MDV 10-Q Quarter ended March 31, 2020

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•	We are subject to risks associated with deteriorating economic conditions resulting from the COVID-19 pandemic and related disruptions in the financial markets.

•	The magnitude and duration of the COVID-19 pandemic and its impact on our tenants, operations and liquidity is uncertain as of the filing date of this Quarterly Report on Form 10-Q and may continue to have an adverse impact on our business and results of operations.

•	We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.

•	We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.

•	Our properties, intangible assets and other assets may be subject to further impairment charges.

•	We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties, and we may be unable to acquire or dispose of properties on advantageous terms.

•	We could be subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally.

•	We have substantial indebtedness, and may incur additional secured or unsecured debt, which may affect our ability to pay distributions, expose us to interest rate fluctuation risk, impose limitations on how we operate and expose us to the risk of default under our debt obligations.

•	We may not be able to attain or maintain profitability.

•	The only sources of cash for distributions to investors will be cash flow from our operations (including sales of properties) or any net proceeds that result from financing or refinancing our properties.

•	We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations.

•	We may be affected by risks resulting from losses in excess of insured limits.

•	We may fail to qualify as a REIT for U.S. federal income tax purposes.

•	Risks of security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology networks and related systems, could adversely affect our business and results of operations.

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•	whether the lease stipulates how a tenant improvement allowance may be spent;

•	whether the amount of a tenant improvement allowance is in excess of market rates;

•	whether the tenant or landlord retains legal title to the improvements at the end of the lease term;

•	whether the tenant improvements are unique to the tenant or general-purpose in nature; and

•	whether the tenant improvements are expected to have any residual value at the end of the lease.

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(1)	No tenants represented the source of 10% of total revenues for the three months ended March 31, 2020 .

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(a)	Includes accrued Merger expenses of $1,188,437 and $1,570,622 as of March 31, 2020 and December 31, 2019 , respectively.

(b)	Represents the estimated liability for a loan guarantee related to the secured mortgage for the Las Vegas, Nevada 24 Hour Fitness property, as a result of the evaluation of the impact of the COVID-19 pandemic on the tenant's business and the risk that the lender could foreclose on the property. See Note 4 for additional information.

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(1)

Contractual interest rate represents the interest rate in effect under the mortgage note payable as of March 31, 2020 . Effective interest rate is calculated as the actual interest rate in effect as of March 31, 2020 , consisting of the contractual interest rate and the effect of the interest rate swap, if applicable (see Note 8 for further information regarding the Company’s derivative instruments) .

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(2)

The loans on each of the Williams Sonoma and Wyndham properties (collectively, the “Property”) located in Summerlin, Nevada were originated by Nevada State Bank (“Bank”). The loans are collateralized by a deed of trust and a security agreement with assignment of rents and fixture filing. In addition, the individual loans are subject to a cross collateralization and cross default agreement whereby any default under, or failure to comply with the terms of any one or both of the loans, is an event of default under the terms of both loans. The value of the Property must be in an amount sufficient to maintain a loan to value ratio of no more than 60% . If the loan to value ratio is ever more than 60% , the borrower shall, upon the Bank’s written demand, reduce the principal balance of the loans so that the loan to value ratio is no more than 60% .

(3)	The initial contractual interest rate is 4.25% and starting November 18, 2022, the interest rate is T-Bill index plus 3.25% .

(4)	The initial contractual interest rate is 4.60% for the first five years and the greater of 4.60% or five-year Treasury Constant Maturity (“TCM”) plus 2.45% for the second five years.

(5)	The initial contractual interest rate is 4.84% for the first five-years and, starting March 28, 2023, the interest rate is the greater of 4.60% or five-year TCM plus 2.45% for the second five-years.

(6)

The interest rate adjusts in the 133rd, 253rd and 313th months. As discussed in Note 4 , during the three months ended March 31, 2020 , the Company recorded an impairment charge of $5,664,517 related to its investment in the 24 Hour Fitness property in Las Vegas, Nevada due to the substantial impact on fitness centers from the COVID-19 pandemic and the requirement of an indefinite and potentially extended period of store closures and the resulting inability of the tenant to make rent payments. On April 1, 2020, the Company’s special purpose subsidiary initiated negotiations with the lender on the 24 Hour Fitness property regarding the special purpose subsidiary's request for a deferral of mortgage payments until the tenant resumes paying rent. The lender on this property did not agree to provide any substantial mortgage relief to the Company's special purpose subsidiary, but rather agreed to only temporarily reduce its $32,000 monthly mortgage payment by $8,000 for the next four monthly payments. On June 15, 2020, the Company received written notice that the lease was formally rejected in connection with 24 Hour Fitness' Chapter 11 bankruptcy proceeding and the premises were surrendered to the Company's subsidiary. If the Company's special purpose subsidiary cannot find a replacement tenant, then it may allow the lender to foreclose on the property and take possession. The estimated liability of $3,129,290 under a loan guarantee related to the secured mortgage was accrued and included in accounts payable and accrued liabilities on the condensed consolidated balance sheet as of March 31, 2020 .

(7)	The loan was acquired through the Merger on December 31, 2019.

(8)

The Company negotiated a lease termination with Dinan Cars effective January 31, 2020 in exchange for a termination payment from Dinan Cars of $783,182 which was used to reduce the principal balance of this mortgage by $650,000 and establish a payment reserve with the remaining $133,182 . In connection with the principal prepayment, the Company terminated the related swap agreement on February 4, 2020 at a cost of $47,000 (see Note 8 for further information).

(9)	These loans were provided by Ray Wirta, Chairman of the Board of the Company, and a trust belonging to Mr. Wirta (“Wirta Trust”). On June 1, 2020, the maturity date of these mortgages was extended to September 1, 2020 on the same terms.

(10)	Represents unamortized net mortgage premium acquired through the Merger.

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•	the maturity date shall be the later of (i) January 6, 2020 or (ii) five business days following the closing of certain transactions as defined in the Agreement;

•	the notes shall be repaid in an amount equal to (i) the sum of (x) all accrued and unpaid interest due on the note and (y) 1.2 times the original outstanding principal balance on the notes, which aggregated $4,000,000 and $800,000 (the “Maturity Date Extension Consideration”);

•	each investor who does not make a conversion election, as defined in the Agreement, was entitled to payment by the Company of a one-time amortization fee equal to 50 basis points of the outstanding principal balance of each respective convertible promissory note on the maturity date; and

•

the Company shall repay the outstanding principal and all accrued and unpaid interest due on the convertible promissory notes, along with the Maturity Date Extension Consideration and the amortization fee (collectively, the “Total Balance”) in three equal installments to occur as follows: (i) the first payment of one-third of the Total Balance shall be made on the maturity date; (ii) the second payment of one-third of the Total Balance shall be made 30 days following the maturity date; and (iii) the final payment of one-third of the Total Balance shall be made 60 days following the maturity date. Interest continued to accrue on the outstanding principal balance until payment was made in full.

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(1)

Includes unrealized loss on interest rate swaps of $1,284,967 and $320,526 for the three months ended March 31, 2020 and 2019 , respectively (see Note 8 ). Accrued interest payable of $25,489 and $22,282 at March 31, 2020 and December 31, 2019 , respectively, represents the unsettled portion of the interest rate swaps for the period from origination of the interest rate swap through the respective balance sheet dates.

(i)	The notional amount of the Company’s swaps decreases each month to correspond to the outstanding principal balance on the related mortgage. The minimum notional amounts (outstanding principal balance at the maturity date) as of March 31, 2020 and December 31, 2019 were $42,920,710 and $45,514,229 , respectively.

(ii)	The reference rate was March 31, 2020 .

(iii)	The reference rate was December 31, 2019 .

(iv)	The Company terminated the swap agreement related to the Dinan property mortgage loan on February 4, 2020 at a cost of $47,000 (see Note 7 ).

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*	Property management fees are classified within property operating expenses on the condensed consolidated statements of operations.

**	Directors and officers insurance and other reimbursements are classified within general and administrative expenses on the condensed consolidated statements of operations.

(1)

To the extent the Former Advisor elected, in its sole discretion, to defer all or any portion of its monthly asset management fee, the Former Advisor was deemed to have waived, not deferred, that portion up to 0.025% of the total investment value of the Company’s assets. For the three months ended March 31, 2019 , the Former Advisor did not waive any of the asset management fees. In addition to amounts presented in this table, the Company also incurred asset management fees to the Former Advisor of $47,983 related to the TIC Interest during the three months ended March 31, 2019 , which amount was reflected as a reduction of income recognized from investments in unconsolidated entities (see Note 5 ).

(2)

Includes payroll costs related to Company employees that answer questions from prospective stockholders. See “ Investor Relations Payroll Expense Reimbursement from Former Sponsor ” below . The Former Sponsor agreed to reimburse the Company for these investor relations compensation costs which the Former Sponsor considered to be offering expenses in accordance with the Advisory Agreement which was terminated effective September 30, 2019. The expense reimbursements from the Former Sponsor for the three months ended March 31, 2019 also include a refund of $40,915 of employment related legal fees which the Former Sponsor agreed to reimburse the Company.

(3)	As of March 31, 2019 , the Former Sponsor had incurred $8,565,661 of organizational and offering costs on behalf of the Company. However, the Company was only obligated to reimburse the Former Sponsor for such organizational and offering expenses to the extent of 3% of gross offering proceeds.

(4)	The amount includes unpaid asset management fees of $264,058 and $242,299 as of March 31, 2020 and December 31, 2019 , respectively, due from BRIX REIT, which have been fully offset by a reserve for uncollectable amounts due to BRIX REIT's early stage of operation and limited real estate assets.

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(i)	30% of the product of (a) the difference of (x) the Preliminary NAV per share minus (y) the Highest Prior NAV per share, multiplied by (b) the number of shares outstanding as of December 31 of the relevant annual period, but only if this resulted in a positive number, plus

(ii)	30% of the product of: (a) the amount by which aggregate distributions to stockholders during the annual period, excluding return of capital distributions, divided by the weighted average number of shares outstanding for the annual period, exceeded the Preferred Return, multiplied by (b) the weighted average number of shares outstanding for the annual period calculated on a monthly basis.

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•	20 properties are retail properties which represent an approximate 26% of the portfolio, 16 properties are office properties which represent an approximate 47% of the portfolio, and nine properties are industrial properties which represent an approximate 27% of the portfolio (expressed as a percentage of annualized base rent);

•	Occupancy rate of 97% ;

•	Leased to 38 different commercial tenants doing business in 14 separate industries;

•	Located in 14 states;

•	Approximately 2,360,802 square feet of aggregate leasable space;

•	An average leasable space per property of approximately 52,500 square feet; approximately 18,000 square feet per retail property, approximately 50,000 square feet per office property, and approximately 133,000 square feet per industrial property; and

•	Outstanding mortgage note payable balance of $198,429,236 .

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•	where construction is substantially complete to reduce risks associated with construction of new buildings;

•	leased on a “net” basis, where the tenant is responsible for the payment, and fluctuations in costs, of real estate and other taxes, insurance, utilities, and property maintenance;

•	located in primary, secondary and certain select tertiary markets;

•	leased to tenants with strong financial statements, including, but not limited to investment grade credit quality, at the time we acquire them; and

•	subject to long-term leases with defined rental rate increases.

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•	$2,132,535 for additions to existing real estate properties;

•	$323,690 for additions to intangible assets; and

•	$990,000 for additions to lease incentives.

•	$6,880,682 of proceeds from issuance of common stock, partially offset by payments for offering costs and commissions of $561,828 ;

•	$4,000,000 of proceeds from mortgage notes payable; partially offset by principal payments of $1,310,245 and deferred financing cost payments of $24,997 to third parties;

•	$3,775,250 of principal repayments on our short-term notes; and

•	$4,260,000 of proceeds from borrowings on our unsecured credit facility; these proceeds were more than offset by $9,091,147 used for repurchases of shares under the share repurchase plan and $1,379,751 of distributions paid to common stockholders.

•	$14,393,574 of proceeds from issuance of common stock, partially offset by payments for offering costs and commissions of $484,714 ;

•	$6,350,000 of proceeds from mortgage notes payable, more than offset by principal payments of $13,976,246 and deferred financing cost payments of $101,056 to third parties and $63,500 to an affiliate; and

•	$4,869,000 of proceeds from borrowings on our unsecured credit facility, more than offset by payments on our former unsecured credit facility of $9,800,000 ; these proceeds were also more than offset by $2,225,987 used for repurchases of shares under the share repurchase plan and $552,134 of distributions paid to stockholders.

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*	Includes non-recurring merger costs of $245,886 during the quarter ended March 31, 2020 and $1,468,913 for the year ended December 31, 2019 ($800,359 during the quarter ended September 30, 2019 and $668,554 during the quarter ended December 31, 2019 ).

(1)	The distribution paid per share of Class S common stock is net of deferred selling commissions.

(2)	The distribution of $1,415,328 for the month of March 2020 was declared in January 2020 and paid on April 27, 2020. The amount was recorded as a liability as of March 31, 2020 in the accompanying unaudited condensed consolidated balance sheets.

(3)	The distribution of $821,300 for the month of March 2019 was declared in February 2019 and paid on April 25, 2019. The amount was recorded as a liability as of March 31, 2019.

(4)	The distribution of $896,291 for the month of June 2019 was declared in February 2019 and paid on July 25, 2019. The amount was recorded as a liability as of June 30, 2019.

(5)	The distribution of $937,863 for the month of September 2019 was declared in August 30, 2019 and paid on October 25, 2019. The amount was recorded as a liability as of September 30, 2019.

(6)	The distribution of $966,491 for the month of December 2019 was declared in August 30, 2019 and paid on January 25, 2020. The amount was recorded as a liability as of December 31, 2019 in the accompanying consolidated balance sheets.

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(1)

In connection with the acquisition of some properties, we may negotiate a reduced purchase price for the acquired property in an amount that equals an agreed-upon rent abatement. During the period of any rent abatement on properties that we acquire, we may be unable to fully fund our distributions from net rental income received. In connection with the extension of the lease term of some existing properties, we may agree to pay a lease extension fee. In those events, we may expand the sources of cash used to fund our stockholder distributions to include proceeds from the sale of our common stock, but only during the periods, and up to the amounts, of any rent abatements where we are able to negotiate a reduced purchase price or the amounts extend a lease term by payment of an extension fee.

(2)	Subsequent to the Self-Management Transaction on December 31, 2019, asset management fees are not applicable.

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(1)	Distributions paid per share of Class S common stock are net of deferred selling commissions.

(2)	Rate per share per day reflects $0.00191257 per day through May 21, 2020 and $0.00095890 per day thereafter.

(3)	Distribution has not been paid as of the filing date of this Quarterly Report on Form 10-Q.

(1)	Includes 20 properties acquired through the Merger with REIT I on December 31, 2019 as follows: (i) 11 retail properties with an aggregate leasable square feet of 177,380; (ii) six office properties with an aggregate leasable square feet of 183,752 and (iii) three industrial properties with an aggregate leasable square feet of 246,259.

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•	a partial or complete closure of, or other operational issues at, some or all of our properties resulting from government or tenant action;

•	reduced economic activity severely impacts our tenants' business operations, financial condition and liquidity and may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;

•	reduced economic activity could result in a prolonged recession, which could negatively impact consumer discretionary spending and in return could severely impact our tenants' business operations, financial condition and liquidity;

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difficulty accessing debt and equity on attractive terms, or at all, impacts to our credit ratings, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund our business operations or address maturing liabilities on a timely basis and our tenants' ability to fund their business operations and meet their obligations to us;

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•	the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our mortgage notes payable and credit facilities and could result in a default or potential acceleration of payment of our debt obligations, which non-compliance could negatively impact our ability to make additional future borrowings;

•	significant impairment in the value of our intangible assets as a result of weaker economic conditions;

•	general decline in business activity and demand for real estate transactions has adversely affected our ability to grow our portfolio of properties;

•	broad acceptance and success of working from home could negatively impact the demand for office space;

•	the deterioration in our or our tenants' ability to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed for our or our tenants' efficient operations has adversely affected our operations and those of our tenants; and

•	potential negative impact on the health of our personnel and staff, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during this disruption.

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(1)

Our share repurchase program was suspended on September 19, 2019 and was reopened on January 2, 2020; therefore, no repurchases were completed in January 2020. The shares of Class C common stock requested for repurchase in January and February 2020 were repurchased in February and March 2020, respectively. We generally repurchase shares approximately three business days following the end of the applicable month in which requests were received. During March 2020 , our board of directors determined not to repurchase any shares of Class C common stock requested for repurchase.

(2)

Following our calculation of our estimated NAV per share of $10.27 (unaudited), which our board of directors approved on January 31, 2020 and calculated as of December 31, 2019 , we repurchased shares on May 5, 2020 based on the estimated NAV per share of $10.27 (unaudited). Following our calculation of our estimated NAV per share of $7.00 (unaudited), which our board of directors approved on May 20, 2020 and calculated as of April 30, 2020, any future share repurchases will be based on the estimated NAV per share of $7.00 (unaudited).

(3)	A description of the maximum number of shares that may be purchased under our share repurchase program is included in the narrative preceding this table.

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