SEC Form PRE 14A filed by Modiv Industrial Inc.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

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PRELIMINARY PROXY STATEMENT- SUBJECT TO COMPLETION, DATED APRIL 9, 2025

 

MODIV INDUSTRIAL, INC.

2195 South Downing Street

Denver, Colorado 80210

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD JULY 23, 2025

Dear Stockholder:

 

NOTICE IS HEREBY GIVEN that the 2025 Annual Meeting of Stockholders (the “Annual Meeting”) of Modiv Industrial, Inc., a Maryland corporation (the “Company”), will be held in a virtual-only format at www.virtualshareholdermeeting.com/MDV2025 on Wednesday, July 23, 2025 at [10:00] a.m. Mountain Time. The virtual meeting will utilize online tools that ensure stockholders have the same rights and opportunities to participate, as described below, as they would at an in-person meeting. Stockholders will not be able to attend the Annual Meeting in-person.

 

Whether you plan to attend the Annual Meeting virtually and vote virtually or not, we urge you to submit your proxy as early as possible to authorize how your shares will be voted at the Annual Meeting. Stockholders may submit a proxy to vote their shares: (1) via the Internet; (2) by phone by calling 1-800-690-6903 to reach a toll-free, automated touchtone voting line; or (3) by mail, using the proxy card accompanying your proxy materials if you received a printed copy of the proxy materials by mail.

 

 

 

 

The virtual Annual Meeting will begin promptly at [10:00] a.m. Mountain Time, and online access will begin at [9:45] a.m. Mountain Time. We encourage you to access the virtual Annual Meeting prior to the start time.

 

 

PRELIMINARY PROXY STATEMENT- SUBJECT TO COMPLETION, DATED APRIL 9, 2025

 

2195 South Downing Street

Denver, Colorado 80210

Proxy Statement

For the Annual Meeting of Stockholders

to be Held on July 23, 2025

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or the “Board”) of Modiv Industrial, Inc., a Maryland corporation, for use at the annual meeting of stockholders to be held virtually at www.virtualshareholdermeeting.com/MDV2025 on Wednesday, July 23, 2025 at [10:00] a.m. Mountain Time (the “Annual Meeting”). On or about [], 2025, proxy materials for the Annual Meeting, including this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Annual Report”), are being made available to stockholders entitled to vote at the Annual Meeting.

When used in this Proxy Statement, the terms “we,” “us,” “our,” “Modiv,” “Modiv Industrial, Inc.,” or the “Company” refer to Modiv Industrial, Inc. and its subsidiaries unless the context requires otherwise. In this Proxy Statement, we refer to our Class C common stock, $0.001 par value per share, as our “common stock.”

 

CERTAIN INFORMATION ABOUT MANAGEMENT

The Board of Directors

We operate under the direction of the Board of Directors. The Board of Directors oversees our operations. We currently have five directors, one of whom is our Chief Executive Officer, Aaron S. Halfacre, and four of whom are independent. All five of our directors have been nominated for re-election at the Annual Meeting. For biographical information regarding our directors, see “—Executive Officers and Directors” below.

During 2024, the Board of Directors held seven meetings. There are three standing committees of the Board of Directors, each of which is composed entirely of independent directors: the audit committee, the compensation committee, and the nominating and corporate governance committee. Information regarding each of these committees is set forth below. During 2024, each of our directors attended at least 75% of the aggregate meetings of the Board and the committees of the Board on which he or she served. Generally, our directors are also encouraged to attend our annual meeting of stockholders each year. Four of our directors attended our 2024 annual meeting of stockholders held on December 11, 2024.

Board Leadership Structure

The composition of the Board of Directors ensures strong oversight by independent directors. Thomas H. Nolan, Jr., an independent director, serves as our Chairman of the Board and, as noted above, our audit committee, compensation committee and the nominating and corporate governance committee are composed entirely of independent directors. Our Company’s management has been led by Mr. Halfacre, our Chief Executive Officer, since January 1, 2019. As Chairman of the Board, Mr. Nolan is responsible for leading Board meetings and generally setting the agendas for Board meetings in consultation with Mr. Halfacre and subject to the requests of other directors. Mr. Halfacre is responsible for providing information to the other directors in advance of meetings and between meetings. The direct involvement of Mr. Halfacre in the Company’s operations makes him best positioned to lead strategic planning sessions and determine the time allocated to each agenda item in discussions of our short- and long-term objectives. Consistent with our Corporate Governance Guidelines, the Board of Directors currently does not have a lead independent director because the Chairman of the Board is an independent director.

The Role of the Board of Directors in our Risk Oversight Process

Our executive officers are responsible for the day-to-day management of risks faced by the Company, while the Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management.

The audit committee oversees risk management in the areas of financial reporting, internal controls, cybersecurity and compliance with legal and regulatory requirements. The compensation committee discharges the Board of Directors’ responsibilities relating to the compensation of the executive officers. The nominating and corporate governance committee is responsible for overseeing the organization, function and composition of our Board of Directors and its committees, the self-evaluation of the Board as a whole and of the individual directors and the Board’s evaluation of management. It is also responsible for reviewing and, if applicable, approving related party transactions. The nominating and corporate governance committee periodically reviews the Company’s corporate governance policies and procedures and, if appropriate, recommends changes to the Board of Directors.

Although each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks as well as through regular reports directly from the executive officers responsible for oversight of particular risks within our Company.

Director Independence

 

The NYSE listing standards set forth objective requirements for a director to satisfy, at a minimum, in order to be determined to be independent by our Board of Directors. In addition, in order to conclude a director is independent in accordance with the NYSE listing standards, our Board of Directors must also consider all relevant facts and circumstances, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. Pursuant to our Corporate Governance Guidelines and the NYSE listing standards, which require that a majority of our directors be independent within the meaning of the NYSE listing standards, our Board of Directors undertook a review of the independence of all non-management directors. Our Board of Directors has affirmatively determined that the following four of our five current directors are independent under the NYSE listing standards and our Corporate Governance Guidelines and do not have a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of the Board: Christopher Gingras, Thomas Nolan, Jr., Kimberly Smith and Connie Tirondola.

 

Our audit committee’s function is to assist the Board of Directors in fulfilling its responsibilities by overseeing (i) our accounting and financial reporting processes, (ii) the integrity of our financial statements, (iii) cybersecurity, (iv) our compliance with legal and regulatory requirements, (v) the selection, appointment and compensation of our independent registered public accounting firm and (vi) our independent registered public accounting firm’s qualifications, performance and independence. The audit committee fulfills these responsibilities primarily by carrying out the activities enumerated in the audit committee charter. The audit committee charter is available in the Investors – Governance – Governance Documents section of our website at www.modiv.com. The information contained on this website is not part of, or incorporated by reference in, this Proxy Statement.

The members of the audit committee are Mr. Nolan (Chairman), Mr. Gingras and Ms. Tirondola. All of the members of the audit committee are “independent” as defined by the NYSE and applicable rules of the SEC. All members of the audit committee are financially literate, and the Board of Directors has determined that Mr. Nolan satisfies the SEC’s requirements for an “audit committee financial expert.”

During 2024, the audit committee held four meetings.

Independent Registered Public Accounting Firm

Grant Thornton has served as our independent registered public accounting firm since March 30, 2023. The audit committee may, however, select new auditors at any time in the future in its discretion if it deems such decision to be in our best interests. Any such decision would be disclosed to our stockholders in accordance with applicable securities laws.

Pre-Approval Policies

In order to ensure that the provision of services by the Company’s independent registered public accounting firm does not impair the auditors’ independence, the audit committee pre-approves all auditing services performed for us by our independent auditors, as well as all permitted non-audit services. In determining whether or not to pre-approve services, the audit committee considers whether the service is a permissible service under the rules and regulations promulgated by the SEC. The audit committee delegates preapproval authority between audit committee meetings to the chair of the audit committee, provided that any such approval is presented to the full audit committee at its next scheduled meeting.

For the years ended December 31, 2023 and 2024, all services rendered by Grant Thornton, our independent registered public accounting firm, were pre-approved in accordance with the policies and procedures described above.

Principal Independent Registered Public Accounting Firm Fees

 

The audit committee reviewed the audit and non-audit services performed by Grant Thornton (Newport Beach, CA, PCAOB ID 248) during the fiscal years ended December 31, 2023 and 2024, as well as the fees charged by Grant Thornton for such services.

The aggregate fees billed to us for professional accounting services by Grant Thornton, including the audit of our annual financial statements for the years ended December 31, 2023 and 2024, are set forth in the table below.

 

 

Report of the Audit Committee

The audit committee (the “audit committee”) of the Board of Directors (the “Board of Directors”) of Modiv Industrial, Inc. (the “Company”) represents the Board of Directors in discharging its responsibilities relating to the accounting, reporting and financial practices of the Company, and, among other things, is responsible for overseeing the Company’s accounting and financial reporting process. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements; for the appropriateness of the accounting principles and reporting policies that are used by the Company; and for establishing and maintaining internal control over financial reporting as required by applicable Securities and Exchange Commission (“SEC”) rules. Grant Thornton LLP (“Grant Thornton”), the Company’s independent registered public accounting firm for the year ended December 31, 2024, was responsible for auditing the Company’s financial statements and for reviewing the Company’s unaudited interim financial statements. The audit committee’s responsibility was to monitor and oversee these processes. The members of the audit committee are not professionally engaged in the practice of accounting or auditing and thus their oversight does not provide an independent basis to determine that management has applied U.S. GAAP appropriately or maintained appropriate internal controls and disclosure controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.

In this context, the audit committee reviewed and discussed with management the Company’s audited financial statements for the year ended December 31, 2024, including a discussion of the quality and acceptability of the Company’s financial reporting, the reasonableness of significant judgments, the critical audit matters and the clarity of disclosures in the financial statements. The audit committee discussed with Grant Thornton, which is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. GAAP, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. The audit committee received from Grant Thornton the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding Grant Thornton’s communications concerning its independence and discussed with Grant Thornton its independence from the Company. In addition, the audit committee considered whether Grant Thornton’s provision of non-audit services, if any, is compatible with Grant Thornton’s independence.

Based on these reviews and discussions, the audit committee recommended to the Board of Directors that the 2024 audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 for filing with the SEC.

 

The foregoing Report of the Audit Committee shall not be deemed to be “soliciting material” or incorporated by reference by any general statement incorporated by reference in this Proxy Statement into any filing under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under the Exchange Act.

 

The Compensation Committee

As noted above, the compensation committee discharges the Board of Directors’ responsibilities relating to the compensation of our executive officers. The compensation committee is responsible for recommending, establishing, overseeing and directing the Company’s executive officer and director compensation philosophy, policies and programs, approving the compensation to be paid by the Company to the Company’s executive officers and making recommendations to the Board of Directors regarding the compensation of the non-employee members of the Company’s Board of Directors. The compensation committee fulfills these responsibilities primarily by carrying out the activities enumerated in the compensation committee charter. The compensation committee may form and delegate authority to subcommittees as appropriate, and the compensation committee reviews the recommendations of the Chief Executive Officer with regard to the compensation of the executive officers other than the Chief Executive Officer. The compensation committee has the authority, in its sole discretion, to select, retain and obtain the advice of a compensation consultant as necessary to assist with the execution of its duties and responsibilities set forth in the compensation committee charter. The compensation committee charter is available in the Investors – Governance – Governance Documents section of our website at www.modiv.com. The information on, or accessible through, our website is not incorporated into and does not constitute a part of this Proxy Statement.

The members of the compensation committee are Mr. Gingras, Mr. Nolan and Ms. Smith, with Ms. Smith serving as chair of the compensation committee. All of the members of the compensation committee are “Independent Directors” as defined by the NYSE and applicable rules of the SEC.

During 2024, the compensation committee held two meetings.

The nominating and corporate governance committee is responsible for, among other things, (i) providing counsel to our Board of Directors with respect to the organization, function and composition of our Board of Directors and its committees, (ii) overseeing the self-evaluation of our Board of Directors and the Board’s evaluation of management, (iii) periodically reviewing and, if appropriate, recommending to our Board of Directors changes to the Company’s corporate governance policies and procedures, (iv) identifying and recommending to our Board of Directors potential director candidates for nomination and (v) reviewing and, if applicable, approving related party transactions. The nominating and corporate governance committee fulfills these responsibilities primarily by carrying out the activities enumerated in the nominating and corporate governance committee charter. The nominating and corporate governance committee charter is available in the Investors – Governance – Governance Documents section of our website at www.modiv.com. The information on, or accessible through, our website is not incorporated into and does not constitute a part of this Proxy Statement.

The members of the nominating and corporate governance committee are Ms. Tirondola, Mr. Nolan and Ms. Smith, with Ms. Smith serving as chair of the nominating and corporate governance committee.

During 2024, the nominating and corporate governance committee held two meetings.

Board Membership Criteria

With respect to filling vacancies for independent director positions, the independent directors review the appropriate experience, skills and characteristics required of directors in the context of the then-current membership of the Board of Directors. The full Board of Directors annually conducts a similar review with respect to all director nominations. This assessment includes, in the context of the perceived needs of the Board of Directors at that time, issues of knowledge, experience, judgment and skills, such as an understanding of the real estate and real estate finance industries or accounting or financial management expertise. The Board of Directors seeks to nominate directors with diverse backgrounds, experiences and skill sets that complement each other so as to maximize the collective knowledge, experience, judgment and skills of the entire Board of Directors. The Board of Directors assesses its effectiveness in achieving this goal annually, in part, by reviewing the diversity of the skill sets of the directors and determining whether there are any deficiencies in the Board of Directors’ collective skill set that should be addressed in the nominating process.

 

Other considerations in director nominations include the candidate’s independence from conflict with us and the ability of the candidate to attend Board meetings regularly and to devote an appropriate amount of time in preparation for those meetings. It also is expected that independent directors will be individuals who possess a reputation and hold positions or affiliations befitting a director of a publicly held company and who are actively engaged in their occupations or professions or are otherwise regularly involved in the business, professional or academic community.

 

In nominating candidates for the Board of Directors, the nominating and corporate governance committee solicits candidate recommendations from its own members and management. The nominating and corporate governance committee may also engage the services of a search firm to assist in identifying potential director nominees.

The nominating and corporate governance committee will consider recommendations made by stockholders for director nominees who meet the established director criteria set forth above. In order to be considered for nomination, recommendations made by stockholders must be submitted within the timeframe required to request a proposal to be included in the proxy materials. In evaluating the persons recommended as potential directors, the nominating and corporate governance committee will consider each candidate without regard to the source of the recommendation and take into account those factors that it determines are relevant. Stockholders may directly nominate potential directors (without the recommendation of the nominating and corporate governance committee or the Board of Directors) by satisfying the procedural requirements for such nomination as provided in Article II, Section 11 of our bylaws. Any stockholder may request a copy of our bylaws free of charge by calling (888) 686-6348 or may view the bylaws in the Investor Relations – Governance – Governance Documents section of our website at www.modiv.com. The information contained on this website is not part of, or incorporated by reference in, this Proxy Statement.

Stockholder and other Interested Party Communications with the Board of Directors

We have established a procedure for stockholders and other interested parties to communicate comments and concerns to the Board of Directors. Stockholders and other interested parties may contact the Board of Directors at the following address:

Board of Directors of Modiv Industrial, Inc.

2195 South Downing Street

Denver, Colorado 80210

(888) 686-6348

Name(1)		Age(2)		Positions		Year of First Becoming a Director
Aaron S. Halfacre		52		Chief Executive Officer, President and Director		2019
Thomas H. Nolan, Jr.(3)(4)(5)(6)		67		Chairman of the Board and Independent Director		2019
Raymond J. Pacini		69		Executive Vice President, Chief Financial Officer, Secretary and Treasurer		N/A
John Raney		44		Chief Operating Officer and General Counsel		N/A
Christopher R. Gingras(3)(4)		50		Independent Director		2024
Kimberly Smith(4)(5)(7)(8)		62		Independent Director		2021
Connie Tirondola(3)(5)		68		Independent Director		2021

(1)	The address of each executive officer and director listed is 2195 South Downing Street, Denver, Colorado 80210.

(2)	As of April 24, 2025.

(3)	Member of the audit committee of our Board of Directors.

(4)	Member of the compensation committee of our Board of Directors.

(5)	Member of the nominating and corporate governance committee of our Board of Directors.

(6)	Chair of the audit committee of our Board of Directors.

(7)	Chair of the compensation committee of our Board of Directors.

(8)	Chair of the nominating and corporate governance committee of our Board of Directors.

Timing of Equity Grants

 

All equity grants made to executive officers must be either directly approved by the compensation committee of our Board of Directors or through delegated authority. The compensation committee of our Board of Directors does not currently take material non-public information into account when determining the timing of equity grants, and we do not time nor do we plan to time the release of material, non-public information for the purpose of affecting the value of employee or director compensation. During 2024, we did not grant stock options (or similar awards).

Pay Versus Performance

The following table presents the Company’s pay versus performance disclosure as required by the SEC. The disclosure included in this section is required by SEC rules and does not necessarily align with how the Company or the Compensation Committee views the link between the Company’s performance and the compensation of its named executive officers. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years presented.

Year(1)		Summary Compensation Table Total for PEO ($)(2)				Compensation Actually Paid to PEO ($)(3)				Average Summary Compensation Table Total for Non-PEO Named Executive Officer ($)(2)				Average Compensation Actually Paid to Non-PEO Named Executive Officer ($)(3)				Value of Initial Fixed $100 Investment Based on Total Shareholder Return(4)				Company Reported Net Income (Loss) ($000)				Company Selected Performance Measure: AFFO($000)(5)
2024			386,600				1,508,002				421,600				585,444			$	115.53				6,493				14,788
2023			370,700				5,883,375				545,700				1,464,832			$	135.38				(8,696)				14,672
2022			265,750				(1,381,612)				494,050				137,365			$	51.52				(4,511)				16,634

 

(1)

Our principal executive officer (“PEO”) for the years ended December 31, 2024, 2023 and 2022 was Aaron S. Halfacre, our Chief Executive Officer and President. Our non-PEO named executive officers for the year ended December 31, 2024 were Raymond J. Pacini, our Executive Vice President, Chief Financial Officer, Secretary and Treasurer and John C Raney, our Chief Operating Officer and General Counsel. Our non-PEO named executive officer for the years ended December 31, 2023 and 2022 was Raymond J. Pacini, our Executive Vice President, Chief Financial Officer, Secretary and Treasurer.

 

(2)	Amounts reported in this column represent the total compensation reported in the Summary Compensation Table for the applicable year in which Mr. Halfacre served as our PEO, and Messrs. Pacini and Raney served as our non-PEO named executive officers, as applicable.

 

(3)	To calculate compensation actually paid, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable year. A reconciliation of the adjustments for Mr. Halfacre, Mr. Pacini and Mr. Raney is set forth following the footnotes to this table.

 

(4)	The cumulative total shareholder return for 2022 is based on the period from February 11, 2022, the date our common stock became listed on a national securities exchange, through December 31, 2022.

 

(5)	A description of our use of AFFO as a performance measure is set forth below under “– Relationships Between Compensation Actually Paid and Financial Performance Measures.”

 

Reconciliation of Compensation Actually Paid Adjustments

Year		Summary Compensa tion Table Total ($)				Minus Grant Date Fair Value of Stock Awards Granted in Fiscal Year ($)				Plus Fair Value at Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Fiscal Year ($)				Plus/(Minus) Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years ($)(1)(2)				Plus Fair Value at Vesting of Stock Awards Granted in Fiscal Year that Vested During Fiscal Year ($)				Plus/(Minus) Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior Years for which Applicable Vesting Conditions Were Satisfied During the Fiscal Year ($)(3)				Minus Fair Value as of Prior Fiscal Year-End of Stock Awards Granted in Prior Fiscal Year that Failed to Meet Applicable Conditions During Fiscal Year ($)				Plus Dividends or Other Earnings Paid on Stock Awards Not Otherwise Included in Total Compensation for the Fiscal Year ($)				Equals Compensation Actually Paid ($)
Mr. Halfacre
2024			386,600				—				—				—				—				1,121,402				—				—				1,508,002
2023			370,700				—				—				5,512,675				—				—				—				—				5,883,375
2022			265,750				—				—				(1,647,362	)			—				—				—				—				(1,381,612	)
Mr. Pacini
2024			421,600				—				—				—				—				207,990				—				—				629,590
2023			545,700				—				—				919,132				—				—				—				—				1,464,832
2022			494,050				—				—				(356,685	)			—				—				—				—				137,365
Mr. Raney
2024			421,600				—				—				—				—				119,698				—				—				541,298
2024 average of Non-PEO Named Executive Officers																																			585,444

(1)

For 2022, represents the change in fair value from March 31, 2022 to December 31, 2022 of (i) 210,667 Class R OP Units and 40,000 Class P OP Units granted to Mr. Halfacre in prior years and (ii) 33,333 Class R OP Units and 16,029 Class P OP Units granted to Mr. Pacini in prior years. The fair value was measured as of March 31, 2022, instead of December 31, 2021, because the Company’s common stock was not listed on a national securities exchange as of December 31, 2021. The fair value as of March 31, 2022 reflects the Company’s common stock closing price on the NYSE of $17.94 on March 31, 2022. The fair value as of December 31, 2022 reflects the Company’s common stock closing price on the NYSE of $12.00 per share on December 30, 2022, the last trading day of 2022. See the discussion above regarding the grant of the Class P OP Units and Class R OP Units.

(2)

For 2023, represents the change in fair value from December 31, 2022, to December 31, 2023, of (i) 210,667 Class R OP Units and 40,000 Class P OP Units granted to Mr. Halfacre in prior years and (ii) 33,333 Class R OP Units and 16,029 Class P OP Units granted to Mr. Pacini in prior years. The fair value as of December 31, 2022 reflects the Company’s common stock closing price on the NYSE of $12.00 per share on December 30, 2022, the last trading day of 2022. The fair value as of December 31, 2023, reflects the Company’s common stock closing price on the NYSE of $14.90 per share on December 29, 2023, the last trading day of 2023.

(3)

For 2024, represents the change in fair value from December 31, 2023, to March 31, 2024 vesting date of (i) 210,667 Class R OP Units and 40,000 Class P OP Units granted to Mr. Halfacre in prior years, (ii) 33,333 Class R OP Units and 16,029 Class P OP Units granted to Mr. Pacini in prior years and 25,333 Class R OP Units granted to Mr. Raney in prior years. The fair value as of December 31, 2023 reflects the Company’s common stock closing price on the NYSE of $14.90 per share on December 29, 2022, the last trading day of 2023. The fair value as of March 31, 2024, reflects the Company’s common stock closing price on the NYSE of $16.79 per share on March 28, 2024, the last trading day of March 2024.

Relationships Between Compensation Actually Paid and Financial Performance Measures

The calculation of compensation actually paid in each of the years shown reflects required adjustments to equity award valuations under SEC rules, which were in turn impacted by our stock price performance. Our compensation committee selected FFO per share as the measure used to determine the performance target for the three-year Class R OP Unit awards granted on January 25, 2021, and this measure was established before our common stock became listed on a national securities exchange in February 2022.

As discussed above, on March 31, 2024, the Class P OP Units were automatically converted into Class C OP Units at a conversion ratio of 1.6667 Class C OP Units for each one Class P OP Unit and the Class R OP Units were automatically converted into Class C OP Units at a conversion ratio of 2.5 Class C OP Units for each one Class R OP Unit. The Class C OP Units are exchangeable for shares of common stock on a one for one basis, or cash, as solely determined by the Company.

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

Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation, deferred rent, amortization of in-place lease valuation intangibles, deferred financing fees, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-offs of transaction costs and other one-time transactions. We also believe that AFFO is a recognized measure of sustainable operating performance of the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance. 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 (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, FFO and AFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

 

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

Compensation Actually Paid and Total Stockholder Return

The decrease in the fair value of outstanding and unvested stock awards granted in prior years reported in column 5 of the reconciliation above for 2022 is less than the decline in the price of our common stock since our initial listing on the NYSE on February 11, 2022 because the fair value of outstanding and unvested stock awards as of December 31, 2021 reported in our 2022 proxy statement was based on the closing price of our common stock on the NYSE of $17.94 on March 31, 2022.

Name		Fees Earned or Paid in Cash				Stock Awards				All Other Compensation				Total
Christopher Gingras(1)		$	—			$	30,000			$	—			$	30,000
Adam S. Markman(2)		$	52,500			$	47,500			$	—			$	100,000
Curtis B. McWilliams(2)		$	30,000			$	47,500			$	—			$	77,500
Thomas H. Nolan, Jr.		$	40,000			$	60,000			$	—			$	100,000
Kimberly Smith		$	40,000			$	55,000			$	—			$	95,000
Connie Tirondola		$	50,000			$	40,000			$	—			$	90,000

(1)	Mr. Gingras joined the Board on September 18, 2024.

(2)	Mr. Markman and Mr. McWilliams resigned from the Board effective September 18, 2024.

Name		Shares of Common Stock Beneficially Owned(2)		Percent of Common Stock Beneficially Owned(3)		Class C OP Units(4)			Class X OP Units(5)			Percent of Common Stock and OP Units Beneficially Owned(6)
Directors and Officers(1)
Aaron S. Halfacre		112,681		1.1%		453,457			546,543			8.9	%
Raymond J. Pacini		115,580		1.1%		—			65,000			1.4	%
John C. Raney		2,170		*		63,333			162,500			1.8	%
Thomas H. Nolan, Jr		25,937		*		—			—			*
Kimberly Smith		13,041		*		—			—			*
Connie Tirondola		10,995		*		—			—			*
Christopher R. Gingras		6,490		*		—						*
All directors and executive officers as a group (7 persons)		286,894		2.8%		516,790			774,043			12.6	%
5% Shareholders
First City Investment Group, LLC(7)		536,135		5.3%		—			—			4.3	%

*	Less than 1% of the outstanding common stock.

(1)	The address of each named beneficial owner is 2195 South Downing Street, Denver, CO 80210.

(2)	None of the shares of common stock of directors and executive officers are pledged as security.

(3)	Based on 10,073,032 shares of common stock outstanding on April 1, 2025.

(4)	The Class C OP Units are exchangeable for shares of common stock on a 1-for-1 basis, or for cash, as solely determined by the Company.

(5)	The Class X OP Units convert automatically into Class C OP Units upon vesting on February 3, 2027 for Mr. Pacini and on February 3, 2030 for Messrs, Halfacre and Raney.

(6)	Based on 10,073,032  shares of common stock, 1,593,328 Class C OP Units and 895,043 Class X OP Units, for a total of 12,561,403  fully-diluted shares outstanding on April 1, 2025.

(7)	Based solely on information set forth in Schedule 13G/A filed by First City Investment Group, LLC (“First City”) on August 12, 2024 reporting sole voting and dispositive power over 536,135 shares of the Company’s common stock. The address of First City is 21140 S. Avalon Blvd., Carson, CA 90745.

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The Chief Executive Officer’s base salary was set below the 25th percentile of the peer group and he waived any cash bonuses for 2021 through 2023 in order to align with stockholders by agreeing that all of his incentive compensation would be in the form of equity awards during those years. Since there were no new equity awards in 2024, the Board of directors approved a cash bonus of $115,000 for our Chief Executive Officer for 2024;

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The Chief Financial Officer’s base salary was set at the 37.5th percentile of the peer group and his total cash compensation including a discretionary cash bonus was set at the median level of the peer group;

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The Chief Operating Officer and General Counsel’s base salary was set at the 37.5th percentile of the peer group and his total cash compensation including a discretionary cash bonus was set at the median level of the peer group; and

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Executive officers’ 2021 stock awards vested over three years and the compensation committee therefore considered the annual value of this incentive plan in determining the amount of the stock award. There were no additional stock awards for 2022 or 2023 since the stock awards granted in 2021 were intended to provide the executive officer’s stock compensation for 2021 through 2023. There were no stock awards to executive officers in 2024.

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Aligns executive compensation to business objectives and overall company performance;

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Aligns executives’ long-term interests with those of our stockholders;

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Attracts, retains, and motivates highly-qualified executives;

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Balances the focus on short- vs. longer-term performance objectives through an appropriate mix of short-term cash incentive awards and equity incentive awards that vest over a number of years; and

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Has features designed to further align executive compensation with stockholder interests and mitigate risks, including: (i) no minimum guaranteed base salary increases and (ii) no significant perquisites.

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Reduce the number of stockholders of record with small accounts directly registered with our transfer agent, which would result in cost savings for the Company and provide Company management with more time to focus on operating the Company’s business; and

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To enhance long-term market liquidity of the Company’s common stock and diversify ownership across a larger number of broker-dealers.

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the number of then-current stockholders with small accounts;

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the per share price of our common stock immediately prior to the Reverse Stock Split;

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the expected stability of the per share price of our common stock following the Reverse Stock Split;

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prevailing market conditions;

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general economic conditions in our industry;

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the likelihood that the Reverse Stock Split will result in the expected cost savings and other benefits described above; and

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our market capitalization before, and anticipated market capitalization after, the Reverse Stock Split.

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an individual who is a citizen or resident of the United States;

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a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof;

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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or

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an estate the income of which is subject to U.S. federal income taxation regardless of its source.

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