# Generation Income Properties, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Generation Income Properties, Inc.](/companies/gipr.md) (CIK 1651721)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 22:06 ET
- Period: 2024-09-30
- Accession: 0000950170-24-127178
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1651721/000095017024127178/gipr-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1651721/000095017024127178/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $2.4m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $7.1m | us-gaap:Revenues |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$1.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$4.0m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$3.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$8.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.55 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.60 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.55 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.60 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 5,433,833 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 5,083,640 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $783.5k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $6.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $1.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $1.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-09-30 | $108.0m | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $75.2m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $6.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 47,487 characters.

**Cautionary Note Regarding Forward‑Looking Statements**

*This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained herein. When used in this report, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. Actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward-looking statements. Readers should be aware of important factors that, in some cases, have affected, and in the future could affect, actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, funds derived from operations, cash available for distribution, cash flows, liquidity and prospects include, but are not limited to, the risk factors listed from time to time in our reports with the Securities and Exchange Commission, including, in particular, those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.*

*In this Quarterly Report on Form 10-Q, references to the “Company,” “we,” “us,” “our” or similar terms refer to Generation Income Properties, Inc., a Maryland corporation, together with its consolidated subsidiaries, including Generation Income Properties, L.P., a Delaware limited partnership, which we refer to as our operating partnership (the “Operating Partnership”). As used in this Quarterly Report, an affiliate, or person affiliated with a specified person, is a person that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.*

### Overview

We are an internally managed, Maryland corporation focused on acquiring retail, office and industrial real estate located in major U.S. markets. We initiated operations during the year ended December 31, 2015 and have elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ending December 31, 2021. Substantially all of the Company’s assets are held by, and operations are conducted through, the Operating Partnership and the Operating Partnership’s direct and indirect subsidiaries. The

Company is the general partner of the Operating Partnership and as of September 30, 2024 owned 95.3% of the outstanding common units of the Operating Partnership. The Company formed a Maryland entity GIP REIT OP Limited LLC in 2018 that owns 0.001% of the Operating Partnership.

### Public Offering and Nasdaq Listing

In September 2021, the Company closed an underwritten public offering of 1,665,000 units at a price to the public of $10 per unit generating net proceeds of $13.8 million including issuance costs incurred during the years ended December 31, 2021 and 2020. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price equal to $10 per share. The common stock and warrants included in the units (which were separated into one share of common stock and one warrant) currently trade on the Nasdaq Capital Market (“Nasdaq”) under the symbols “GIPR” and “GIPRW,” respectively.

### Our Investments

The following are characteristics of our properties as of September 30, 2024:

- *Creditworthy Tenants*. Approximately 60% of our portfolio’s annualized base rent ("ABR") as of September 30, 2024 was derived from tenants that have (or whose parent company has) an investment grade credit rating from a recognized credit rating agency of “BBB-” or better. Our largest tenants are the General Service Administration, Dollar General, EXP Services, and Kohl’s Corporation, PRA Holdings, and City of San Antonio contributed approximately 69% of our portfolio’s annualized base rent.
- *% Leased*. Our portfolio is 89% leased and occupied.
- *Contractual Rent Growth*. Approximately 92% of the leases in our current portfolio (based on ABR as of September 30, 2024) provide for increases in contractual base rent during future years of the current term or during the lease extension periods.
- *Average Effective Annual Rental per Square Foot*. Average effective annual rental per square foot is $14.75.

Given the nature of our leases, our tenants either pay the realty taxes directly or reimburse us for such costs. We believe all of our properties are adequately covered by insurance.

The table below presents an overview of the properties in our portfolio as of September 30, 2024:

| Property Type | Location | Rentable Square Feet | Tenant | S&P Credit Rating (1) | IG | Remaining Term (Yrs) | Options (Number x Yrs) | Contractual Rent Escalations (5) | ABR (2) | ABR per Sq. Ft. |
| --- | --- | ---: | --- | --- | --- | ---: | --- | --- | ---: | ---: |
| Retail | Washington, D.C. | 3,000 | 7-Eleven Corporation | A | Y | 1.5 | 2 x 5 | Yes | $129,804 | $43.27 |
| Retail | Tampa, FL | 2,200 | Starbucks Corporation | BBB+ | Y | 3.4 | 4 x 5 | Yes | $200,750 | $91.25 |
| Industrial | Huntsville, AL | 59,091 | Auburn University | N/A | Not Rated | 2.8 | N/A | Yes | $283,500 | $4.80 |
| Office | Norfolk, VA | 49,902 | General Services Administration-Navy(7) | AA+ | Y | 4.0 | N/A | Yes | $640,742 | $12.84 |
| Office | Norfolk, VA | 22,247 | Armed Services YMCA of the U.S.A.(7) | N/A | N/A | 9.6 | 2 x 5 | Yes | $274,380 | $12.33 |
| Office | Norfolk, VA | 34,847 | PRA Holdings, Inc. | BB+ | N | 2.9 | 1 x 5 | Yes | $788,091 | $22.62 |
| Retail | Tampa, FL | 3,500 | Sherwin Williams Company | BBB | Y | 3.8 | 5 x 5 | Yes | $126,788 | $36.23 |
| Office | Manteo, NC | 7,543 | General Services Administration-FBI | AA+ | Y | 4.4 | 1 x 5 | Yes | $100,682 | $13.35 |
| Office | Plant City, FL | 7,826 | Irby Construction | BBB- | Y | 0.3 | 2 x 5 | Yes | $176,674 | $22.58 |
| Retail | Grand Junction, CO | 30,701 | Best Buy Co., Inc. | BBB+ | Y | 2.5 | 1 x 5 | Yes | $353,061 | $11.50 |
| Medical-Retail | Chicago, IL | 10,947 | Fresenius Medical Care Holdings, Inc. | BBB | Y | 2.1 | 2 x 5 | Yes | $233,480 | $21.33 |
| Retail | Tampa, FL | 2,642 | Starbucks Corporation | BBB+ | Y | 2.4 | 2 x 5 | Yes | $148,216 | $56.10 |
| Retail | Tucson, AZ | 88,408 | Kohl's Corporation | BB | N | 5.3 | 7 x 5 | Yes | $864,630 | $9.78 |
| Retail | San Antonio, TX | 50,000 | City of San Antonio (PreK) | AAA | Y | 4.8 | 1 x 8 | Yes | $924,000 | $18.48 |
| Retail | Bakersfield, CA | 18,827 | Dollar General Market | BBB | Y | 3.8 | 3 x 5 | Yes | $361,075 | $19.18 |
| Retail | Big Spring, TX | 9,026 | Dollar General | BBB | Y | 5.8 | 3 x 5 | Yes | $86,041 | $9.53 |
| Retail | Castalia, OH | 9,026 | Dollar General | BBB | Y | 10.7 | 3 x 5 | Yes | $79,320 | $8.79 |
| Retail | East Wilton, ME | 9,100 | Dollar General | BBB | Y | 5.8 | 3 x 5 | Yes | $112,439 | $12.36 |
| Retail | Lakeside, OH | 9,026 | Dollar General | BBB | Y | 10.7 | 3 x 5 | Yes | $81,036 | $8.98 |
| Retail | Litchfield, ME | 9,026 | Dollar General | BBB | Y | 6.0 | 3 x 5 | Yes | $92,961 | $10.30 |
| Retail | Mount Gilead, OH | 9,026 | Dollar General | BBB | Y | 5.8 | 3 x 5 | Yes | $85,924 | $9.52 |
| Retail | Thompsontown, PA | 9,100 | Dollar General | BBB | Y | 6.1 | 3 x 5 | Yes | $85,998 | $9.45 |
| Retail | Morrow, GA | 10,906 | Dollar Tree Stores, Inc. | BBB | Y | 0.8 | 3 x 5 | Yes | $103,607 | $9.50 |
| Office | Maitland, FL | 33,118 | exp U.S. Services Inc. | Not Rated | Not Rated | 2.2 | 1 x 5 | Yes | $864,583 | $26.11 |
| Office | Vacaville, CA | 11,014 | General Services Administration | AA+ | Y | 1.9 | N/A | No | $257,050 | $23.34 |
| Retail | Santa Maria, CA | 14,490 | Walgreens (6) | BBB | Y | 7.5 | N/A | No | $369,000 | $25.47 |
| Retail | Rockford, IL | 15,288 | La-Z-Boy Inc. | Not Rated | Not Rated | 3.1 | 4 x 5 | Yes | $366,600 | $23.98 |
| Retail | Ames, IA | 30,259 | Best Buy Co., Inc. | BBB+ | Y | 5.5 | 2 x 5 | No | $405,471 | $13.40 |
| **Tenants - All Properties** |  | **570,086** |  |  |  |  |  |  | **$8,595,903** | **$15.08** |

(1) Tenant, or tenant parent, rated entity.

(2) Annualized cash base rental income in place as of September 30, 2024. Our leases do not include tenant concessions or abatements.

(3) This section is not used

(4) Tenant terminated the lease and vacated on January 31, 2024.

(5) Includes rent escalations available from lease renewal options.

(6) Tenant has the right to terminate the lease as of March 31, 2032, March 31, 2037, March 31, 2042, March 31, 2047, March 31, 2052, and March 31, 2057.

(7) Two tenants occupy this single property. New lease executed for the vacant unit, effective May 1, 2024.

### Distributions

From inception through September 30, 2024, we have distributed $5,031,549 to common stockholders. On July 3, 2024, the Company announced that its Board of Directors determined to suspend the Company’s regular dividend, commencing with the monthly dividends that would have been paid in July 2024.

### Recent Developments

On July 3, 2024 we announced that our Board of Directors had voted to suspend the Company's dividend for shareholder of record of our common stock.

On July 19, 2024, we determined that MaloneBailey LLP (“MaloneBailey”) would no longer serve as the Company’s independent registered public accounting firm and would be dismissed effective as of July 19, 2024. The decision to change independent registered public accounting firms was approved by the Board of Directors and the Audit Committee of the Company on July 19, 2024.

On July 19, 2024, we ratified the appointment of CohnReznick LLP (“CohnReznick”) as its new independent registered public accounting firm to audit and review the Company’s financial statements.

On July 24, 2024, the Operating Partnership of Generation Income Properties, Inc. (the “Company”), entered into a Fifth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “LPA Amendment”), pursuant to which the Company, as the general partner of the Operating Partnership, issued partnership interests to LMB Owenton I LLC (“Contributor”) in the form of Series B-1 Preferred Units (the “Series B-1 Preferred Units”).

Also on July 24, 2024, the Operating Partnership and the Contributor entered into a Contribution and Exchange Agreement (the “Contribution Agreement”) pursuant to which the Contributor contributed 155,185 Common Units in exchange for 155,185 Series B-1 Preferred Units. If and when determined by the Company, as general partner of the Operating Partnership, in its sole discretion, holders of the Series B-1 Preferred Units will be paid cash distributions in the amount of $0.117 per Series B-1 Preferred Unit per quarter, subject to prior payment of any preferred return on senior preferred units of the Operating Partnership. The Contributor will have the right to cause the Operating Partnership to redeem the Series B-1 Preferred Units after two (2) years for either (i) cash in an amount equal to $7.15 per Series B-1 Preferred Unit or (ii) a number of shares of common stock of the Company equal to the number of Series B-1 Preferred Units being redeemed multiplied by 1.00, plus, in each case, an amount equal to all dividends accrued and unpaid thereon.

On July 25, 2024, the Operating Partnership entered into First Amendments to the Second Amended and Restated Limited Liability Company Agreements, dated as of February 8, 2023, for each of the Norfolk, Virginia properties, GIPVA 2510 Walmer Ave, LLC and GIPVA 130 Corporate Blvd, LLC to revise the redemption date of Brown Family Enterprises, LLC membership interests from February 8, 2025 to February 8, 2027.

On August 29, 2024, we acquired a 30,465 square foot retail property in Ames, Iowa for $5.5 million occupied by Best Buy with a remaining lease of approximately 6 years at an annual base rent of $405,470. Future minimum rent reflected in the above table, accordingly.

We modified terms for two secured mortgage loans set to expire in September 2024 and October 2024. As of September 30, 2024 the principal balances of the modified secured loans were $7.2 million and $4.4 million at 6.15% annual interest with maturity dates extended to August 2029.

### Results of Operations

### Operating results for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023:

### Revenue

During the three and nine months ended September 30, 2024, total revenue from operations were 2,400,282 and $7,092,690, respectively, as compared to $1,844,148 and 4,510,065 for the three and nine months ended September 30, 2023, respectively. Revenue increased by $556,134 and $2,582,625 during the three and nine months ended September 30, 2024, respectively, compared with the three and nine months ended September 30, 2023. The overall revenue increase was driven by the integration of the 13 property portfolio acquired from Modiv in August 2023.

### Operating Expenses

During the three and nine months ended September 30, 2024, we incurred total operating expenses of $3,769,715 and $11,133,386 respectively, as compared to $3,060,715 and $7,082,645, respectively, for the three and nine months ended September 30, 2023. Operating expenses increased overall by $709,578 and $4,050,740, respectively, as follows:

|  | Three months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| General and administrative expense | $577,565 | $530,538 | $47,027 |
| Building expenses | 729,062 | 431,359 | 297,703 |
| Depreciation and amortization | 1,068,081 | 981,419 | 86,662 |
| Interest expense, net | 1,098,608 | 770,624 | 327,984 |
| Compensation costs | 296,399 | 346,196 | (49,797) |
| Total expenses | $3,769,715 | $3,060,136 | $709,579 |

32

|  | Nine months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| General, administrative and organizational costs | $1,632,018 | $1,233,674 | $398,344 |
| Building expenses | 2,067,356 | 1,065,214 | 1,002,142 |
| Depreciation and amortization | 3,474,918 | 2,096,970 | 1,377,948 |
| Interest expense, net | 3,142,489 | 1,706,585 | 1,435,904 |
| Compensation costs | 816,605 | 980,202 | (163,597) |
| Total expenses | $11,133,386 | $7,082,645 | $4,050,741 |

- General, administrative and organizational costs increased by $47,027 and $398,344 driven by an increase in accounting, audit and tax fees during the three and nine months ended September 30, 2024, respectively.
- Building expenses increased by $297,703 and $1,002,142 during the three and nine months ended September 30, 2024, due to an overall increase driven by the integration of the acquired 13 property portfolio from Modiv in August 2023, compared to the portfolio in operation during the three and nine months ended September 30, 2023.
- Depreciation and amortization increased by $86,662 and $1,377,948 during the three and nine months ended September 30, 2024, driven by the integration of the since acquired 13 property portfolio from Modiv compared with the portfolio in operation during the three and nine months ended September 30, 2023.
- Interest expense, net increased by $327,984 and $1,435,904 during the three and nine months ended September 30, 2024 due to Company's borrowing of approximately $21 million of mortgage debt secured by the acquired 13 property portfolio. An additional incremental increase is the result of the guaranty fee expense to the Company's CEO of $96,652 and $304,245 incurred during the three and nine months ended September 30, 2024, respectively.
- Compensation costs decreased by $49,798 and $163,598, respectively, primarily due to savings in salary expense and for accounting and administrative staff.

### Net loss

During the three and nine months ended September 30, 2024 and 2023, we generated a net loss of $2,103,549 and $1,213,265 and $5,444,133 and 3,156,015, respectively.

### Other expense

During the three months ended September 30, 2024 and 2023, we accrued $0 and $506,000 relating to the potential reimbursement of federal, state and local income taxes incurred by a remaining partner in one of our partnerships pursuant to a tax protection agreement.

### Net income attributable to non-controlling interests

During the three and nine months ended September 30, 2024 and 2023, net income attributable to non-controlling interest was $866,047 and $425,637 and $2,612,405 and $681,916, respectively. The variance is attributable to additional redeemable non-controlling interests established during the second half of fiscal year 2023 to facilitate acquisitions, namely the acquisition of the 13 property Modiv portfolio in August 2023.

### Net loss attributable to common shareholders

During the three and nine months ended September 30, 2024 and 2023, we generated a net loss attributable to our shareholders of $2,969,596 and $1,828,902 and $8,151,537 and 4,027,931, respectively.

### Liquidity and Capital Resources

We require capital to fund our investment activities and operating expenses. Our capital sources may include net proceeds from offerings of our equity securities, cash flow from operations and borrowings under credit facilities. As of September 30, 2024, we had total cash (unrestricted and restricted) of $1,581,610, properties with a gross cost basis of $102,307,436 and outstanding mortgage loans with a principal balance of $59,707,772, excluding assets held for sale for $5.75 million.

In September 2021, we closed an underwritten public offering of 1,665,000 units at a price to the public of $10 per unit generating net proceeds of $13.8 million including issuance costs incurred during the years ended December 31, 2021 and 2020.

On April 1, 2022, we entered into two mortgage loan agreements with an aggregate balance of $13.5 million to refinance seven of our properties. The loan agreements consist of one loan in the amount of $11.4 million secured by six properties and allocated to each property based on each property's appraised value, and one loan in the amount of $2.1 million on the property previously held in the tenancy-in-common investment at an interest rate of 3.85% from April 1, 2022 through and until March 31, 2027. In conjunction with the LC2 Investment to purchase the remaining interest in the tenancy-in-common interest discussed above, the Company assumed the original $2.1 million loan on the property with a remaining balance of $2,079,178 and recognized a discount of $383,767. Effective April 1, 2027 and through the maturity date of March 31, 2032, the interest rate adjusts to the 5-year Treasury plus 2.5% and is subject to a floor of 3.85%. Our CEO entered into a guarantee agreement pursuant to which he guaranteed the payment obligations under the promissory notes if they become due as a result of certain “bad-boy” provisions, individually and on behalf of the Operating Partnership.

On August 10, 2023, GIP13, LLC, a Delaware limited liability company and wholly owned subsidiary of GIP SPE ("GIP Borrower"), entered into a Loan Agreement with Valley pursuant to which Valley made a loan to the Company in the amount of $21.0 million to finance the acquisition of the Modiv Portfolio. The outstanding principal amount of the loan bears interest at an annual rate for each 30-day interest period equal to the compounded average of the secured overnight financing rate published by Federal Reserve Bank of New York for the thirty-day period prior to the last day of each 30-day interest rate for the applicable interest rate period plus 3.25%, with interest payable monthly after each 30-day interest period. However, the Company entered into an interest rate swap to fix the interest rate at 7.47% per annum. Payments of interest and principal in the amount of approximately $156,000 are due and payable monthly, with all remaining principal and accrued but unpaid interest due and payable on a maturity date of August 10, 2028. The loan may generally be prepaid at any time without penalty in whole or in part, provided that there is no return of loan fees and prepaid financing fees. The loan is secured by first mortgages and assignments of rents in the properties comprising the Modiv Portfolio and eight other properties held by subsidiaries of GIP SPE that had outstanding loans with Valley. All of the mortgaged properties cross collateralize the loan, and the loan is guaranteed by the Operating Partnership and the subsidiaries of the Company that hold the properties that comprise the Modiv Portfolio. The loan agreement also provides for customary events of default and other customary affirmative and negative covenants that are applicable to GIP Borrower and its subsidiaries, including reporting covenants and restrictions on investments, additional indebtedness, liens, sales of properties, certain mergers, and certain management changes. The Company's President and CEO also entered into a personal, full recourse guarantee with a $7,500,000 cap.

On June 27, 2024, the Operating Partnership and an accredited investor entered into a Unit Purchase Agreement (the “June 2024 Unit Purchase Agreement”) pursuant to which the Operating Partnership issued and sold to the investor 500,000 Series A Preferred Units at a price of $5.00 per unit for an aggregate purchase price of two million five hundred thousand dollars ($2,500,000) in cash. Under the terms of the Series A Preferred Units, the investor will be paid cumulative cash distributions in the amount of $0.325 per Series A Preferred Unit per year, payable monthly in arrears, on or about the 15th day of each month. Each of the investor and the Operating Partnership will have the right to cause the Operating Partnership to redeem the Series A Preferred Units after two (2) years for cash in an amount equal to $5.15 per Series A Preferred Unit plus any accrued but unpaid Series A Preferred Return, provided that the Operating Partnership may (with the prior written consent of the investor) cause the redemption price to be satisfied by the issuance of a number of shares of common stock of the Company equal to the number of Series A Preferred Units being redeemed multiplied by 1.03 plus any accrued but unpaid Series A Preferred Return. If the Operating Partnership fails to declare and pay the Series A Preferred Return for a period of three consecutive months, the investor may exercise the foregoing redemption right within the 30-day period following such failure.

Our President and CEO has also personally guaranteed the repayment of the $10.6 million due under the 7-11 - Washington, DC; Starbucks - South Tampa, FL; and vacant - Huntsville, AL loan as well as the $1.3 million loan secured by the Company's Sherwin-Williams - Tampa, FL property. In addition, our President and CEO has also provided a guaranty of the Company’s nonrecourse carveout liabilities and obligations in favor of the lender for the GSA and PRA Holdings, Inc. - Norfolk, VA mortgage loans ("Bayport loans") with an aggregate principal amount of $11.6 million.

During the three and nine months ended September 30, 2024, we incurred a guaranty fee expense to our President and CEO of $102,023 and $304,245, respectively, recorded to interest expense. A guaranty fee expense of $81,022 and $196,304 was incurred during the three and six months ended September 30, 2023, respectively.

On August 9, 2022, we entered a Redemption Agreement with a unit holder. As such, we recorded another payable - related party in the amount of $2,912,300 upon execution of the Redemption Agreement entered into July 20, 2022 and has since made installment payments of $2,007,380 to date with a remaining balance of $904,920 outstanding as of September 30, 2024.

On October 14, 2022, we entered into a loan transaction that is evidenced by a secured non-convertible promissory note to Brown Family Enterprises, LLC, a preferred equity partner and therefore a related party, for $1.5 million that is due on October 14, 2024, and bears a fixed interest rate of 9% with simple interest payable monthly. On July 21, 2023, the Company amended and restated the promissory note to reflect an increase in the loan to $5.5 million and extend the maturity date thereof from October 14, 2024 to October 14, 2026. Except for the increase in the amount of the Loan and Note and the extension of the maturity date thereof, no changes were made to the original note. The loan may be repaid without penalty at any time. The loan is secured by the Operating Partnership’s equity interest in its current direct subsidiaries that hold real estate assets pursuant to the terms of a security agreement between the Operating Partnership and Brown Family Enterprises, LLC.

We currently obtain the capital required to primarily invest in and manage a diversified portfolio of commercial net lease real estate investments and conduct our operations from the proceeds of equity offerings, debt financings, preferred minority interest obtained from third parties, issuance of Operating Partnership units and from any undistributed funds from our operations.

For the nine months ended September 30, 2024, the Company generated positive operating cash flows of $783,511 and had cash on hand of $1.58 million as of September 30, 2024. As a result of our recurring losses, our projected cash needs, and our current liquidity, substantial doubt exists about the Company’s ability to continue as a going concern one year after the date that these financial statements are issued. In August 2024 the Company modified terms for two secured mortgage loans set to expire in September 2024 and October 2024. As of September 30, 2024, the principal balances of the modified secured loans were $7.2 million and $4.4 million at 6.15% annual interest with maturity dates extended to August 2029. The Company’s ability to continue as a going concern is contingent upon continued successful execution of management’s plan to improve the Company’s liquidity and profitability.

Outstanding mortgage loans payable consisted of the following as of September 30, 2024 and December 31, 2023, respectively:

| Occupying Tenant | Location | Original Loan Amount |  | Interest Rate |  | Maturity Date | 9/30/2024 | 12/31/2023 | Debt Service Coverage Ratios ("DSCR") Required |
| --- | --- | ---: | --- | ---: | --- | --- | ---: | ---: | ---: |
| 7-Eleven Corporation & Starbucks Corporation | Washington, D.C., Tampa, FL, and Huntsville, AL | $11,287,500 | (a) | 4.17% |  | 3/6/2030 | $10,619,578 | $10,757,239 | 1.25 |
| General Services Administration-Navy & AYMCA | Norfolk, VA | 8,260,000 | (f) | 6.15% |  | 8/30/2029 | 7,165,788 | 7,341,804 | 1.25 |
| PRA Holdings, Inc. | Norfolk, VA | 5,216,749 | (f) | 6.15% |  | 8/23/2029 | 4,439,827 | 4,562,722 | 1.25 |
| Sherwin Williams Company | Tampa, FL | 1,286,664 |  | 3.72% | (b) | 8/10/2028 | 1,263,111 | 1,286,664 | 1.20 |
| General Services Administration-FBI | Manteo, NC | 928,728 | (c) | 3.85% | (d) | 3/31/2032 | 896,924 | 913,958 | 1.50 |
| Irby Construction | Plant City , FL | 928,728 | (c) | 3.85% | (d) | 3/31/2032 | 896,924 | 913,958 | 1.50 |
| La-Z-Boy Inc. | Rockford, IL | 2,100,000 |  | 3.85% | (d) | 3/31/2032 | 2,028,087 | 2,066,604 | 1.50 |
| Best Buy Co., Inc. | Grand Junction, CO | 2,552,644 | (c) | 3.85% | (d) | 3/31/2032 | 2,465,231 | 2,512,050 | 1.50 |
| Fresenius Medical Care Holdings, Inc. | Chicago, IL | 1,727,108 | (c) | 3.85% | (d) | 3/31/2032 | 1,667,965 | 1,699,642 | 1.50 |
| Starbucks Corporation | Tampa, FL | 1,298,047 | (c) | 3.85% | (d) | 3/31/2032 | 1,253,596 | 1,277,404 | 1.50 |
| Kohl's Corporation | Tucson, AZ | 3,964,745 | (c) | 3.85% | (d) | 3/31/2032 | 3,828,975 | 3,901,694 | 1.50 |
| City of San Antonio (PreK) | San Antonio, TX | 6,444,000 | (e) | 7.47% | (b) | 8/10/2028 | 6,347,784 | 6,416,362 | 1.50 |
| Dollar General Market | Bakersfield, CA | 2,428,000 | (e) | 7.47% | (b) | 8/10/2028 | 2,391,747 | 2,417,587 | 1.50 |
| Dollar General | Big Spring, TX | 635,000 | (e) | 7.47% | (b) | 8/10/2028 | 625,519 | 632,277 | 1.50 |
| Dollar General | Castalia, OH | 556,000 | (e) | 7.47% | (b) | 8/10/2028 | 547,698 | 553,615 | 1.50 |
| Dollar General | East Wilton, ME | 726,000 | (e) | 7.47% | (b) | 8/10/2028 | 715,160 | 722,886 | 1.50 |
| Dollar General | Lakeside, OH | 567,000 | (e) | 7.47% | (b) | 8/10/2028 | 558,534 | 564,568 | 1.50 |
| Dollar General | Litchfield, ME | 624,000 | (e) | 7.47% | (b) | 8/10/2028 | 614,683 | 621,324 | 1.50 |
| Dollar General | Mount Gilead, OH | 533,000 | (e) | 7.47% | (b) | 8/10/2028 | 525,042 | 530,714 | 1.50 |
| Dollar General | Thompsontown, PA | 556,000 | (e) | 7.47% | (b) | 8/10/2028 | 547,698 | 553,615 | 1.50 |
| Dollar Tree Stores, Inc. | Morrow, GA | 647,000 | (e) | 7.47% | (b) | 8/10/2028 | 637,340 | 644,225 | 1.50 |
| exp U.S. Services Inc. | Maitland, FL | 2,950,000 | (e) | 7.47% | (b) | 8/10/2028 | 2,905,953 | 2,937,348 | 1.50 |
| General Services Administration | Vacaville, CA | 1,293,000 | (e) | 7.47% | (b) | 8/10/2028 | 1,273,694 | 1,287,454 | 1.50 |
| Walgreens | Santa Maria, CA | 3,041,000 | (e) | 7.47% | (b) | 8/10/2028 | 2,995,594 | 3,027,958 | 1.50 |
| Best Buy Co., Inc. | Ames, IA | 2,495,000 |  | 6.29% | (b) | 8/23/2029 | 2,495,000 | n/a | 1.50 |
|  |  | 63,045,913 |  |  |  |  | 59,707,452 | 58,143,672 |  |
|  |  |  |  |  |  | Less Debt Discount, net | (328,943) | (383,767) |  |
|  |  |  |  |  |  | Less Debt Issuance Costs, net | (827,677) | (942,595) |  |
|  |  |  |  |  |  |  | 58,550,832 | 56,817,310 |  |

(a) Loan subject to prepayment penalty

(b) Fixed via interest rate swap

(c) One loan in the amount of $11.4 million secured by six properties and allocated to each property based on each property's appraised value.

(d) Adjustment effective April 1, 2027 equal to 5-year Treasury plus 2.5% and subject to a floor of 3.85%

(e) One loan in the amount of $21.0 million secured by 13 properties and allocated to each property based on each property's appraised value.

(f) Debt has been modified to mature in August 2029

We amortized debt issuance costs during the three and nine months ended September 30, 2024 and 2023 to interest expense of approximately $60,532 and $46,260 and $156,091 and $103,990, respectively. The Company paid debt issuance costs of $0 and $376,877 during the three and nine months ended September 30, 2024 and 2023.

Each mortgage loan requires the Company to maintain certain debt service coverage ratios as noted above. In addition, two mortgage loans, one encumbered by six properties and requiring a 1.50 DSCR, and another stand alone mortgage loan requiring a 1.50 DSCR, require the Company to maintain a 54% loan to fair market stabilized value ratio. Fair market stabilized value shall be determined by the lender by reference to acceptable guides and indices or appraisals from time to time at its discretion. As of September 30, 2024, we were in compliance with all covenants.

Minimum required principal payments on our debt as of September 30, 2024 are as follows:

|  | Mortgage Loans | Other Payable - Related Party | Loan Payable - Related Party | Total as of September 30, 2024 |
| --- | ---: | ---: | ---: | ---: |
| 2024 (3 months remaining) | 317,629 | 452,460 | - | 770,089 |
| 2025 | 1,236,176 | - | - | 1,236,176 |
| 2026 | 1,319,320 | - | 5,500,000 | 6,819,320 |
| 2027 | 1,422,520 | - | - | 1,422,520 |
| 2028 | 21,757,610 | - | - | 21,757,610 |
| Thereafter | 33,654,197 | - | - | 33,654,197 |
|  | $59,707,452 | $452,460 | $5,500,000 | $65,659,912 |

On February 8, 2023, we entered into new Amended and Restated Limited Liability Company Agreements for the Norfolk, Virginia properties, GIPVA 2510 Walmer Ave, LLC ("GIPVA 2510") and GIPVA 130 Corporate Blvd, LLC ("GIPVA 130"), in which we, as the sole member of GIPVA 2510 and GIPVA 130, admitted a new preferred member, Brown Family Enterprises, LLC, through the issuance of preferred membership interests in the form of Class A Preferred Units of GIPVA 2510 and GIPVA 130. GIPVA 2510 and GIPVA 130 (the “Virginia SPEs”) hold our Norfolk, Virginia properties. In addition, both of the Virginia SPEs and Brown Family Enterprises, LLC entered into Unit Purchase Agreements in which GIPVA 2510 issued and sold 180,000 Class A Preferred Units at a price of $10.00 per unit for an aggregate price of $1,800,000, and GIPVA 130 issued and sold 120,000 Class A Preferred Units at a price of $10.00 per unit for an aggregate price of $1,200,000. The Operating Partnership is the general manager of the subsidiary while Brown Family Enterprises, LLC is a preferred equity member. Pursuant to the agreement, we are required to pay the preferred equity member a 7% IRR paid on a monthly basis and will share in 16% of the equity in each of the Virginia SPEs upon a capital transaction resulting in distributable proceeds. After 24 months, Brown Family Enterprises, LLC has the right to redeem the preferred equity at redemption value. On July 25, 2024, we entered into First Amendments to the Second Amended and Restated Limited Liability Company Agreements, dated as of February 8, 2023, for each of these entities revising the redemption date from February 8, 2025 to February 8, 2027. Because of the redemption right, the non-controlling interest is presented as temporary equity at an aggregated redemption value of $3,000,000 as of September 30, 2024.

In connection with the acquisition of the Modiv Portfolio, the Operating Partnership and LC2 entered into an Amended and Restated Limited Liability Company Agreement for GIP SPE (the “GIP SPE Operating Agreement”) pursuant to which LC2 made a $12.0 million initial capital contribution to GIP SPE, together with a commitment to make an additional $2.1 million contribution upon the satisfactory completion of the acquisition of a tenant-in-common interest held by a third party in the Company’s Rockford, Illinois property (the “LC2 Investment”). The Company completed the acquisition of such tenant-in-common interest on September 7, 2023, for a purchase price of $1.3 million and LC2 made the additional $2.1 million capital contribution on September 11, 2023. LC2 made the LC2 Investment in exchange for a preferred equity interest in GIP SPE (the “Preferred Interest”). The Preferred Interest has a cumulative accruing distribution preference of 15.5% per year, compounded monthly, a portion of which in the amount of 5% per annum (compounded monthly) is deemed to be the “current preferred return,” and the remainder of which in the amount of 10.5% per annum (compounded monthly) is deemed to be the “accrued preferred return.” The GIP SPE operating agreement provides that operating distributions by GIP SPE will be made first to LC2 to satisfy any accrued but unpaid current preferred return, with the balance being paid to the Operating Partnership, unless the “annualized debt yield” of GIP SPE is less than 10%, in which case the balance will be paid to LC2. For this purpose, “annualized debt yield” is calculated as the sum of senior debt and LC2 Investment divided by the trailing three-month annualized adjusted net operating income (as defined in the GIP SPE Operating Agreement) of GIP SPE. The GIP SPE Operating Agreement also provides that distributions from capital transactions will be paid first to LC2 to satisfy any accrued but unpaid preferred return, then to LC2 until the “Make-Whole Amount” (defined as the amount equal to 1.3 times the LC2 Investment) is reduced to zero, and then to the Operating Partnership.

The Preferred Interest is required to be redeemed in full by the Company on or before August 10, 2025 for a redemption amount equal to the greater of (i) the amount of the LC2 Investment plus the accrued preferred return, and (ii) the Make-Whole Amount. Upon a failure to timely redeem the Preferred Interest, the preferred return will accrue at an increased rate of 18% per annum, compounded monthly. The Company will have the right to extend the Mandatory Redemption Date for two consecutive 12-month extension periods, provided that (i) LC2 is paid an extension fee of 0.01% of the outstanding amount of the LC2 Investment for each such extension, (ii) the preferred return is increased from 15.5% to 18% of which the accrued preferred return is increased from 10.5% to 13%, (iii) the trailing 6-month annualized adjusted net operating income (as defined in the GIP SPE Operating Agreement) is in excess of $5.0 million, (iv) GIP SPE and its subsidiaries’ senior debt is extended through the end of the extension period, and there are no defaults under the GIP SPE Operating Agreement.

Under the GIP SPE Operating Agreement, GIP SPE is also required to pay to Loci Capital, an affiliate of LC2, an equity fee of 1.5% of the LC2 Investment, with 1% having been paid upon the execution and delivery of the GIP SPE Operating Agreement and the 0.5% payable upon redemption of the LC2 Investment.

Due to the redemption right, the Preferred Interest is presented as temporary equity at redemption value of $14,100,000 plus accrued but unpaid preferred interest of $2,280,471 as of September 30, 2024.

Each of the preferred members described above may redeem their interest on or after the Redemption date (second year anniversary of the closing of the acquisition), at the discretion of such preferred member, as applicable, all or a portion thereof, of such preferred member’s pro-rata share of the redemption value in the form of the units of the Operating Partnership ("GIP LP Units"). Such GIP LP Units shall be subject to all such restrictions, such as with respect to transferability, as reasonably imposed by the Operating Partnership. The number of GIP LP Units issued to any preferred member shall be determined by dividing the total amount of the redemption value that such preferred member shall receive in GIP LP Units by a 15% discount of the average 30-day market price of Generation Income Properties, Inc. common stock. GIP LP Units shall then be convertible into common stock of Generation Income Properties, Inc. on a 1:1 basis in accordance with the partnership agreement of the Operating Partnership. Additionally, the Operating Partnership has the right to redeem the preferred equity at redemption value with cash after the second year anniversary of the closing of the acquisition.

The primary objective of our financing strategy is to maintain financial flexibility using retained cash flows, long-term debt and common and perpetual preferred stock to finance our growth. We intend to have a lower-leveraged portfolio over the long-term after we have acquired an initial substantial portfolio of diversified investments. During the period when we are acquiring our current portfolio, we will employ greater leverage on individual assets (that will also result in greater leverage of the current portfolio) in order to quickly build a diversified portfolio of assets.

### Cash from Operating Activities

Net cash provided by operating activities was $783,511 and net cash provided by operating activities was $18,537 for the nine months ended September 30, 2024 and 2023, respectively. The change is due to the doubling of the number of the Company's income generating assets through the 13 property Modiv acquisition.

### Cash from Investing Activities

Net cash used in investing activities during the three and nine months ended September 30, 2024 was $5,960,893. Net cash used in investing activities was $33,314,973 during the nine months ended September 30, 2023 related to an escrow deposit for a property purchase.

### Cash from Financing Activities

Net cash provided by financing activities was $3,607,045 and $33,916,112 for the nine months ended September 30, 2024 and 2023, respectively. The change is due to several factors comprising the increase of mortgage principal repayments driven by the Modiv acquisition in August 2023, the increase in distributions to non-controlling interests, and dividend payments on both preferred and common stock.

### Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

### Non-GAAP Financial Measures

Our reported results are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). We also disclose funds from operations ("FFO"), adjusted funds from operations ("AFFO"), core funds from operations ("Core FFO") and core adjusted funds of operations ("Core AFFO") all of which are non-GAAP financial measures. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.

FFO and related measures do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income or loss as a performance measure or cash flows from operations as reported on our statement of cash flows as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures.

We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude, net gains from sales of property and adding back real estate depreciation; namely, excluding from net income depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. We then adjust FFO for non-cash revenues and expenses such as amortization of deferred financing costs, above and below market lease intangible amortization, straight line rent adjustment where the Company is both the lessor and lessee, and non-cash stock compensation to calculate Core AFFO.

FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by other non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other companies. We believe that Core FFO and Core AFFO are useful measures for management and investors because they further remove the effect of non-cash expenses and certain other expenses that are not directly related to real estate operations. We use each as measures of our performance when we formulate corporate goals.

As FFO excludes depreciation and amortization, gains and losses from property dispositions that are available for distribution to stockholders and non-recurring or extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, providing a perspective not immediately apparent from net income or loss. However, FFO should not be viewed as an alternative measure of our operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties which could be significant economic costs and could materially impact our results from operations. Additionally, FFO does not reflect distributions paid to redeemable non-controlling interests.

The following tables reconcile net income (net loss), which we believe is the most comparable GAAP measure, to FFO, Core FFO, AFFO and Core AFFO:

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Net loss** | **$(2,103,549)** | **$(1,213,265)** | **$(5,444,133)** | **$(3,156,015)** |
| Other expense | - | 639 | - | 506,639 |
| Loss on derivative valuation | 734,116 | - | 308,570 | - |
| Depreciation and amortization | 1,068,081 | 981,419 | 3,474,918 | 2,096,970 |
| Loss on held for sale asset valuation | - | - | 1,058,994 | - |
| **Funds From Operations** | **$(301,352)** | **$(231,207)** | **$(601,651)** | **$(552,406)** |
| Amortization of debt issuance costs | 60,532 | 46,260 | 156,091 | 103,990 |
| Non-cash stock compensation | 94,935 | 119,380 | 284,804 | 287,067 |
| Adjustments to Funds From Operations | 155,467 | 165,640 | 440,895 | 391,057 |
| **Core Funds From Operations** | **$(145,885)** | **$(65,567)** | **$(160,756)** | **$(161,349)** |
| **Net loss** | **$(2,103,549)** | **$(1,213,265)** | **$(5,444,133)** | **$(3,156,015)** |
| Other expense | - | 639 | - | 506,639 |
| Loss on derivative valuation | 734,116 | - | 308,570 | - |
| Depreciation and amortization | 1,068,081 | 981,419 | 3,474,918 | 2,096,970 |
| Amortization of debt issuance costs | 60,532 | 46,260 | 156,091 | 103,990 |
| Above and below-market lease amortization, net | 203,357 | 20,398 | 203,357 | (81,957) |
| Straight line rent, net | 42,972 | 20,942 | 74,253 | 61,383 |
| Adjustments to net loss | $2,109,058 | $1,069,658 | $4,217,189 | $2,687,025 |
| **Adjusted Funds From Operations** | **$5,509** | **$(143,607)** | **$(1,226,944)** | **$(468,990)** |
| Dead deal expense | $- | $- | $35,873 | $109,569 |
| Non-cash stock compensation | 94,935 | 119,380 | 284,804 | 287,067 |
| Adjustments to Adjusted Funds From Operations | $94,935 | $119,380 | $320,677 | $396,636 |
| **Core Adjusted Funds From Operations** | **$100,444** | **$(24,227)** | **$(906,267)** | **$(72,354)** |

The table above presents FFO in accordance with the most current available NAREIT guidance and in alignment with current industry standards. Presentations of FFO in our prior filings and announcements did not include Loss on held for sale asset valuation as an add-back in calculating FFO, but the data for three and nine months ended September 30, 2023 set forth above has been revised to include Loss on held for sale asset valuation as an add-back.

### Critical Accounting Policies

Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. See our audited consolidated financial statements included herein for a summary of our significant accounting policies.

## Controls and procedures

As filed, 1,601 characters.

#### (a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our Chief Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. 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 its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Management, with the participation of our CEO and Principal Accounting Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on that evaluation, our management, including our CEO and Principal Accounting Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2024.

#### (b) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 185 characters.

There have been no material changes from the risk factors previously disclosed in Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Filed Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-127178. Last ingested by Listed: Oct 24, 2026, 15:14 ET. No prices; not investment advice.