Modiv Industrial (NYSE: MDV) details 42-property industrial REIT portfolio
Filing Impact
Filing Sentiment
Form Type
10-K
Modiv Industrial, Inc. files its annual report, outlining a focused strategy as an internally managed industrial manufacturing REIT with a diversified portfolio of 42 properties generating $39.1 million in annual base rent as of December 31, 2025. About 82% of rent comes from 39 industrial assets, with a weighted average lease term of roughly 14 years and 98% occupancy over 4.4 million square feet in 14 states. The company is recycling 12–15 non-core and shorter-lease assets over the next 24 months to become a pure-play industrial platform. Concentration risks are notable, with two tenants providing about 25% of annual base rent and approximately 31% of rent coming from California. Modiv reports a $5.8 million impairment on a Minnesota property and leverage of about 45.1% of asset value, above its long-term 40% target, and highlights cybersecurity, interest-rate, liquidity, and REIT-qualification risks.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM 10-K
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(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 001-40814
________________________________________________________
(Exact Name of Registrant as Specified in Its Charter)
________________________________________________________
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
(Registrant’s Telephone Number, Including Area Code)
________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ☐ No ☒
As of June 30, 2025, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of its Class C common stock held by non-affiliates was $142.9 million, calculated by reference to the closing price of the Registrant’s Class C common stock on the New York Stock Exchange on June 30, 2025, of $14.08 per share.
As of March 20, 2026, there were 10,319,480 outstanding shares of the Registrant’s Class C common stock.
Documents Incorporated by Reference:
The information that is required to be included in Part III of this Annual Report on Form 10-K is incorporated by reference to the definitive proxy statement to be filed by the registrant within 120 days of December 31, 2025. Only those portions of the definitive proxy statement that are specifically incorporated by reference herein shall constitute a part of this Annual Report on Form 10-K.
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TABLE OF CONTENTS
PART I | |||||||||||
ITEM 1. | BUSINESS | 5 | |||||||||
ITEM 1A. | RISK FACTORS | 9 | |||||||||
ITEM 1B. | UNRESOLVED STAFF COMMENTS | 27 | |||||||||
ITEM 1C. | CYBERSECURITY | 27 | |||||||||
ITEM 2. | PROPERTIES | 29 | |||||||||
ITEM 3. | LEGAL PROCEEDINGS | 30 | |||||||||
ITEM 4. | MINE SAFETY DISCLOSURES | 31 | |||||||||
PART II | |||||||||||
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 31 | |||||||||
ITEM 6. | [RESERVED] | 34 | |||||||||
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 35 | |||||||||
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 45 | |||||||||
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 45 | |||||||||
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 45 | |||||||||
ITEM 9A. | CONTROLS AND PROCEDURES | 45 | |||||||||
ITEM 9B. | OTHER INFORMATION | 46 | |||||||||
ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 46 | |||||||||
PART III | |||||||||||
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 46 | |||||||||
ITEM 11. | EXECUTIVE COMPENSATION | 46 | |||||||||
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 46 | |||||||||
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 47 | |||||||||
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 47 | |||||||||
PART IV | |||||||||||
ITEM 15. | EXHIBIT AND FINANCIAL STATEMENT SCHEDULES | 47 | |||||||||
ITEM 16. | FORM 10-K SUMMARY | 49 | |||||||||
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | F-1 | ||||||||||
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K of Modiv Industrial, Inc. (the “Company,” “Modiv,” “us,” “we,” or “our”), other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act, Section 21E of the Exchange Act and other applicable law. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “can,” “will,” “would,” “could,” “should,” “plan,” “potential,” “project,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words.
These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Stockholders should carefully review the Part I, Item 1A. Risk Factors section in this filing for a discussion of the risks and uncertainties that we believe are material to our business, operating results, prospects and financial condition.
Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution readers not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date this Annual Report on Form 10-K is filed with the Securities and Exchange Commission (the “SEC”). We make no representation or warranty, express or implied, about the accuracy of any such forward-looking statements contained hereunder. Except as otherwise required by federal securities laws, we undertake no obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, whether as a result of new information, future events or otherwise.
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RISK FACTOR SUMMARY
Our business, financial condition and results of operations are subject to numerous risks and uncertainties. Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face and should be read in conjunction with the full risk factors contained below in the Part I, Item 1A. Risk Factors section in this Annual Report on Form 10-K.
•Our listing on the NYSE does not guarantee an active and liquid market for our Class C Common Stock, and the market price and trading volume of the shares of our Class C Common Stock may fluctuate significantly.
•Our Class C Common Stock is subordinate to our Series A Preferred Stock and our existing and future debt, and our common stockholders' interests could be diluted by the issuance of additional preferred stock, future offerings of debt securities, which could be senior to our common stock, or equity securities, and by other transactions.
•We are focused on future acquisitions of industrial manufacturing properties, recycling certain of our assets, and reducing the number of non-core properties in our portfolio, and therefore the prior performance of our real estate investments may not be comparable to our ongoing results.
•We face risks associated with cybersecurity incidents through cyber-attacks, cyber intrusions or otherwise, as well as failures of systems on which we rely and other significant disruptions of our information technology networks and related systems.
•We face significant competition for real estate investment opportunities, which may limit our ability to acquire suitable investments and achieve our investment objectives or pay distributions.
•Investments in real estate are illiquid, and it may not be possible to dispose of assets in a timely manner or on favorable terms or at all, which could adversely affect our financial condition, operating results and cash flows.
•Disruptions in the financial markets and uncertain economic conditions could adversely affect market rental rates, commercial real estate values and our ability to secure debt financing at interest rates acceptable to us or at all, to service future debt obligations, or to pay distributions to our stockholders.
•Our real estate properties and related intangible assets may be subject to impairment charges.
•Downturns relating to certain geographic regions, industries or business sectors may have a more significant adverse impact on our assets and our ability to pay distributions than if we had a more diversified investment portfolio.
•We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us.
•We may change our targeted investments or investment strategy.
•We have incurred losses in the past and we may experience additional losses in the future.
•Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our common stock or a change in control.
•Certain provisions in the Partnership Agreement of our Operating Partnership may delay, make more difficult, or prevent unsolicited acquisitions of us.
•We are subject to risks from natural disasters, such as hurricanes, tornadoes and flooding, and changes in weather patterns.
•We are subject to risks relating to litigation and regulatory liability.
•Inflation and rising interest rates may adversely affect our financial condition and results of operations or result in a decrease in the market price of our Class C Common Stock.
•Each of our current properties depends upon a single-tenant for its rental income, and our financial condition and ability to make distributions may be adversely affected by the bankruptcy or insolvency of a tenant, a downturn in the business of a tenant or a tenant’s lease termination in bankruptcy, or otherwise.
•We have a substantial amount of indebtedness outstanding, which may expose us to the risk of default under our debt obligations.
•Increases in mortgage rates or changes in underwriting standards may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash available for distribution to our stockholders.
•We may be subject to adverse legislative or regulatory tax changes.
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PART I
ITEM 1. BUSINESS
The Company
Modiv Industrial, Inc. (“Modiv”) is an internally-managed Maryland corporation that acquires, owns and manages a portfolio of single-tenant net-lease properties throughout the United States, with a focus on critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation’s supply chains. Modiv also owns three non-core, legacy retail and office real estate properties, and is gradually reducing its non-core exposure, subject to market conditions, as it furthers its focus as a pure-play industrial manufacturing real estate investment trust (“REIT”). Modiv seeks to provide investors access to MOnthly DIVidends through a durable portfolio of real estate investments designed to generate both current income and long-term growth. Modiv has operated as a REIT for U.S. federal income tax purposes beginning with the year ended December 31, 2016.
As used herein, the terms “Modiv,” the “Company,” “we,” “our” and “us” refer to Modiv Industrial, Inc. and, as required by context, Modiv Operating Partnership, LP, a Delaware limited partnership (our “Operating Partnership” or “Modiv OP”).
Our Class C common stock, $0.001 par value per share (the “Class C Common Stock”), is listed on the New York Stock Exchange (the “NYSE”) under the symbol “MDV.” Our 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”), also is listed on the NYSE under the symbol “MDV.PA.”
Details of our diversified portfolio of 42 operating properties, including one property held for sale and an approximate 72.7% tenant-in-common interest in a Santa Clara, California industrial property (the “TIC Interest”) as of December 31, 2025 are as follows:
• Annual base rent (“ABR”) aggregating $39.1 million, which is calculated based on the next 12 months of contractual monthly base rent as of December 31, 2025 (on a pro forma basis reflecting our January 2026 acquisition of the remaining 27.3% TIC interest owned by third parties, ABR was $39.8 million based on the next 12 months of contractual monthly base rent as of December 31, 2025);
•39 industrial properties, which represent approximately 82% of the portfolio (expressed as a percentage of ABR), including the TIC Interest and one property held for sale, and three non-core properties which represent approximately 18% of the portfolio by ABR;
•28% of the portfolio by ABR is leased by investment grade tenants;
•Weighted average remaining lease term (“WALT”), excluding tenants’ rights to extend leases, of approximately 14.0 years as of December 31, 2025;
•Occupancy rate of 98% based on square footage;
• Located in 14 states;
• Leased to 27 different commercial tenants doing business in 12 separate industries;
• Approximately 4.4 million square feet of aggregate leasable space, including the TIC Interest;
• An average leasable space per property of approximately 104,000 square feet (approximately 107,000 square feet per industrial property and approximately 68,000 square feet per non-core property); and
• Outstanding mortgage notes payable balance of $12.1 million for one consolidated property, $12.1 million for the unconsolidated property that became wholly-owned in January 2026 and a credit facility term loan balance of $250.0 million.
During the year ended December 31, 2025, we acquired an industrial manufacturing property located in Florida. We also sold two properties (a vacant office property in Washington and an industrial property in New York). See Notes 3 and 13 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for further details of our acquisitions and dispositions. Subsequent to December 31, 2025, we acquired the 27.3% remaining TIC interest for $9.6 million, giving us 100% ownership of the property.
To date, we have invested primarily in single-tenant, income-producing properties, leased to creditworthy tenants under long-term net leases. Although we are not limited as to the form our investments may take, our investments in real estate will primarily constitute acquiring fee title or interests in entities that own and operate real estate. We own and will make acquisitions of our real estate investments through special purpose limited liability companies which are wholly-owned subsidiaries of our 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
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other owners of properties through special purpose limited liability companies which are wholly-owned subsidiaries of our Operating Partnership.
We are structured as an umbrella partnership REIT under which substantially all of our business is conducted and of which we are the sole general partner and own approximately 81% of the interests as of December 31, 2025.
Our limited partners owned an approximate 19% interest in the Operating Partnership, comprised of units of Class C limited partnership interest (“Class C OP Units”) and units of Class X limited partnership interest (“Class X OP Units”, together with Class C OP Units, “OP Units”) in the Operating Partnership as of March 20, 2026. The Class C OP Units and Class X OP Units are further described in Note 11 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.
We intend to continue to qualify as a REIT for U.S. federal income tax purposes. If we continue to meet the qualification requirements for taxation as a REIT for U.S. federal income tax purposes, we generally will not be subject to U.S. federal income tax on the income that we distribute to our stockholders each year. If we fail to maintain our qualification for taxation as a REIT in any year, our income will be taxed at regular corporate rates, and we would be precluded from qualifying for taxation as a REIT for the four taxable years following the year during which we failed to qualify. Such an event could materially and adversely affect our net income and cash available for distribution to our stockholders.
Creditworthiness of Tenants
In the course of making a real estate investment decision, we assess the creditworthiness of the tenant that leases the property we intend to purchase. Tenant creditworthiness is an important investment criterion, as it provides a barometer of relative risk of tenant default, but tenant creditworthiness analysis is just one element of due diligence which we perform when considering a property purchase, and the weight we ascribe to tenant creditworthiness is a function of the results of other elements of due diligence.
Most of our leases require tenants to provide us with financial reports on a regular basis, or they are publicly-traded or have a parent that is publicly-traded, and we continue to analyze tenant creditworthiness on an ongoing basis, including review of tenant payment histories. However, a few of our older legacy leases limit our ability as landlord to demand non-public tenant financial information on a recurring basis. It is also our policy and practice to monitor public announcements regarding our tenants.
Description of Leases
We expect to invest in industrial manufacturing real estate investments, which are primarily single-tenant properties, with new leases negotiated in connection with sale and leaseback transactions or existing net leases. Under most commercial leases, tenants are obligated to pay a predetermined base rent. All of our leases also contain provisions that increase the amount of base rent payable annually during the lease term. We anticipate that most of our acquisitions will have lease terms of 15+ years at the time of the property acquisition and we may acquire properties under which the lease term has partially expired. We also may acquire properties with shorter lease terms if the property is located in a desirable location, is difficult to replace, or has other significant favorable real estate attributes.
There are various forms of net leases, typically classified as triple-net or double-net. Triple-net leases typically require tenants to pay all or a majority of the operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, insurance, common area maintenance charges, and building repairs related to the property, in addition to the lease payments. Double-net leases typically require the landlord to be responsible for structural and capital elements of the leased property, while the tenants are obligated to pay the majority of the operating expenses listed above. Modified gross leases require the landlord to be responsible for most operating expenses of the property. All of our leases entered into over the last three years are triple-net leases and we expect to enter into triple-net leases in connection with future acquisitions. Some of our older legacy leases are double-net leases and we have only one modified gross lease, which is with the State of California’s Office of Emergency Services.
We expect to have adequate insurance coverage for all properties in which we invest. Generally, the triple-net and double-net leases require each tenant to procure, at its own expense, commercial general liability insurance, as well as property insurance covering the building for the full replacement value and naming the ownership entity and the lender, if applicable, as the additional insured on the policy. In such instances, the policy will list us as an additional insured. However, lease terms may provide that tenants are not required to, and we may decide not to, obtain any or adequate earthquake or similar catastrophic insurance coverage because the premiums are too high, even in instances where it may otherwise be available. We may elect to obtain, to the extent commercially available, contingent liability and property insurance, flood insurance, environmental
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contamination insurance, as well as loss of rent insurance that covers one or more years of annual rent in the event of a rental loss. However, the coverage and amounts of our insurance policies may not be sufficient to cover our entire risk. See Part I, Item 1A. Risk Factors – General Risks Related to Investments in Real Estate. Tenants are required to provide proof of insurance by furnishing a certificate of insurance to us on an annual basis. We track and review the insurance certificates for compliance.
Disposition Policies
We generally intend to hold each property we acquire for an extended period. However, we may sell a property at any time if, in our judgment, the sale of the property is in the best interests of our stockholders. During the fourth quarter of 2021, we embarked on a strategic plan to reduce our exposure to office and retail properties and increase our WALT by acquiring industrial manufacturing properties with the majority of the lease terms having 15+ years in duration. Acting on this plan has resulted in an increase in our industrial properties to 82% of our portfolio by ABR as of December 31, 2025, and the extension of our WALT to approximately 14.0 years.
The Company has identified 12 to 15 assets that it would like to recycle over the next 24 months, including two office assets, one retail asset and certain legacy industrial assets that have shorter lease terms and do not fit with the Company’s long-term investment strategy. The determination of whether a particular property should be sold or otherwise disposed of will generally be made after consideration of relevant factors, including prevailing economic conditions, other investment opportunities and considerations specific to the condition, value and financial performance of the property.
Affiliate Transaction Policy
Pursuant to the Company’s Related Party Transaction Policy, the Nominating and Corporate Governance Committee (the “NCGC”) is responsible for approving any transaction between us and our affiliates (including any director, nominee for director or executive officer of the Company, any known beneficial holder of 5% of the Company’s common stock and any person who is or was known to be an immediate family member of any of the foregoing); provided that any director who has a direct or indirect material interest in the affiliate transaction shall recuse himself or herself from voting on any such affiliate transaction.
Competitive Market Factors
The U.S. commercial real estate investment and leasing markets are competitive. We face competition from various entities for investment opportunities for prospective tenants and to retain our current tenants, including other REITs, pension funds, insurance companies, private equity and other investment funds and companies, partnerships and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Further, as a result of their greater resources, those entities may have more flexibility than we do in their ability to offer rental concessions to attract and retain tenants. This could put pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. As a result, our financial condition, results of operations, cash flow, ability to satisfy our debt service obligations and ability to pay distributions to our stockholders may be adversely affected.
Although we believe that we are well-positioned to compete effectively, there is significant competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.
Compliance with Federal, State and Local Environmental Law
Our business is subject to many laws and governmental regulations. Changes in these laws and regulations, or their interpretation by agencies and courts, occur frequently, and we consider these laws and regulations in the operation of our business.
Environmental Matters
All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the presence and release of hazardous substances and the remediation of any associated contamination.
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Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real property may be held liable for the costs of removing or remediating hazardous or toxic substances. These laws often impose clean-up responsibility and liability without regard to whether the owner or operator was responsible for, or even knew of, the presence of the hazardous or toxic substances. The costs of investigating, removing or remediating these substances may be substantial, and the presence of these substances may adversely affect our ability to rent or sell properties or to borrow using the property as collateral and may expose us to liability resulting from any release of or exposure to these substances. If we arrange for the disposal or treatment of hazardous or toxic substances at another location, we may be liable for the costs of removing or remediating these substances at the disposal or treatment facility, whether or not the facility is owned or operated by us.
We perform a diligence review on each property that we purchase. As part of this review, we obtain an environmental site assessment for each proposed acquisition (which at a minimum includes a Phase I environmental assessment). We will not close the purchase of any property unless we are generally satisfied with the environmental status of the property. Furthermore, under most of our leases, the tenants have primary responsibility for compliance with all environmental laws and indemnify us for any costs or damages resulting from noncompliance with environmental laws.
We may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site that we own or operate. Certain environmental laws also impose liability in connection with the handling of or exposure to asbestos-containing materials, pursuant to which third parties may seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances. In addition to indemnifications from our tenants, we maintain an environmental insurance policy for our portfolio to insure against the potential liability of remediation and exposure risk, but it may not be sufficient to cover any catastrophic claims. See Part I, Item 1A. Risk Factors — General Risks Related to Investments in Real Estate.
Other Regulations
The properties we acquire will be subject to various federal, state and local regulatory requirements, such as zoning and state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. We intend to acquire properties that are in material compliance with all such regulatory requirements. However, we cannot assure investors that these requirements will not change or that new requirements will not be imposed which would require significant unanticipated expenditures and could have an adverse effect on our financial condition and results of operations.
Industry Segments
Our current business consists of owning, managing, operating, leasing, acquiring, investing in and disposing of commercial real estate assets, primarily utilized for industrial manufacturing, as well as a few non-core assets. All of our consolidated revenues are derived from our consolidated real estate properties. We internally evaluate operating performance on an individual property level and view all of our real estate assets as one industry segment, and, accordingly, all of our properties are aggregated into one reportable segment.
Major Tenants
We have two tenants that each generate over 10% of our rental income, with the nine properties leased to Lindsay accounting for 14.5% of rental income and the KIA retail property accounting for 11.0% of rental income for the year ended December 31, 2025. See Note 3 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for further details.
See Part I, Item 1A. Risk Factors – Risks Related to Our Business – We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us.
Employees
As of December 31, 2025, we had nine total employees, all of which are full-time employees.
Principal Executive Offices
Our principal executive offices are located at 1500 North Grant Street #5609, Denver, Colorado, 80203. Our telephone number and website address are (888) 686-6348 and http://www.modiv.com, respectively.
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Available Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. Access to copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and other filings with the SEC, including amendments to such filings, may be obtained free of charge from our website, http://www.modiv.com, and/or through a link to the SEC’s website, http://www.sec.gov. These filings are available promptly after we file them with, or furnish them to, the SEC. Our website is intended to serve as a primary means of public disclosure of material information about Modiv under Regulation FD. Investors should regularly check this section for important updates and announcements. The information on, or accessible through, our website is not incorporated into and does not constitute a part of this Annual Report on Form 10-K or any other report or document we file with or furnish to the SEC.
ITEM 1A. RISK FACTORS
Risks Related to an Investment in Our Class C Common Stock
Our listing on the NYSE does not guarantee an active and liquid market for our Class C Common Stock, and the market price and trading volume of the shares of our Class C Common Stock may fluctuate significantly.
Our Class C Common Stock began trading on the NYSE in 2022, and we can provide no assurance an active and liquid trading market for the shares of our Class C Common Stock will be sustained. The market price and liquidity of our Class C Common Stock may be adversely affected by the absence of an active trading market. The market price for the shares of our Class C Common Stock may not equal or may exceed the price our stockholders pay for their shares.
The trading price for our Class C Common Stock may be influenced by many factors, including:
• general financial and economic market conditions and, in particular, developments related to market conditions for REITs and other real estate-related companies including the potential impact of inflation;
• low trading volume in our Class C Common Stock, which makes it difficult to attract institutional investors;
• our operating results and financial condition, including actual or anticipated quarterly fluctuations therein;
• our ability to grow through property acquisitions or real estate-related investments, the terms and pace of any acquisitions we may make and the availability and terms of financing for those acquisitions;
• the financial condition of our tenants, including tenant bankruptcies or defaults;
• the amount and frequency of our payment of dividends and other distributions;
• additional sales of equity securities, including Series A Preferred Stock, Class C Common Stock or any other equity interests, or the perception that additional sales may occur;
• the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, and fixed income debt securities;
• uncertainty and volatility in the equity and credit markets;
• fluctuations in interest rates and exchange rates;
• changes in revenue or earnings estimates, if any, or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs;
• failure to meet analysts’ revenue or earnings estimates;
• strategic actions by us or our competitors, such as acquisitions or restructurings;
• the extent of investment in our Class C Common Stock by institutional investors;
• the extent of short-selling of our Class C Common Stock;
• failure to maintain our REIT status;
• changes in tax laws;
• additions and departures of key personnel;
•potential tariffs which could impact our manufacturing tenants;
• domestic and international economic factors unrelated to our performance including uncertainty related to inflation and interest rates, tariffs, supply chain disruptions and negative impacts associated with foreign policy actions implemented by the United States, and volatility in stock and bond markets, and particularly yields on U.S. Treasury securities; and
• the occurrence of any of the other risk factors presented in this Annual Report on Form 10-K, including in this “Part I, Item 1A. Risk Factors” section.
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Our Class C Common Stock is subordinate to our Series A Preferred Stock and our existing and future debt, and our common stockholders' interests could be diluted by the issuance of additional preferred stock, future offerings of debt securities, which could be senior to our common stock, or equity securities, and by other transactions.
Our Class C Common Stock ranks junior to all Series A Preferred Stock and our existing and future debt and to other non-equity claims on us and our assets available to satisfy claims against us, including claims in bankruptcy, liquidation or similar proceedings. Our Credit Facility includes, and our future debt may include, restrictions on our ability to pay dividends to common stockholders, including holders of Class C Common Stock. As of December 31, 2025, there were approximately 1.7 million shares of Series A Preferred Stock issued and outstanding. In addition, our board of directors has the power under our charter to classify any of our unissued shares of preferred stock, and to reclassify any of our previously classified but unissued shares of preferred stock of any class or series, from time to time, in one or more series of preferred stock.
In the future, we may attempt to increase our capital resources by offering debt or equity securities, including medium term notes, senior or subordinated notes and classes of preferred or common stock. Debt securities or shares of preferred stock will generally be entitled to receive interest payments or distributions, both current and in connection with any liquidation or sale, prior to the holders of our common stock. We are not required to offer any such additional debt or equity securities to existing common stockholders on a preemptive basis. Therefore, offerings of common stock or other equity securities may dilute the holdings of our existing stockholders. Future offerings of debt or equity securities, or the perception that such offerings may occur, may reduce the market price of our common stock and/or the distributions that we pay with respect to our common stock. Because we may generally issue any such debt or equity securities in the future without obtaining the consent of our stockholders, our stockholders will bear the risk of our future offerings reducing the market price of our common stock and diluting their proportionate ownership.
Further, in connection with an acquisition in March 2025, as discussed herein, the seller received Class C OP Units as a portion of the purchase price. In the first quarter of 2025, we granted Class X OP Units, which convert automatically into Class C OP Units upon vesting and satisfaction of certain other conditions, to our employees. These holders of the Class C OP Units that have been outstanding for at least one year may require the redemption of all or a portion of these units for shares of Class C Common Stock or, at our option as the general partner of the Operating Partnership, for cash (a “Class C OP Unit Redemption”). If we determine to satisfy the Class C OP Unit Redemption with shares of Class C Common Stock, such holder of Class C OP Units will be entitled to receive one share of Class C Common Stock for each Class C OP Unit, subject to adjustment. As a result, our stockholders will be diluted by the issuance of Class C Common Stock in connection with any Class C OP Unit Redemption, which could have a material adverse impact on the market price of our common stock.
The future issuance or sale of additional shares of our Class C Common Stock could adversely affect the trading price of our Class C Common Stock.
Future issuances or sales of substantial numbers of shares of our Class C Common Stock in the public market or the perception that issuances or sales might occur, could adversely affect the per share trading price of our Class C Common Stock. The per share trading price of our Class C Common Stock may decline significantly upon the sale or offering of additional shares of our Class C Common Stock.
Our Operating Partnership may issue additional OP Units to third parties without the consent of our stockholders, which would reduce our ownership percentage in our Operating Partnership and could have a dilutive effect on the amount of distributions made to us by our Operating Partnership and, therefore, the amount of distributions we can make to our stockholders.
As of March 20, 2026, we owned 81% of the outstanding OP Units in our Operating Partnership. We have issued OP Units to third parties as consideration for acquisitions and to employees as compensation, and we may do so in the future. Any such future issuances would reduce our ownership percentage in our Operating Partnership and could affect the amount of distributions made to us by our Operating Partnership and, therefore, the amount of distributions we can make to our stockholders. Because our stockholders do not directly own OP Units, our stockholders do not have any voting rights with respect to any such issuances or other partnership level activities of our Operating Partnership.
Our distributions to stockholders may change, which could adversely affect the market price of our Class C Common Stock.
All distributions will be at the sole discretion of our board of directors and will depend upon our actual and projected financial condition, results of operations, cash flows, liquidity and funds from operations, maintenance of our REIT qualification and such other matters as our board of directors may deem relevant from time to time. We may not be able to make distributions in the future or may need to fund such distributions from external sources, as to which no assurances can be given. In addition, we may choose to retain operating cash flow for investment purposes, working capital reserves or other purposes, and these retained
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funds, although increasing the value of our underlying assets, may not correspondingly increase the market price of our Class C Common Stock. Our failure to meet the market’s expectations with regard to future cash distributions could adversely affect the market price of our Class C Common Stock.
Increases in market interest rates may result in a decrease in the market price of our Class C Common Stock.
One of the factors that may influence the price of our Class C Common Stock will be the distribution rate on the Class C Common Stock (as a percentage of the price of our Class C Common Stock) relative to market interest rates. If market interest rates rise, prospective purchasers of shares of our Class C Common Stock may expect a higher distribution rate. Higher interest rates would not, however, result in more funds being available for distribution and, in fact, would likely increase our borrowing costs and might decrease our funds available for distribution. We therefore may not be able, or we may not choose, to provide a higher distribution rate. As a result, prospective purchasers may decide to purchase other securities rather than our Class C Common Stock, which would reduce the demand for, and result in a decline in the market price of, our Class C Common Stock.
Risks Related to Our Business
Our business focuses on future acquisitions of industrial manufacturing properties while reducing the number of non-core properties and certain legacy properties in our portfolio, and therefore the prior performance of our real estate investments may not be comparable to our ongoing results.
We were incorporated in the State of Maryland on May 15, 2015, and during the fourth quarter of 2021, we embarked on a strategic plan to reduce our exposure to non-core properties and invest primarily in industrial manufacturing real estate properties. As of December 31, 2025, we owned 42 properties, including one property held for sale and a tenant-in-common real estate investment (an approximate 72.7% interest in a 91,740 square foot industrial property located in Santa Clara, California). We are focused on future acquisitions of industrial manufacturing properties and have identified 12 to 15 assets that we would like to recycle over the next 24 months, including two office assets, one retail asset and certain legacy industrial assets that have shorter lease terms and do not fit with our long-term investment strategy. As a result, the prior performance of our real estate investments or real estate investment programs, particularly those in place prior to the fourth quarter of 2021, may not be comparable to our ongoing results.
Investors should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that are, like us, in their early stage of operations or have recently shifted investment objectives. To be successful in this market, we must, among other things:
•identify and acquire investments that further our investment objectives;
•increase awareness of our brand within the investment products market;
•retain qualified personnel to manage our day-to-day operations; and
•respond to competition for our targeted real estate properties and other investments as well as for potential investors.
We cannot guarantee that we will succeed in achieving these goals, and our failure to do so could cause our investors to lose money.
We face risks associated with cybersecurity incidents through cyber-attacks, cyber intrusions or otherwise, as well as failures of systems on which we rely and other significant disruptions of our information technology (“IT”) networks and related systems.
The risk of a cybersecurity incident or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our website, www.modiv.com, IT networks and related systems, including third party providers of software-as-a-service (“SaaS”) platforms, are essential to the operation of our business and our ability to perform day-to-day operations. Although we make efforts to maintain the security and integrity of our IT networks and related systems, and we have implemented various measures to manage our risk of a cyber-attack or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted cyber-attacks or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted cyber-attacks evolve and may be designed to be undetectable. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. Additionally, data protection laws and regulations often require “reasonable,” “appropriate” or “adequate” technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our
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security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed appropriate, reasonable, and/or in accordance with applicable legal requirements may not be able to protect the information we maintain.
A cybersecurity incident or other significant disruption involving IT networks and related systems we use could:
•disrupt the proper functioning of our networks and systems and therefore our operations;
•result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines to the regulators;
•result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;
•result in the unauthorized access to, or destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us, or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;
•require significant management attention and resources to remedy any damages that result or improve our security;
•subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements;
•result in litigation or increased regulatory oversight, including governmental investigations, enforcement actions, regulatory fines, and/or criminal prosecution; and/or
•damage our reputation among investors.
We rely heavily on SaaS solutions supplied by third party providers, including data centers and cloud storage services. If these third party providers cease to provide the facilities or services, experience operational interference or disruptions, breach their agreements with us, fail to perform their obligations and meet our expectations, or experience a cybersecurity incident, our operations could be disrupted or otherwise negatively affected, which could result in damage to our reputation among investors and brands, and materially and adversely affect our business. We may not carry business interruption insurance sufficient to compensate us for all losses that may result from interruptions in our service as a result of systems failures and similar events. And while we may be entitled to damages if our third-party providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.
We face significant competition for real estate investment opportunities, which may limit our ability to acquire suitable investments and achieve our investment objectives or pay distributions.
We face competition from various entities for real estate investment opportunities, including other REITs, pension funds, banks and insurance companies, private equity and other investment funds, and companies, partnerships and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant or the geographic location of their investments. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets could impact the cost and availability of debt to finance real estate investments, which is a key component of our acquisition strategy. A downturn in the credit markets and a potential lack of available debt could limit our ability to pursue suitable investment opportunities and create a competitive advantage for other entities that have greater financial resources than we do. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If we acquire investments at higher prices and/or by using less-than-ideal capital structures, or if we are not able to acquire investments at all, our returns will be lower and the value of our respective assets may not appreciate or may decrease significantly below the amount we paid for such assets. If such events occur, our stockholders may experience a lower return on their investment.
Investments in real estate are illiquid, and it may not be possible to dispose of assets in a timely manner or on favorable terms, which could adversely affect our financial condition, operating results and cash flows.
Although we have identified 12 to 15 assets that we would like to recycle over the next 24 months, our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers, and we cannot predict whether we will be able to sell any property we desire to for the price or on the terms set by us or acceptable to us, or the length of time needed to find a willing buyer and to close the sale. Upon sales of properties or assets, we may become subject to contractual indemnity obligations, incur unusual or extraordinary distribution requirements, be required to expend funds to correct defects or make capital improvements or, as a result of required debt repayment, face a shortage of liquidity. Therefore, as a result of the foregoing events or circumstances, we
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may not be able to achieve our targeted industrial composition of our portfolio promptly, on favorable terms or at all in response to changing economic, financial and investment conditions, which may adversely affect our cash flows and our ability to make distributions to stockholders.
Disruptions in the financial markets and uncertain economic conditions could adversely affect market rental rates, commercial real estate values and our ability to secure debt financing at interest rates acceptable to us or at all, to service future debt obligations, or to pay distributions to our stockholders.
Currently, both the investing and leasing environments are highly competitive. The uncertainty regarding the economic environment has made businesses reluctant to make long-term commitments. Since we publicly listed our common stock in February 2022, there have been significant disruptions in financial markets, supply chains, elevated inflation and interest rate levels, uncertainty about how the economy will perform and the extent to which employees working from home will return to the office. Recent events have resulted in disruption to global financial markets and affected macroeconomic conditions. More recently, the U.S. has imposed and subsequently paused, in part, tariffs on certain foreign products, including from China, Mexico and Canada, that in the past have resulted in retaliatory tariffs on U.S. goods and products. Such uncertainty has disrupted global financial markets and the enforcement of any new or significant tariffs could harm our tenants. Volatility in global markets and changing political environments can cause fluctuations in the performance of the U.S. commercial real estate markets. Economic slowdowns of large economies outside the United States could negatively impact growth of the U.S. economy. Political uncertainties both home and abroad may discourage business investment in real estate and other capital spending. 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 investment properties. Increases in the cost of financing due to higher interest rates may cause difficulty in refinancing debt obligations prior to maturity at terms as favorable as the terms of existing indebtedness. Market conditions can change quickly, potentially negatively impacting the value of real estate investments. Management continuously reviews our investment and debt financing strategies to optimize our portfolio and the cost of our debt exposure.
We plan to rely on debt financing to finance our real estate properties and we may have difficulty refinancing some of our debt obligations prior to or at maturity, or we may not be able to refinance these obligations at terms as favorable as the terms of our current indebtedness and we also may be unable to obtain additional debt financing on attractive terms or at all. If we are not able to refinance our current indebtedness on attractive terms at the various maturity dates, we may be forced to dispose of some of our assets.
The debt market remains sensitive to the macro environment, such as Federal Reserve policy, market sentiment or regulatory factors affecting the banking and commercial mortgage-backed securities industries, significant increases in inflation, and global and political volatility. We may experience more stringent lending criteria, which may affect our ability to finance certain property acquisitions or refinance any debt at maturity. Additionally, for properties for which we are able to obtain financing, the interest rates and other terms on such loans may be unacceptable.
Disruptions in the financial markets and uncertain economic conditions could adversely affect the values of our investments. Furthermore, declining 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 pay distributions or meet our debt service obligations on debt financing.
All of these factors could reduce stockholders’ return and decrease the value of an investment in us.
Our real estate properties and related intangible assets may be subject to impairment charges.
We routinely evaluate our real estate properties and related intangible assets for impairment indicators and have recognized impairment charges to the value of our real estate properties, goodwill and intangible assets. For example, we recorded an impairment charge of $5.8 million related to its property and equipment located in Saint Paul, Minnesota during the year ended December 31, 2025. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, tenant performance and lease structure. For example, the early termination of, or default under, a lease by a tenant may lead to an impairment charge. Furthermore, as we reposition our portfolio by selling some of our legacy office and industrial properties with short lease terms, such sales could lead to potential impairment charges depending on the final selling price. If we determine that an impairment has occurred, we would be required to make a downward adjustment to the net carrying value of the property or related intangible assets, which could have a material adverse effect on our results of operations in the period in which the
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impairment charge is recorded. Negative developments in the real estate market may cause management to reevaluate the business and macro-economic assumptions used in its impairment analysis. Changes in management’s assumptions based on actual results may have a material impact on our financial statements.
Downturns relating to certain geographic regions, industries or business sectors may have a more significant adverse impact on our assets and our ability to pay distributions than if we had a more diversified investment portfolio.
While we intend to diversify our portfolio of investments by geography, investment size and investment risk, we are not required to observe specific diversification criteria. Therefore, our investments may at times be concentrated in a limited number of geographic locations, or secured by assets concentrated in a limited number of geographic locations. To the extent that our portfolio is concentrated in limited geographic regions, industries or business sectors, downturns relating generally to such region, industry or business sector may result in defaults on a number of our investments within a short time period, which may reduce our net income and the market price of our Class C Common Stock and accordingly limit our ability to pay distributions to our stockholders. As of December 31, 2025, eight of our 42 operating properties, including our approximate 72.7% TIC Interest, are located in California, which makes the performance of our properties highly dependent on the health of the California economy. As of December 31, 2025, approximately 31% of our ABR is concentrated in California.
Furthermore, we are not required to meet any property-type, tenant or geographic diversification standards. Therefore, our investments may become concentrated by type, tenant or geographic location, which could subject us to significant risks. For example, 82% of our ABR as of December 31, 2025, is concentrated in industrial property assets and we expect that percentage to continue to increase as we target acquisitions of additional industrial property assets and dispose of our remaining legacy retail and office assets.
Any adverse economic or real estate developments in our markets could adversely affect our operating results and our ability to pay distributions to our stockholders.
We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us.
Our portfolio has two tenants that in the aggregate contribute approximately 25% of our ABR as of December 31, 2025, with Lindsay (which is comprised of nine properties in six states) representing approximately 14% of our ABR and the KIA retail property in Carson, California representing approximately 11% of our ABR. As a result, our financial performance depends significantly on the revenues generated from these tenants and, in turn, their financial condition. Although we expect to increase tenant diversification over time, in the future, we may experience additional tenant and industry concentrations. In the event that one of these tenants, or another tenant that occupies a significant portion of our properties or whose lease payments represent a significant portion of our rental revenue, were to experience financial weakness or file for bankruptcy, it could have a material adverse effect on us.
The loss of or our inability to retain key executive officers could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of an investment in our shares.
Our success depends to a significant degree upon the contributions of Messrs. Aaron Halfacre, our Chief Executive Officer, and John Raney, our Chief Financial Officer (effective upon Mr. Pacini’s resignation upon the filing of this Annual Report on Form 10-K) and General Counsel, each of whom would be difficult to replace. Neither we nor our affiliates have employment agreements with these individuals. If either of these persons were to cease their association with us, we may be unable to find suitable replacements and our operating results could suffer as a result. We believe that our future success depends, in large part, upon our ability to retain our highly skilled managerial, financial and operational professionals. Competition for such professionals is intense, and we may be unsuccessful in retaining such skilled professionals. If we lose or are unable to obtain the services of highly skilled professionals, our ability to implement our investment strategies could be delayed or hindered.
We may change our targeted investments or investment strategy.
We intend to focus future investments in industrial manufacturing real estate properties and reduce the number of non-core properties and certain legacy properties in our portfolio; however, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities, and we may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this Annual Report on Form 10-K. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the market price of our Class C Common Stock and our ability to make distributions to our stockholders. We will not forgo an investment opportunity because it does not precisely fit our expected portfolio composition. We believe that
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we are most likely to meet our investment objectives through the careful selection and underwriting of assets. When making an acquisition, we will analyze the performance and risk characteristics of that investment, how that investment will fit with our portfolio-level performance objectives, the other assets in our portfolio and how the returns and risks of that investment compare to the returns and risks of available investment alternatives. Thus, our portfolio composition may vary from our initial expectations. However, we will attempt to continue to construct a portfolio that produces stable and attractive returns by spreading risk across different real estate investments.
We have incurred losses in the past and we may experience additional losses in the future.
Historically, we have experienced net losses (calculated in accordance with generally accepted accounting principles in the United States (“GAAP”)) and in the future, we may not be profitable or realize growth in the value of our investments. Many of our losses can be attributed to depreciation and amortization, as well as interest expense and general and administrative expenses. Accordingly, we may not generate cash flows sufficient to pay distributions to stockholders or meet our debt service obligations.
If we are unable to obtain funding for future capital needs, cash distributions to our stockholders and the value of our investments could decline.
When tenants do not renew their leases or otherwise vacate their space, we will often need to expend substantial funds for improvements to the vacated space in order to attract replacement tenants. Even when tenants do renew their leases, we may agree to make improvements to their space as part of our negotiations. If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain funding from sources other than our cash flow from operations or proceeds from our At-The-Market (“ATM”) offering, such as borrowings or future equity offerings. These sources of funding may not be available on attractive terms, or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, which would limit our ability to make distributions to our stockholders and could reduce the value of our stockholders’ investment in us.
Risks Related to Our Corporate Structure
Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our Class C Common Stock or a change in control.
Our charter and bylaws contain a number of provisions, the exercise or existence of which could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stockholders.
• Our Charter Contains Restrictions on the Ownership and Transfer of Our Stock. In order for us to qualify as a REIT, no more than 50% of the value of outstanding shares of our stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year other than the first year for which we elect to be taxed as a REIT. Subject to certain exceptions, our charter prohibits any stockholder from owning beneficially or constructively more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our Class C Common Stock, or 9.8% in value of the aggregate of the outstanding shares of all classes or series of our stock. We refer to these restrictions collectively as the “ownership limits.” The constructive ownership rules under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our outstanding Class C Common Stock or the outstanding shares of all classes or series of our stock by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits. Our charter also prohibits any person from owning shares of our stock that could result in our being “closely held” under Section 856(h) of the Internal Revenue Code or otherwise cause us to fail to qualify as a REIT. Any attempt to own or transfer shares of our Class C Common Stock or of any of our other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. These ownership limits may prevent a third-party from acquiring control of us if our board of directors does not grant an exemption from the ownership limits, even if our stockholders believe the change in control is in their best interests.
• Our Board of Directors Has the Power to Cause Us to Issue Additional Shares of Our Stock Without Stockholder Approval. Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of common stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of directors may establish a class or series of shares of common
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or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our shares of Class C Common Stock or otherwise be in the best interests of our stockholders.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Maryland law provides that a director has no liability in the capacity as a director if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the company’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. As permitted by Maryland law, our charter limits the liability of our directors and officers and our stockholders for money damages, except for liability resulting from:
• actual receipt of an improper benefit or profit in money, property or services; or
• a final judgment based on a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.
In addition, our charter requires us to indemnify our directors and officers for actions taken by them in those capacities and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding to the maximum extent permitted by Maryland law, and we have entered into indemnification agreements with our directors and executive officers. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. Accordingly, in the event that any of our directors or officers are exculpated from, or indemnified against, liability but whose actions impede our performance, our stockholders’ ability to recover damages from that director or officer will be limited.
Certain provisions of Maryland law may limit the ability of a third-party to acquire control of us.
Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of inhibiting a third-party from acquiring us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including:
• “business combination” provisions that, subject to limitations, prohibit certain business combinations between an “interested stockholder” (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding stock of the corporation) or an affiliate of any interested stockholder for a period of five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations; and
• “control share” provisions that provide that holders of “control shares” of the company (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer, would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares.
Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. This bylaw provision may be amended or eliminated at any time in the future.
Additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not have.
The change of control conversion and redemption features of the Series A Preferred Stock may make it more difficult for a party to acquire us or discourage a party from seeking to acquire us.
Upon the occurrence of a change of control, holders of Series A Preferred Stock will, under certain circumstances, have the right to convert some of or all their shares of Series A Preferred Stock into shares of our Class C Common Stock (or equivalent value of alternative consideration) and under these circumstances we will also have a change of control redemption right to redeem shares of Series A Preferred Stock. Upon exercise of this conversion right, the holders will be limited to a maximum number of shares of our Class C Common Stock pursuant to a predetermined ratio. These features of the Series A Preferred Stock may have the effect of discouraging a third party from seeking to acquire us or of delaying, deferring or preventing a change of control under circumstances that otherwise could provide the holders of our Class C Common Stock and Series A Preferred Stock
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with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.
Certain provisions in our Operating Partnership Agreement may delay, make more difficult, or prevent unsolicited acquisitions of us.
Provisions in the Operating Partnership Agreement may delay, make more difficult, or prevent unsolicited acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some of our stockholders might consider such proposals, if made, desirable. These provisions include, among others:
•exchange rights of holders of our Class C OP Units;
•a requirement that we may not be removed as the general partner of our Operating Partnership without our consent;
• transfer restrictions on OP Units;
•our ability, as general partner, in some cases, to amend the partnership agreement and to cause the Operating Partnership to issue units with terms that could delay, defer, or prevent a merger or other change of control of us or our Operating Partnership without the consent of the limited partners; and
•the right of the limited partners to consent to direct or indirect transfers of the general partnership interest, including as a result of a merger or a sale of all or substantially all of our assets.
The limited partners in our Operating Partnership (other than us) owned approximately 19% of the outstanding OP Units of our Operating Partnership as of December 31, 2025.
General Risks Related to Investments in Real Estate
Economic, market and regulatory changes that impact the real estate market generally may decrease the value of our investments and weaken our operating results.
Our operating results and the performance of the properties we acquire are subject to the risks typically associated with real estate, any of which could decrease the value of our investments and could weaken our operating results, including:
•downturns in national, regional and local economic conditions;
•competition from other commercial developments;
•adverse local conditions, such as oversupply or reduction in demand for commercial buildings and changes in real estate zoning laws that may reduce the desirability of real estate in an area;
•vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;
•changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive;
•changes in tax (including real and personal property tax), real estate, environmental and zoning laws;
•potential tariffs and trade wars;
•material failures, inadequacy, interruptions or security failures of the technology on which our operations rely;
•natural disasters such as hurricanes, earthquakes and floods;
•geopolitical instability;
•acts of war or terrorism;
•the potential for uninsured or underinsured property losses; and
•periods of high inflation, high interest rates and tight money supply.
Any of the above factors, or a combination thereof, could result in a decrease in our cash flow from operations and a decrease in the value of our investments, which would have an adverse effect on our operations, on our ability to pay distributions to stockholders and on the market price of our Class C Common Stock.
We are subject to risks from natural disasters, such as hurricanes, tornadoes and flooding, and changes in weather patterns.
Natural disasters and severe weather such as flooding, earthquakes, fires, tornadoes or hurricanes may result in significant damage to our properties. The extent of our casualty losses and loss in operating income in connection with such events is a function of the severity of the event and the total amount of exposure in the affected area. When we have geographic
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concentration like we have in California, a single catastrophe (such as an earthquake) or destructive weather event (such as a wildfire, tornado or hurricane) affecting a region may have a significant negative effect on our financial condition and results of operations. Our financial results may be adversely affected by our exposure to losses arising from natural disasters or severe weather.
We also are exposed to risks associated with inclement winter weather which could increase the need for maintenance and repair of our properties.
Lastly, to the extent that natural disasters do occur, their physical effects could have a material adverse effect on our properties, operations, and business. To the extent there are changes in weather patterns, our markets could experience increases in storm intensity. These conditions could result in physical damage to our properties or declining demand for space in our buildings or the inability of us to operate the buildings at all in the areas affected by these conditions. Natural disasters and changes in weather patterns that increase the intensity of storms also may have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy, and increasing the cost of snow removal or related costs at our properties. In addition, proposed legislation and regulatory actions to address climate change could increase utility and other costs of operating our properties which, if not offset by rising rental income, would reduce our net income. Should any of these events be material in nature or occur for lengthy periods of time, our properties, operations, or business would be adversely affected.
We intend to purchase properties with (or enter into, as necessary) long-term leases with tenants, which may not result in fair market rental rates over time.
We intend to purchase properties with (or enter into as necessary) long-term leases with tenants. These leases would provide for rent to increase over time; however, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of these long-term leases at levels such that, even after contractual rent increases, the rent under our long-term leases is less than then-current market rates.
Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our cash available for distribution could be lower than if we did not purchase properties with, or enter into, long-term leases.
We depend on tenants for our revenue generated by our real estate investments and, accordingly, our revenue generated by our real estate investments and our ability to make distributions to our stockholders are dependent upon the success and economic viability of our tenants and our ability to retain and attract tenants. Non-renewals, terminations or lease defaults could reduce our net income and limit our ability to make distributions to our stockholders.
The success of our real estate investments materially depends upon the financial stability of the tenants leasing the properties we own. The inability of a single major tenant or a significant number of smaller tenants to meet their rental obligations would significantly lower our net income. A non-renewal after the expiration of a lease term, termination or default by a tenant on its lease payments to us would cause us to lose the revenue associated with such lease and require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord of a property and may incur substantial costs in protecting our investment and re-leasing the property. Tenants may have the right to terminate their leases upon the occurrence of certain customary events of default and, in other circumstances, may not renew their leases or, because of market conditions, may only be able to renew their leases on terms that are less favorable to us than the terms of their initial leases. Further, some of our assets may be outfitted to suit the particular needs of the tenants. We may have difficulty replacing the tenants of these properties if the outfitted space limits the types of businesses that could lease that space without major renovation. If a tenant does not renew, terminates or defaults on a lease, we may be unable to lease the property for the rent previously received or sell the property without incurring a loss. These events could cause us to reduce distributions to stockholders.
There are no leases scheduled to expire within the next 12 months. We have one lease scheduled to expire in 2027: our property in Charlotte, North Carolina leased to Husqvarna that expires on June 30, 2027.
Our inability to renew or re-lease space in 2027 and beyond could adversely impact our financial condition, results of operations, cash flow and our ability to pay distributions to our stockholders.
Costs imposed pursuant to laws and governmental regulations may reduce our net income and our cash available for distribution to our stockholders.
Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or
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damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials and other health and safety-related concerns.
Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Activities of our tenants, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.
The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties or damages we must pay will reduce our ability to pay distributions to our stockholders and could seriously harm our operating results and financial condition.
The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce our cash available for distribution to our stockholders.
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce our cash available for distribution to our stockholders.
We intend that most if not all of our real estate acquisitions be subject to Phase I environmental assessments prior to the time they are acquired; however, such assessments may not provide complete environmental histories due, for example, to limited available information about prior operations at the properties or other gaps in information at the time we acquire the property. A Phase I environmental assessment is an initial environmental investigation to identify potential environmental liabilities associated with the current and past uses of a given property. If any of our properties were found to contain hazardous or toxic substances after our acquisition, the value of our investment could decrease below the amount paid for such investment.
We are subject to risks relating to litigation and regulatory liability.
We face legal risks in our businesses, including risks related to the securities laws and regulations across various state and federal jurisdictions.
We may in the future become subject to claims and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant costs. Significant litigation costs could impact our ability to comply with certain financial covenants under our Credit Agreement. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these types of lawsuits. Regardless of the outcome, litigation may require significant attention from management and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our financial position, results of operations and cash flows.
Inflation and rising interest rates may adversely affect our financial condition and results of operations or result in a decrease in the market price of our Class C Common Stock.
Rising inflation may have an adverse impact on our general and administrative expenses, as these costs could increase at a rate higher than our rental and other revenue. While the U.S. Federal Reserve reduced rates in September, October and December
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2025, the Federal Reserve may refrain from reducing interest rates further to try to rein in inflation, which could lead to a recession, and would negatively impact our future operating results due to higher borrowing costs. To the extent our exposure to increases in interest rates is not eliminated through interest rate swaps or other protection agreements, such increases may result in higher debt service costs, which will adversely affect our cash flows. Inflation may also have an adverse effect on consumer spending, which could impact our tenants’ revenues and, in turn, their demand for space and future extensions of their leases.
In addition, one of the factors that may influence the price of our Class C Common Stock will be the distribution rate on the Class C Common Stock (as a percentage of the price of our Class C Common Stock) relative to market interest rates. If market interest rates rise, prospective purchasers of shares of our Class C Common Stock may expect a higher distribution rate. Higher interest rates would not, however, result in more funds being available for distribution and, in fact, would likely increase our borrowing costs and might decrease our funds available for distribution. We therefore may not be able, or we may not choose, to provide a higher distribution rate. As a result, prospective purchasers may decide to purchase other securities rather than our Class C Common Stock, which would reduce the demand for, and result in a decline in the market price of, our Class C Common Stock.
Risks Related to Investments in Single-Tenant Real Estate
Our current properties depend upon a single-tenant for their rental income, and our financial condition and ability to make distributions may be adversely affected by the bankruptcy or insolvency of a tenant, a downturn in the business of a tenant or a tenant’s lease termination in bankruptcy or otherwise.
While we are focused on future acquisitions of industrial manufacturing properties, we expect that most of our properties will be occupied by only one tenant or will derive a majority of their rental income from one tenant and, therefore, the success of those properties will be materially dependent on the financial stability of such tenants. Lease payment defaults by tenants could cause us to reduce the amount of distributions we pay. A default of a tenant on its lease payments to us and the potential resulting vacancy would cause us to lose the revenue from the property and force us to find an alternative source of revenue to meet any mortgage payment and prevent a foreclosure if the property is subject to a mortgage. In the event of a default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting the property, and we may be required to renovate the property or to make rent concessions in order to lease the property to another tenant. If a lease is terminated or an existing tenant elects not to renew a lease upon its expiration, there is no assurance that we will be able to lease the property for the rent previously received or sell the property without incurring a loss. In addition, many of our single-tenant properties are also special-use and if the current lease is terminated or not renewed and we are forced to sell the property, we may have difficulty selling it to a party other than the tenant or borrower due to the special purpose for which the property may have been designed. A default by a tenant, the failure of a guarantor to fulfill its obligations or other premature termination of a lease, or a tenant’s election not to extend a lease upon its expiration, and other limitations, could have an adverse effect on our financial condition, results of operations and our ability to pay distributions.
If a tenant declares bankruptcy, we may be unable to collect balances due under relevant leases, including sale-leaseback transactions, which could harm our operating results and financial condition.
Any of our tenants, or any guarantor of a tenant’s lease obligations, could be subject to a bankruptcy proceeding pursuant to Title 11 of the bankruptcy laws of the United States. Such a bankruptcy filing would bar all efforts by us to collect pre-bankruptcy debts from these entities or their properties, including any work performed by contractors that could result in mechanics liens on our property, unless we receive an enabling order from the bankruptcy court. Post-bankruptcy debts would be paid currently. If a lease is assumed, all pre-bankruptcy balances owing under it must be paid in full. If a lease is rejected by a tenant in bankruptcy, we would have a general unsecured claim for damages. If a lease is rejected, it is unlikely we would receive any payments from the tenant because our claim is capped at the rent reserved under the lease, without acceleration, for the greater of one year or 15% of the remaining term of the lease, but not greater than three years, plus rent already due but unpaid. This claim could be paid only in the event funds were available, and then only in the same percentage as that realized on other unsecured claims. If mechanics liens are filed on our property, we could be required to pay the amounts owed to contractors if they are not paid by the tenant in order to avoid a foreclosure.
A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. Such an event could cause a decrease or cessation of rental payments that would mean a reduction in our cash flow and the amount available for distributions to stockholders. In the event of a bankruptcy, we cannot assure stockholders that the tenant or its trustee will assume our lease. If a given lease, or guaranty of a lease, is not assumed, our cash flow and the amounts available for distributions to stockholders may be adversely affected. Further, our lenders may have a first priority claim to any recovery under the leases, any guarantees and any credit support, such as security deposits and letters of credit.
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In addition, we often enter into sale-leaseback transactions, whereby we purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be recharacterized as either a financing or a joint venture, either of which outcomes could adversely affect our business. If the sale-leaseback were recharacterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan to restructure the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were recharacterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow and the amount available for distributions to stockholders.
Net leases may not result in fair market lease rates over time.
We expect most of our rental income to come from net leases. Net leases typically contain: (i) longer lease terms; (ii) fixed rental rate increases during the primary term of the lease; and (iii) fixed rental rates or fixed increases for renewal options, and, thus, there is an increased risk that these contractual lease terms will fail to result in fair market rental rates if fair market rental rates increase at a greater rate than the fixed rental rate increases.
Risks Associated with Debt Financing
We have a substantial amount of indebtedness outstanding, which may expose us to the risk of default under our debt obligations.
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. As of December 31, 2025, our leverage was 45.1%. 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.
There is no limitation on the amount we may borrow for the purchase of any single asset, and our charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval. Further, our Credit Facility allows for borrowings up to 60% of our borrowing base; however, we are targeting leverage below 40% over the long term and do not currently plan to allow our leverage ratio to exceed 50% in order to minimize the interest rate payable on the Revolver and Term Loan (each as defined below).
Additionally, we may provide full or partial guarantees of mortgage debt incurred by our subsidiaries that own the mortgaged properties. Under these circumstances, we will be responsible to the lender for satisfaction of the debt if it is not paid by our subsidiary. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.
Our use of indebtedness could have important consequences to us. For example, it could: (1) result in the acceleration of a significant amount of debt for non-compliance with the terms of such debt or, if such debt contains cross-default or cross-acceleration provisions, other debt; (2) result in the loss of assets, including individual properties or portfolios, due to foreclosure or sale on unfavorable terms, which could create taxable income without accompanying cash proceeds; (3) materially impair our ability to borrow unused amounts under existing financing arrangements or to obtain additional financing or refinancing on favorable terms or at all; (4) require us to dedicate a substantial portion of our cash flow to paying principal and interest on our indebtedness, reducing the cash flow available to fund our business, to make distributions, including those necessary to maintain our REIT qualification, unless we decide to make distributions of our Class C Common Stock; (5) increase our vulnerability to an economic downturn; (6) limit our ability to withstand competitive pressures; or (7) reduce our flexibility to respond to changing business and economic conditions.
Secured indebtedness exposes us to the possibility of foreclosure on our ownership interests in pledged properties.
Incurring mortgage and other secured indebtedness increases our risk of loss of our ownership interests in the pledged property because defaults thereunder, and the inability to refinance such indebtedness, may result in foreclosure action initiated by lenders. As of December 31, 2025, two of our 42 properties, including the TIC Interest, were encumbered with mortgages. Incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the
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value of our stockholders’ investment. For tax purposes, a foreclosure on any of our properties will be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the loan secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds. We have and may in the future give full or partial guarantees to lenders of mortgage loans to the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the loan if it is not paid by such entity. If any mortgage contains cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders may be adversely affected.
Covenants in the Credit Facility and our mortgages may restrict our operating activities and adversely affect our financial condition.
The Credit Facility and our mortgage loans contain, and future debt agreements may contain, financial and/or operating covenants, including, among other things, certain coverage ratios, borrowing base requirements, net worth requirements and limitations on our ability to make distributions. These covenants may limit our operational flexibility and acquisition and disposition activities. Moreover, if any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default.
Increases in interest rates or changes in underwriting standards may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash available for distribution to our stockholders.
If debt is unavailable at reasonable interest rates, we may not be able to finance the purchase of properties. If we place mortgage debt on a property, we run the risk of being unable to refinance part or all of the debt when it becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance properties subject to mortgage debt, our income could be reduced. We may be unable to refinance or may only be able to partly refinance properties if underwriting standards, including loan to value ratios and yield requirements, among other requirements, are stricter than when we originally financed the properties. If any of these events occurs, our cash flow could be reduced and/or we might have to pay down existing mortgages. This, in turn, would reduce cash available for distribution to our stockholders, could cause us to require additional capital and may hinder our ability to raise capital by issuing more stock or by borrowing more money.
We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.
We may finance our assets over the long-term through a variety of means, including repurchase agreements, credit facilities, issuances of commercial mortgage-backed securities and other structured financings. Our ability to execute this strategy will depend on various conditions in the markets for financing in this manner that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long-term financing for our assets. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets, as secured revolving credit facilities and repurchase agreements may not accommodate long-term financing. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flow, thereby reducing cash available for distribution to our stockholders and funds available for operations as well as for future business opportunities.
To hedge against interest rate fluctuations, we may use derivative financial instruments that may be costly and ineffective.
From time to time, we may use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions will be determined in light of the facts and circumstances existing at the time of the hedge and may differ from our currently anticipated hedging strategy. There is no assurance that our hedging strategy will achieve our objectives. We may be subject to costs, such as transaction fees or breakage costs, if we terminate these arrangements.
To the extent that we use derivative financial instruments to hedge against interest rate fluctuations, we will be exposed to credit risk, basis risk and legal enforceability risks. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Legal enforceability risks encompass general contractual risks including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. There is a risk that counterparties could fail, shut down, file for bankruptcy or be unable to pay out contracts.
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The failure of a counterparty that holds collateral that we post in connection with an interest rate swap agreement could result in the loss of that collateral.
Variable rate indebtedness would subject us to interest rate risk, and could cause our debt service obligations to increase significantly.
Amounts outstanding under the Credit Facility, as adjusted by swap agreements, bear interest at fixed rates through December 31, 2026. However, in the future, we may incur additional indebtedness that bears interest at variable rates or be unable to enter into new swap agreements to fix interest rates. Variable rate borrowings expose us to increased interest expense in a rising interest rate environment. If interest rates were to increase, our debt service obligations on variable rate indebtedness would increase even though the amount borrowed remained the same, which could adversely affect our cash flows and cash available for distribution to our stockholders.
Changes in the Secured Overnight Financing Rate (“SOFR”) could adversely affect the amount of interest that accrues on SOFR-linked instruments.
Our Credit Facility includes floating rates based, in part, on SOFR. Because SOFR is published by the Federal Reserve Bank of New York (“FRBNY”) based on data received from other sources, we have no control over its determination, calculation or publication. There can be no assurance that SOFR will not be discontinued or fundamentally altered in a manner that is materially adverse to the interests of debtors in SOFR-linked instruments. If the manner in which SOFR is calculated is changed, that change may result in a change in the amount of interest that accrues on any SOFR-linked instruments. In addition, the interest rate on SOFR-linked instruments may for any day not be adjusted for any modification or amendments to SOFR for that day that the FRBNY may publish if the interest rate for that day has already been determined prior to such determination. There is no assurance that changes in SOFR could not have a material adverse effect on the yield on, value of, and market for SOFR-linked instruments.
Further, SOFR is a relatively new interest rate, and the FRBNY or any successor, as administrator of SOFR, may make methodological or other changes that could change the value of SOFR, including changes related to the methodology by which SOFR is calculated, eligibility criteria applicable to the transactions used to calculate SOFR or timing related to the publication of SOFR. If the manner in which SOFR is calculated is changed, the change may result in an increase in the amount of interest payable on loans we owe from the lenders. The administrator of SOFR may withdraw, modify, suspend or discontinue the calculation or dissemination of SOFR in its sole discretion and without notice, and has no obligation to consider the interests of lenders in calculating, withdrawing, modifying, amending, suspending or discontinuing SOFR.
We may finance properties with debt that has prepayment penalties, which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties.
Prepayment provisions are provisions that generally prohibit repayment of a loan balance for a certain number of years following the origination date of a loan unless a prepayment penalty is paid at the time of repayment. Such provisions are typically provided by the terms of the agreement underlying a loan. Prepayment provisions could materially restrict us from selling or otherwise disposing of or refinancing properties. These provisions would affect our ability to turn our investments into cash and thus affect cash available for distributions to stockholders.
Prepayment provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties.
Prepayment provisions could impair our ability to take actions during the prepayment period that would otherwise be in our stockholders' best interests and, therefore, may have an adverse impact on the value of the shares, relative to the value that would result if the prepayment provisions did not exist. In particular, prepayment provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in our stockholders' best interests.
U.S. Federal Income Tax Risks
Failure to qualify as a REIT would subject us to U.S. federal income tax, which would reduce the cash available for distribution to our stockholders.
We expect to operate in a manner that will allow us to continue to qualify as a REIT for U.S. federal income tax purposes. However, the U.S. federal income tax laws governing REITs are extremely complex, and interpretations of the U.S. federal
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income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we may not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, there can be no assurance that the U.S. Internal Revenue Service (“IRS”) will not contend that our assets or income cause a violation of the REIT requirements under the Internal Revenue Code.
While we intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, including the tax treatment of certain investments we may make, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income at corporate rates. Additionally, distributions would no longer qualify for the dividends paid deduction, which could result in an increase in our tax liabilities. If this occurs, we might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders. Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless we were to qualify for certain statutory relief provisions, we would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost.
Certain of our business activities are potentially subject to the prohibited transaction tax, which could decrease the value of our stockholders’ investment in us.
The U.S. federal income tax provisions applicable to REITs provide that any gain realized by a REIT on the sale of property held as inventory or other property held primarily for sale in the ordinary course of business is treated as income from a “prohibited transaction” subject to a 100% excise tax. Our ability to dispose of a property during the first few years following its acquisition is restricted to a substantial extent as a result of these rules. Whether a sale is a “prohibited transaction” depends on the particular facts and circumstances surrounding each property and its sale. However, if we meet the requirements of a statutory “safe harbor” with respect to any such sales, such sales will be deemed not to constitute “prohibited transactions”. Such safe harbor, among other things, requires that we hold property to be sold at least two years for the production of income and places limits on the amount of sales we can undertake each year. Therefore, our ability to dispose of a property in the near term following its acquisition is restricted to a substantial extent and, in order to comply with the safe harbor or otherwise avoid the prohibited transaction tax, we may forgo disposition opportunities that would otherwise be advantageous if we were not a REIT.
Even if we qualify as a REIT, we may nonetheless be subject to tax in certain circumstances that reduce our cash flow and our ability to make distributions to our stockholders.
Even if we qualify as a REIT, we may be subject to some federal, state and local taxes. For example:
•In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on the undistributed income.
•We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
•As discussed above, if we sell an asset, other than foreclosure property (described below), that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our TRSs or the sale met certain “safe harbor” requirements under the Internal Revenue Code of 1986, as amended (the “Code”).
•If we elect to treat property that we acquire in connection with foreclosures or certain leasehold terminations as “foreclosure property,” we may avoid the 100% prohibited transaction tax on the gain from a resale of that property, but the income from the sale or operation of that property may be subject to corporate income tax at the highest applicable rate.
•We may be subject to state and local taxes on our income or property, either directly or at the level of the companies through which we indirectly own our assets.
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REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order to qualify as a REIT. To the extent that we satisfy this distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. In order to qualify as a REIT and avoid such taxes, we may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution.
From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available, we may be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
Re-characterization of sale-leaseback transactions may cause us to lose our REIT status.
We may purchase properties and lease them back to the sellers of such properties. We generally characterize such a sale-leaseback transaction as a “true lease,” which treats the lessor as the owner of the property for U.S. federal income tax purposes. In the event that any sale-leaseback transaction is challenged by the IRS and re-characterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. As a result, the amount of our REIT taxable income may increase, resulting in additional taxes and/or required distributions. In addition, if a sale-leaseback transaction were so re-characterized, we might fail to satisfy the “asset tests” or the “income tests” for REIT qualification and, consequently, lose our REIT status.
Complying with REIT requirements may force us to liquidate otherwise attractive investments.
To continue to qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including investments in certain mortgage loans and residential and commercial mortgage-backed securities. The remainder of our investment in securities (other than government securities and securities issued by REITs) generally cannot constitute more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, no more than 5% of the value of our assets (other than government securities and securities issued by REITs) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. We may be required to liquidate from our portfolio otherwise attractive investments in order to meet these REIT requirements.
Characterization of any repurchase agreements we enter into to finance our investments as sales for tax purposes rather than as secured lending transactions would adversely affect our ability to qualify as a REIT.
We may enter into repurchase agreements with a variety of counterparties to achieve our desired amount of leverage for the assets in which we invest. When we enter into a repurchase agreement, we generally sell assets to our counterparty to the agreement and receive cash from the counterparty. The counterparty is obligated to resell the assets back to us at the end of the term of the transaction. We believe that for U.S. federal income tax purposes we will be treated as the owner of the assets that are the subject of repurchase agreements and that the repurchase agreements will be treated as secured lending transactions notwithstanding that such agreement may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could successfully assert that we did not own these assets during the term of the repurchase agreements, in which case we may fail to satisfy the “asset tests” or the “income tests” for REIT qualification and, consequently, lose our REIT status.
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Complying with REIT requirements may limit our ability to hedge effectively.
The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (i) interest rate risk on liabilities incurred to carry or acquire real estate, (ii) risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests or (iii) a transaction entered into in connection with the termination of a hedging transaction described in either clause (i) or (ii) where the property or indebtedness that was the subject of the prior hedging transaction was disposed of or extinguished, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.
Our ownership of and relationship with our TRSs will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.
We may own one or more TRSs. A TRS may earn income that would not be qualifying income if earned directly by the REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% (25% for taxable years beginning after December 31, 2025) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. A domestic TRS will pay U.S. federal, state and local income tax at regular corporate rates on any income that it earns. In addition, certain tax laws may limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We cannot assure our stockholders that we will be able to comply with the 20% value limitation on ownership of TRS stock and securities on an ongoing basis so as to maintain REIT status or to avoid application of the 100% excise tax imposed on certain non-arm’s length transactions.
Dividends paid by REITs are generally not eligible for the reduced rates for qualified dividends and therefore could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our shares.
Currently, the maximum U.S. federal income tax rate applicable to qualified dividend income payable to U.S. stockholders that are individuals, trusts and estates is 20% plus a 3.8% “Medicare tax”. Dividends payable by REITs, however, generally are not eligible for the reduced rates for qualified dividends and are taxed at ordinary income rates (and are also subject to the 3.8% “Medicare tax”; provided, however, that under current tax laws, U.S. stockholders that are individuals (directly or indirectly through a pass-through entity), trusts and estates generally may deduct 20% of ordinary dividends from a REIT. Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our shares.
Our stockholders may have current tax liability on distributions if they elect to reinvest in shares of our common stock.
We terminated our Distribution Reinvestment Plan (“DRP”). In the event we restart a DRP, participation in such a plan would not defer the recognition of any taxable income that results from the reinvested dividends. Stockholders who elect to participate in such a DRP, and who are subject to U.S. federal income taxation laws, would incur a tax liability on any such reinvested dividend to the extent such dividend is properly treated as being paid out of “earnings and profits,” even though such stockholders have elected to receive shares instead of cash. Each of our stockholders that is not a tax-exempt entity may have to use funds from other sources to pay such tax liability.
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If our Operating Partnership fails to maintain its status as a partnership, its income may be subject to taxation, which would reduce the cash available for distribution to stockholders and likely result in a loss of our REIT status.
We intend to maintain the status of our Operating Partnership as a “partnership” for U.S. federal income tax purposes. However, if the IRS were to successfully challenge the status of the Operating Partnership as a partnership for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that the Operating Partnership could make to us. This would also likely result in our losing REIT status, and, if so, becoming subject to a corporate level tax on our own income. This would substantially reduce any cash available to pay distributions. In addition, if any of the partnerships or limited liability companies through which the Operating Partnership owns its properties, in whole or in part, loses its characterization as a partnership or limited liability company, as applicable, and is otherwise not disregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the Operating Partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain our status as a REIT.
Change to the U.S. federal income tax laws, including the enactment of certain tax reform measures, could have an adverse impact on our business and financial results.
In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments in real estate and REITs, and it is possible that additional legislation may be enacted in the future. There can be no assurance that future changes to the U.S. federal income tax laws or regulatory changes will not be proposed or enacted that could impact our business and financial results. The REIT rules are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain of such changes could have an adverse impact on our business and financial results.
We cannot predict whether, when or to what extent any new U.S. federal tax laws, regulations, interpretations or rulings will impact the real estate investment industry or REITs, including whether various favorable U.S. federal tax laws will be extended. Prospective investors are urged to consult their tax advisors regarding the effect of potential future changes to the U.S. federal tax laws on an investment in our shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 1C. CYBERSECURITY
We believe we maintain an information technology and cybersecurity program appropriate for a company our size, taking into account our operations and risks.
We are committed to cybersecurity and vigilantly protecting all our resources and information from unauthorized access. Our cybersecurity approach incorporates a layered portfolio of employee training programs, multiple resources to manage and monitor the evolving threat landscape, effective board oversight of cybersecurity risks and knowledgeable teams responsible for preventing and detecting cybersecurity risks.
Management and Board Oversight
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Processes for Assessing, Identifying and Managing Material Risks from Cybersecurity Threats
We use industry recognized cybersecurity frameworks and standards as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. Recognizing that the nature of cybersecurity threats and the particular threat vectors we face continually change, our board, audit committee, senior management, and information technology team continually evaluate and invest in updating and enhancing our Cybersecurity Program.
We consider our cybersecurity risk and related management processes when assessing risk across the Company. Our risk management systems and processes comprise numerous components, including policies and procedures, risk detection systems, tools and protocols, internal auditing, management review, defined lines of communications, cybersecurity awareness training for employees, phishing simulation tests, penetration testing, engagement of outside advisors and experts to assess, test or otherwise assist with aspects of our security controls, regular operations reviews with the CEO, and board (and audit committee) oversight. We use a number of means to assess and manage cyber risks related to our third-party service providers, such as conducting due diligence in connection with onboarding new vendors and legal review of vendor engagements and new products. We utilize the foregoing systems and processes to manage our risks and associated cybersecurity threats.
Cybersecurity Risks
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ITEM 2. PROPERTIES
Properties and Investment:
As of December 31, 2025, we owned a real estate investment portfolio consisting of 42 operating properties, comprised of 39 industrial properties, including our approximate 72.7% TIC Interest in an industrial property in Santa Clara, California and one property held for sale, and three non-core properties, with an overall occupancy rate of 98%. See Notes 3 and 4 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for further details of our real estate investments.
The following tables provide summary information regarding our real estate portfolio as of December 31, 2025 (dollars in thousands):
| Tenant Industry Diversification | ||||||||||||||||||||||||||||||||
| Industry | Number of Properties (2) | ABR | ABR as a Percentage of Total Portfolio | Leased Area (Square Feet) (2) | Square Feet as a Percentage of Total Portfolio | |||||||||||||||||||||||||||
| Infrastructure | 17 | $ | 9,646 | 25 | % | 1,217,915 | 28 | % | ||||||||||||||||||||||||
| Automotive | 3 | 6,126 | 16 | % | 501,233 | 11 | % | |||||||||||||||||||||||||
| Industrial Products | 4 | 5,682 | 15 | % | 897,242 | 21 | % | |||||||||||||||||||||||||
| Aerospace/Defense | 4 | 5,092 | 13 | % | 346,046 | 8 | % | |||||||||||||||||||||||||
| Government | 1 | 2,697 | 7 | % | 106,592 | 2 | % | |||||||||||||||||||||||||
| Technology | 2 | 2,502 | 6 | % | 132,601 | 3 | % | |||||||||||||||||||||||||
| Metals | 4 | 2,421 | 6 | % | 419,001 | 10 | % | |||||||||||||||||||||||||
| Agriculture/Food Production | 1 | 1,714 | 4 | % | 216,727 | 5 | % | |||||||||||||||||||||||||
| Energy | 1 | 1,506 | 4 | % | 218,696 | 5 | % | |||||||||||||||||||||||||
Other (1) | 3 | 1,760 | 4 | % | 217,401 | 5 | % | |||||||||||||||||||||||||
| Total | 40 | $ | 39,146 | 100 | % | 4,273,454 | 98 | % | ||||||||||||||||||||||||
(1) Includes industries with ABR of less than 4% of total portfolio.
(2) Excludes 104,893 vacant square feet comprised of (i) the industrial property in Saint Paul, Minnesota subject to a purchase and sale agreement and (ii) the legacy property formerly leased to Solar Turbines in San Diego, California that we expect to sell after we complete a parcel split.
| Tenant Geographic Diversification | ||||||||||||||||||||||||||||||||
| State | Number of Properties | ABR | ABR as a Percentage of Total Portfolio | Leasable Area (Square Feet) | Square Feet as a Percentage of Total Portfolio | |||||||||||||||||||||||||||
| California | 8 | $ | 11,986 | 31 | % | 442,315 | 10 | % | ||||||||||||||||||||||||
| Ohio | 6 | 4,985 | 13 | % | 1,003,438 | 23 | % | |||||||||||||||||||||||||
| Arizona | 2 | 4,174 | 11 | % | 379,441 | 9 | % | |||||||||||||||||||||||||
| Illinois | 2 | 3,487 | 9 | % | 619,092 | 14 | % | |||||||||||||||||||||||||
| Florida | 4 | 2,880 | 7 | % | 282,499 | 6 | % | |||||||||||||||||||||||||
| Pennsylvania | 2 | 2,187 | 6 | % | 253,646 | 6 | % | |||||||||||||||||||||||||
| South Carolina | 3 | 2,168 | 6 | % | 343,422 | 8 | % | |||||||||||||||||||||||||
| Texas | 2 | 1,745 | 4 | % | 251,583 | 6 | % | |||||||||||||||||||||||||
| Minnesota | 5 | 1,717 | 4 | % | 362,647 | 8 | % | |||||||||||||||||||||||||
| North Carolina | 2 | 1,611 | 4 | % | 134,576 | 3 | % | |||||||||||||||||||||||||
Other (1) | 6 | 2,206 | 5 | % | 305,688 | 7 | % | |||||||||||||||||||||||||
| Total | 42 | $ | 39,146 | 100 | % | 4,378,347 | 100 | % | ||||||||||||||||||||||||
(1) Includes states with ABR of less than 4% of total portfolio.
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Lease Expirations:
We completed extensions of existing leases with two of our tenants during 2025 and we are continuing to explore potential lease extensions for certain of our other properties.
The following table reflects lease expirations with respect to our properties as of December 31, 2025, including the TIC Interest and one property held for sale (dollars in thousands):
| Year | Number of Leases Expiring (2) | ABR Expiring | Percentage of ABR Expiring | Cumulative Percentage of ABR Expiring | Leased Area Expiring (Square Feet)(2) | Percentage of Leased Area Expiring (Square Feet )(2) | Cumulative Percentage of Leased Area Expiring (Square Feet)(2) | |||||||||||||||||||||||||||||||||||||
| 2026 | — | $ | — | — | % | — | % | — | — | % | — | % | ||||||||||||||||||||||||||||||||
| 2027 | 1 | 968 | 2 | % | 2 | % | 64,637 | 1 | % | 1 | % | |||||||||||||||||||||||||||||||||
| 2028 | 1 | 585 | 1 | % | 3 | % | 148,012 | 3 | % | 4 | % | |||||||||||||||||||||||||||||||||
| 2029 | 2 | 1,492 | 5 | % | 8 | % | 84,714 | 2 | % | 6 | % | |||||||||||||||||||||||||||||||||
| 2030 | 1 | 687 | 2 | % | 10 | % | 20,800 | 1 | % | 7 | % | |||||||||||||||||||||||||||||||||
| 2031 | 1 | 1,352 | 3 | % | 13 | % | 107,419 | 3 | % | 10 | % | |||||||||||||||||||||||||||||||||
| 2032 | 2 | 2,948 | 8 | % | 21 | % | 211,303 | 5 | % | 15 | % | |||||||||||||||||||||||||||||||||
| 2033 | 1 | 1,714 | 4 | % | 25 | % | 216,727 | 5 | % | 20 | % | |||||||||||||||||||||||||||||||||
2034 (1) | 3 | 5,568 | 14 | % | 39 | % | 554,441 | 13 | % | 33 | % | |||||||||||||||||||||||||||||||||
| 2035 | — | — | — | % | 39 | % | — | — | % | 33 | % | |||||||||||||||||||||||||||||||||
| Thereafter | 28 | 23,832 | 61 | % | 100 | % | 2,865,401 | 65 | % | 98 | % | |||||||||||||||||||||||||||||||||
| Total | 40 | $ | 39,146 | 100 | % | 4,273,454 | 98 | % | ||||||||||||||||||||||||||||||||||||
(1) Includes OES that has a purchase option that can be exercised any time through December 31, 2026 and an early termination option that can be exercised any time on or after December 31, 2028. The exercise of these options was not determined to be probable.
(2) Excludes 104,893 vacant square feet comprised of (i) the industrial property in Saint Paul, Minnesota subject to a purchase and sale agreement and (ii) the legacy property formerly leased to Solar Turbines in San Diego, California that we expect to sell after we complete a parcel split.
Investment:
As of December 31, 2025, we had the following other real estate investment (dollars in thousands):
| TIC Interest | Investment Balance | |||||||
Santa Clara, CA Property – an approximate 72.7% TIC Interest (1) | $ | 9,437 | ||||||
(1)This industrial property was acquired in 2017 and has approximately 91,740 rentable square feet. Our TIC Interest ABR is approximately $1.8 million. The tenant's lease expiration date is March 16, 2036, the mortgage bears interest at a fixed rate of 3.86% and matures on October 1, 2027, and the lease provides for two seven-year renewal options. In January 2026, we acquired the 27.3% remaining TIC interest for $9.6 million, giving us 100% ownership of the property.
Additional information about our other real estate investment is included in Note 4 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become party to legal proceedings that arise in the ordinary course of our business. We are not currently a party to any legal proceeding, nor are we aware of any pending or threatened litigation that could have a material adverse effect on our business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.
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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Stockholder Information
As of March 20, 2026, there were approximately 3,200 holders of record of our Class C Common Stock. However, because many of our shares of Class C Common Stock are held by brokers and other institutions on behalf of stockholders, we believe there are considerably more beneficial holders of our Class C Common Stock than record holders.
Market Information
Our Class C Common Stock is listed on the NYSE under the symbol “MDV” (see Note 8 to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details).
Unregistered Sales of Equity Securities
None.
Distribution Information
We have historically paid distributions on a monthly basis, and we paid our first distribution on August 10, 2016. The distribution rate is determined by our board of directors based on our financial condition and such other factors as our board of directors deems relevant. Our board of directors has not pre-established a percentage range of return for distributions to stockholders. We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders other than as necessary to meet REIT qualification requirements.
For the year ended December 31, 2025, distributions paid to our stockholders were 100% return of capital and for the year ended December 31, 2024, distributions paid to our stockholders were approximately 84% return of capital and 16% ordinary income.
The following presents the U.S. federal income tax characterization of the distributions paid in 2025 and 2024:
| Years Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Ordinary income | $ | — | $ | 0.37 | ||||||||||
| Capital gain | — | — | ||||||||||||
| Non-taxable distribution | 1.17 | 1.94 | ||||||||||||
| Total | $ | 1.17 | $ | 2.31 | ||||||||||
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Distributions generally are declared during the beginning of a quarter and paid based on a month end record date and a monthly rate per share. The 2025 distribution details are as follows:
| Distribution Period | Amount Per Share and Unit Per Month | Declaration Date | Payment Date | |||||||||||||||||
| 2025: | ||||||||||||||||||||
| January 1-31 | $ | 0.09750 | November 4, 2024 | February 25, 2025 | ||||||||||||||||
| February 1-28 | $ | 0.09750 | November 4, 2024 | March 25, 2025 | ||||||||||||||||
| March 1-31 | $ | 0.09750 | November 4, 2024 | April 25, 2025 | ||||||||||||||||
| April 1-30 | $ | 0.09750 | February 27, 2025 | May 15, 2025 | ||||||||||||||||
| May 1-31 | $ | 0.09750 | February 27, 2025 | June 16, 2025 | ||||||||||||||||
| June 1-30 | $ | 0.09750 | February 27, 2025 | July 15, 2025 | ||||||||||||||||
| July 1-31 | $ | 0.09750 | May 6, 2025 | August 15, 2025 | ||||||||||||||||
| August 1-31 | $ | 0.09750 | May 6, 2025 | September 15, 2025 | ||||||||||||||||
| September 1-30 | $ | 0.09750 | May 6, 2025 | October 15, 2025 | ||||||||||||||||
| October 1-31 | $ | 0.09750 | October 7, 2025 | November 14, 2025 | ||||||||||||||||
| November 1-30 | $ | 0.09750 | October 7, 2025 | December 15, 2025 | ||||||||||||||||
| December 1-31 | $ | 0.09750 | October 7, 2025 | January 15, 2026 | ||||||||||||||||
| 2026: | ||||||||||||||||||||
| January 1-31 | $ | 0.10000 | January 16, 2026 | February 13, 2026 | ||||||||||||||||
| February 1-28 | $ | 0.10000 | January 16, 2026 | March 13, 2026 | ||||||||||||||||
| March 1-31 | $ | 0.10000 | January 16, 2026 | April 15, 2026 (1) | ||||||||||||||||
| April 1- 30 | $ | 0.10000 | March 17, 2026 | May 15, 2026 (1) | ||||||||||||||||
| May 1-31 | $ | 0.10000 | March 17, 2026 | June 15, 2026 (1) | ||||||||||||||||
| June 1- 30 | $ | 0.10000 | March 17, 2026 | July 15, 2026 (1) | ||||||||||||||||
(1) Reflects the expected payment date since the distribution has not been paid as of the filing date of this Annual Report on Form 10-K.
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. On January 16, 2026, our board of directors authorized a 2.6% increase in the annual distribution rate from $1.17 per share to $1.20 per share commencing with monthly distributions payable to common stockholders and Class C OP Unit holders of record beginning as of January 30, 2026.
To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain, and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to U.S. federal income tax on the income that we distribute to our stockholders each year. Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.
Our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under Part I, Item 1A. Risk Factors. Those factors include: (a) our ability to continue to raise capital to make additional investments; (b) the future operating performance of our current and future real estate investments in the existing real estate and financial environment; (c) our ability to identify additional real estate investments that are suitable to execute our investment objectives; (d) the success and economic viability of our tenants; (e) our ability to refinance existing indebtedness at maturity on comparable terms; (f) changes in interest rates on any variable rate debt obligations we incur; and (g) the level of participation in our DRP. In the event our cash flow from operations decreases in the future, the level of our distributions may also decrease.
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Distribution Reinvestment Plan
On January 22, 2021, we filed a Registration Statement on Form S-3 (File No. 333-252321) to register a maximum of $100 million of additional shares of Class C Common Stock to be issued pursuant to the DRP (the “Registered DRP Offering”). 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 amended and restated our distribution reinvestment plan (the “Second Amended and Restated DRP”) with respect to the Class C Common Stock to change the purchase price at which the Class C Common Stock is issued to stockholders who elect to participate in our DRP. The purpose of this change was to reflect the fact that our Class C Common Stock was listed on the NYSE and no longer priced based on net asset value (“NAV”) per share. As more fully described in the Second Amended and Restated DRP, the purchase price for the 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.
On January 16, 2026, our board of directors authorized the termination of the DRP, effective on February 15, 2026.
Prior to November 4, 2024, the purchase price for the Class C Common Stock issued directly by us was 97% of the market price (as defined in the Second Amended and Restated DRP) of the Class C Common Stock, reflecting a 3% discount. On November 4, 2024, we, with the authorization of our board of directors, increased the discount for the purchase price of shares of Class C Common Stock under our DRP from 3% to 5%, which went into effect on December 7, 2024 and applied to distributions payable on January 27, 2025 through February 15, 2026.
The purchase price for the Class C Common Stock that we or any third-party administrator purchased from parties other than us, either in the open market or in privately negotiated transactions, was 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 reflected the $0.05 per share processing fee that was paid to our transfer agent 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. Through December 31, 2025, the Company has issued 598,337 shares of Class C Common Stock pursuant to the DRP.
Issuer Purchases of Equity Securities
On March 4, 2025, the Company’s board of directors authorized the Company to repurchase shares of its Series A Preferred Stock up to an aggregate amount not to exceed the aggregate amount of proceeds from sales of the Company’s Class C Common Stock during the trailing twelve month period (the “Repurchase Program”). Repurchases under the Repurchase Program may be made through open market purchases, block purchases, privately negotiated transactions or other methods of acquiring shares permitted by applicable law, and the amount and timing of any repurchases will be dependent on various factors, including market conditions and corporate and regulatory considerations. Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act.
On January 16, 2026, the Company’s board approved an amendment to the Repurchase Program to (1) extend the expiration date of the Repurchase Program from December 31, 2026 to December 31, 2027 and (2) set the maximum amount of shares of Series A Preferred Stock that may be repurchased under the Repurchase Program at $49.6 million, including shares of Series A Preferred Stock that had been repurchased as of January 16, 2026.
Issuer Purchases of Series A Preferred Stock
| Period | Total Number of Shares (or Units) Purchased | Average Price Paid Per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| October 1-31, 2025 | — | $ | — | — | (1) | |||||||||||||||||||||
| November 1-30, 2025 | 10,000 | 24.71 | 10,000 | (1) | ||||||||||||||||||||||
| December 1-31, 2025 | 13,500 | 24.82 | 13,500 | (1) | ||||||||||||||||||||||
| Total | 23,500 | $ | 24.77 | 23,500 | (1) | |||||||||||||||||||||
(1) During the three months ended December 31, 2025, the Company was authorized to repurchase an aggregate amount not to exceed the aggregate amount of proceeds from sales of the Company’s Class C Common Stock during the trailing twelve month period.
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ITEM 6. [RESERVED]
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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 accompanying audited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“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.
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 81% interest in the Operating Partnership as of both December 31, 2025 and March 20, 2026. The Operating Partnership’s limited partnership interests are further described in Note 11 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.
Recent Events and Uncertainties
There are continuing significant uncertainties in the market in which we operate related to inflation and interest rates, tariffs, supply chain disruptions and negative impacts associated with foreign policy actions implemented by the United States. Volatility in stock and bond markets, and particularly yields on U.S. Treasury securities, 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 elevated and there is continued uncertainty over the future rate of inflation and interest rates. While the Federal Reserve reduced rates in September, October and December 2025, the Federal Reserve may refrain from reducing interest rates further to try to rein in inflation, which could lead to a recession, and would negatively impact our future operating results due to higher borrowing costs. 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.
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In January 2026, we entered into three new swap agreements, effective December 31, 2025, for $83.3 million each, for an aggregate of $250.0 million, corresponding to the Term Loan (as defined below), which will fix the Secured Overnight Financing Rate (“SOFR”) for the year ending December 31, 2026 to 2.45%, resulting in a fixed rate of 4.15% based on our leverage ratio of 45.1% as of December 31, 2025. We paid aggregate premiums of $2.7 million, including accrued interest receivable of $0.1 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, 2026 and amortized over the 12 months ending December 31, 2026, increasing interest expense by approximately $0.6 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, 2026. The derivatives will be marked to fair value each reporting period with any change in fair value 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 . There are no leases scheduled to expire within the next 12 months. We have one lease scheduled to expire in 2027: our property in Charlotte, North Carolina leased to Husqvarna that expires on June 30, 2027.
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 obtained two lease extensions during 2025, with Fujifilm Dimatix, Inc. extending its lease for ten years from March 17, 2026 to March 16, 2036, and Northrop Grumman Systems Corporation extending its lease for five years from June 1, 2026 to May 31, 2031; 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. We entered into new swaps for 2026 that fix the rate of our Term Loan for one year. Our mortgages with fixed rates, including the mortgage on the Santa Clara, California property leased to Fujifilm Dimatix, Inc., mature after September 2027. As a result of the interest rate swap agreements entered into for the year ending December 31, 2026, 100% of our indebtedness has a weighted average fixed interest rate of 4.14% 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.
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 certain legacy assets, bank borrowing through our Credit Facility, proceeds from our ATM Offering and cash on hand. We have $30.0 million of borrowing capacity available under our Credit Facility as of March 25, 2026, 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 Offering
During the year ended December 31, 2025, we sold 212,791 shares of Class C Common Stock in the ATM Offering at an average price of $15.66 per share for proceeds of $3.3 million, net of sale commissions. From November 15, 2023 through December 31, 2025, an aggregate of 819,700 shares have been sold in the ATM Offering at an average price of $15.95 per share for aggregate net proceeds of $11.3 million after legal, accounting, investor relations and other offering costs of $1.4 million. As
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of December 31, 2025, we had $36.9 million of shares of Class C Common Stock available for future issuance under the ATM Offering. No shares of Class C Common Stock were sold in the ATM Offering subsequent to December 31, 2025.
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 6 to our accompanying audited 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.
On January 16, 2026, we entered into an agreement with the Lenders to amend the Credit Agreement to (i) extend the maturity date of the credit facility eighteen months to July 18, 2028, (ii) remove the 10 basis point SOFR Adjustment and (iii) allow repurchases of shares of the Series A Preferred Stock, by amending certain distribution covenants so long as such repurchases are funded by proceeds from the issuance of preferred or common stock or asset sales, in each case, occurring within the trailing twelve month period of such repurchase.
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 45.1% as of December 31, 2025, the spread over SOFR was 175 basis points and the interest rate on the Revolver was 5.4375% as of February 26, 2026. As of March 25, 2026, there were no amounts outstanding 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 $0.1 million and $0.4 million of unused fees for the years ended December 31, 2025 and 2024, respectively.
In January 2025, we entered into two swap agreements, effective December 31, 2024, for $125.0 million each, for an aggregate of $250.0 million, corresponding to the Term Loan, which fixed SOFR for the year ending December 31, 2025 at 2.45%, resulting in a fixed rate of 4.25%. We paid aggregate premiums of $4.2 million, including accrued interest receivable of $0.3 million, to buy down the fixed rate below the prevailing market rate. We designated the two pay-fixed, receive-floating interest rate swaps as cash flow hedges (see Note 7 to our accompanying audited consolidated financial statements included in this Annual Report on Form 10-K for more details). The interest rate on the Term Loan was 5.4875% as of December 31, 2025, which was partially offset by the interest rate swaps.
In January 2026, we entered into three new swap agreements, effective December 31, 2025, for $83.3 million each, for an aggregate of $250.0 million, corresponding to the Term Loan, which will fix SOFR for the year ending December 31, 2026 to 2.45%, resulting in a fixed rate of 4.15% based on our leverage ratio of 45.1% as of December 31, 2025. We paid aggregate premiums of $2.7 million, including accrued interest receivable of $0.1 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, 2026 and amortized over the 12 months ending December 31, 2026, increasing interest expense by approximately $0.6 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, 2026.
As of December 31, 2025 the outstanding principal balance of our mortgage note payable secured by one property was $12.1 million. As of December 31, 2025, the Term Loan outstanding principal balance was $250.0 million and there was no outstanding balance on the Revolver. As of December 31, 2025, our approximate 72.7% pro-rata share of the TIC Interest’s mortgage note payable of $12.1 million was $8.8 million, which is not included in our audited 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-
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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 funds 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 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, 2025.
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.
Acquisitions
On March 7, 2025, we acquired an industrial property for $6.1 million, consisting of $0.3 million in cash and 344,119 Class C OP Units valued at $5.9 million, based on an estimated fair value of $17.00 per Class C OP Unit. The property with a leasable area of 48,589 square feet 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.
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
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.
On December 15, 2025, we completed the sale of our office property in Issaquah, Washington formerly leased to Costco Wholesale Corporation (“Costco”) for $26.0 million, which included the sale price of $25.6 million and $0.4 million of extension fees. In conjunction with the sale, we repaid the $18.3 million mortgage note secured by the property and a $0.7 million loan prepayment fee.
We have received $2.0 million of non-refundable deposits under the terms of an amended purchase and sale agreement for our industrial property in Saint Paul, Minnesota and this sale is scheduled to close on March 30, 2026.
We are under contract to sell our industrial property that is leased to Northrop Grumman Systems Corporation in Melbourne, Florida during the second quarter of 2026, although there can be no assurances that the transaction will be completed.
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, 2025, we had obligations to reimburse $2.0 million for future on-site and tenant improvements expected to be incurred by tenants. We expect that the related improvements will be completed during the 2026 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.
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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 audited 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, proceeds from the settlement of property-related insurance claims, amortization of deferred financing costs, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, amortization of off-market interest rate derivatives and reduction for accrued interest, 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.
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The following are the calculations of FFO and AFFO for the year ended December 31, 2025 and 2024 (in thousands, except shares outstanding and per share data):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Net income (in accordance with GAAP) | $ | 554 | $ | 6,493 | ||||||||||||||||||||||
| Preferred stock dividends | (3,202) | (3,688) | ||||||||||||||||||||||||
| Net (loss) income attributable to common stockholders and OP Unit holders | (2,648) | 2,805 | ||||||||||||||||||||||||
| FFO adjustments: | ||||||||||||||||||||||||||
| Depreciation and amortization of real estate properties | 15,087 | 16,601 | ||||||||||||||||||||||||
| Depreciation and amortization for unconsolidated investment in a real estate property | 756 | 756 | ||||||||||||||||||||||||
| Impairment of real estate investment property | 5,814 | — | ||||||||||||||||||||||||
| Gain on sale of real estate investments, net | (2,520) | (3,360) | ||||||||||||||||||||||||
| FFO attributable to common stockholders and OP Unit holders | 16,489 | 16,802 | ||||||||||||||||||||||||
| AFFO adjustments: | ||||||||||||||||||||||||||
| Stock compensation expense | 2,915 | 1,586 | ||||||||||||||||||||||||
| Amortization of deferred financing costs | 629 | 1,192 | ||||||||||||||||||||||||
| Abandoned pursuit costs | 143 | 240 | ||||||||||||||||||||||||
| Amortization of deferred rents | (5,048) | (5,716) | ||||||||||||||||||||||||
| Amortization of unrealized holding gain, net of unrealized loss on non-designated or ineffective interest rate derivative instruments | (1,015) | 1,479 | ||||||||||||||||||||||||
| Amortization of off-market interest rate derivatives and reduction for accrued interest | 4,200 | — | ||||||||||||||||||||||||
| Loss on early extinguishment of debt | 768 | — | ||||||||||||||||||||||||
| Amortization of (below) above market lease intangibles, net | (854) | (847) | ||||||||||||||||||||||||
| Proceeds from the settlement of property-related insurance claims | (684) | — | ||||||||||||||||||||||||
| Loss on equity investments | — | 151 | ||||||||||||||||||||||||
| Other adjustments for unconsolidated investment in a real estate property | (305) | 101 | ||||||||||||||||||||||||
| AFFO attributable to common stockholders and OP Unit holders | $ | 17,238 | $ | 14,988 | ||||||||||||||||||||||
| Weighted Average Shares/Units Outstanding: | ||||||||||||||||||||||||||
Fully diluted (1) | 12,480,553 | 11,188,974 | ||||||||||||||||||||||||
| FFO Per Share/Unit: | ||||||||||||||||||||||||||
| Fully diluted | $ | 1.32 | $ | 1.50 | ||||||||||||||||||||||
| AFFO Per Share/Unit: | ||||||||||||||||||||||||||
| Fully diluted | $ | 1.38 | $ | 1.34 | ||||||||||||||||||||||
(1) Fully diluted shares/units outstanding includes the weighted average dilutive effect of 1,532,047 Class C OP Units and 803,715 Class X OP Units for the year ended December 31, 2025, and 1,895,871 Class C OP Units for the year ended December 31, 2024. Class X OP Units were excluded from the weighted average shares/units outstanding in calculating earnings (loss) per share for the year ended December 31, 2025 in the audited consolidated statements of operations since they were anti-dilutive.
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 .
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The following is a breakdown of our ABR by property type as of December 31, 2025, 2024, 2023, 2022 and 2021.
| December 31, | ||||||||||||||||||||||||||||||||
| 2021 | 2022 | 2023 | 2024 | 2025 | ||||||||||||||||||||||||||||
| Industrial core | 41 | % | 59 | % | 76 | % | 78 | % | 82 | % | ||||||||||||||||||||||
| Non-core | 59 | % | 41 | % | 24 | % | 22 | % | 18 | % | ||||||||||||||||||||||
| WALT (years) | 6.1 | 11.9 | 14.1 | 13.8 | 14.0 | |||||||||||||||||||||||||||
Since the public listing of our Class C Common Stock in February 2022, we have repositioned the composition of our portfolio toward a primary focus of industrial assets, specifically those supporting domestic manufacturing. The implementation of this recycling incorporated both the reduction of our non-core properties and the active acquisition of industrial manufacturing properties. We have identified certain assets that we plan to recycle over the next two years, including our two office assets and certain legacy industrial assets that have shorter lease durations and do not fit our long-term strategy. We define legacy assets as those that were acquired by different management teams utilizing different investment objectives and underwriting criteria.
The following is a breakdown of our revenue by property type for the year ended December 31, 2025 (in thousands):
Industrial Core (1) | Non-Core (2) | Total | ||||||||||||||||||
| Rental | $ | 35,841 | $ | 9,982 | $ | 45,823 | ||||||||||||||
| Other property | $ | 564 | $ | — | $ | 564 | ||||||||||||||
(1) Industrial core properties include an approximate 72.7% TIC interest in the Santa Clara, California property. Subsequent to December 31, 2025, we acquired the 27.3% remaining TIC interest for $9.6 million, giving us 100% ownership of the 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;
(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; and
(iii) one legacy office property formerly leased to Solar Turbines in San Diego, California, that we expect to sell after we complete a parcel split to maximize its value.
The following is a breakdown of our assets by property type as of December 31, 2025 (in thousands):
Industrial Core (1) | Non-Core (2) | |||||||||||||
| Total investments in real estate property | $ | 386,975 | $ | 108,378 | ||||||||||
| Accumulated depreciation and amortization | (61,261) | (11,947) | ||||||||||||
| Total real estate investments, net, excluding unconsolidated investment in real estate property | 325,714 | 96,431 | ||||||||||||
| Unconsolidated investment in a real estate property | 9,437 | — | ||||||||||||
| Total real estate investments, net | $ | 335,151 | $ | 96,431 | ||||||||||
Real estate investments held for sale, net (3) | $ | 3,901 | $ | — | ||||||||||
| Tenant deferred rent and other receivables | $ | 17,293 | $ | 6,143 | ||||||||||
| Above-market lease intangibles, net | $ | 1,169 | $ | — | ||||||||||
(1) See footnote (1) above
(2) See footnote (2) above.
(3) In December 2025, we entered into a purchase and sale agreement for our industrial property in Saint Paul, Minnesota for $4.0 million and the buyer deposited a $0.3 million non-refundable deposit. In January 2026, the parties amended the purchase and sale agreement, extending the closing date to February 11, 2026 with the buyer depositing a $1.2 million non-refundable deposit, which we received on January 12, 2026, and allowing for an option to further extend the closing date to March 31, 2026 with a $0.5 million non-refundable deposit,which we received on February 6, 2026.
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We have one mortgage secured by an industrial 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 6 to our accompanying audited 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. On January 16, 2026, our board of directors authorized a 2.6% increase in the annual distribution rate from $1.17 per share to $1.20 per share commencing with monthly distributions payable to common stockholders and Class C OP Unit holders of record beginning as of January 30, 2026.
Cash Flow Summary
The following table summarizes our cash flow activity for the years ended December 31, 2025 and 2024 (in thousands):
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Net cash provided by operating activities | $ | 14,967 | $ | 18,241 | ||||||||||
| Net cash provided by investing activities | $ | 27,801 | $ | 8,395 | ||||||||||
| Net cash used in financing activities | $ | (39,917) | $ | (18,235) | ||||||||||
Cash Flows from Operating Activities
The decrease in cash provided by operating activities for the year ended December 31, 2025 compared to the year ended December 31, 2024 is due to excluding derivative cash settlements received during the year ended December 31, 2025 from cash provided from operating activities since they are included in cash provided by investing activities, as described in Note 2, while derivative cash settlements received during the year ended December 31, 2024 are included in cash provided by operating activities. This decrease was partially offset by reduced general and administrative expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Cash Flows from Investing Activities
The increase in net cash provided by investing activities for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily reflects (i) net proceeds from the sale of two real estate properties of $27.1 million during the year ended December 31, 2025 compared to net proceeds from the sale of two real estate properties and a land parcel aggregating $15.0 million during the year ended December 31, 2024, and (ii) a property acquired during the year ended December 31, 2025 primarily for Class C OP Units compared to a property acquisition for $5.2 million of cash during the year ended December 31, 2024. The change also reflects derivative cash settlements of $4.6 million, partially offset by the payment of aggregate premiums of $4.2 million during the year ended December 31, 2025 to buy down the swaps fixed rate below the prevailing market rate.
Cash Flows from Financing Activities
The increase in net cash used in financing activities for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily reflects an aggregate of $18.6 million for the repayment of the mortgage note secured by the office property in Issaquah, Washington formerly leased to Costco in conjunction with the property sale and monthly principal payments, the repurchase of Series A Preferred Stock for $7.1 million, and an increase in distributions paid to common stockholders and OP Unit holders during the year ended December 31, 2025, partially offset by the repurchase of Class C Common Stock and Class C OP Units for $11.5 million during the year ended December 31, 2024.
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Results of Operations
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
Rental Revenue
Rental revenue was $45.8 million and $46.5 million for the years ended December 31, 2025 and 2024, respectively, which included tenant reimbursements of $1.7 million and $2.0 million, respectively. The decrease of $0.7 million is primarily due to Costco’s lease expiration on July 31, 2025 and Solar Turbines lease expiration on September 30, 2025.
General and Administrative
General and administrative expenses were $5.8 million and $6.3 million for the years ended December 31, 2025 and 2024, respectively. The decrease of $0.5 million, or 8%, was primarily due to our reduced headcount from 12 employees to nine employees in April 2025, our CEO no longer receiving a salary effective April 1, 2025 in connection with his grant of Class X OP Units, which vest over five years, and decreases in professional services and insurance expenses, partially offset by $0.2 million in non-recurring separation pay.
Stock Compensation
Stock compensation expense was $2.9 million and $1.6 million for the years ended December 31, 2025 and 2024, respectively. The increase of $1.3 million, or 84%, compared to 2024 was due to the Class X OP Units awarded in the first quarter of the year ended December 31, 2025, as described in Note 11 to our accompanying audited consolidated financial statements included in this Annual Report on Form 10-K. Stock compensation expense in 2024 included $1.3 million for our Class P OP Units and Class R OP Units, which vested and automatically converted to Class C OP Units on the last business day of March 2024.
Depreciation and Amortization
Depreciation and amortization expense was $15.1 million and $16.6 million for the years ended December 31, 2025 and 2024, 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 decrease of $1.5 million, or 9%, period-over-period was primarily due to no longer recognizing depreciation and amortization expense for the real estate investments of our office property in Issaquah, Washington formerly leased to Costco upon classifying the property as held for sale as of December 31, 2024.
Property Expenses
Property expenses remained relatively constant at $3.5 million and $3.6 million for the years ended December 31, 2025 and 2024, 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.
Impairment of real estate investment property
We recorded an impairment charge of $5.8 million related to our property and equipment located in Saint Paul, Minnesota during the year ended December 31, 2025. We determined that an impairment charge was required based on current market conditions and represented the excess of the assets' carrying value over the assets’ estimated sale price less estimated selling costs. No impairment charges were recorded during the year ended December 31, 2024.
Gain on Sale of Real Estate Investments, Net
The gain on sale of real estate investments of $2.5 million for the year ended December 31, 2025 primarily related to the sale of our office property in Issaquah, Washington formerly leased to Costco. The gain on sale of real estate investments of $3.4 million for the year ended December 31, 2024 related 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).
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Other (Expense) Income
Other expense was $15.3 million and $15.5 million for the years ended December 31, 2025 and 2024, respectively. The decrease was primarily due to $0.7 million of proceeds from the settlement of property-related insurance claims received during the year ended December 31, 2025 and an increase of $0.5 million in income from unconsolidated investment in a real estate property due to an increase in straight-line rent related to the execution of the lease extension. These decreases were partially offset by an increase of $0.7 million in interest expense during the year ended December 31, 2025 as compared to the prior year. The increase in interest expense was primarily due to the amortization of off-market interest rate derivatives of $3.9 million and a $0.7 million prepayment fee incurred upon repayment of the mortgage loan secured by the office property in Issaquah, Washington formerly leased to Costco that was sold during the year ended December 31, 2025. The increase was partially offset by the $2.5 million of losses on non-designated or ineffective interest rate derivative instruments for the year ended December 31, 2024 related to swap agreements that were terminated on December 31, 2024. No such losses were recorded during year ended December 31, 2025. The decrease was also due to a decrease in the weighted average fixed rate as set by the respective swap agreements in place from 4.53% during the year ended December 31, 2024 to 4.25% during the year ended December 31, 2025.
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 audited consolidated financial statements included in this Annual Report on Form 10-K for any recent accounting pronouncements.
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Commitments and Contingencies
We may be subject to certain commitments and contingencies with regard to certain transactions (see Note 10 to our accompanying audited consolidated financial statements included in this Annual Report on Form 10-K for discussion of commitments and contingencies).
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable as we are a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Consolidated Financial Statements at page F-1 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.
As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of December 31, 2025 was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Under Rule 13a-15(c), management must evaluate, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness, as of the end of each fiscal year, of our internal control over financial reporting. The term internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;
2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with the authorization of management of the issuer; and
3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the issuer’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In the course of preparing this Annual Report on Form 10-K and the consolidated financial statements included herein, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025, using the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the Internal Control-Integrated Framework (2013). Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2025.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm as we are a smaller reporting company as of December 31, 2025.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) that occurred during the quarter ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our disclosure controls and procedures and internal controls over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. We recognize that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurances that its objectives will be met. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
ITEM 9B. Other Information
During the three months ended December 31, 2025, none of our directors or officers adopted terminated
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated herein by reference to our definitive proxy statement to be filed within 120 days of December 31, 2025, and delivered to stockholders in connection with our 2026 annual meeting of stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to our definitive proxy statement to be filed within 120 days of December 31, 2025, and delivered to stockholders in connection with our 2026 annual meeting of stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to our definitive proxy statement to be filed within 120 days of December 31, 2025, and delivered to stockholders in connection with our 2026 annual meeting of stockholders.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to our definitive proxy statement to be filed within 120 days of December 31, 2025, and delivered to stockholders in connection with our 2026 annual meeting of stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated herein by reference to our definitive proxy statement to be filed within 120 days of December 31, 2025, and delivered to stockholders in connection with our 2026 annual meeting of stockholders.
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements:
See Index to Consolidated Financial Statements at page F-1 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedule:
The following financial statement schedule is included herein at pages F-32 through F-34 of this Annual Report on Form 10-K: Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization.
(a)(3) Exhibits:
The exhibits listed in this section are included, or incorporated by reference, in this Annual Report on Form 10-K.
(b) Exhibits:
See (a)(3) above.
(c) Financial Statements Schedule:
See (a)(2) above.
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EXHIBITS LIST
| Exhibit | Description | ||||
| 3.1 | Articles of Amendment and Restatement of Modiv Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K (File No. 000-55776) filed with the Securities and Exchange Commission on July 8, 2021) | ||||
| 3.2 | Articles of Amendment to the Articles of Amendment and Restatement of Modiv Inc. changing its name to Modiv Industrial, Inc. (incorporated by reference to Exhibit 3.4 to our Quarterly Report on Form 10-Q (File No. 001-40814) filed with the Securities and Exchange Commission on August 14, 2023 | ||||
| 3.3 | Second Amended and Restated Bylaws of Modiv Inc., adopted on March 9, 2023 (incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K (File No. 001-40814) filed with the Securities and Exchange Commission on March 13, 2023) | ||||
| 3.4 | Articles Supplementary designating 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value per share (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on September 17, 2021) | ||||
| 4.1 | Second Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on February 15, 2022) | ||||
| 4.2 | Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.2 to our Annual Report on Form 10-K (File No. 001-40814) filed with the Securities and Exchange Commission on March 23, 2022) | ||||
10.1 | Fourth Amended and Restated Limited Partnership Agreement of Modiv Operating Partnership, LP, dated February 3, 2025 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on February 4, 2025) | ||||
10.2+ | Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-55776) filed with the Securities and Exchange Commission on August 2, 2021) | ||||
| 10.3 | Contribution Agreement between Trophy of Carson Real Estate LLC and Modiv Operating Partnership, LP dated January 13, 2022 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on January 20, 2022) | ||||
| 10.4 | First Amendment to Contribution Agreement Between Trophy of Carson Real Estate LLC and Modiv Operating Partnership, LP dated March 22, 2022 (incorporated by reference to Exhibit 10.18 to our Annual Report on Form 10-K (File No. 001-40814) filed with the Securities and Exchange Commission on March 23, 2022) | ||||
10.5 | Kia – Carson, CA Lease Agreement as of January 18, 2022, by and between MDV Trophy Carson CA LLC and Trophy of Carson LLC for the property located at 22020 Recreation Rd., Carson, California (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on January 20, 2022) | ||||
| 10.6 | Credit Agreement dated as of January 18, 2022 by and among Modiv Operating Partnership, LP, as the borrower, KeyBank National Association, the other lenders which are parties to the agreement, and other lenders that may become parties to the agreement, KeyBank National Association, as the agent, BMO Capital Markets, Truist Bank and The Huntington Bank, as co-syndication agents, and KeyBanc Capital Markets Inc., BMO Capital Markets, Truist Securities, Inc. and The Huntington Bank, as joint-lead arrangers (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on January 20, 2022) | ||||
| 10.7 | First Amendment to Credit Agreement and Guarantee dated October 21, 2022 between Modiv Operating Partnership, LP, as the borrower, KeyBank National Association, the other lenders which are parties to the agreement, and other lenders that may become parties to the agreement, KeyBank National Association, as the agent, First Financial Bank, Truist Bank and The Huntington Bank, as co-syndication agents, and KeyBanc Capital Markets Inc., First Financial Bank, Truist Securities, Inc. and The Huntington National Bank, as joint-lead arrangers for the expanded Credit Facility (incorporated by reference to Exhibit 10.13 to our Annual Report on Form 10-K (File No. 001-40814) filed with the Securities and Exchange Commission on March 13, 2023) | ||||
| 10.8 | Second Amendment to Credit Agreement dated December 20, 2022 between Modiv Operating Partnership, LP, as the borrower, KeyBank National Association, the other lenders which are parties to the agreement, and other lenders that may become parties to the agreement, KeyBank National Association, as the agent, First Financial Bank, Truist Bank and The Huntington Bank, as co-syndication agents, and KeyBanc Capital Markets Inc., First Financial Bank, Truist Securities, Inc. and The Huntington National Bank, as joint-lead arrangers for the expanded Credit Facility (incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-K (File No. 001-40814) filed with the Securities and Exchange Commission on March 13, 2023) | ||||
| 10.9 | Third Amendment to Credit Agreement dated February 26, 2025 between Modiv Operating Partnership, LP, as the borrower, KeyBank National Association, the other lenders which are parties to the agreement, and other lenders that may become parties to the agreement, KeyBank National Association, as the agent, First Financial Bank, Truist Bank and The Huntington Bank, as co-syndication agents, and KeyBanc Capital Markets Inc., First Financial Bank, Truist Securities, Inc. and The Huntington National Bank, as joint-lead arrangers for the expanded Credit Facility | ||||
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| Exhibit | Description | ||||
| 10.10 | Fourth Amendment to Credit Agreement, dated January 16, 2026, between Modiv Operating Partnership, LP, as the borrower, KeyBank National Association, the other lenders which are parties to the agreement, and other lenders that may become parties to the agreement, KeyBank National Association, as the agent, Truist Bank and The Huntington Bank, as co-syndication agents, and KeyBanc Capital Markets Inc., Truist Securities, Inc. and The Huntington National Bank, as joint-lead arrangers for the amended Credit Facility (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on January 20, 2026) | ||||
| 10.11 | Unconditional Guaranty of Payment and Performance of Modiv Operating Partnership, LP under the Credit Agreement dated January 18, 2022 with KeyBank and other lenders by Modiv Inc. and certain subsidiary guarantors (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to our Registration Statement on Form S-11 (File No. 333-261529) filed with the Securities and Exchange Commission on February 10, 2022) | ||||
| 10.12 | Securities Purchase Agreement, dated July 31, 2024, by and among Modiv Industrial Inc., Modiv Operating Partnership, LP and First City Investment Group, LLC (incorporated by reference to our Quarterly Report on Form 10-Q (File No. 001-40814) filed with the Securities and Exchange Commission on August 6, 2024) | ||||
| 10.13+ | Modiv Industrial, Inc. 2024 Omnibus Incentive Plan, approved by the Company’s stockholders on December 11, 2024 (incorporated by reference to Exhibit 10.12 to our Annual Report on Form 10-K (File No. 001-40814) filed with the Securities and Exchange Commission on March 4, 2025) | ||||
| 10.14+ | Form of Class X Unit Award Agreement (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (File No. 001-40814) filed with the Securities and Exchange Commission on February 4, 2025) | ||||
| 19.1 | |||||
| 21.1* | Subsidiaries of Modiv Industrial, Inc. | ||||
23.1* | Consent of Grant Thornton LLP | ||||
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 32.1** | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
| 97.1 | Modiv Industrial, Inc. Incentive Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to our Annual Report on Form 10-K (File No. 001-40814) filed with the Securities and Exchange Commission on March 7, 2024) | ||||
| 101.INS* | XBRL INSTANCE DOCUMENT | ||||
| 101.SCH* | XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | ||||
| 101.CAL* | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE | ||||
| 101.DEF* | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE | ||||
| 101.LAB* | XBRL TAXONOMY EXTENSION LABELS LINKBASE | ||||
| 101.PRE* | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE | ||||
| 104* | COVER PAGE INTERACTIVE DATA FILE (FORMATTED AS INLINE XBRL AND CONTAINED IN EXHIBIT 101) | ||||
* Filed herewith.
** Furnished herewith. In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
+ Indicates management or compensatory plan.
ITEM 16. FORM 10-K SUMMARY
None.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Consolidated Financial Statements | |||||
Report of Independent Registered Public Accounting Firm - Grant Thornton LLP (PCAOB ID | F-2 | ||||
Consolidated Balance Sheets as of December 31, 2025 and 2024 | F-4 | ||||
Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024 | F-5 | ||||
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2025 and 2024 | F-6 | ||||
Consolidated Statements of Equity for the Years Ended December 31, 2025 and 2024 | F-7 | ||||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 | F-8 | ||||
Notes to Consolidated Financial Statements | F-10 | ||||
| Financial Statement Schedule | |||||
Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization | F-32 | ||||
All other schedules are omitted because they are not applicable or the required information is presented in the consolidated financial statements or notes thereto.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Modiv Industrial, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Modiv Industrial, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the two years in the period ended December 31, 2025, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment of investments in real estate properties
As described further in notes 2 and 3 to the consolidated financial statements, the Company monitors events and changes in circumstances that could indicate that the carrying amounts of investments in real estate properties may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of investments in real estate properties may not be recoverable, management assesses whether the carrying value of the investments in 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, the Company does not believe that it will be able to recover the carrying value of the investments in real estate properties, the Company records an impairment charge to the extent the carrying value exceeds the estimated fair value of the investments in real estate properties. As of December 31, 2025, the Company’s net real estate investments totaled $435.5 million. During the year ended December 31, 2025, the Company recorded impairment charges of $5.8 million. We identified impairment of investments in real estate properties as a critical audit matter.
The principal considerations for our determination that impairment of investments in real estate properties is a critical audit matter are that auditing management’s evaluation of impairment of investments in real estate properties is challenging due to the high degree of judgment necessary in evaluating management’s indicators of possible impairment and due to significant auditor
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judgment in assessing the key inputs and assumptions used in forecasting undiscounted future cash flows and determining fair value.
Our audit procedures related to assessing impairment of investments in real estate properties included the following, among others.
•We evaluated the completeness of the population of real estate investments requiring further impairment evaluation as compared to the criteria established in management’s accounting policies.
•We tested the Company’s undiscounted cash flow analyses and estimates of fair value for investments in real estate properties with indicators of impairment, including evaluating the reasonableness of the methods and significant inputs and assumptions used. We compared anticipated sale values and appraised values with comparable observable market data, which involved the use of our real estate valuation professionals with specialized skills and knowledge.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2023.
March 25, 2026
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MODIV INDUSTRIAL, INC.
Consolidated Balance Sheets
(in thousands, except shares and per share data)
| As of December 31, | |||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Assets | |||||||||||||||||
| Real estate investments: | |||||||||||||||||
| Land | $ | $ | |||||||||||||||
| Buildings and improvements | |||||||||||||||||
| Equipment | |||||||||||||||||
| Tenant origination and absorption costs | |||||||||||||||||
| Total investments in real estate property | |||||||||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||||||||
| Total real estate investments, net, excluding unconsolidated investment in real estate property and real estate investments held for sale, net | |||||||||||||||||
| Unconsolidated investment in a real estate property | |||||||||||||||||
| Total real estate investments, net, excluding real estate investments held for sale, net | |||||||||||||||||
| Real estate investments held for sale, net | |||||||||||||||||
| Total real estate investments, net | |||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||
| Tenant deferred rent and other receivables | |||||||||||||||||
| Above-market lease intangibles, net | |||||||||||||||||
| Prepaid expenses and other assets | |||||||||||||||||
| Total assets | $ | $ | |||||||||||||||
| Liabilities and Equity | |||||||||||||||||
| Mortgage notes payable, net | $ | $ | |||||||||||||||
| Credit facility term loan, net | |||||||||||||||||
| Accounts payable, accrued and other liabilities | |||||||||||||||||
| Distributions payable | |||||||||||||||||
| Below-market lease intangibles, net | |||||||||||||||||
| Other liabilities related to real estate investments held for sale | |||||||||||||||||
| Total liabilities | |||||||||||||||||
Commitments and contingencies (Note 10) | |||||||||||||||||
Class C common stock, $ | |||||||||||||||||
| Additional paid-in-capital | |||||||||||||||||
Treasury stock, at cost, | ( | ( | |||||||||||||||
| Cumulative distributions and net losses | ( | ( | |||||||||||||||
| Accumulated other comprehensive income | |||||||||||||||||
| Total Modiv Industrial, Inc. equity | |||||||||||||||||
| Noncontrolling interests in the Operating Partnership | |||||||||||||||||
| Total equity | |||||||||||||||||
| Total liabilities and equity | $ | $ | |||||||||||||||
See accompanying notes to consolidated financial statements.
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MODIV INDUSTRIAL, INC.
Consolidated Statements of Operations
(in thousands, except shares and per share data)
| Year Ended December 31, | |||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| Rental | $ | $ | |||||||||||||||||||||||||||
| Other property | |||||||||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||||||||
| Expenses: | |||||||||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||||||||
| Stock compensation | |||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||
| Property | |||||||||||||||||||||||||||||
| Impairment of real estate investment property | |||||||||||||||||||||||||||||
| Total expenses | |||||||||||||||||||||||||||||
| Gain on sale of real estate investments, net | |||||||||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||
| Interest and other income | |||||||||||||||||||||||||||||
| Dividend income | |||||||||||||||||||||||||||||
| Income from unconsolidated investment in a real estate property | |||||||||||||||||||||||||||||
| Interest expense, net of unrealized gain on interest rate swaps and derivative settlements | ( | ( | |||||||||||||||||||||||||||
| Loss on equity investments | ( | ||||||||||||||||||||||||||||
| Other expense, net | ( | ( | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||
| Less: net loss (income) attributable to noncontrolling interests in Operating Partnership | ( | ||||||||||||||||||||||||||||
| Net income attributable to Modiv Industrial, Inc. | |||||||||||||||||||||||||||||
| Preferred stock dividends | ( | ( | |||||||||||||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | ( | $ | ||||||||||||||||||||||||||
| Earnings (loss) per share attributable to common stockholders: | |||||||||||||||||||||||||||||
| Basic | $ | ( | $ | ||||||||||||||||||||||||||
| Earnings (loss) per share attributable to common stockholders and Class C OP Units: | |||||||||||||||||||||||||||||
| Diluted | $ | ( | $ | ||||||||||||||||||||||||||
| Weighted-average number of common shares outstanding | |||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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MODIV INDUSTRIAL, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Other comprehensive income (loss): cash flow hedge adjustments | ||||||||||||||||||||||||||
| Amortization of unrealized holding gain on interest rate swap | ( | ( | ||||||||||||||||||||||||
| Unrealized loss on interest rate derivatives | ( | |||||||||||||||||||||||||
| Amortization of off-market interest rate derivatives | ||||||||||||||||||||||||||
| Total other comprehensive loss | ( | ( | ||||||||||||||||||||||||
| Comprehensive (loss) income | ( | |||||||||||||||||||||||||
| Comprehensive loss (income) attributable to noncontrolling interest in Operating Partnership | ( | |||||||||||||||||||||||||
| Comprehensive income attributable to Modiv Industrial, Inc. | $ | $ | ||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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MODIV INDUSTRIAL, INC.
Consolidated Statements of Equity
For the Years Ended December 31, 2025 and 2024
(in thousands, except share data)
Class C CS | Additional Paid-in Capital | Cumulative Distributions and Net Losses | Accumulated Other Comprehensive Income (Loss) | Total Modiv Industrial, Inc. Equity | Noncontrolling Interest in the Operating Partnership | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock - distribution reinvestments | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATM offering of common stock, net | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exchange of Class C OP Units to common stock | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OP Units compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of CS and Class C OP Units | — | — | — | — | — | ( | ( | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared, preferred stock | — | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash distributions declared, CS and non-controlling interests | — | — | — | — | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment to noncontrolling interests | — | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock - distribution reinvestments | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATM offering of common stock, net | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OP Units compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of preferred stock | ( | — | — | — | ( | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class C OP Units for property acquisition | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared, preferred stock | — | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash distributions declared, CS and non-controlling interests | — | — | — | — | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment to noncontrolling interests | — | — | — | — | ( | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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MODIV INDUSTRIAL, INC.
Consolidated Statements of Cash Flows
(in thousands)
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Stock compensation expense | ||||||||||||||
| Amortization of deferred rents | ( | ( | ||||||||||||
| Amortization of deferred financing costs and premium/discount | ||||||||||||||
| Amortization of (below) above market lease intangibles, net | ( | ( | ||||||||||||
| Impairment of real estate investment property | ||||||||||||||
| Loss on equity investments | ||||||||||||||
| Gain on sale of real estate investments, net | ( | ( | ||||||||||||
| Amortization of unrealized holding gain and unrealized gain on non-designated or ineffective interest rate derivative instruments | ( | |||||||||||||
| Adjustment for receipts from off-market interest rate derivatives | ( | |||||||||||||
| Amortization of off-market interest rate derivatives | ||||||||||||||
| Loss on early extinguishment of debt | ||||||||||||||
| Income from unconsolidated investment in a real estate property | ( | ( | ||||||||||||
| Distributions from unconsolidated investment in a real estate property | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| (Increase) decrease in tenant rent and other receivables | ( | |||||||||||||
| (Increase) decrease in prepaid expenses and other assets | ( | |||||||||||||
| Decrease in accounts payable, accrued and other liabilities | ( | ( | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||
| Acquisitions of real estate investments | ( | ( | ||||||||||||
| Improvements to existing real estate investments and other assets | ( | ( | ||||||||||||
| Net proceeds from sale of real estate investments | ||||||||||||||
| Net proceeds from sale of investment in common stock | ||||||||||||||
| Purchase deposits applied (paid) | ( | |||||||||||||
| Sale deposits received, net of applied | ||||||||||||||
| Proceeds from the settlement of property-related insurance claims | ||||||||||||||
| Investments in off-market interest rate derivatives | ( | |||||||||||||
| Receipts from off-market interest rate derivatives | ||||||||||||||
| Net cash provided by investing activities | ||||||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||
| Principal payments on mortgage notes payable | ( | ( | ||||||||||||
| Payments of deferred financing costs | ( | |||||||||||||
| Payment of loan prepayment fees | ( | |||||||||||||
| Proceeds from offering of common stock, net | ||||||||||||||
| Repurchases of preferred stock | ( | |||||||||||||
| Repurchases of common stock and Class C OP Units | ( | |||||||||||||
| Dividends paid to preferred stockholders | ( | ( | ||||||||||||
| Distributions paid to common stockholders and non-controlling interest holders | ( | ( | ||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Net increase in cash, cash equivalents, and restricted cash | ||||||||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | ||||||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | ||||||||||||
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MODIV INDUSTRIAL, INC.
Consolidated Statements of Cash Flows - (Continued)
(in thousands)
| Year Ended December 31, | ||||||||||||||
| Supplemental Disclosure of Cash Flow Information: | 2025 | 2024 | ||||||||||||
| Cash paid for interest | $ | $ | ||||||||||||
| Supplemental Schedule of Noncash Investing and Financing Activities: | ||||||||||||||
| Distribution of Generation Income Properties, Inc. (“GIPR”) common stock to Class C Common Stock and Class C OP Units | $ | $ | ||||||||||||
| Receipt of GIPR common stock in exchange of GIPR preferred stock | $ | $ | ( | |||||||||||
| Conversion of Classes M, P and R OP Units to Class C OP Units | $ | $ | ( | |||||||||||
| Exchange of Class C OP Units for Class C Common Stock | $ | $ | ||||||||||||
| Change in construction advances | $ | $ | ||||||||||||
| Issuance of Class C OP Units in the acquisition of a real estate investment | $ | $ | ||||||||||||
| Reinvested distributions from common stockholders | $ | $ | ||||||||||||
| (Decrease) increase in accrued distributions | $ | ( | $ | |||||||||||
See accompanying notes to consolidated financial statements.
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MODIV INDUSTRIAL, INC.
Notes to Consolidated Financial Statements
NOTE 1. BUSINESS AND ORGANIZATION
Modiv Industrial, Inc. (the “Company”) was incorporated on May 15, 2015 as a Maryland corporation. The Company changed its name from Modiv Inc. to Modiv Industrial, Inc., effective August 11, 2023, upon achieving 70 % (expressed as a percentage of annual base rent (“ABR”)) of industrial properties in its portfolio. The Company has the authority to issue 450.0 million shares of stock, consisting of 50.0 million shares of preferred stock, $0.001 par value per share, of which 1.7 million shares are designated as 7.375 % Series A cumulative redeemable perpetual preferred stock (“Series A Preferred Stock”), 300.0 million shares of Class C common stock (“Class C Common Stock”), $0.001 par value per share, and 100.0 million shares of Class S common stock, $0.001 par value per share. The Company’s Series A Preferred Stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol MDV.PA and has been trading since September 17, 2021. The Company’s Class C Common Stock is listed on the NYSE under the symbol “MDV” and has been trading since February 11, 2022.
The Company holds its investments in real property primarily through special purpose limited liability companies which are wholly-owned subsidiaries of Modiv Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”). The Operating Partnership was formed on January 28, 2016. The Company is the sole general partner of, and owned an approximate 81 % and 89 % partnership interest in, the Operating Partnership as of December 31, 2025 and 2024, respectively. The Operating Partnership’s limited partners include holders of Class C Operating Partnership Units (“Class C OP Units”) and Class X Operating Partnership Units (“Class X OP Units”, and, together with the Class C OP Units, “OP Units”), as described in Note 11.
As of December 31, 2025, the Company’s portfolio of approximately 4.4 million square feet of aggregate leasable space consisted of investments in 42 real estate properties, comprised of 39 industrial properties, which represent approximately 82 % of the portfolio (expressed as a percentage of ABR) as of December 31, 2025, including an approximate 72.7 % tenant-in-common interest in a Santa Clara, California industrial property (the “TIC Interest”) and one held for sale property, and three non-core properties, which represent approximately 18 % of the portfolio by ABR.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC. The Company’s financial statements, and the financial statements of the Operating Partnership, including its wholly-owned subsidiaries, are consolidated in the accompanying consolidated financial statements. The portion of the Operating Partnership which is not wholly-owned by the Company is presented as a noncontrolling interest. All significant intercompany balances and transactions are eliminated in consolidation.
The accompanying consolidated financial statements and related notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
Use of Estimates
The preparation of the accompanying consolidated financial statements and the related notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in such consolidated financial statements and related notes thereto. These estimates are based on historical experience and, in some cases, assumptions based on current and future market experience. Actual results could differ materially from those estimates.
Noncontrolling Interest in Consolidated Entities
The Company accounts for the noncontrolling interests in its Operating Partnership in accordance with the related accounting guidance. Due to the Company’s exclusive responsibility and discretion in the management and control of the Operating Partnership as its sole general partner, the Operating Partnership, including its wholly-owned subsidiaries, are consolidated by the Company, and the limited partner interests not held by the Company are reflected as noncontrolling interests
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in the accompanying consolidated balance sheets and statements of equity. See Note 11 for more information on the limited partner interests not held by the Company.
Revenue Recognition
The Company accounts for leases in accordance with FASB Accounting Standards Update (“ASU”) No. 2016-02, Leases (“Topic 842”), and the related FASB ASU Nos. 2018-10, 2018-11, 2018-20 and 2019-01, which provide practical expedients, technical corrections and improvements for certain aspects of ASU 2016-02 (collectively, “Topic 842”). As a lessor, the Company’s leases with tenants generally provide for the lease of real estate properties, as well as common area maintenance, property taxes and other recoverable costs. Rental income and tenant reimbursements and other lease related property income that meet the requirements of the practical expedient provided by ASU No. 2018-11 have been combined under rental revenue in the Company’s accompanying consolidated statements of operations.
The Company recognizes rental income from tenants under operating leases on a straight-line basis over the noncancellable term of the lease when collectability of such amounts is reasonably assured. Recognition of rental income on a straight-line basis includes the effects of rental abatements, lease incentives and fixed and determinable increases in lease payments over the lease term. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or by the Company.
When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term.
The Company records tenant reimbursements on a gross basis in instances when its tenants reimburse the Company for lessor costs, including real estate taxes, which the Company incurs. Conversely, the Company records lessor costs on a net basis when these costs are paid directly by the Company’s tenants to suppliers and service providers, including taxing authorities, on the Company’s behalf. To the extent any tenant responsible for these obligations under the applicable lease defaults on such lease, or if it is deemed probable that the tenant will fail to pay for these obligations, the Company records a liability for such obligations.
The Company evaluates the collectability of rents and other receivables on a regular basis based on factors including, among others, payment history, credit rating, the asset type and current economic conditions. If the Company’s evaluation of these factors indicates it may not recover the full value of the receivable, it provides an allowance against the portion of the receivable that it estimates may not be recovered. This analysis requires the Company to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected.
Collectability of Tenant Deferred Rent Receivables
The Company’s determination of the collectability of tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination. The Company also may record an allowance under other authoritative GAAP depending upon the Company’s evaluation of the individual receivables, specific credit enhancements, current economic conditions and other relevant factors. Such allowances are recorded as increases or decreases through rental income in the Company’s consolidated statements of operations.
With respect to tenants in bankruptcy, management makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. When a tenant is in bankruptcy, the Company will record a bad debt allowance for the tenant’s receivable balance and generally will not recognize subsequent rental income until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments.
Gain or Loss on Sale of Real Estate Investments
The Company recognizes gain or loss on sale of real estate property when the Company has executed a contract for sale of the property, transferred controlling financial interest in the property to the buyer and determined that it is probable that the
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Company will collect substantially all of the consideration for the property. When properties are sold, operating results of the properties prior to the sale remain in continuing operations, and any associated gain or loss from the disposition is included in gain or loss on sale of real estate investments in the Company’s accompanying consolidated statements of operations.
Income Taxes
The Company has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under Section 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Company expects to operate in a manner that will allow it to continue to qualify as a REIT for U.S. federal income tax purposes. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including meeting various tests regarding the nature of the Company’s assets and income, the ownership of the Company’s outstanding stock and distribution of at least 90% of the Company’s annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to U.S. federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service (“IRS”) grants the Company relief under certain statutory provisions.
The Company has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements. Neither the Company nor its subsidiaries has been assessed material interest or penalties by any major tax jurisdictions. The Company’s evaluations were performed for the tax years ended December 31, 2025 and 2024. As of December 31, 2025, the returns for calendar years 2022, 2023 and 2024 remain subject to examination by the IRS and some additional years may be subject to examination wherein tax loss carryforwards are utilized and in certain state tax jurisdictions.
Treasury Stock
The Company accounts for repurchased shares of its Class C Common Stock as treasury stock. Treasury shares are recorded at cost and are included as a component of equity in the Company’s accompanying consolidated balance sheets as of December 31, 2025 and 2024.
Per Share Data
Fair Value Measurements and Disclosures
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy, which is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, is as follows:
Level 1: quoted prices in active markets for identical assets or liabilities;
Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value for certain financial instruments is derived using valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price
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transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value:
Cash and cash equivalents; tenant receivables; prepaid expenses and other assets and accounts payable, accrued and other liabilities: These balances approximate their fair values due to their short maturities.
Derivative instruments: The Company’s derivative instruments are presented at fair value in the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In accordance with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a gross basis by counterparty portfolio.
Credit facilities: The fair values of the Company’s credit facility approximate the carrying value as their interest rates are variable and based on the secured overnight financing rate (“SOFR”).
Mortgage notes payable: The fair value of the Company’s mortgage notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. The Company classifies these inputs as Level 3 inputs.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Cash and cash equivalents are stated at cost, which approximates fair value. The Company’s cash and cash equivalents balance may exceed federally insurable limits. The Company mitigates this risk by depositing funds in government money market funds or with major financial institutions; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets.
As of December 31, 2025, the Company had cash and cash equivalents of $14.4 million, of which $11.5 million was held in investments in government money market funds and $1.9 million exceeded the federally insurable limits and was held with major financial institutions. Although the Company bears the risk with respect to amounts not federally insured, it has not experienced and does not anticipate any losses as a result due to the high quality of the financial institutions where the Company’s cash and cash equivalents are held.
Real Estate Investments
Real Estate Acquisition Valuation
The Company records acquisitions that meet the definition of a business as a business combination. If the acquisition does not meet the definition of a business, the Company records the acquisition as an asset acquisition. All real estate acquisitions during the years ended December 31, 2025 and 2024 qualified as asset acquisitions. The Company allocates 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.
The Company assesses the estimated fair values 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. The majority of the Company’s properties that were acquired during the years ended
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December 31, 2025 and 2024 were purchased through sale-leaseback transactions. These acquisitions satisfied the requirements of sale-leaseback accounting under ASC 842, Leases.
The Company records 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 noncancellable term of above-market in-place leases plus any extended term for any leases with below-market renewal options. The Company amortizes any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income.
The Company estimates 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, the Company generally includes real estate taxes, insurance and other operating expenses and estimates of lost rent at market rates during the expected lease up periods. The Company amortizes the value of tenant origination and absorption costs to depreciation and amortization expense over the remaining term of the respective lease.
Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, market land and building values, discount and capitalization rates, and future cash flows. Therefore, the Company classifies these inputs as Level 3 inputs.
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are capitalized and depreciated or amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset and are expensed as incurred. Significant replacements and improvements are capitalized. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
| ● | Buildings | |||||||
| ● | Site improvements | |||||||
| ● | Tenant improvements | Shorter of remaining lease term or useful life | ||||||
| ● | Industrial equipment | |||||||
| ● | Tenant origination and absorption costs, and above-/below-market lease intangibles | Remaining lease term | ||||||
Impairment of Investment in Real Estate Properties
The Company monitors events and changes in circumstances that could indicate that the carrying amounts of investments in real estate properties may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of investments in real estate properties may not be recoverable, management assesses whether the carrying value of the investments in 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, the Company does not believe that it will be able to recover the carrying value of the investments in real estate properties, the Company records an impairment charge to the extent the carrying value exceeds the estimated fair value of the investments in real estate properties.
The fair value of assets with impairment indicators is determined using techniques including discounted cash flow analysis, analysis of recent comparable sales transactions and purchase offers received from third parties, which are Level 3 inputs. When estimating the fair value of the Company’s real estate investment, consideration may be given to a single valuation technique or multiple valuation techniques, as appropriate. Estimating future cash flows is highly subjective and estimates can differ materially from actual results.
Leasing Costs
The Company accounts for leasing costs under Topic 842, capitalizing initial direct costs, which include only those costs that are incremental to the lease arrangement and would not have been incurred if the lease had not been obtained. The Company amortizes third-party leasing commissions over the life of lease or lease term extension and charges internal leasing costs and third-party legal leasing costs to expense as incurred. These expenses are included in property expenses or general and administrative expenses in the Company’s consolidated statements of operations.
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Real Estate Investments Held for Sale
The Company generally considers a real estate investment to be held for sale when the following criteria are met as of the balance sheet date: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value, (iv) the sale of the property within one year is considered probable and (v) significant changes to the plan to sell are not expected. Real estate investments classified as held for sale are no longer depreciated and are reported at the lower of their carrying value or their estimated fair value less estimated costs to sell. Operating results of properties that were classified as held for sale in the ordinary course of business are included in continuing operations in the Company’s accompanying consolidated statements of operations.
Equity Investment in Unconsolidated Investment in a Real Estate Property
The Company accounts for investments in an entity over which the Company has the ability to exercise significant influence using the equity method of accounting. Under the equity method of accounting, an investment is initially recognized at cost and is subsequently adjusted to reflect the Company’s share of earnings or losses of the investee. The investment is also increased for additional amounts invested and decreased for any distributions received from the investee. Equity method investments are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the investment might not be recoverable. If an equity method investment is determined to be other-than-temporarily impaired, the investment is reduced to fair value and an impairment charge is recorded as a reduction to earnings. The Company’s unconsolidated investment is in the form of its share in the ownership of a real estate property where the equity method of accounting is applied.
Other Investments
The Company has insignificant investments through simple agreements for future equity (“SAFE”) in two entities that it made when the Company was in the crowdfunding business. These SAFE investments provide that the Company will automatically receive shares of the entities based on the conversion rate of any future equity rounds up to a valuation cap. The investments are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. The Company has recorded these investments at cost. An impairment of $0.1 million was recorded for the year ended December 31, 2024 for one of these investments, which is included in loss on equity investments in the accompanying consolidated statement of operations, and no impairment was recorded for the year ended December 31, 2025.
Deferred Financing Costs
Derivative Instruments and Hedging Activities
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates on its variable rate debt. The Company does not enter into derivatives for speculative purposes. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
The Company records derivative instruments at fair value on its accompanying consolidated balance sheets. The accounting for changes in the fair value of derivatives depends on whether the Company elects to designate a derivative instrument in a hedging relationship as a fair value or cash flow hedge and whether the hedging relationship satisfies the criteria necessary to apply hedge accounting. If a derivative is designated and qualifies for hedge accounting treatment, changes in the fair value of the derivative are included in other comprehensive income (loss). If the derivative is not designated or does not meet the hedge accounting criteria, changes in the fair value of the derivative are included in interest expense, net of unrealized gain on interest rate swaps and derivative settlements in the consolidated statements of operations.
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The Company will discontinue hedge accounting prospectively when it is determined that the derivative instrument is no longer effective in offsetting changes in the cash flows of the hedged item, the derivative instrument expires or is terminated, the derivative instrument is re-designated as a hedging instrument or management determines that designation of the derivative instrument as a hedging instrument is no longer appropriate. When hedge accounting is discontinued, the Company recognizes any changes in the derivative’s fair value in its consolidated statements of operations and continues to carry the derivative instrument on its consolidated balance sheet.
Premiums paid by the Company for off-market derivative instruments are amortized to interest expense over the term of the derivative instrument. Cash flows for derivative instruments are classified as cash flows from operating activities within the consolidated statements of cash flows, unless there is an other-than-insignificant financing element present at inception of the derivative financial instrument. For derivatives with an other-than-insignificant financing element at inception due to off-market terms, cash flows are classified as cash flows from investing activities for the party acting as the lender within the consolidated statements of cash flows.
The Company entered into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate term loan. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero. The Company may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
Restricted Operating Partnership Unit Awards
Operating Partnership units are recorded in equity under noncontrolling interest in the Operating Partnership in the Company’s consolidated balance sheets and statements of equity. For units granted to employees of the Company, the fair value of awards is amortized using the straight-line method over the requisite service period of the award, which is generally the vesting period (see Note 12 for more details). The Company has elected to record forfeitures as they occur. Compensation cost is recorded for units to be issued subject to a performance condition when it is probable that the performance condition will be met.
Segments
The Company owns and manages single-tenant long-term net-lease properties located in the United States. The Company’s real estate properties exhibit similar long-term financial performance and have similar economic characteristics to each other and are managed as one unit by a common management team. The Company aggregates its investments in real estate into one reportable segment and manages the business activities on a consolidated basis.
The Company’s chief operating decision maker (the “CODM”) is the chief executive officer, who assesses the Company’s performance and decides how to allocate resources based on net income (loss), which is reported on the accompanying statements of operations. The CODM uses net income (loss) in deciding whether to use profits for acquisitions, further investment in owned properties, repay debt, repurchase preferred shares, or change the monthly distribution rate. Net income or loss is also used to monitor budget versus actual results. The CODM reviews the consolidated expenses, which are reported on the face of the consolidated statements of operations and include general and administrative expenses, property expenses, depreciation and amortization, any impairment loss and interest expense. Additionally, the measure of segment assets is reported on the consolidated balance sheets as total assets, including long-lived real estate assets which include land, buildings, and improvements subject to operating leases.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires annual disclosure of specific categories in the income tax rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold within the rate reconciliation. In addition, ASU 2023-09 requires annual disclosure of income taxes paid, net of refunds, disaggregated by federal, state and foreign jurisdictions as well as individual jurisdictions in which income taxes paid is over a quantitative threshold. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. The Company adopted this standard in the year ended December 31, 2025. The adoption did not have a material effect on the Company’s consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires
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additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the statement of income. The amendment does not change the timing or amount of expense recognized, rather it is intended to provide incremental information about the components of an entity’s expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related notes thereto.
In December 2025, the FASB issued ASC 2025-11, Interim Reporting (Topic 270) - Narrow-Scope Improvements ("ASU 2025-11"). ASU 2025-11 clarifies required form and content of interim financial statements and notes and requires entities issuing condensed financial statements to disclose certain events occurring since the end of the most recent fiscal year that have a material impact on the entity and is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-11 on its consolidated financial statements and related notes thereto.
NOTE 3. REAL ESTATE INVESTMENTS
As of December 31, 2025, the Company’s real estate net investment portfolio of $426.0 million consisted of 42 operating properties, excluding the TIC Interest and including one property held for sale, located in 14 states.
Acquisitions
On March 7, 2025, the Company acquired an industrial property for $6.1 million, consisting of $0.3 million in cash and 344,119 Class C OP Units valued at $5.9 million, based on an estimated fair value of $17.00 per Class C OP Unit. The property with a leasable area of 48,589 square feet 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. The total acquisition cost, including legal fees and transaction costs, was $6.2 million and was allocated as follows: $1.0 million to land, $4.8 million to buildings and improvements, $0.4 million to tenant origination and absorption costs, and an immaterial amount to below-market lease intangibles. The seller is not affiliated with the Company or its affiliates. The Company recognized $0.4 million of rental revenue related to this property during the year ended December 31, 2025.
On July 15, 2024, the Company acquired an industrial manufacturing property that produces optical systems for the defense and aerospace industries for $5.1 million. The property is located in the Tampa, Florida metropolitan area and the tenant entered into a 20 -year sale-leaseback agreement. The total acquisition cost, including legal fees and transaction costs, was $5.2 million and was allocated as follows: $1.4 million to land, $3.7 million to buildings and improvements, and $0.1 million to tenant origination and absorption costs. The seller is not affiliated with the Company or its affiliates. The Company recognized $0.5 million and $0.3 million, of rental income related to this property during years ended December 31, 2025 and 2024, respectively.
Dispositions
On December 15, 2025, the Company completed the sale of its office property in Issaquah, Washington formerly leased to Costco Wholesale Corporation (“Costco”) for $26.0 million, which included the sale price of $25.6 million and $0.4 million of extension fees. The gain on sale was $2.4 million and net proceeds from the sale were $5.3 million, net of the $18.3 million mortgage repayment, $0.7 million loan prepayment fee, transfer taxes, commissions and other closing costs.
On February 26, 2025, the Company completed the sale of its industrial property located in Endicott, New York, leased to New Vision Industries, LLC, a subsidiary of Producto Holdings LLC (“Producto”), for a sales price of $2.4 million to an affiliate of the lessee. The gain on sale was $0.1 million and the net proceeds from sale was $2.3 million. In connection with this sale, the lease for the Company’s property in Jamestown, New York with another Producto subsidiary was amended to increase the base rent by $2,500 per month.
During the year ended December 31, 2024, the Company sold two real estate properties (one non-core office and one industrial) and a land parcel for aggregate contract sales prices of $15.3 million, aggregate gain on sale of $3.4 million and aggregate net proceeds of $15.0 million, net of commissions and closing costs.
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Asset Concentration
As of December 31, 2025 and 2024, the Company’s real estate portfolio asset concentration (greater than 10% of total assets) was as follows (dollars in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Property and Location | Net Carrying Value | Percentage of Total Assets | Net Carrying Value | Percentage of Total Assets | ||||||||||||||||||||||
| KIA retail property, Carson, CA | $ | % | $ | % | ||||||||||||||||||||||
Rental Income Concentration
During the years ended December 31, 2025 and 2024, the Company’s rental income concentration (greater than 10% of rental income) was as follows (dollars in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Location | Rental Income | Percentage of Total Rental Income | Rental Income | Percentage of Total Rental Income | ||||||||||||||||||||||||||||||||||||||||||||||
Lindsay, | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||
| KIA retail property - CA | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases
The Company’s real estate properties are primarily leased to tenants under net leases for which terms and expirations vary. The Company monitors the credit of all tenants to stay abreast of any material changes in credit quality. The Company monitors tenant credit by (1) reviewing the credit ratings of tenants (or their parent companies or lease guarantors) that are rated by nationally recognized rating agencies; (2) reviewing financial statements and related metrics and information that are publicly available or that are required to be provided pursuant to the lease; (3) monitoring news reports and press releases regarding the tenants (or their parent companies or lease guarantors), and their underlying business and industry; and (4) monitoring the timeliness of rent collections. Except for the property leased to the State of California’s Office of Emergency Services (“OES”) in Rancho Cordova, California, all of the Company’s operating leases contain options to extend the lease term with one to six five- or seven-year extensions or one to two 10-year extensions. The lease with OES includes a purchase option that may be exercised until December 31, 2026.
As of December 31, 2025, the future minimum contractual rent payments due to the Company under the Company’s non-cancellable operating leases, excluding the TIC Interest, are as follows (in thousands):
| Amount | ||||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| $ | ||||||||
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Intangible Assets, Net Related to the Company’s Real Estate
As of December 31, 2025 and 2024, intangible assets, net related to the Company’s real estate were as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| Tenant Origination and Absorption Costs | Above-Market Lease Intangibles | Below-Market Lease Intangibles | Tenant Origination and Absorption Costs | Above-Market Lease Intangibles | Below-Market Lease Intangibles | ||||||||||||||||||||||||||||||
| Cost | $ | $ | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
| Accumulated amortization | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net amount | $ | $ | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
Amortization of tenant origination and absorption costs for the years ended December 31, 2025 and 2024 was $0.6 million and $1.0 million, respectively. Amortization of above-market lease intangibles for each of the years ended December 31, 2025 and 2024 was $0.1 0.9 million and $0.8 million for the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, amortization of intangible assets for each of the next five years and thereafter is expected to be as follows (dollars in thousands):
| Tenant Origination and Absorption Costs | Above-Market Lease Intangibles | Below-Market Lease Intangibles | ||||||||||||||||||
| 2026 | $ | $ | $ | ( | ||||||||||||||||
| 2027 | ( | |||||||||||||||||||
| 2028 | ( | |||||||||||||||||||
| 2029 | ( | |||||||||||||||||||
| 2030 | ( | |||||||||||||||||||
| Thereafter | ( | |||||||||||||||||||
| $ | $ | $ | ( | |||||||||||||||||
| Weighted-average remaining amortization period | ||||||||||||||||||||
Real Estate Investments Held for Sale
As of December 31, 2025, the Company classified one property as held for sale. In December 2025, the Company entered into a purchase and sale agreement for its industrial property in Saint Paul, Minnesota for $4.0 million and the buyer deposited a $0.3 million non-refundable deposit. In January 2026, the parties amended the purchase and sale agreement, increasing the purchase price to $4.1 million and allowing for an option to extend the closing date to March 31, 2026 with the buyer depositing an additional $1.7 million of non-refundable deposits, which the Company has received.
As of December 31, 2024, the Company classified its office property in Issaquah, Washington formerly leased to Costco as held for sale. The property was sold on December 15, 2025.
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The following table summarizes the major components of assets and liabilities related to real estate investments held for sale as of December 31, 2025 and 2024 (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Assets related to real estate investments held for sale: | ||||||||||||||
| Land, buildings and improvements | $ | $ | ||||||||||||
| Tenant origination and absorption costs | ||||||||||||||
| Accumulated depreciation and amortization | ( | ( | ||||||||||||
| Real estate investments held for sale, net | $ | $ | ||||||||||||
| Liabilities related to real estate investments held for sale: | ||||||||||||||
| Other liabilities, net | $ | $ | ||||||||||||
Impairment Charge
The Company recorded aggregate impairment charges of $5.8 million related to its property and equipment located in Saint Paul, Minnesota during the year ended December 31, 2025. The Company determined that impairment charges were required based on current market conditions at the time and represented the excess of the assets' carrying value over the assets’ estimated sale price less estimated selling costs, of $3.9 million. Impairment estimates can differ materially from actual impairment results once a property is sold and could result in further impairment charges.
NOTE 4. UNCONSOLIDATED INVESTMENT IN A REAL ESTATE PROPERTY
The Company’s unconsolidated investment in a real estate property amounted to $9.4 million and $9.3 million as of December 31, 2025 and 2024, respectively. The related income from unconsolidated investment in a real estate property amounted to $0.8 million and $0.3 million for the years ended December 31, 2025 and 2024, respectively.
During 2017, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired an approximate 72.7 % TIC Interest. The remaining approximate 27.3 % interest in the Santa Clara, California property was held by third parties. The Company receives approximately 72.7 % of the cash flow distributions and recognizes approximately 72.7 % of the results of operations from the TIC Interest.
As of December 31, 2025, the Company and the third parties each hold an individual, undivided ownership interest in the Santa Clara property. Undivided ownership interests are arrangements in which two or more parties jointly own the property and the title is held individually to the extent of each party’s interest. Based upon the nature of the Company’s interest, consolidation is not appropriate. As the Santa Clara property is subject to joint control, the Company accounts for its TIC Interest using the equity method. Subsequent to December 31, 2025, the Company acquired the 27.3 % remaining TIC interest for $9.6 million, giving the Company 100 % ownership and control of the property.
On April 24, 2025, the TIC’s leases with Fujifilm Dimatix, Inc. were amended to extend the leases for ten years from March 17, 2026 to March 16, 2036. The leases, as amended, provide for annual rent escalations of 3.0 % and include two seven-year renewal options. The mortgage on this property bears interest at 3.86 % and has a maturity date of October 1, 2027.
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The following is summarized financial information for the Santa Clara, California property as of December 31, 2025 and 2024 and for the years ended December 31, 2025 and 2024 (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Assets: | ||||||||||||||
| Real estate investments, net | $ | $ | ||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||
Mortgage note payable, net | $ | $ | ||||||||||||
| Below-market lease, net | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Total equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Total revenue | $ | $ | ||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Other expenses | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Operating income | ||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
NOTE 5. OTHER BALANCE SHEET DETAILS
Tenant Deferred Rent and Other Receivables
As of December 31, 2025 and 2024, tenant deferred rent and other receivables consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Straight-line rent | $ | $ | ||||||||||||
| Tenant rent and reimbursements | ||||||||||||||
| Total | $ | $ | ||||||||||||
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Prepaid Expenses and Other Assets
As of December 31, 2025 and 2024, prepaid expenses and other assets were comprised of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
Prepaid expenses | $ | $ | ||||||||||||
Construction advances (1) | ||||||||||||||
| Purchase deposits | ||||||||||||||
Other assets | ||||||||||||||
Deferred financing cost on credit facility revolver | ||||||||||||||
Total | $ | $ | ||||||||||||
(1) The balance as of December 31, 2024 represented advances for improvements to be made to the Lindsay property in Franklinton, North Carolina that were completed during the year ended December 31, 2025.
Accounts Payable, Accrued and Other Liabilities
As of December 31, 2025 and 2024, accounts payable, accrued and other liabilities were comprised of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued expenses | ||||||||||||||
| Accrued interest payable | ||||||||||||||
| Unearned rent | ||||||||||||||
| Security deposits | ||||||||||||||
| Sale deposits | ||||||||||||||
| Lease incentive obligation | ||||||||||||||
| Total | $ | $ | ||||||||||||
NOTE 6. DEBT
Mortgage Notes Payable, Net
As of December 31, 2025 and 2024, the Company’s mortgage notes payable consisted of the following (dollars in thousands):
| Collateral | December 31, 2025 | December 31, 2024 | Interest Rate (1) | Loan Maturity | ||||||||||||||||||||||
Costco property (2) | $ | $ | N/A | N/A | ||||||||||||||||||||||
| Taylor Fresh Foods property | 11/01/2029 | |||||||||||||||||||||||||
| Total mortgage notes payable | ||||||||||||||||||||||||||
| Less unamortized deferred financing costs | ( | ( | ||||||||||||||||||||||||
| Mortgage notes payable, net | $ | $ | ||||||||||||||||||||||||
(1)Represents the contractual interest rate in effect under the respective mortgage note payable.
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The following summarizes the face value, carrying amount and fair value of the Company’s mortgage notes payable, net, which are Level 3 fair value measurements, reflecting unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, as of December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Face Value | Carrying Value | Fair Value | Face Value | Carrying Value | Fair Value | |||||||||||||||||||||||||||||||||
| Mortgage notes payable, net | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Disclosures of the fair values of financial instruments are based on pertinent information available to the Company as of the period end and require a significant amount of judgment. The actual value could be materially different from the Company’s estimate of value.
Credit Facility, Net
The Company’s Operating Partnership entered into an agreement for a line of credit (the “Credit Agreement”) on January 18, 2022. The Credit Agreement currently provides a $280.0 million line of credit comprised of a $30.0 million revolving line of credit (the “Revolver”), and a $250.0 million term loan (the “Term Loan” and together with the Revolver, the “Credit Facility”) with KeyBank and the other lending institutions party thereto (collectively, the “Lenders”), including KeyBank as Agent for the Lenders (in such capacity, the “Agent”). The Credit Facility is available for general corporate purposes, including, but not limited to, acquisitions, repayment of existing indebtedness, and capital expenditures.
On February 26, 2025, the Company entered into an agreement with the Lenders to amend the Credit Agreement to extend the maturity of the Revolver to January 18, 2027, which was coterminous with the maturity of the Term Loan.
On January 16, 2026, the Company entered into an agreement with the Lenders to amend the Credit Agreement to (i) extend the maturity date of the credit facility for eighteen months to July 18, 2028, (ii) remove the 10 basis point secured overnight financing rate (“SOFR”) Adjustment and (iii) allow repurchases of shares of the Preferred Stock, by amending certain distribution covenants so long as such repurchases are funded by proceeds from the issuance of preferred or common stock or asset sales, in each case, occurring within the trailing twelve month period of such repurchase.
There was no outstanding balance on the Revolver at or during the years ended December 31, 2025 or 2024. The Credit Facility is priced on a leverage-based grid that fluctuates based on the Company’s actual leverage ratio at the end of the prior quarter. The Company also pays an annual unused fee of up to 25 basis points on the Revolver, depending on the daily amount of the unused commitment, and incurred $0.1 million and $0.4 million for the years ended December 31, 2025 and 2024, respectively.
In January 2025, the Company entered into two swap agreements, effective December 31, 2024, for $125.0 250.0 million, corresponding to the Term Loan, which fixed SOFR for the year ending December 31, 2025 at 2.45 %, resulting in a fixed rate of 4.25 % based on the Company’s current leverage ratio. The Company paid aggregate premiums of $4.2 million to buy down the fixed rate below the market rate. The Company designated the two pay-fixed, receive-floating interest rate swaps as cash flow hedges (see Note 7 for more details). The floating interest rate was 5.4875 % on the Term Loan as of December 31, 2025. In January 2026, the Company entered into three new swap agreements to fix SOFR from December 31, 2025 to December 31, 2026 at 2.45 %. See Note 13 for more details.
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 the Company, and various cash collateral owned by the Operating Partnership and the Subsidiary Guarantors. In connection with the Credit Facility, the Company and each of the Subsidiary Guarantors entered into an Unconditional Guaranty of Payment and Performance in favor of the Agent, pursuant to which the Company and each of the Subsidiary Guarantors agreed to guarantee the full and prompt payment of the Operating Partnership’s obligations under the Credit Agreement.
Compliance with All Debt Agreements
Pursuant to the terms of mortgage notes payable on certain of the Company’s properties and the Credit Facility, the Company and/or the subsidiary borrowers are subject to certain financial loan covenants. The Company and/or the subsidiary borrowers were in compliance with such financial loan covenants as of December 31, 2025.
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Future Principal Payments
The following summarizes the future principal repayments of the Company’s mortgage notes payable and Credit Facility as of December 31, 2025 (in thousands):
| Credit Facility | ||||||||||||||||||||||||||
| Mortgage Notes Payable | Revolver | Term Loan | Total | |||||||||||||||||||||||
| 2026 | $ | $ | $ | $ | ||||||||||||||||||||||
2027 (1) | ||||||||||||||||||||||||||
| 2028 | ||||||||||||||||||||||||||
| 2029 | ||||||||||||||||||||||||||
| 2030 | ||||||||||||||||||||||||||
| Thereafter | ||||||||||||||||||||||||||
| Total principal | ||||||||||||||||||||||||||
| Less: deferred financing costs, net | ( | ( | ( | |||||||||||||||||||||||
| Net | $ | $ | $ | $ | ||||||||||||||||||||||
(1) On January 16, 2026, the Company entered into an agreement with the Lenders to amend the Credit Agreement to extend the maturity date of the Credit Facility eighteen months to July 18, 2028.
Interest Expense, Including Unrealized Gain or Loss on Interest Rate Swaps and Net of Derivative Settlements
The following is a reconciliation of the components of interest expense, net of derivative settlements and unrealized loss (gain) on interest rate swaps for the years ended December 31, 2025 and 2024 (in thousands):
| Year Ended December 31, | |||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||
| Mortgage notes payable: | |||||||||||||||||||||||||||||
| Interest expense | $ | $ | |||||||||||||||||||||||||||
| Amortization of deferred financing costs | |||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | |||||||||||||||||||||||||||||
| Credit facility: | |||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||
| Unused commitment fees | |||||||||||||||||||||||||||||
Amortization and write-off of deferred financing costs | |||||||||||||||||||||||||||||
| Swap derivatives: | |||||||||||||||||||||||||||||
| Derivative cash settlements | ( | (1) | ( | (3) | |||||||||||||||||||||||||
| Amortization of off-market interest rate derivatives | (1) | ||||||||||||||||||||||||||||
| Accrued interest from December 31, 2024 to respective swap execution date | (1) | ||||||||||||||||||||||||||||
| Amortization of unrealized gain on interest rate swap valuation | ( | (2) | ( | (2) | |||||||||||||||||||||||||
| Unrealized loss on non-designated or ineffective interest rate derivative instruments, net | (4) | ||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total interest expense | $ | $ | |||||||||||||||||||||||||||
(1)Related to the two swap agreements effective December 31, 2024, for $125.0 250.0 million, corresponding to the Term Loan, as described in Note 7. The Company paid aggregate premiums of $4.2 million, including accrued interest receivable of $0.3 million, to buy down the fixed rate below the market rate, and the resulting derivatives were amortized over the term of the swap agreements.
(2)The unrealized gain on interest rate swap derivative previously recorded in accumulated other comprehensive income and noncontrolling interest in Operating Partnership is being amortized on a straight-line basis as a reduction to interest expense through the original maturity date of the Credit Facility, January 18, 2027.
(3)Derivative cash settlements received from derivative instruments entered into by the Company covering (i) its original $150.0 million Credit Facility Term Loan effective May 31, 2022 and (ii) its additional $100.0 million Term Loan
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commitment effective November 30, 2022. Both derivative instruments were canceled on December 31, 2024, as discussed above and in Note 7.
(4) Represents the $3.0 million unrealized loss on the valuation of the $150.0 million derivative instrument, net of the $0.5 million gain on the valuation of the $100.0 million derivative instrument for the year ended December 31, 2024 that were recognized as a net increase in interest expense.
NOTE 7. INTEREST RATE SWAP DERIVATIVES
In January 2025, the Company, through its Operating Partnership, entered into two swap agreements, effective December 31, 2024, for $125.0 250.0 million, corresponding to the Term Loan, which fixed SOFR for the year ending December 31, 2025 at 2.45 %, resulting in a fixed rate of 4.25 % based on the Company’s leverage ratio. The fixed rate increases if the Company’s leverage ratio increases above 50 %. The Company paid aggregate premiums of $4.2 million, including accrued interest receivable of $0.3 million, to buy down the fixed rate below the market rate. The Company designated the pay-fixed, receive-floating interest rate swaps as cash flow hedges and therefore the change in fair value of $3.9 million from the swap execution dates to December 31, 2025 was recorded as accumulated other comprehensive income in the Company's consolidated balance sheet as of December 31, 2025.
The Company, through its Operating Partnership, entered into a five-year swap agreement in May 2022 to fix SOFR at 2.258 % effective May 31, 2022 related to the variable interest rate on its original $150.0 million Term Loan. The Company designated the pay-fixed, receive-floating interest rate swap as a cash flow hedge, which was effective through December 31, 2022. The derivative instrument failed to qualify as a cash flow hedge during the year ended December 31, 2023 and as a result, the net change in fair value of the $150.0 million derivative instrument was recorded as a component of interest expense with any losses resulting in an increase to interest expense and any gains resulting in a decrease to interest expense. The Company recognized $3.0 million of unrealized losses on the valuation of the $150.0 million derivative instrument for the year ended December 31, 2024.
Due to the $150.0 million derivative instrument’s failure to qualify as a cash flow hedge, the unrealized gain on interest rate swap derivative of $4.1 million as of December 31, 2022 (recorded in the Company’s financial statements as follows: (i) $3.5 million of accumulated other comprehensive income and (ii) $0.6 million of noncontrolling interest in operating partnership), is being amortized on a straight-line basis as a reduction to interest expense through the original maturity date of the Credit Facility, January 18, 2027. There is no income tax expense resulting from this amortization. During each of the years ended December 31, 2025 and 2024, interest expense was reduced by $1.0
As of December 31, 2025, the Company’s unamortized unrealized gain on interest rate swap derivative in accumulated other comprehensive income and noncontrolling interest in operating partnership in the Company’s consolidated balance sheet amounted to $1.1 million. The Company estimates that $1.0 million of the remaining unrealized gain on interest rate swap derivative will be reclassified from accumulated other comprehensive income and noncontrolling interest in operating partnership as a reduction to interest expense in the Company’s accompanying consolidated statements of operations over the next twelve months.
The Company, through its Operating Partnership, also entered into another five-year swap agreement in October 2022 to fix SOFR at 3.440 % effective November 30, 2022 related to the variable interest rate on its additional $100.0 million Term Loan commitment. The Company did not designate the pay-fixed, receive-floating interest rate swap as a cash flow hedge. On December 31, 2024, the counterparties to the swap agreements exercised their one-time option to cancel the swap agreements. The $0.5 million unrealized gain for the year ended December 31, 2024 was recognized as a decrease to interest expense in the Company’s accompanying consolidated statements of operations.
NOTE 8. PREFERRED STOCK AND COMMON STOCK
Preferred Stock
The Company is authorized to issue up to $50.0 million shares of preferred stock. In connection with an underwritten public offering in September 2021 (discussed below in detail), the Company issued 2.0 million shares of its Series A Preferred Stock. As of December 31, 2025 and 2024, 1.7 2.0
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Series A Preferred Stock - Terms
Holders of Series A Preferred Stock are entitled to cumulative dividends in the amount of $1.84375 per share each year, which is equivalent to the rate of 7.375 25
On and after September 17, 2026, at any time and from time to time, the Series A Preferred Stock will be redeemable in whole or in part, at the Company’s option, at a cash redemption price of $25 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date. In addition, upon the occurrence of a Delisting Event or a Change of Control (each as defined in the Articles Supplementary), the Company may, subject to certain conditions, at its option, redeem the Series A Preferred Stock, in whole or in part, (i) after the first date on which the Delisting Event occurred or (ii) on, or within 120 days after, the first date on which the Change of Control occurred, as applicable, by paying the liquidation preference of $25
Upon the occurrence of a Change of Control during a continuing Delisting Event, unless the Company has elected to exercise its redemption right, holders of the Series A Preferred Stock will have certain rights to convert the Series A Preferred Stock into shares of the Company’s Class C Common Stock. In addition, upon the occurrence of a Delisting Event, the dividend rate will be increased on the day after the occurrence of the Delisting Event by 2.00 % per annum to the rate of 9.375 % of the $25 2.34 per share each year) from and after the date of the Delisting Event. Following the cure of such Delisting Event, the dividend rate will revert to the rate of 7.375 25
The Series A Preferred Stock ranks senior to the Company’s Class C Common Stock with respect to dividend rights and rights upon the Company’s voluntary or involuntary liquidation, dissolution or winding up.
Voting rights for holders of Series A Preferred Stock exist primarily with respect to the ability to elect two additional directors to the board of directors if six or more quarterly dividends (whether or not authorized or declared or consecutive) payable on the Series A Preferred Stock are in arrears, and with respect to voting on amendments to the Company’s charter (which includes the Articles Supplementary) that materially and adversely affect the rights of the Series A Preferred Stock or create additional classes or series of shares of the Company’s capital stock that are senior to the Series A Preferred Stock. Other than the limited circumstances described above and in the Articles Supplementary, holders of Series A Preferred Stock do not have any voting rights.
Series A Preferred Stock Dividends
Dividends on the Company’s Series A Preferred Stock accrue in an amount equal to $1.84375 per share each year ($0.460938 per share per quarter) to holders of Series A Preferred Stock, which is equivalent to 7.375 25
On February 27, 2025, the Company’s board of directors declared Series A Preferred Stock dividends payable of $0.8 million for the first quarter of 2025, which was paid on April 15, 2025. On May 6, 2025, the Company’s board of directors declared Series A Preferred Stock dividends payable of $0.8 million for the second quarter of 2025, which was paid on July 15, 2025. On August 5, 2025, the Company’s board of directors declared Series A Preferred Stock dividends payable of $0.8 million for the third quarter of 2025, which were paid on October 15, 2025. On November 12, 2025, the Company’s board of directors declared Series A Preferred Stock dividends payable of $0.8 million for the fourth quarter of 2025, which were paid on January 15, 2026.
Preferred Stock Repurchase Program
On March 4, 2025, the Company’s board of directors authorized the Company to repurchase shares of its Series A Preferred Stock up to an aggregate amount not to exceed the aggregate amount of proceeds from sales of the Company’s Class C Common Stock during the trailing twelve month period (the “Repurchase Program”). Repurchases under the Repurchase Program
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may be made through open market purchases, block purchases, privately negotiated transactions or other methods of acquiring shares permitted by applicable law, and the amount and timing of any repurchases will be dependent on various factors, including market conditions and corporate and regulatory considerations. Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act. The Repurchase Program was scheduled to expire on December 31, 2026, and it may be suspended or discontinued at any time. On January 16, 2026, the Company’s board approved an amendment to the Repurchase Program to extend the expiration date of the Repurchase Program from December 31, 2026 to December 31, 2027.
From March 4, 2025 through December 31, 2025, the Company repurchased a total of 298,500 shares of its Series A Preferred Stock, representing 14.9 % of shares issued, for a total of $7.1 million at an average cost of $23.82 per share.
Common Stock Offerings
On March 30, 2022, the Company filed a Registration Statement on Form S-3 (File No. 333-263985), and on May 27, 2022, the Company 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 the Company filed a prospectus supplement for the Company’s 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 March 4, 2025, the Company filed Supplement No. 2 to the ATM Prospectus to reflect Amendment No. 1 to the Amended and Restated At Market Issuance Sales Agreement, dated March 4, 2025.
On May 30, 2025, the Company filed a Registration Statement on Form S-3 (File No. 333-287684) to issue and sell from time to time, together or separately, the following securities at an aggregate public offering price that will not exceed $250.0 million: Class C Common Stock, preferred stock, warrants, rights and units. The Form S-3 became effective on June 27, 2025 and the Company filed a prospectus supplement for the Company’s ATM Offering on August 7, 2025.
During the year ended December 31, 2025, the Company sold 212,791 shares of Class C Common Stock in the ATM Offering at an average price of $15.66 per share for proceeds of $3.3 million, net of sale commissions. From November 15, 2023 through December 31, 2025, an aggregate of 819,700 shares have been sold in the ATM Offering at an average price of $15.95 per share for aggregate net proceeds of $11.3 million after legal, accounting, investor relations and other offering costs of $1.4 million. As of December 31, 2025, the Company had $36.9 million of shares of Class C Common Stock available for future issuance under the ATM Offering.
Common Stock Distributions
Aggregate distributions declared per share of Class C Common Stock were $1.17 and $1.15 for the years ended December 31, 2025 and 2024, respectively.
NOTE 9. RELATED PARTY TRANSACTIONS
The Company pays the members of its board of directors who are not executive officers for services rendered through cash payments and by issuing shares of Class C Common Stock to them. Total fees incurred and paid or accrued by the Company for board services for the years ended December 31, 2025 and 2024, are as follows (dollars in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Payments for services rendered | $ | $ | ||||||||||||||||||||||||
| Value of shares of Class C Common Stock issued | ||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
| Number of shares issued for services rendered | ||||||||||||||||||||||||||
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Related Party Transactions with Unconsolidated Investment in a Real Estate Property
The Company earns management fee income from the Santa Clara property, in which it has a TIC Interest. The management fee income is presented as part of other property revenue in the Company’s statements of operations. The related Santa Clara asset management fee expense is included as a reduction in the income from unconsolidated investment in a real estate property. Amounts of each for the years ended December 31, 2025 and 2024 are as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
Management fee income from TIC Interest | $ | $ | ||||||||||||||||||||||||
Company’s share in TIC asset management fee expense | $ | $ | ||||||||||||||||||||||||
NOTE 10. COMMITMENTS AND CONTINGENCIES
Environmental
Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, a real estate property owner may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines, penalties and damages for injuries to persons and adjacent property. Such laws often impose liability without regard to whether the property owner knew of, or was responsible for, the presence or disposal of such substances. Although most of the tenants of properties in which the Company has an interest are primarily responsible for any environmental damage and claims related to the leased premises, in the event of the bankruptcy or inability of the tenant of such leased premises to satisfy any obligations with respect to such environmental liability, or if the tenant is found not responsible, the Company’s property owner subsidiary may be required to satisfy any of such obligations, should they exist. In addition, the property owner subsidiary, as the owner of such property, may be held directly liable for any such damages or claims irrespective of the terms and provisions of any lease. As of December 31, 2025, the Company was not aware of any environmental matter relating to any of its real estate investments that would have a material impact on the Company’s consolidated financial statements. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.
Tenant Improvements
Pursuant to lease agreements, as of December 31, 2025 and 2024, the Company had obligations to pay $2.0 million and $3.0 million, respectively, for on-site building and tenant improvements to be incurred by tenants.
Legal Matters
From time to time, the Company or its subsidiaries may become party to legal proceedings that arise in the ordinary course of its business. As of December 31, 2025, the Company, including its subsidiaries, is not a party to any legal proceeding, nor is the Company aware of any pending or threatened litigation that could have a material adverse effect on the Company’s business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.
NOTE 11. OPERATING PARTNERSHIP UNITS
As of December 31, 2025 and 2024, there were 1,593,328 and 1,249,210 Class C OP Units outstanding that were not held by the Company, which are entitled to distributions, but have limited voting rights. After the Class C OP Units have been outstanding for at least one year, the holder may require the Operating Partnership to exchange all or a portion of such holder’s Class C OP Units for cash or, at the option of the Company, shares of Class C Common Stock on a one -for-one basis. On March 7, 2025, the Company acquired an industrial property whereby the seller received 344,119 Class C OP Units valued at $5.9 million, based on an estimated fair value of $17.00 per Class C OP Unit (see Note 3 for additional information).
On February 3, 2025, the Company entered into the Fourth Amended and Restated Limited Partnership Agreement (the “Amended OP Agreement”) of the Operating Partnership, to, among other things, incorporate prior amendments to the Third Amended and Restated Partnership Agreement, and designate and set forth the terms of the Class X OP Units. As of December 31, 2025, the Operating Partnership had awarded a total of 895,043 Class X OP Units to employees. Class X OP Units generally are entitled to receive the same current distributions that are paid on the Class C OP Units.
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Prior to December 31, 2024, the Company had issued three types of units of limited partnership interest in the Operating Partnership (“Class M OP Units,” “Class P OP Units,” and “Class R OP Units”), which were not entitled to distributions and had no voting rights. During the year ended December 31, 2024, all of the Class M OP Units, Class P OP Units, and Class R OP Units automatically converted to Class C OP Units. Some of these units were then exchanged on a one-for-one basis for the Company's Class C Common Stock.
OP Unit and Stock Compensation Expense
Stock compensation expense for the OP Unit awards and for stock issued to the board of directors for the years ended December 31, 2025 and 2024, was as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Class P OP Units | $ | $ | ||||||||||||||||||||||||
| Class R OP Units | ||||||||||||||||||||||||||
| Class X OP Units | ||||||||||||||||||||||||||
| OP Units stock compensation expense | ||||||||||||||||||||||||||
| Class C Common Stock issued to the board of directors | ||||||||||||||||||||||||||
| Total stock compensation expense | $ | $ | ||||||||||||||||||||||||
As of December 31, 2025, total unrecognized compensation expense related to the Class X OP Unit awards was $10.8 million with a weighted average remaining term of 3.9 years.
Distributions and Allocations
Class C OP Units and Class X OP Units received the following distributions and allocations of net income (loss) during the years ended December 31, 2025 and 2024, as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Class C and Class X OP Units distributions paid | $ | $ | ||||||||||||||||||||||||
| Class C and Class X OP Units net (loss) income allocation | $ | ( | $ | |||||||||||||||||||||||
NOTE 12. EARNINGS (LOSS) PER SHARE
The Company’s Class X OP Units (see Note 11) contain non-forfeitable rights to distributions and are considered to be participating securities and therefore are included in the computation of earnings per share pursuant to the two-class method. The two-class method is an allocation formula that determines earnings per share for each share of common stock and participating securities according to distributions declared (or accumulated) and participation rights in undistributed earnings. Losses are not allocated to the Class X OP Units because they have not vested and do not have a contractual obligation to share in the Company’s losses. Class C OP Unit distributions are not deducted in the table below since they share in the Company’s losses.
On repurchase of preferred stock, any excess or deficit of the net carrying amount of the preferred stock in the Company’s consolidated balance sheet over or under the fair value of the consideration transferred to the holders of the preferred stock is included in the determination of net income (loss) attributable to common stockholders in the calculation of earnings per share.
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The following table presents the computation of the Company’s basic earnings (loss) per share attributable to common stockholders and its diluted earnings (loss) per share attributable to common stockholders and noncontrolling interests, which are Class C OP Units for the years ended December 31, 2025 and 2024 (in thousands, except shares/units and per share data):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Net loss (income) attributable to noncontrolling interest in Operating Partnership (1) | ( | |||||||||||||||||||||||||
Preferred stock dividends | ( | ( | ||||||||||||||||||||||||
| Loss on repurchases of preferred stock | ( | |||||||||||||||||||||||||
| Class X OP Unit distributions | ( | |||||||||||||||||||||||||
| Net (loss) income available to common stockholders used in basic net (loss) income per share | ( | |||||||||||||||||||||||||
| Net (loss) income attributable to noncontrolling interest in Operating Partnership | ( | |||||||||||||||||||||||||
| Net (loss) income available to common stockholders and noncontrolling interests used in diluted net (loss) income per share/unit | $ | ( | $ | |||||||||||||||||||||||
Weighted average shares of Common Stock outstanding - basic | ||||||||||||||||||||||||||
Class C OP Units (2) | ||||||||||||||||||||||||||
Weighted average shares and units outstanding - diluted (2) | ||||||||||||||||||||||||||
Earnings (loss) per share attributable to common stockholders: | ||||||||||||||||||||||||||
| Basic | $ | ( | $ | |||||||||||||||||||||||
| Earnings (loss) per share attributable to common stockholders and Class C OP Units: | ||||||||||||||||||||||||||
| Diluted | $ | ( | $ | |||||||||||||||||||||||
(1) Each Class C Common Share and Class C OP Unit have the same participation in earnings (loss).
NOTE 13. SUBSEQUENT EVENTS
The Company evaluates subsequent events until the date these consolidated financial statements are issued. Significant subsequent events are described below:
Amendments to the Credit Facility
On January 16, 2026, the Company entered into an agreement with the Lenders to amend the Credit Agreement to (i) extend the maturity date of the credit facility eighteen months to July 18, 2028, (ii) remove the 10 basis points SOFR Adjustment and (iii) allow repurchases of shares of the Series A Preferred Stock, by amending certain distribution covenants so long as such repurchases are funded by proceeds from the issuance of preferred or common stock or asset sales, in each case, occurring within the trailing twelve month period of such repurchase.
Preferred Stock Repurchase Program
On January 16, 2026, the Company’s board approved an amendment to the Repurchase Program to (1) extend the expiration date of the Repurchase Program from December 31, 2026 to December 31, 2027 and (2) set the maximum amount of shares of Series A Preferred Stock that may be repurchased under the Repurchase Program at $49.6 million, including shares of Series A Preferred Stock that had been repurchased as of January 16, 2026.
In January 2026, the Company repurchased 21,109 shares of Series A Preferred Stock for a total of $0.5 million at an average cost of $24.95 per share and there were 1,680,391 shares of Series A Preferred Stock outstanding as of the filing date of this Annual Report on Form 10-K.
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Preferred Dividends
On November 12, 2025, the Company’s board of directors declared Series A Preferred Stock dividends payable of $0.8 million for the fourth quarter of 2025, which were paid on January 15, 2026.
On March 17, 2026, the Company’s board of directors declared Series A Preferred Stock dividends payable of $0.8 million for the first quarter of 2026, which are scheduled to be paid on April 15, 2026.
Common Stock and OP Unit Distributions
On January 16, 2026, the Company’s board of directors authorized a 2.6 % increase in the annual distribution rate from $1.17 per share to $1.20 per share commencing with monthly distributions payable to common stockholders and Class C OP Unit holders of record beginning as of January 30, 2026 and (ii) authorized monthly distributions of $0.10 per share payable to common stockholders and OP Unit holders of record as of January 30, 2026, February 27, 2026 and March 31, 2026, which will be paid on or about February 13, 2026, March 13, 2026 and April 15, 2026, respectively.
On March 17, 2026, the Board authorized and the Company declared monthly distributions of $0.10 per share payable to common stockholders and Class C OP Unit holders of record as of April 30, 2026, May 29, 2026 and June 30, 2026, which will be paid on or about May 15, 2026, June 15, 2026 and July 15, 2026, respectively.
The per share monthly distribution rate of $0.10 per share of Common Stock is equivalent to an annualized rate of $1.20 per share.
TIC Interest Acquisition
On January 16, 2026, the Company acquired the 27.3 % remaining TIC interest for $9.6 million, giving the Company 100 % ownership and control of the Santa Clara, California property leased to Fujifilm Dimatix, Inc.
New Interest Rate Swap Agreements
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MODIV INDUSTRIAL, INC.
Schedule III
Real Estate Assets and Accumulated Depreciation and Amortization
December 31, 2025
(in thousands, excludes real estate asset held for sale)
| Initial Cost to Company | Costs Capitalized Subsequent to Acquisition (3) | Gross Amount at Which Carried at Close of Period | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description | Location | Original Year of Construction | Date Acquired | Encumbrances (1) | Land | Buildings & Improvements (2) | Total | Land | Buildings & Improvements (2) | Total | Accumulated Depreciation and Amortization | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Northrop Grumman | Melbourne, FL | 1986 | 03-07-2017 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Northrop Grumman Parcel | Melbourne, FL | — | 06-21-2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Husqvarna | Charlotte, NC | 2010 | 11-30-2017 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AvAir | Chandler, AZ | 2015 | 12-28-2017 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3M | DeKalb, IL | 2007 | 03-29-2018 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Taylor Fresh Foods | Yuma, AZ | 2001 | 10-24-2019 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Labcorp | San Carlos, CA | 1974 | 12-31-2019 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WSP USA | San Diego, CA | 1985 | 12-31-2019 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ITW Rippey | El Dorado, CA | 1998 | 12-31-2019 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| L3Harris | Carlsbad, CA | 1984 | 12-31-2019 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Arrow Tru-Line | Archbold, OH | 1976 | 12-03-2021 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Colorado Springs, CO | Varies | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Colorado Springs, CO | Varies | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Dacono, CO | Varies | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Alachua, FL | 2009 | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Franklinton, NC | 2007 | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Canal Fulton, OH | 1998 | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Canal Fulton, OH | 2004 | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Rock Hill, SC | 1999 | 04-19-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lindsay | Gap, PA | 1992/2008 | 04-13-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Producto | Jamestown, NY | 1961/1971 | 07-15-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Valtir | Centerville, UT | 1970/2013 | 07-26-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Valtir | Orangeburg, SC | 1998 | 07-26-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Valtir | Fort Worth, TX | 1968 | 07-26-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Valtir | Lima, OH | 1928/2002 | 08-04-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Plastic Products | Princeton, MN | 1960/2020 | 01-26-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stealth Manufacturing | Savage, MN | 1982 | 03-31-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summit Steel | Reading, PA | 2005 | 04-13-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PBC Linear | Roscoe, IL | 1961/2018 | 04-20-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cameron Tool | Lansing, MI | Varies | 05-03-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Initial Cost to Company | Costs Capitalized Subsequent to Acquisition (3) | Gross Amount at Which Carried at Close of Period | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description | Location | Original Year of Construction | Date Acquired | Encumbrances (1) | Land | Buildings & Improvements (2) | Total | Costs Capitalized Subsequent to Acquisition (3) | Land | Buildings & Improvements (2) | Total | Accumulated Depreciation and Amortization | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| S.J. Electro Systems | Detroit Lakes, MN | 1998/2009 | 05-05-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| S.J. Electro Systems | Plymouth, MN | 1989 | 05-05-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| S.J. Electro Systems | Ashland, OH | 2018 | 05-05-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Titan | Alleyton, TX | 1976/2012 | 05-11-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vistech | Piqua, OH | 1974 | 07-03-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SixAxis | Andrews, SC | 2002 | 07-11-2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KIA/Trophu of Carson | Carson, CA | 2016 | 01-18-2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vacant | San Diego, CA | 1985 | 12-31-2019 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OES | Rancho Cordova, CA | 2009 | 12-31-2019 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Torrent | Tampa, FL | 1996 | 07-15-2024 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Science First | Yulee, FL | 2009 | 03-07-2025 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Except for the properties leased to Plastic Products, Torrent and Science First, and the mortgaged Taylor Fresh Foods property, all other properties served as collateral for borrowings under our Credit Facility as of December 31, 2025.
(2) Building and improvements include tenant origination and absorption costs.
(3) Consists of capital expenditures and real estate development costs, net of a partial land sale.
Notes:
•The aggregate cost of real estate for U.S. federal income tax purposes was approximately $513.9 million (unaudited) as of December 31, 2025.
•Real estate investments (excluding land) are depreciated over their estimated useful lives. Their useful lives are generally 15 -50 years for buildings, the shorter of 15 years or remaining lease term for site/building improvements, the shorter of 15 years or remaining contractual lease term for tenant improvements and the remaining lease term with consideration as to above- and below-market extension options for above- and below-market lease intangibles for tenant origination and absorption costs.
•The real estate assets are 100% owned by the Company.
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The following is a reconciliation of gross real estate investments and accumulated depreciation and amortization activity for the years ended December 31, 2025 and 2024:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Real estate investments: | |||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Acquisitions | |||||||||||
| Improvements to real estate | |||||||||||
| Dispositions | ( | (1) | ( | ||||||||
| Held for sale | ( | ( | |||||||||
Impairment of real estate investment | ( | ||||||||||
| Balance at end of year | $ | $ | |||||||||
| Accumulated depreciation and amortization: | |||||||||||
| Balance at beginning of year | $ | ( | $ | ( | |||||||
| Depreciation and amortization | ( | ( | |||||||||
| Dispositions | (1) | ||||||||||
| Held for sale | |||||||||||
Impairment of real estate investment | |||||||||||
| Balance at end of year | $ | ( | $ | ( | |||||||
(1) Represents the sale of the Company’s industrial property located in Endicott, New York, leased to New Vision Industries, LLC, a subsidiary of Producto, on February 26, 2025. The gross assets and accumulated depreciation and amortization activity for the year ended December 31, 2025 excludes the sale of its office property in Issaquah, Washington formerly leased to Costco on December 15, 2025, as it was classified as held for sale at December 31, 2025.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on March 25, 2026.
| MODIV INDUSTRIAL, INC. | ||||||||
| By: | /s/ AARON S. HALFACRE | |||||||
| Aaron S. Halfacre | ||||||||
| Chief Executive Officer, President and Director | ||||||||
| (principal executive officer) | ||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Name | Title | Date | ||||||||||||
| /s/ AARON S. HALFACRE | Chief Executive Officer, President and Director | March 25, 2026 | ||||||||||||
| Aaron S. Halfacre | (principal executive officer) | |||||||||||||
| /s/ THOMAS H. NOLAN, JR. | Chairman of the Board and Independent Director | March 25, 2026 | ||||||||||||
| Thomas H. Nolan, Jr. | ||||||||||||||
| /s/ RAYMOND J. PACINI | Executive Vice President, Chief Financial Officer, | March 25, 2026 | ||||||||||||
| Raymond J. Pacini | Secretary and Treasurer | |||||||||||||
| (principal financial officer) | ||||||||||||||
| /s/ SARA R. GRISHAM | Chief Accounting Officer | March 25, 2026 | ||||||||||||
| Sara R. Grisham | (principal accounting officer) | |||||||||||||
/s/ CHRISTOPHER R. GINGRAS | Independent Director | March 25, 2026 | ||||||||||||
Christopher R. Gingras | ||||||||||||||
| /s/ KIMBERLY SMITH | Independent Director | March 25, 2026 | ||||||||||||
| Kimberly Smith | ||||||||||||||
| /s/ CONNIE TIRONDOLA | Independent Director | March 25, 2026 | ||||||||||||
| Connie Tirondola | ||||||||||||||
F-35
FAQ
What is Modiv Industrial (MDV) and how is its portfolio structured?
Modiv Industrial (MDV) is an internally managed REIT focused on single-tenant, net-lease industrial manufacturing properties. As of December 31, 2025 it owned 42 properties, including 39 industrial and 3 non-core assets, spread across 14 states with about 4.4 million square feet.
How much rental income does Modiv Industrial (MDV) generate and from what mix?
Modiv generated annual base rent of $39.1 million based on the next 12 months of contractual rent as of December 31, 2025. Approximately 82% of this rent comes from industrial properties and 18% from three non-core retail and office assets.
What are the key tenant and geographic concentration risks for Modiv Industrial (MDV)?
Two tenants account for roughly 25% of Modiv’s annual base rent, with nine Lindsay-leased properties contributing about 14% and a KIA property about 11%. Around 31% of annual base rent comes from California, increasing exposure to that state’s economic and natural disaster risks.
What is Modiv Industrial (MDV)’s lease profile and occupancy level?
Modiv reports a weighted average remaining lease term of about 14.0 years as of December 31, 2025, reflecting long-duration net leases. Occupancy stands at 98% by square footage, with 27 tenants across 12 industries and approximately 4.4 million square feet of leasable space.
How leveraged is Modiv Industrial (MDV) and what debt does it use?
As of December 31, 2025 Modiv’s leverage was 45.1% of the aggregate fair value of its real estate and cash, above its long-term 40% target. Debt includes a $250.0 million credit facility term loan and $12.1 million mortgage balances on each of two properties.
What strategic changes is Modiv Industrial (MDV) pursuing in its portfolio?
Modiv is executing a strategy started in late 2021 to reduce exposure to office, retail and short-lease legacy industrial assets. It has identified 12–15 assets for recycling over 24 months, while emphasizing long-term, single-tenant industrial manufacturing properties to extend lease terms and stabilize income.
What notable impairments and risks does Modiv Industrial (MDV) disclose?
Modiv recorded a $5.8 million impairment on a Saint Paul, Minnesota property in 2025 and warns that further sales of legacy assets could trigger additional impairments. It also highlights cybersecurity, tenant default, refinancing, interest rate, inflation, environmental, and REIT-qualification risks.
Modiv Industrial Inc
NYSE:MDV
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Mar 25, 2026
[8-K] MODIV INDUSTRIAL, INC. Reports Material Event
Mar 18, 2026
[8-K] MODIV INDUSTRIAL, INC. Reports Material Event