12 months and beyond.

Credit Facility and Mortgages

Our Operating Partnership entered into an agreement for a line of credit (the “Credit Agreement”) on January 18, 2022 which was amended on October 21, 2022, and currently provides a $400,000,000 line of credit comprised of a $150,000,000 four-year Revolver, which may be extended by up to 12 months subject to certain conditions, and a $250,000,000 five-year Term Loan with KeyBank and the other lending institutions party thereto (collectively, the “Lenders”), including KeyBank as Agent for the Lenders (in such capacity, the “Agent”), as further described in Note 7 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K. The Credit Facility is available for general corporate purposes, including, but not limited to, acquisitions, repayment of existing indebtedness and capital expenditures.

36

Table of Contents

The Credit Facility includes an accordion option that allows us to request additional Revolver and Term Loan lender commitments up to a total of $750,000,000 subject to customary conditions, including the receipt of new commitments from the Lenders. The Revolver’s maturity is in January 2026, with options to extend for a total of 12 months, and the Term Loan’s maturity is in January 2027.

The Credit Facility is priced on a leverage-based grid that fluctuates based on our actual leverage ratio at the end of the prior quarter. With our leverage ratio at 48% as of September 30, 2023, the spread over SOFR, including a 10-basis point credit adjustment, is 185 basis points for the Revolver. Therefore, the interest rate on the Revolver was 7.1625% as of February 29, 2024; although there was no outstanding balance on the Revolver. We also pay an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment, and paid total unused fees of $378,816 and $200,578 for the years ended December 31, 2023 and 2022, respectively.

On May 10, 2022, we entered into a swap agreement, effective from May 31, 2022 to January 17, 2027, subject to our counterparty’s one-time cancellation option on December 31, 2024, to fix SOFR at 2.258% with respect to our original $150,000,000 Term Loan. We granted the cancellation option because it reduced the swap rate by approximately 50 basis points. The Company has begun to explore, and intends to further explore various alternatives available to extend or restructure the cancellation option. This swap agreement resulted in a fixed interest rate of 4.058% on our original $150,000,000 Term Loan based on our leverage ratio of 48% as of December 31, 2023, as described in Note 8 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

On October 26, 2022, we entered into a swap agreement, effective from November 30, 2022 to November 30, 2027, subject to our counterparty’s one-time cancellation option on December 31, 2024, to fix SOFR at 3.44% with respect to our expanded Term Loan. We granted the cancellation option because it reduced the swap rate by approximately 50 basis points. This swap agreement resulted in a fixed interest rate of 5.240% on the additional $100,000,000 borrowed under the expanded Term Loan based on our leverage ratio of 48% as of December 31, 2023, as described in Note 8 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

As of December 31, 2023 and 2022, the outstanding principal balance of our mortgage notes payable on our operating properties was $31,200,000 and $44,515,009, respectively, our Revolver outstanding principal balance was zero and $3,000,000, respectively, and our Term Loan outstanding principal balance was $250,000,000 and $150,000,000, respectively. As of December 31, 2023, our approximate 72.7% pro-rata share of the TIC Interest’s mortgage note payable of $12,730,664 was $9,256,466, which is not included in our consolidated balance sheets in this Annual Report on Form 10-K.

The Credit Facility includes customary representations, warranties and covenants, including covenants regarding minimum fixed charge coverage of 1.50x, minimum tangible net worth of $208,629,727 plus 85% of net offering proceeds after January 18, 2022, and maximum consolidated leverage of 60%. The Credit Facility is secured by a pledge of all of the Operating Partnership’s equity interests in certain of the single-purpose, property-owning entities (the ‘‘Subsidiary Guarantors’’) that are indirectly owned by us, and various cash collateral owned by the Operating Partnership and the Subsidiary Guarantors. In connection with the Credit Facility, we and each of our Subsidiary Guarantors entered into an Unconditional Guaranty of Payment and Performance in favor of the Agent, pursuant to which we and each of our Subsidiary Guarantors agreed to guarantee the full and prompt payment of the Operating Partnership’s obligations under the Credit Agreement.

We are targeting leverage of 40% or lower over the long-term once we achieve scale; however, we increased our borrowing during 2023 in order to execute attractive acquisition opportunities resulting in leverage of 48% as of December 31, 2023. We may have higher leverage in the near or medium-term if we identify attractive investment opportunities in advance of completing dispositions or raising additional equity to fund future acquisitions.

While we intend for the Credit Facility to be an important source of financing, we may continue to use mortgage debt financing for certain real estate investments and acquisitions. This financing may be obtained at the time an asset is acquired or an investment is made or at such later time as determined to be appropriate. In addition, debt financing may be used from time-to-time for property improvements, lease inducements, tenant improvements and other working capital needs.

37

Table of Contents

The $150,000,000 unused capacity on our Revolver as of the date of this Annual Report on Form 10-K, subject to our borrowing base covenant, along with proceeds from any future offerings of shares of Class C Common Stock, can be used to invest in real estate and real estate-related investments or to re-lease and reposition our properties in accordance with our investment strategy and policies, including costs and fees associated with such investments, such as capital expenditures, tenant improvement costs and leasing costs. We also may use a portion of the proceeds from our equity offerings for payment of principal on our outstanding indebtedness and for general corporate purposes.

Compliance with All Debt Agreements

Pursuant to the terms of our Credit Facility and our two mortgage notes payable secured by certain of our properties, we and/or our subsidiary borrowers are subject to certain financial loan covenants. We and/or our subsidiary borrowers were in compliance with such financial loan covenants as of December 31, 2023.

Acquisitions and Sale of Real Estate Investments

We acquired a total of 12 industrial manufacturing properties for an aggregate of $129,753,499 (including closing costs) during the year ended December 31, 2023, at a blended initial cap rate of 7.8% and a weighted average cap rate of 10.3%. We define “initial cap rate” for property acquisitions as the initial annual cash rent divided by the purchase price of the property. We define “weighted average cap rate” for property acquisitions as the average annual cash rent including rent escalations over the lease term, divided by the purchase price of the property.

The details follow of the 12 and 16 properties we acquired during the years ended December 31, 2023 and 2022, respectively:

38

Table of Contents

(a)    Includes $1,800,000 funding provided for improvements to the previously acquired Lindsay property in Franklinton, North Carolina, which was initially recorded as a construction advance in prepaid expenses and other assets (see Note 6 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for the remaining balance as of December 31, 2023).

(b)    The Summit property was acquired in an ‘‘UPREIT’’ unit transaction wherein the seller received 287,516 Class C OP Units accounting for approximately 46% of the property value with the rest of the price paid in cash.

(c)    The KIA property was acquired in an ‘‘UPREIT’’ unit transaction wherein the seller received 1,312,382 Class C OP Units accounting for approximately 47% of the property value and we repaid a $36,465,449 existing mortgage, including accrued interest, on the property.

(d)    The South Carolina and Ohio properties each have a 25-year master lease and the Texas and Utah properties each have a 15-year master lease.

In evaluating the above properties as potential acquisitions, including the determination of an appropriate purchase price to be paid for the properties, we considered a variety of factors, including the condition and financial performance of the properties, the terms of the existing leases and the creditworthiness of the tenants, property location, visibility and access, age of the properties, physical condition and curb appeal, neighboring property uses, local market conditions, including vacancy rates, area demographics, including trade area population and average household income and neighborhood growth patterns and economic conditions.

We sold a total of 14 properties (11 retail, two office and one flex) during 2023, comprising 241,795 square feet for aggregate contract sales prices of $47,466,960, net losses on sales of $1,708,801 and aggregate net proceeds of $44,357,474, net of commissions and closing costs. See Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for further details of these dispositions.

Capital Expenditures and Tenant Improvements

Other than as discussed below, we do not have other plans to incur any significant costs to renovate, improve or develop our properties. We believe that our properties are adequately insured. Pursuant to our lease agreements, as of December 31, 2023 and 2022, we had obligations to reimburse $2,439,098 and $1,789,027, respectively, for future on-site and tenant improvements expected to be incurred by tenants. We expect that the related improvements will be completed during the 2024 calendar year and will be funded from cash on hand, operating cash flow, offerings of shares of our Class C Common Stock or borrowings under our Credit Facility.

In addition, we have identified approximately $664,611 of capital expenditures that are expected to be completed in the next 12 months which are not recoverable from tenants with double-net leases. These improvements will be funded from cash on hand or operating cash flows. More information on our properties and investments can be found in Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

39

Table of Contents

Funds from Operations and Adjusted Funds from Operations

In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts (“Nareit”) promulgated a measure known as Funds from Operations (“FFO”). FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures, preferred dividends and real estate impairments. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.

Additionally, we use Adjusted Funds From Operations (“AFFO”) as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, stock-based compensation, deferred rent, amortization of in-place lease valuation intangibles, deferred financing fees, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, and write-offs of due diligence expenses for abandoned pursuits. We also believe that AFFO is a recognized measure of sustainable operating performance of the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance and ability to sustain our current distribution level. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or our future ability to pay our dividends. By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.

For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

Neither the SEC, Nareit, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure.

40

Table of Contents

The following are the calculations of FFO and AFFO for the years ended December 31, 2023 and 2022:

(1)    Excludes 474,515 performance units in accordance with the terms of the Operating Partnership Agreement.

(2)    Includes the Class M OP Units which were automatically converted to Class C OP Units on January 30, 2024, and Class P and Class R OP Units (time vesting and performance vesting) which have now vested and will be automatically converted to Class C OP Units on March 31, 2024, to compute the fully diluted weighted average number of shares.

41

Table of Contents

Property Portfolio Information

Although we only have a single segment for financial reporting purposes, given our strategic initiative to focus solely on acquiring and operating industrial manufacturing properties, we are presenting the following information regarding our property portfolio to help investors better understand our strategic direction:

The following is a breakdown of our FFO and AFFO by property type for the year ended December 31, 2023:

42

Table of Contents

(1)    We categorize Tactical Non-Core Assets as those assets that offer compelling value-add or opportunistic investment characteristics when measured over a near-term or interim holding period. We currently hold three such assets: (i) our tactical non-core acquisition of a leading KIA auto dealership located in a prime location in Los Angeles County in January 2022, which was structured as an UPREIT unit transaction resulting in a favorable equity issuance of $32,809,550 value of Class C OP Units at a cost basis of $25.00 per unit; (ii) our 12 year lease to OES executed in January 2023 for one of our legacy office assets located in Rancho Cordova, California that includes an attractive purchase option by the tenant which we believe has a favorable probability of being executed upon in the next 24 months; and (iii) our office property leased to Costco located in Issaquah, Washington which offers compelling redevelopment opportunities following Costco's lease expiration on July 31, 2025 given its higher density infill location and the fact that the land is zoned for additional uses including multi-family. On January 11, 2024, we entered into a contingent purchase and sale agreement with a national homebuilder for the sale of this property as further described in Note 14 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

(2)    Other non-core assets include (1) one legacy office property leased to Cummins classified as held for sale beginning September 30, 2023, and sold on February 28, 2024 (see Notes 3 and 14 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details), and (2) one additional legacy office property leased to Solar Turbines. We define legacy assets as those inherited through prior mergers and acquisitions activity and such assets that were acquired by different management teams utilizing different investment objectives or underwriting criteria.

(3)     We do not allocate non-property expenses across our property types; therefore, we report these expenses separately under the Non-Property & Other caption in the table above. Such expenses can include stock compensation expense, general and administrative, unrealized gains and losses on interest rate hedges, and other comprehensive items.

(4)    Excludes 474,515 performance units in footnote (5) (v) below in accordance with the terms of the Operating Partnership Agreement.

(5)    Weighted average fully diluted shares outstanding includes the following for the year ended December 31, 2023:

(i)    7,558,833 shares of Class C Common Stock;

(ii)    1,528,020 Class C OP Units for the year ended December 31, 2023, including 1,312,382 issued in January 2022 in connection with the acquisition of the KIA auto dealership property and the weighted average of 287,516 units which were issued in April 2023 in conjunction with our acquisition of the property in Reading, Pennsylvania leased to Summit Steel & Manufacturing, LLC;

(iii)    1,096,582 Class C OP Units that resulted from conversion of 657,949.5 Class M OP Units during January 2024;

(iv)     93,382 Class C OP Units that will result from the automatic conversion of 56,029 Class P OP Units on March 31, 2024, based on the conversion ratio of 1.6667 Class C OP Units for each Class P OP Unit outstanding; and

(v)    790,858 Class C OP Units that will result from the automatic conversion of 316,343 Class R OP Units on March 31, 2024, which reflects the conversion ratio of 2.5-for-1 based on the achievement of the FFO performance target of $1.05 per diluted share for the year ended December 31, 2023, as described in Note 12 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

(6)    For the intra-period allocation, we treat all component per share amounts as fully-diluted to correspond with the consolidated FFO and AFFO results reflected above.

43

Table of Contents

The following is a breakdown of our accompanying consolidated statement of operations included in this Annual Report on Form 10-K by property type for the year ended December 31, 2023:

(1)-(3)    See footnotes (1) through (3) above.

(4)    Non-Property & Other interest expense includes amortization of a net unrealized gain on interest rate swap valuation of $1,015,151 and derivative cash settlements of $5,679,720 (see Notes 7 and 8 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details).

(5)     Other income reflects management fees earned for managing the TIC Interest.

44

Table of Contents

The following is a breakdown of our accompanying consolidated balance sheet included in this Annual Report on Form 10-K by property type as of December 31, 2023:

(1)-(3)    See footnotes (1) through (3) above.

(4)    Non-Property & Other prepaid expenses and other assets include deferred financing fees on our Revolver and prepaid directors and officers insurance.

45

Table of Contents

Distributions

The source of cash used to pay our distributions has been and is expected to continue to be internally generated funds from operations.

A table of distributions declared and paid is disclosed in Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Distribution Information.

We expect that our board of directors will continue to declare distributions based on a single record date as of the end of each month and to pay these distributions on a monthly basis. Distributions will be determined by our board of directors based on our financial condition and such other factors as our board of directors deems relevant. We have not established a minimum dividend or distribution level, and our charter does not require that we make dividends or distributions to our stockholders other than as necessary to meet REIT qualification standards.

Cash Flow Summary

The following table summarizes our cash flow activity for the years ended December 31, 2023 and 2022:

Cash Flows from Operating Activities

Net cash provided by operating activities was $16,578,228 for the year ended December 31, 2023 compared to $16,648,821 for the year ended December 31, 2022, resulting in a net decrease in cash provided by operating activities of $70,593 year-over-year primarily due to the increase in cash interest expense during 2023, partially offset by decreases in general and administrative and property expenses.

Cash Flows from Investing Activities

Net cash used in investing activities was $93,602,234 for the year ended December 31, 2023 compared to $61,063,193 for the year ended December 31, 2022, resulting in an increase in cash used in investing activities of $32,539,041, primarily due to a reduction in net sales proceeds received of $34,737,474 in 2023 for 14 properties, which were primarily smaller retail properties, compared with net sales proceeds of $70,662,287 received in 2022 for eight office, flex and retail properties. This decrease in net proceeds from asset sales was partially offset by a decrease in funds utilized to invest in acquisitions and additions to existing real estate investments of $3,970,067, reflecting 12 property acquisitions in 2023 compared with 16 property acquisitions in 2022.

Cash Flows from Financing Activities

Net cash provided by financing activities was $71,544,771 for the year ended December 31, 2023 compared to cash used in financing activities of $5,384,499 for the year ended December 31, 2022, which primarily reflects a decrease of $117,181,737 in the principal payments on notes payable that were refinanced with borrowings under our Credit Facility in January 2022, or repaid upon sales of properties, partially offset by a decrease in our Credit Facility Term Loan borrowings of $50,000,000 year-over-year. In addition, payments of deferred financing costs incurred in 2022 aggregated $3,638,229. No such charges were incurred in 2023.

46

Table of Contents

Results of Operations

Portfolio Information

Our wholly-owned investments in real estate properties as of December 31, 2023 and 2022, including two and one properties held for sale as of the years ended December 31, 2023 and 2022, respectively, and the 91,740 square foot industrial property underlying the TIC Interest for all balance sheet dates presented were as follows:

(a)    Includes the TIC Interest.

(b)    Includes two properties (one industrial and one office) held for sale as of December 31, 2023, which were sold on January 10, 2024 and February 28, 2024.

(c)    Includes one flex property held for sale as of December 31, 2022, which was sold on August 31, 2023.

We acquired 12 and 16 operating properties during 2023 and 2022, respectively. We sold 14 properties (11 retail, two office and one flex) during 2023 and eight properties (six office, one retail and one flex) during 2022. The operating results of each property that was classified as held for sale as of December 31, 2023 and 2022, and the 14 and eight properties that were sold during 2023 and 2022, respectively, were included in the continuing results of operations in our accompanying consolidated financial statements included in this Annual Report on Form 10-K. We expect that rental income, depreciation and amortization expense, and interest expense will increase in 2024 as compared with 2023, as a result of the $129,753,499 of industrial manufacturing property acquisitions during 2023, which were partially offset by the sale of 14 properties completed in August 2023, along with the sale of the two properties held for sale in January and February 2024. Our results of operations for the year ended December 31, 2023, may not be comparable to those expected for 2024 or in future periods.

Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

Rental Income

Rental income, including tenant reimbursements, for the years ended December 31, 2023 and 2022 was $46,936,599 and $43,822,032, respectively. Rental income during 2022 included early termination fee revenue of $3,751,984 related to an office property in Rancho Cordova, California leased to Sutter Health, which was subsequently leased to OES effective January 4, 2023. The increase in rental income of $6,866,551, or 17%, year-over-year, excluding the 2022 early termination fee revenue, primarily reflects the rental income contribution from our acquisitions of 12 industrial manufacturing properties acquired during the first three quarters of 2023, partially offset by the decrease in rental income from the sale of eight properties during 2022 and 14 properties sold during August 2023. Pursuant to most of our lease agreements, tenants are required to pay or reimburse all or a portion of the property operating expenses. The ABR of the 44 operating properties owned as of December 31, 2023, was $40,114,613 and December 31, 2023 ABR, excluding periods subsequent to the sales of Levins and Cummins, was $39,586,711.

General and Administrative

47

Table of Contents

General and administrative expenses were $6,642,990 and $7,812,057 for the years ended December 31, 2023 and 2022, respectively. The decrease of $1,169,067, or 15%, year-over-year primarily reflects decreases in (i) employee compensation due to personnel reductions during 2022; (ii) directors and officers insurance; and (iii) costs for technology services, offset in part by an increase in costs for professional services during 2023.

Stock Compensation

Stock compensation expense was $11,171,207 and $2,401,022 for the years December 31, 2023 and 2022, respectively. The increase of $8,770,185 reflects a catch-up adjustment of $8,555,529 related to our achievement of management’s performance target for FFO of $1.05 per diluted share for the year ended December 31, 2023, exclusive of the dilutive effect of the performance units and related stock compensation expense. Our FFO per fully diluted share excluding the dilutive impact of the performance units and the related stock compensation expense was $1.77 for the year ended December 31, 2023 (see “Funds from Operations and Adjusted Funds from Operations” above). This exceeded the performance target of $1.05 per diluted share by $0.72, or 69%. As a result of achieving our performance target of $1.05 per diluted share, exclusive of the effect of the performance units and related stock compensation expense, an additional 474,515 Class C OP Units will be issued on March 31, 2024, upon the automatic conversion of our Class R OP Units based on a conversion ratio of 2.5 Class C OP Units for each Class R OP Unit. The catch-up adjustment reflects amortization of the $19.58 per share fair value of the performance units from the January 25, 2021 grant date through December 31, 2023. The remaining unamortized fair value of $733,331 will be recorded as compensation expense for the performance units through the end of the vesting period on March 31, 2024. The performance target was established in January 2021 and represented a 20% increase over the FFO per diluted share achieved for the year ended December 31, 2020. The $1.77 of FFO per diluted share, exclusive of the effect of the performance units and related stock compensation expense, represents a 101% increase over the FFO per diluted share achieved for the year ended December 31, 2020. The remaining $224,656 increase in stock compensation expense reflects the absence of forfeitures during the year ended December 31, 2023, as compared to recapture of stock compensation expense related to employee departures and forfeitures in 2022.

Depreciation and Amortization

Depreciation and amortization expense was $15,551,173 and $14,929,574 for the years ended December 31, 2023 and 2022, respectively. The purchase price of properties acquired is allocated to tangible assets, identifiable intangibles and assumed liabilities, if any, and depreciated or amortized over their estimated useful lives. The increase of $621,599, or 4%, year-over-year primarily reflects an increase in depreciation of real estate properties acquired, partially offset by reductions due to properties sold in the second half of 2022 and August 2023, along with reductions in amortization of intangible lease assets for the year ended December 31, 2023, due to the disposition of properties with acquired leases rather than leases initiated by us.

Property Expenses

Our property expenses generally consist of site repair and maintenance costs, real estate taxes, business licenses, insurance, utilities, property management fees and other property costs. Property expenses were $5,161,017 and $6,547,391 for the years ended December 31, 2023 and 2022, respectively. A significant portion of these expenses are reimbursed by tenants and rental income includes tenant reimbursements of $2,962,297 and $4,244,009 for the years ended December 31, 2023 and 2022, respectively. The decrease of $1,386,374, or 21%, year-over-year primarily reflects decreases in property taxes and repairs and maintenance related to assets sold, which included double-net and modified gross leases, offset in part by increases in property management fees associated with acquired properties during the current year.

Impairment of Goodwill

The impairment of goodwill of $17,320,857 for the year ended December 31, 2022 reflects the significant decline in the market value of our Class C Common Stock following the inception of our trading on the NYSE in February 2022. For the quarter ended March 31, 2022, management considered the fact that the trading price of our Class C Common Stock caused our market capitalization to be below the book value of our equity as of March 31, 2022. Our stock price was evaluated to be materially below both our historical net asset value and the book value of our equity, reflecting the negative impacts of rising inflation and interest rates, declining office occupancy rates affecting owners of real estate properties and fears of a potential recession. We, therefore, reduced the carrying value of goodwill to zero as of March 31, 2022.

(Loss) Gain on Sale of Real Estate Investments, Net

The loss on sale of real estate investments of $1,708,801 for the year ended December 31, 2023 includes the $1,887,040 loss on sale of the 13 properties (11 retail and two office) sold to GIPR on August 10, 2023, partially offset by the $178,239 gain on sale of the flex property sold on August 31, 2023. The loss includes the $2,380,000 difference between the $12,000,000

48

Table of Contents

liquidation value and the $9,620,000 fair value of our investment in GIPR's newly-created Series A Redeemable Preferred Stock received on August 10, 2023 as a portion of the sale proceeds (see Note 5 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details). The gain on sale of real estate investments of $12,196,371 for the year ended December 31, 2022 relates to the gain on sale of eight properties (six office, one retail and one flex) sold during 2022 (see Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details).

Other (Expense) Income

Interest income was $325,888 and $21,910 for the years ended December 31, 2023 and 2022, respectively, reflecting interest earned on cash proceeds from April 2023 draws on the Term Loan prior to utilizing such cash to acquire industrial manufacturing properties in May 2023 and higher interest rates earned on available cash and cash equivalents during 2023.

Dividend income was $475,000 and zero for the years ended December 31, 2023 and 2022, respectively, reflecting dividends on the GIPR Series A Redeemable Preferred Stock received in August 2023.

Income from unconsolidated investment in a real estate property, which reflects our approximate 72.7% TIC Interest in the Santa Clara, California property's results of operations, was $279,549 and $278,002 for the years ended December 31, 2023 and 2022, respectively.

Interest expense, including unrealized loss on interest rate swaps and net of derivative settlements was $13,806,838 and $8,106,658 for the years December 31, 2023 and 2022, respectively (see Note 7 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for details of the components of interest expense, net). The increase of $5,700,180 year-over-year primarily reflects the increase in interest expense incurred on our Credit Facility due to larger balances outstanding and net unrealized loss on interest rate swap valuations, partially offset by an increase in derivative settlements.

The net unrealized loss on swap valuation of $1,633,451 for the year ended December 31, 2023 reflects the change in valuation of both our $150,000,000 first swap and $100,000,000 second swap. The unrealized loss was partially offset by the $1,015,151 amortization of the unrealized gain on interest rate swap derivative previously recorded in accumulated other comprehensive income. The first swap derivative instrument failed to qualify as a cash flow hedge beginning January 1, 2023, because the swap was deemed ineffective due to our counterparty’s one-time cancellation option on December 31, 2024, as compared with the maturity date of the Term Loan. We granted this cancellation option because it reduced the swap rate by approximately 50 basis points. The second derivative instrument was not designated as a cash flow hedge. These unrealized losses reflect decreases during the year ended December 31, 2023 in the forward curve for future SOFR rates through December 31, 2024 (the one-time cancellation option date). We have begun, and intend to further explore various alternatives available to extend or restructure the cancellation option.

The increase in fair value of our investment in preferred stock of $1,418,658 reflects the change in the fair value between when the stock was acquired on August 10, 2023 and the fair value as of December 31, 2023.

Loss on early extinguishment of debt of $1,725,318 for the year ended December 31, 2022 reflects non-cash charges of $1,164,998 for deferred financing costs and prepayment penalties of $615,336 upon repayment of 20 mortgages on 27 properties, full repayment of our Prior Credit Facility and mortgage repayments related to four asset sales, as well as $733,000 of swap termination fees related to the four mortgage refinancings, which were offset by the related write-off of unrealized swap valuation losses of $788,016.

Other income of $297,695 and $93,971 for the years ended December 31, 2023 and 2022, respectively, reflects our monthly management fee from the entities that own the TIC Interest property, partially offset in 2022 by charges for the write-off of certain crowdfunding related investments. The monthly management fee is equal to 0.1% of the total investment value of the property. The total management fee was $263,971 for each of the years ended December 31, 2023 and 2022, of which our portion of expense relating to the TIC Interest was $191,933 for each year and is reflected as a component of income from unconsolidated investment in a real estate property in our accompanying consolidated statements of operations included in this Annual Report on Form 10-K.

49

Table of Contents

Critical Accounting Policies and Estimates

The policies and estimates discussed below reflect those that management believes are or will be critical in affecting the preparation of our consolidated financial statements. We consider these policies critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain 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 consolidated 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 consolidated financial statements. Management evaluates these estimates based upon information currently available and on various assumptions that it believes are reasonable an ongoing basis. Additionally, other companies may have utilized different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. See “Note 2 – Summary of Significant Accounting Policies” to our consolidated financial statements of this report on Form 10-K for additional discussion of our significant accounting policies.

Real Estate Investments

Real Estate Acquisition Valuation

We record acquisitions that meet the definition of a business as a business combination. If the acquisition does not meet the definition of a business, we record the acquisition as an asset acquisition. Under both methods, all assets acquired and liabilities assumed are measured based on their acquisition-date fair values. Transaction costs that are related to a business combination are charged to expense as incurred. Transaction costs that are related to an asset acquisition are capitalized as incurred.

We assess the acquisition date fair values of all tangible assets, identifiable intangibles, and assumed liabilities using methods similar to those used by independent appraisers, generally utilizing a discounted cash flow analysis that applies appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.

We record above-market and below-market in-place lease values for acquired properties based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of above-market in-place leases plus any extended term for any leases with below-market renewal options. We amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods.

We estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease up periods. We amortize the value of tenant origination and absorption costs to depreciation and amortization expense over the remaining non-cancelable term of the respective lease.

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of our acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of our net income (loss).

Impairment of Investment in Real Estate Properties

We monitor events and changes in circumstances that could indicate that the carrying amounts of real estate properties may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of real estate and related intangible assets may not be recoverable, management assesses whether the carrying value of the real estate properties will be recovered through the future undiscounted operating cash flows expected from the use of and eventual disposition of the property. If, based on the analysis, we do not believe that we will be able to recover the carrying value of the real estate properties, we will record an impairment charge to the extent the carrying value exceeds the estimated fair value of the real estate properties.

50

Table of Contents

Recent Accounting Pronouncements

See Note 2 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition, results of operations and cash flows together with the consolidated financial statements and related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. Also, see “Cautionary Note Regarding Forward-Looking Statements” preceding Part I of this Annual Report on Form 10-K and Part I, Item 1A. Risk Factors herein.

Management’s discussion and analysis of financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Overview

We are a Maryland corporation with issued and outstanding stock consisting of Series A Preferred Stock, publicly traded on the NYSE under the symbol “MDV.PA,” and Class C Common Stock, publicly traded on the NYSE under the symbol “MDV.” We currently own and manage single-tenant net-lease industrial, retail and office properties throughout the United States, with a focus on future acquisitions of critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation's supply chains, while reducing the number of office and retail properties in our portfolio. We elected to be taxed as a REIT for federal income tax purposes beginning with our taxable year ended December 31, 2016. We believe that we have operated in conformity with the requirements for qualification as a REIT for federal income tax purposes. Through various transactions, including the Merger, we created one of the largest non-listed REITs to be raised via crowdfunding technology. Since December 31, 2019, we have been internally managed, as further described below. Driven by an investor-first focus and an experienced management team, Modiv leveraged its history as a real estate crowdfunding pioneer to create an approximate $535 million (based on estimated fair value) real estate portfolio comprised of approximately 3.2 million square feet of income-producing real estate. As of December 31, 2022, we have a portfolio of 46 commercial real estate properties

53

Table of Contents

in 17 states, comprised of 27 industrial properties, including our approximate 72.7% TIC Interest in a 91,740 square foot Santa Clara, California industrial property, 12 retail properties and 7 office properties (including one held for sale) as discussed in Notes 3 and 4 to our accompanying consolidated financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K. As of December 31, 2022, after reflecting lease extensions through the filing date of this Annual Report on Form 10-K, 48% of our tenants (based on ABR) are investment grade, our ABR was $33,667,366, all of our properties are 100% leased and our WALT was 11.9 years.

Although we are not limited as to the form our investments may take, our investments in real estate will generally constitute acquiring fee title or interests in entities that own and operate real estate. We will make substantially all acquisitions of our real estate investments directly through the Operating Partnership or indirectly through limited liability companies or limited partnerships, including through other REITs, or through investments in joint ventures, partnerships, tenants-in-common, co-tenancies or other co-ownership arrangements with other owners of properties, some of which may be affiliated with us or our executive officers or directors. We are the sole general partner of, and owned an approximate 73% partnership interest in the Operating Partnership on December 31, 2022. The Operating Partnership’s limited partners include holders of several classes of units with various vesting and enhancement terms as further described in Note 12 to our accompanying consolidated financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K. We report with the SEC as a smaller reporting company under Rule 12b-2 of the Exchange Act.

Self-Management Transaction and Merger on December 31, 2019

Through December 31, 2019, we were externally managed by our former external advisor. On December 31, 2019, we acquired substantially all of the assets and assumed certain liabilities of our former external advisor and our former sponsor in exchange for Class M OP Units. As a result of such acquisition, we became self-managed and eliminated all fees for acquisitions, dispositions and management of our properties, which were previously paid to our former external advisor.

On December 31, 2019, pursuant to the Merger Agreement, REIT I merged with and into Merger Sub, with Merger Sub surviving as our direct, wholly-owned subsidiary. As a result, we issued 2,680,740 shares of our Class C Common Stock to former stockholders of REIT I. On December 31, 2020, Merger Sub was merged into the Operating Partnership and ceased to exist.

Common Stock Offerings and Distribution Reinvestment Plan

Since our initial registered offering of common stock was declared effective by the SEC in 2016,we have raised an aggregate of $212,086,682 pursuant to: (i) non-listed offerings of common stock registered with the SEC, (ii) offerings of common stock exempt from registration pursuant to Regulation S under the Securities Act, (iii) DRP offerings of common stock registered with the SEC, (iv) the Private Offering, (v) the Reg A Offering and (vi) the Listed Offering.

On December 8, 2021, we filed with the SEC a Registration Statement on Form S-11 (File No. 333-261529), and, on February 9, 2022, we filed with the SEC Amendment No. 1 to the Registration Statement on Form S-11, in connection with the Listed Offering of our Class C Common Stock, which became effective on February 10, 2021. In connection with and upon the listing on the NYSE, each share of our Class S Common Stock converted into a share of Class C Common Stock. Our Listed Offering of Class C Common Stock closed on February 15, 2022. In connection with our Listed Offering, we sold 40,000 shares of our Class C Common Stock at $25.00 per share to a major stockholder who was formerly a related party.

On January 22, 2021, we filed a Registration Statement on Form S-3 (File No. 333-252321) to reflect our amended and restated DRP and register a maximum of $100,000,000 in share value of Class C Common Stock to be issued pursuant to our amended and restated DRP. We commenced offering shares of Class C Common Stock pursuant to the Registered DRP Offering on January 27, 2021.

On February 15, 2022, our board of directors approved the Second Amended and Restated DRP to change the purchase price at which the Class C Common Stock is issued to stockholders who elect to participate in the DRP, and we filed a Post-Effective Amendment to the Registration Statement on Form S-3. The purpose of this change was to reflect the fact that our Class C Common Stock is now listed on the NYSE and no longer priced based on our most-recently determined estimated NAV per share. As more fully described in the Second Amended and Restated DRP, the purchase price for our Class C Common Stock under the DRP depends on whether we issue new shares to DRP participants or we or any third-party administrator obtains shares to be issued to DRP participants by purchasing them in the open market or in privately negotiated transactions. We expect to continue issuing our monthly distributions and maintain the ability for investors to reinvest their distributions under our Registered DRP Offering.

54

Table of Contents

The purchase price for the Class C Common Stock issued directly by us is 97%, reflecting a 3% discount (or such other discount as may then be in effect) of the Market Price (as defined in the Second Amended and Restated DRP) of our Class C Common Stock. This discount is subject to change from time to time, in our sole discretion, but will be between 0% to 5% of the Market Price. The purchase price for the Class C Common Stock that we or any third-party administrator purchases from parties other than our Company, either in the open market or in privately negotiated transactions, will be 100% of the “average price per share” (as described in the Second Amended and Restated DRP) actually paid for such shares of Class C Common Stock, excluding any processing fees. The Second Amended and Restated DRP also reflects the $0.05 per share processing fee that will be paid by DRP participants for each share of Class C Common Stock purchased through the DRP. The Second Amended and Restated DRP was effective beginning with distributions paid in February 2022. From February 2022 through December 31, 2022, we issued 179,502 shares of Class C Common Stock under the DRP.

On March 30, 2022, we filed a Registration Statement on Form S-3 (File No. 333-263985), and on May 27, 2022, we filed Amendment No. 1 to the Registration Statement on Form S-3, to issue and sell from time to time, together or separately, the following securities at an aggregate public offering price that will not exceed $200,000,000: Class C Common Stock, preferred stock, warrants, rights and units. The Form S-3, as amended, became effective on June 2, 2022 and we filed a prospectus supplement for our ATM Offering of up to $50,000,000 of our Class C Common Stock on June 6, 2022. As of December 31, 2022, no shares have been issued in connection with our ATM Offering.

Preferred Stock Offering

On September 14, 2021, we and the Operating Partnership entered into an underwriting agreement (the “Preferred Stock Underwriting Agreement”) with B. Riley Securities, Inc., as representative of the underwriters listed on Schedule I thereto (collectively, the “Preferred Stock Underwriters”), pursuant to which we agreed to issue and sell 1,800,000 shares of our Series A Preferred Stock in an underwritten public offering (the “Preferred Offering”) at a price per share of $25.00. In addition, we granted the Preferred Stock Underwriters a 30-day option to purchase up to an additional 200,000 shares of the Series A Preferred Stock, which the Preferred Stock Underwriters exercised in full on September 16, 2021. The issuance and sale of the shares of Series A Preferred Stock, including the issuance and sale of an additional 200,000 shares pursuant to the Preferred Stock Underwriters’ full exercise of their option to purchase additional shares, closed on September 17, 2021. The gross proceeds from the Preferred Offering were $50,000,000 and the net proceeds were $47,607,309, after deducting the underwriting discount of $1,575,000 and other offering expenses of $817,691, which included the structuring fee of $250,000 (see Note 9 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional information).

Liquidity and Capital Resources

Generally, our cash requirements for property acquisitions, debt payments and refinancings, capital expenditures and other investments will be funded by bank borrowings from financial institutions, mortgage indebtedness on our properties, assets sales and internally generated funds or offerings of shares of Class C Common Stock. Our cash requirements for operating and interest expenses and dividends on our Series A Preferred Stock and distributions on our Class C Common Stock will be funded by internally generated funds.

Credit Facility

On January 18, 2022, our Operating Partnership entered into a $250,000,000 Credit Agreement providing for a $100,000,000 four-year Revolver, which may be extended by up to 12 months subject to certain conditions, and a $150,000,000 five-year Term Loan with KeyBank and the other lending institutions party thereto (collectively, the “Lenders”), including KeyBank as Agent for the Lenders (in such capacity, the “Agent”), BMO Capital Markets, Truist Bank and The Huntington National Bank as Co-Syndication Agents (the “Co-Syndication Agents”) and KeyBanc Capital Markets Inc., BMO Capital Markets, Inc., Truist Securities, Inc. and The Huntington National Bank as Joint-Lead Arrangers (the “Lead Arrangers”). The Credit Facility is available for general corporate purposes, including, but not limited to, acquisitions, repayment of existing indebtedness and capital expenditures. On October 21, 2022, we exercised the accordion feature of our Credit Agreement and increased the Credit Facility from $250,000,000 to $400,000,000 as further described below.

55

Table of Contents

The Credit Facility is priced on a leverage-based grid that fluctuates based on our actual leverage ratio at the end of the prior quarter. With our leverage ratio at 38% as of September 30, 2022, the spread over SOFR, including a 10-basis point credit adjustment, is 165 basis points and the interest rate on the Revolver was 5.96% as of December 31, 2022. We also pay an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment, and paid total unused fees of $200,578 for the year ended December 31, 2022. On May 10, 2022, we entered into a swap agreement, effective May 31, 2022, to fix SOFR at 2.258% with respect to our original $150,000,000 Term Loan as described in Note 8 to our accompanying consolidated financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K, which resulted in a fixed interest rate of 3.858% on the first $150,000,000 of our Term Loan based on our leverage ratio of 38%.

On October 21, 2022, we exercised the accordion feature of our Credit Facility and increased the Credit Facility to $400,000,000, comprised of a $150,000,000 Revolver and a $250,000,000 Term Loan. The Credit Facility includes an updated accordion option that allows us to request additional Revolver and Term Loan lender commitments up to a total of $750,000,000 subject to customary conditions, including the receipt of new commitments from the Lenders. On December 20, 2022, the Credit Agreement was amended to allow us to draw on the additional $100,000,000 Term Loan commitment up to five times between December 20, 2022 and April 19, 2023 in exchange for a quarterly unused fee, which amounted to $6,944 during the quarter ended December 31, 2022. The maturities for our Revolver and Term Loan remain unchanged with the Revolver’s maturity in January 2026 with options to extend for a total of 12 months, and the Term Loan’s maturity in January 2027. We paid lender fees of $1,378,125 in connection with the expansion of our Credit Facility.

On October 26, 2022, we entered into a swap agreement, effective November 30, 2022, to fix SOFR at 3.44% with respect to our expanded Term Loan as described in Note 8 to our accompanying consolidated financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K, which would result in a fixed interest rate of 5.04% on the additional $100,000,000 to be borrowed under the Term Loan based on our leverage ratio of 38% as of December 31, 2022.

The Credit Facility includes customary representations, warranties and covenants, including covenants regarding minimum fixed charge coverage of 1.50x, minimum tangible net worth of $208,629,727 plus 85% of net offering proceeds after January 18, 2022, and maximum consolidated leverage of 60%. We were in compliance with these covenants as of December 31, 2022. The Credit Facility is secured by a pledge of all of the Operating Partnership’s equity interests in certain of the single-purpose, property-owning entities (the ‘‘Subsidiary Guarantors’’) that are indirectly owned by us, and various cash collateral owned by the Operating Partnership and the Subsidiary Guarantors. In connection with the Credit Facility, we and each of the Subsidiary Guarantors entered into an Unconditional Guaranty of Payment and Performance in favor of the Agent, pursuant to which we and each of the Subsidiary Guarantors agreed to guarantee the full and prompt payment of the Operating Partnership’s obligations under the Credit Agreement.

While the Credit Facility allows for borrowings of up to 60% of our borrowing base, we are targeting leverage of 40% or lower over the long-term once we achieve scale; however, we will consider higher leverage in the near-term if we identify attractive acquisition opportunities in advance of completing dispositions or raising additional equity. As of December 31, 2022, our leverage ratio was 38%.

Credit Facility Drawdown and Repayments

On January 18, 2022, we borrowed $155,775,000 from our Credit Facility consisting of $100,000,000 under the Term Loan and $55,775,000 under the Revolver. We used a portion of the proceeds from the Credit Facility to pay total commitment and arrangement fees of $2,020,000 to the Agent, the Lenders, the Lead Arrangers and Co-Syndication Agents.

We used a portion of the proceeds from the Credit Facility to repay 20 property mortgages, and related interest aggregating $153,428,764, including the $36,465,449 mortgage on the KIA auto dealership property which was acquired on January 18, 2022, as discussed above, and our prior line of credit outstanding balance of $8,022,000. The 20 mortgages that were paid off were for the following 27 properties: eight Dollar Generals, Northrop Grumman, exp Maitland, Wyndham, Williams Sonoma, EMCOR, Husqvarna, AvAir, 3M, Cummins, Levins, Labcorp, GSA (MHSA), PreK Education, ITW Rippey, Solar Turbines, WSP USA (formerly Wood Group), Gap, L3Harris and Walgreens. After the 20 property mortgages were paid-off, seven property mortgages as of December 31, 2021 remained outstanding, including four property mortgages related to assets held for sale. Those four mortgages were paid-off pursuant to sales of the properties in February 2022 as discussed below under “- Sale of Real Estate Investments.”

56

Table of Contents

On March 8, 2022, we prepaid $35,000,000 of the outstanding balance on the Revolver with cash on hand in order to reduce interest expense, and on April 19, 2022, we drew $44,000,000 on the Revolver to fund the acquisition of the Lindsay properties. On April 25, 2022, we drew the remaining $50,000,000 on the Term Loan for a repayment on the Revolver and we also repaid $8,000,000 on the Revolver on June 22, 2022. We borrowed and repaid $28,000,000 during the three months ended September 30, 2022 in connection with acquisitions completed in July and August 2022 and dispositions completed in August and September 2022. We used proceeds from the Sutter Health early termination fee to prepay $3,775,000 on the Revolver in December 2022 and prepaid the remaining $3,000,000 Revolver balance on January 5, 2023 with the proceeds from the December 30, 2022 sale of our Raising Cane’s property. In January 2023, we borrowed $10,000,000 under the Term Loan to fund our acquisition of the property leased to Plastic Products Company, Inc. and for general corporate purposes. As of February 28, 2023, we had availability under the Credit Facility, prior to any new properties being added to the borrowing base, of approximately $85,000,000 which can be drawn for general corporate purposes, including future acquisitions.

While we intend for the Credit Facility to be our primary source of financing, we may continue to use mortgage debt financing for certain real estate investments and acquisitions. This financing may be obtained at the time an asset is acquired or an investment is made or at such later time as determined to be appropriate. In addition, debt financing may be used from time-to-time for property improvements, lease inducements, tenant improvements and other working capital needs.

As of December 31, 2022, the outstanding principal balance of our mortgage notes payable on our operating properties was $44,515,009, and the outstanding principal balances of our Revolver and Term Loan were $3,000,000 and $150,000,000, respectively. As of December 31, 2022, our approximate 72.7% pro-rata share of the TIC Interest’s mortgage note payable was $9,487,515, which is not included in our consolidated balance sheets in this Annual Report on Form 10-K.

We had $8,608,649 of cash and no restricted cash as of December 31, 2022, as reported in our accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Our cash and restricted cash, along with $150,000,000 of available capacity on our Revolver and $90,000,000 of available capacity on our Term Loan as of February 28, 2023, subject to our borrowing base covenant, along with proceeds from any future offerings of shares of Class C Common Stock, will primarily be used to invest in real estate and real estate-related investments or to re-lease and reposition our properties in accordance with our investment strategy and policies, including costs and fees associated with such investments, such as capital expenditures, tenant improvement costs and leasing costs. We also may use a portion of the proceeds from our offerings for payment of principal on our outstanding indebtedness, reserves required by financings of our real estate investments and for general corporate purposes.

Sale of Real Estate Investments

During the year ended December 31, 2022, we sold eight real estate properties as follows:

On February 11, 2022, we completed the sale of two medical office properties in Dallas, Texas and Richmond, Virginia leased to Texas Health and Bon Secours, respectively, and one flex property in Richmond, Virginia leased to Omnicare for an aggregate sales price of $26,000,000, which generated net proceeds of $11,892,305 after payment of commissions, closing costs and existing mortgages.

On February 24, 2022, we completed the sale of a medical office property in Orlando, Florida leased to Accredo for a sales price of $14,000,000, which generated net proceeds of $5,012,724 after payment of commissions, closing costs and repayment of the existing mortgage.

57

Table of Contents

On June 29, 2022, we completed the sale of an office property in Cincinnati, Ohio leased to EMCOR for a sales price of $6,525,000, which generated net proceeds of $6,345,642 after payment of commissions and closing costs.

On August 26, 2022, we completed the sale of an office property in Summerlin, Nevada leased to Williams Sonoma for a sales price of $9,300,000, which generated net proceeds of $8,964,252 after payment of commissions and closing costs.

On September 16, 2022, we completed the sale of an office property in Summerlin, Nevada leased to Wyndham for a sales price of $12,900,000, which generated net proceeds of $12,267,571 after payment of commissions and closing costs.

On December 30, 2022, we completed the sale of a retail property in San Antonio, Texas leased to Raising Cane's for a sales price of $4,313,045, which generated net proceeds of $4,173,283 after payment of commissions and closing costs.

Funds from Operations and Adjusted Funds from Operations

In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts (“Nareit”) promulgated a measure known as Funds from Operations (“FFO”). FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures, preferred dividends and real estate impairments. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.

Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation, deferred rent, amortization of in-place lease valuation intangibles, deferred financing fees, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-offs of transaction costs and other one-time transactions. We also believe that AFFO is a recognized measure of sustainable operating performance of the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance and ability to sustain our current distribution level. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or our future ability to pay our dividends. By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.

For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, FFO and AFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

Neither the SEC, Nareit, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure. Furthermore, as described in Note 12 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K, the conversion ratios for Class M OP Units, Class P OP Units and Class R OP Units can increase if the specified performance hurdles are achieved, which would increase the fully-diluted weighted average shares outstanding.

58

Table of Contents

The following are the calculations of FFO and AFFO for the years ended December 31, 2022 and 2021:

(1)    Straight-line rent receivable write-offs related to sale of real estate investments for the year ended December 31, 2021 amounting to $1,667,114 were reclassified from rental income to gain on sale of real estate investments, net to conform with the current year presentation (see Note 2 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details on such reclassification).

(2)    Includes the Class M, Class P and Class R OP Units to compute the weighted average number of shares.

59

Table of Contents

Distributions

Historically, the sources of cash used to pay our distributions have been from net rental income received and the waiver and deferral of management fees by our former advisor through December 31, 2019.

A table of distributions declared, distributions paid out, the impact on cash flows from operations and the source of distribution payments is disclosed in Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Distribution Information.

We expect that our board of directors will continue to declare distributions based on a single record date as of the end of each month and to pay these distributions on a monthly basis. Distributions will be determined by our board of directors based on our financial condition and such other factors as our board of directors deems relevant. We have not established a minimum dividend or distribution level, and our charter does not require that we make dividends or distributions to our stockholders other than as necessary to meet REIT qualification standards.

Cash Flow Summary

The following table summarizes our cash flow activity for the years ended December 31, 2022 and 2021:

Cash Flows from Operating Activities

The cash provided by operating activities of $16,648,821 for the year ended December 31, 2022 primarily reflects adjustments to our net loss of $4,511,318 to exclude net non-cash charges of $23,209,673 related to depreciation and amortization, impairment of goodwill, impairment of real estate property, stock compensation expense, amortization of deferred financing costs and premium, write-off of purchase deposit, amortization of deferred lease incentives, and amortization of above market lease intangibles, which were partially offset by gain on sale of real estate investments, write-off of unrealized gain on interest rate swaps, amortization of below-market lease intangibles, amortization of deferred rents and undistributed income from our unconsolidated investment in a real estate property. Cash provided by operations also included distributions from our unconsolidated investment in real estate property of $211,921. The cash provided by operations was also offset in part by cash used to fund changes in operating assets and liabilities of $2,261,455 during the year ended December 31, 2022 primarily due to increases in tenant receivables and prepaid expenses and a decrease in accounts payable, accrued and other liabilities.

The cash provided by operating activities of $9,728,685 for the year ended December 31, 2021 primarily reflects adjustments to our net loss of $435,505 to exclude net non-cash charges of $12,948,386 related to depreciation and amortization, impairment of intangible assets, stock compensation expense, amortization of deferred financing incentives, amortization of above-market lease intangibles and amortization of deferred rents, which were partially offset by gain on sale of real estate investments, amortization of below-market lease intangibles, unrealized gain on interest rate swap valuation, gain on forgiveness of economic relief note payable, reversal of impairment of real estate property and undistributed income from our unconsolidated investment in a real estate property. Cash provided by operations also included distributions from our unconsolidated investment in real estate property of $337,072. The cash provided by operations was offset in part by cash used to fund changes in operating assets and liabilities of $3,121,268 during the year ended December 31, 2021 primarily due to increases in note receivable and prepaid expenses and other assets, partially offset by a decrease in tenant receivables and an increase in accounts payable, accrued and other liabilities.

We continue to expect that our cash flows from operating activities will be positive in the next 12 months; however, there can be no assurance that this expectation will be realized.

60

Table of Contents

Cash Flows from Investing Activities

Net cash used in investing activities was $61,063,193 for the year ended December 31, 2022 and consisted primarily of the following:

•$127,144,030 for acquisitions of 16 real estate properties;

•$4,353,938 for capitalized costs for improvements to existing real estate properties; and

•$2,148,731 for payments of lease incentives.

These uses were partially offset by:

•$70,662,287 of proceeds from sales of eight real estate properties;

•$1,836,767 from collection of receivable for early termination of lease; and

•$84,452 from a refundable purchase deposit.

Net cash provided by investing activities was $21,830,288 for the year ended December 31, 2021 and consisted primarily of the following:

•$37,719,998 of proceeds from sales of five real estate properties; and

•$1,824,383 from collection of a note receivable from the sale of real estate property.

These proceeds were partially offset by:

•$15,162,305 for acquisitions of two real estate properties;

•$1,356,038 for capitalized costs for improvements to existing real estate properties;

•$1,000,000 for a refundable purchase deposit; and

•$195,750 for additions to intangible assets.

Cash Flows from Financing Activities

Net cash used in financing activities was $5,384,499 for the year ended December 31, 2022 and consisted primarily of the following:

•$130,496,746 of mortgage note principal payments upon entering into the Credit Facility and the sale of four real estate properties;

•$5,857,849 of cash distributions paid to common stockholders;

•$1,383,433 of cash distributions paid to the Class C OP Unit holder;

•$3,830,903 of cash dividends paid to preferred stockholders;

•$4,161,618 used for repurchases of common stock;

•$3,638,229 of deferred financing cost payments; and

•$1,108,221 for payments of offering costs.

These uses were partially offset by:

•$150,000,000 of proceeds from borrowings on our Term Loan;

•$3,000,000 of net proceeds from our Revolver, more than offset by repayment of $8,022,000 on the prior credit facility with Banc of California (the “Prior Credit Facility”); and

•$114,500 of net proceeds from issuance of common stock in the Listed Offering.

Net cash provided by financing activities was $18,471,017 for the year ended December 31, 2021 and consisted primarily of the following:

•$47,607,309 of net proceeds from issuance of preferred stock;

•$4,336,086 of proceeds from issuance of common stock;

•$25,436,000 of proceeds from refinancing of mortgage notes payable;

•$2,022,000 of proceeds from borrowings on our prior credit facility revolver, net; and

•$18,804 of refundable loan deposits made.

These proceeds were partially offset by:

•$36,569,537 of mortgage notes principal payments and deferred financing cost payments of $404,971 to third parties;

•$19,082,962 used for repurchases of shares under our prior share repurchase programs;

•$3,473,378 of cash distributions paid to common stockholders; and

•$1,418,334 for offering costs.

61

Table of Contents

Results of Operations

As of December 31, 2022, we owned (i) 46 operating properties (including one property held for sale); (ii) one parcel of land which currently serves as an easement to one of our industrial properties; and (iii) the TIC Interest. We acquired 16 and two operating properties in 2022 and 2021, respectively. We sold eight and five operating properties in 2022 and 2021, respectively, in accordance with our strategic plan to reduce our exposure to office and retail properties and increase our WALT by acquiring primarily industrial manufacturing properties generally with lease terms of 15+ years. We expect that rental income, depreciation and amortization expense and interest expense will be higher on a year-over-year basis in 2023 due to our planned acquisitions. Our results of operations for the year ended December 31, 2022 are not indicative of those expected in future periods as we have significant unused capacity on our Credit Facility and expect to continue to acquire additional operating properties. We can provide no assurance that our plans for acquisitions, if any, will be successful in the near term.

The COVID-19 pandemic's impact on the economy appears to have diminished and the general commercial real estate market appears to be recovering from COVID-19 impacts except for a continuing impact on commercial office properties due to the prevalence of employees working from home. The COVID-19 pandemic has caused and may continue to cause significant disruption to certain tenants' business operations which may impact our results of operations and cash flows in ways that remain unpredictable in the foreseeable future; for example, increased demand for work-from-home arrangements resulting from the COVID-19 pandemic may adversely impact the operations of our office properties. Additionally, a resurgence of COVID-19, including any future variants and resistance to currently available vaccines, or any future outbreak of other highly infectious or contagious diseases, could materially and adversely impact or disrupt our business operations, financial condition, results of operations, cash flows and performance.

We, our tenants and operating partners are also impacted by inflation and rising interest rates. According to the U.S. Labor Department, the annual inflation rate for the U.S. was 6% and 7% for the years ended December 31, 2022 and 2021, respectively, the highest increases since June 1982. As a result, the Federal Reserve is expected to continue raising interest rates to try to rein in inflation, which may lead to a recession and will negatively impact our future results due to higher borrowing costs on any floating rate borrowing. However, as of February 28, 2023, 100% of our outstanding debt is at fixed rates as a result of the swap agreements entered into in May 2022 and October 2022. Furthermore, the prolonged Russia-Ukraine conflict, as well as further retaliatory sanctions from the U.S. and its allies to Russia, may also exacerbate the already high inflation, continue to rattle the global economies and markets and worsen the fragile global supply chain.

Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Rental Income

Rental income, including tenant reimbursements, was $46,174,267 and $37,889,831 for the years ended December 31, 2022 and 2021, respectively. Rental income during 2022 and 2021 included early termination fee revenue of $3,751,984 and $1,381,767, respectively. The 2022 early termination fee was related to an office property in Rancho Cordova, California leased to Sutter Health, which was subsequently leased to OES effective January 4, 2023, and the 2021 early termination fee was related to an industrial property in Cedar Park, Texas, leased to Dana Incorporated which was sold on July 7, 2021 (see Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details on such transactions).

Excluding the early termination fee revenue in 2022 and 2021, rental income increased by $5,914,219, or 16%, as compared to 2021 primarily reflecting the rental income contribution from our acquisition of 16 properties during 2022, including the KIA auto dealership property in Carson, California in January 2022, and our acquisition of eight industrial properties leased to Lindsay Precast in April 2022, which contributed approximately 12.4% and 8.0% of our total rental income during 2022, respectively. Rental income from our 16 acquisitions in 2022, together with the rental income contributions of two properties acquired during the second half of 2021, was partially offset by the decrease in rental income from the sale of 13 non-core properties over the last 24 months. Our acquisitions and dispositions are detailed in Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K. Pursuant to most of our lease agreements, tenants are required to pay or reimburse all or a portion of the property operating expenses. Rental income includes tenant reimbursements of $6,596,244 and $5,807,634 in 2022 and 2021, respectively. The ABR of the operating properties owned as of December 31, 2022 was $33,667,366.

62

Table of Contents

General and Administrative

General and administrative expenses were $7,812,057 and $9,715,067 for the years ended December 31, 2022 and 2021, respectively. The decrease of $1,903,010, or 20%, year-over-year primarily reflects personnel reductions and the resulting decrease in compensation to employees, reduced costs for technology services following our exit from the crowdfunding business in the first quarter of 2022 and reduced costs for professional services during the current year.

Stock Compensation Expense

Stock compensation expense was $2,401,022 and $2,744,881 for the years December 31, 2022 and 2021, respectively. The decrease of $343,859, or 13%, as compared with the prior year primarily reflects forfeitures related to employee terminations and resignations during the second half of 2021 and the first and third quarters of 2022.

Depreciation and Amortization

Depreciation and amortization expenses for the years ended December 31, 2022 and 2021 were $14,929,574 and $15,266,936, respectively. The purchase price of the acquired properties was allocated to tangible assets, identifiable intangibles and assumed liabilities and is being depreciated or amortized over their estimated useful lives. The decrease of $337,362, or 2%, year-over-year primarily reflects the absence of amortization of corporate intangibles of $1,556,347 in 2021. The corporate intangibles were impaired during the fourth quarter of 2021 in connection with our decision to exit the crowdfunding business. The absence of amortization of corporate intangibles during the current year was partially offset by the net increase on depreciation expense for acquisitions in excess of dispositions compared with the prior year.

Interest Expense

Interest expense includes interest paid or payable to lenders on our property mortgages and Credit Facility, related amortization of deferred financing costs and unrealized gains and losses on swap valuations. Interest expense was $8,106,658 and $7,586,197 for the years ended December 31, 2022 and 2021, respectively (see Note 7 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for the detail of the components of interest expense). On January 18, 2022, we used funds from our initial borrowing from our Credit Facility to pay off 20 existing property mortgages on 27 properties, the $36,465,449 mortgage on the KIA auto dealership property which we acquired on January 18, 2022 and repayment of our Prior Credit Facility and related interest, aggregating $153,428,764. In addition, four interest rate swap agreements related to four property mortgages were terminated in connection with the prepayment of the property mortgages. The increase in interest expense of $520,461, or 7%, year-over-year was primarily due to the year-over-year decrease in gains on interest rate swaps of $821,996, partially offset by the year-over-year decrease in interest expense paid or payable to the lenders and amortization of deferred financing costs. Following the purchase of a second interest rate swap on October 26, 2022, effective November 30, 2022, we have fixed our $250,000,000 Term Loan (including the additional $100,000,000 Term Loan commitment available as a result of our exercise of the accordion feature of our Credit Facility) at a weighted average interest rate of 4.33% when our leverage ratio is no more than 40%. The weighted average interest rate on our total debt outstanding of approximately $204.5 million as of February 28, 2023 is 4.05% based on our leverage ratio of 38% as of December 31, 2022.

Property Expenses

Property expenses were $8,899,626 and $6,880,993 for the years ended December 31, 2022 and 2021, respectively. These expenses primarily relate to property taxes and repairs and maintenance expenses, the majority of which are reimbursed by tenants, along with write offs of legal and due diligence costs for abandoned pursuits of acquisitions. The increase of $2,018,633, or 29%, year-over-year primarily reflects increases in repairs and maintenance, property management fees and property taxes, the majority of which are reimbursed by tenants.

Impairment (Reversal of Impairment) of Real Estate Investment Property

Impairment of investment in real estate property of $2,080,727 for the year ended December 31, 2022 reflects an impairment charge for a property located in Rocklin, California leased to Gap through February 28, 2023. We determined that the impairment charge was required, based on efforts initiated during the fourth quarter of 2022 to sell the property and its reclassification to asset held for sale as of December 31, 2022 (see Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details). Reversal of impairment of investment in real estate property of $400,999 for the year ended December 31, 2021 reflects an adjustment to reduce the impairment charge recorded in December 2020 for the property located in Bedford, Texas due to its reclassification from held for sale to held for investment and use in June 2021.

63

Table of Contents

Impairment of Goodwill and Intangible Assets

Impairment charges for non-property intangible assets were $17,320,857 and $3,767,190 during the years ended December 31, 2022 and 2021, respectively. The impairment of goodwill of $17,320,857 for year ended December 31, 2022 reflects the significant decline in the market value of our common stock since it began trading on the NYSE in February 2022. During the first quarter of 2022, management considered the fact that the trading price of our common stock caused our market capitalization to be below the book value of our equity as of March 31, 2022. Our stock price is materially below both our historical net asset value and the book value of our equity, reflecting the negative impacts of rising inflation and interest rates, declining office occupancy rates affecting owners of real estate properties and fears of a potential recession. We, therefore, reduced the carrying value of goodwill to zero as of March 31, 2022 (see Note 5 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details). The impairment of intangible assets of $3,767,190 for the year ended December 31, 2021 relates to the unamortized balance of intangible assets used to raise equity capital through our crowdfunding activities which were abandoned when we planned our Listed Offering in the fourth quarter of 2021.

Gain on Sale of Real Estate Investments, Net

The gain on sale of real estate investments, net was $12,196,371 and $6,136,588 for the years ended December 31, 2022 and 2021, respectively, and relates to the sale of eight properties (six office, one flex and one retail) during the year ended December 31, 2022 and five properties (four retail and one industrial) during the year ended December 31, 2021 (see Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details on the gain on sale of real estate investments). Our 2022 and 2021 sales of real estate investments were primarily due to our strategic plan to reduce our exposure to office and retail properties and acquire industrial manufacturing properties with longer lease terms.

Other Income (Expense), Net

Interest income was $21,910 and $21,328 for the years ended December 31, 2022 and 2021, respectively.

Income from unconsolidated investment in a real estate property was $278,002 and $276,042 for the years ended December 31, 2022 and 2021, respectively. This represents our approximate 72.7% TIC Interest in the Santa Clara, California property's results of operations for the years ended December 31, 2022 and 2021, respectively.

Gain on forgiveness of economic relief note payable of $517,000 for the year ended December 31, 2021 reflects the forgiveness in February 2021 of our economic relief note payable of $517,000 obtained in April 2020 under the terms of the Paycheck Protection Program of the Small Business Administration. There was no gain on forgiveness of economic relief note payable for the year ended December 31, 2022.

Loss on early extinguishment of debt of $1,725,318 for the year ended December 31, 2022 reflects non-cash charges of $1,164,998 for deferred financing costs and prepayment penalties of $615,336 upon repayment of 20 mortgages on 27 properties, full repayment of our Prior Credit Facility and mortgage repayments related to four asset sales, as well as $733,000 of swap termination fees related to the four mortgage refinancings which were offset by the related write-off of unrealized swap valuation losses of $788,016 (see Notes 7 and 8 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details). There was no loss on early extinguishment of debt for the year ended December 31, 2021.

Other income of $93,971 and $283,971 for the years ended December 31, 2022 and 2021, respectively, primarily reflects our monthly management fee from the entities that own the TIC Interest property which is equal to 0.1% of the total investment value of the property. The total management fee was $263,971 for each of the years ended December 31, 2022 and 2021, of which our portion of expense relating to the TIC Interest was $191,933 for each year and is reflected as a component of income from unconsolidated investment in a real estate property in our accompanying consolidated statements of operations included in this Annual Report on Form 10-K.

64

Table of Contents

Quarterly Data

Our quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the future as a result of ongoing property acquisitions and dispositions and various other factors as more fully described in Part I, Item 1A. Risk Factors herein. The following table sets forth certain unaudited quarterly historical financial data for each of the eight quarters in the two years ended December 31, 2022. This unaudited quarterly information has been prepared on the same basis as the annual information presented elsewhere herein and, in our opinion, includes all adjustments necessary for a fair statement of the selected quarterly information. This information should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The operating results for any quarter shown are not necessarily indicative of results for any future period.

(1)    During the fourth quarter of 2022, management determined that straight-line rents receivable write-offs associated with real estate investments previously sold should be reclassified as a component of the related gain on sale of the real estate investments rather than as an offset to rental income as previously presented in our statements of operations. Accordingly, our statements of operations reflect an increase in rental income and a corresponding reduction in the gain on sale of real estate investments for the first three quarters of 2022 and the first, third and fourth quarters of 2021 as follows: first quarter of 2022, $525,691; second quarter of 2022, $282,030; and third quarter of 2022, $739,255; and first quarter of 2021, $51,123; third quarter of 2021, $683,606; and fourth quarter of 2021, $932,385. The reclassifications did not affect net income (loss) or net income (loss) per share in the unaudited quarterly condensed consolidated statements of operations (see Note 2 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details on such reclassification).

(2)    The first quarter of 2022 includes the impact of the goodwill impairment charge of $17,320,857, non-recurring loan prepayment penalties of $615,336 and swap termination costs of $733,000. The fourth quarter of 2022 includes revenue from early termination fee of $3,751,984, partially offset by impairment of real estate investment property of $2,080,727.

(3)    The first quarter of 2021 includes the impact of a gain of $517,000 on forgiveness of economic relief note payable loan. The second quarter of 2021 includes an impairment credit of $400,999 on the reclassification of a real estate investment to held for investment from held for sale in the second quarter of 2021. The third quarter of 2021 includes an early termination fee of $1,381,767. The fourth quarter of 2021 includes the impact of intangible assets impairment charge of $3,767,190.

65

Table of Contents

Organizational and Offering Costs

Organizational and offering costs include all costs incurred in connection with the offerings prior to the Listed Offering, including investor relations' payroll costs and other costs incurred in connection with the offerings of our stock, including, but not limited to legal fees, federal and state filing fees and other costs. Through November 24, 2021, the termination date of the Reg A Offering, we had recorded cumulative organizational and offering costs of $8,298,499, including $5,429,105 paid to our former sponsor or affiliates through December 31, 2019.

In connection with our Listed Offering of Class C Common Stock, we incurred organizational and offering costs in the aggregate of $885,500 in the fourth quarter of 2021 and the first quarter of 2022. We also incurred additional organizational and offering costs of $1,108,221 during the year ended December 31, 2022 related to our Registration Statement on Form S-3 (File No. 333-263985) that we filed on March 30, 2022, and Amendment No. 1 to the Registration Statement on Form S-3 that we filed on May 27, 2022, to issue and sell from time to time, together or separately, the following securities at an aggregate public offering price that will not exceed $200,000,000: Class C Common Stock, preferred stock, warrants, rights and units. The Form S-3, as amended, became effective on June 2, 2022 and we filed a prospectus supplement for our $50,000,000 ATM Offering on June 6, 2022. As of December 31, 2022, no shares were issued in connection with our ATM Offering.

Properties

Portfolio Information

Our wholly-owned investments in real estate properties as of December 31, 2022 and 2021, including one and four properties held for sale as of the years ended December 31, 2022 and 2021, respectively, and the 91,740 square foot industrial property underlying the TIC Interest for all balance sheet dates presented were as follows:

(1)    Includes one office property held for sale as of December 31, 2022, which is in escrow and scheduled to be sold by the end of March 2023.

(2)    Includes four healthcare related properties held for sale as of December 31, 2021, which consisted of three office properties and one flex property. These held for sale properties were sold in February 2022.

(3)One property was reclassified on December 31, 2022 to industrial from office to reflect the lessee's change in use since a majority of the square footage of the property is being used as laboratory space.

We are a smaller reporting entity and operate in an evolving environment.

66

Table of Contents

Acquisitions of Real Estate Investments

We acquired 16 and two properties during the years ended December 31, 2022 and 2021, respectively, as follows:

(1)    The KIA property was acquired in an ‘‘UPREIT’’ transaction wherein the seller received 1,312,382 Class C OP Units for approximately 47% of the property value and we repaid a $36,465,449 existing mortgage, including accrued interest, on the property.

(2)    The South Carolina and Ohio properties have a 25-year master lease and the Texas and Utah properties have a 15-year master lease.

In evaluating the above properties as potential acquisitions, including the determination of an appropriate purchase price to be paid for the properties, we considered a variety of factors, including the condition and financial performance of the properties, the terms of the existing leases and the creditworthiness of the tenants, property location, visibility and access, age of the properties, physical condition and curb appeal, neighboring property uses, local market conditions, including vacancy rates, area demographics, including trade area population and average household income and neighborhood growth patterns and economic conditions.

67

Table of Contents

Sales of Real Estate Investments

We completed the sale of eight and five non-core properties during the years ended December 31, 2022 and 2021, respectively, as follows:

(1)    Net of commissions, closing costs paid and repayment of any outstanding mortgages.

(2)    Classified as held for sale as of December 31, 2021.

(3)    Net proceeds from the combined sale of the Bon Secours, Omnicare and Texas Health properties.

Extension of Leases