Modiv is among a growing crop of investment crowdfunding platforms offering a “public, non-listed REIT” (PNLR) leveraging various parts of the 2012 JOBS Act, including Reg A+. Founded in 2006 as a more traditional REIT, they rebranded in 2016 as “Rich Uncles” as part of a strategy to offer REITs via direct marketing to smaller investors (ie, crowdfunding), and more recently have rebranded again as “Modiv”, following the merger of Rich Uncles with RW Holdings NNN REIT Inc. (which itself acquired its former sponsor, BrixInvest LLC).
Like the other major platforms offering Reg A+ REITs, Modiv features low minimums, and an easy way for non-accredited investors in particular to get broad exposure to commercial real estate, with both regular cash distributions and the potential for long-term equity appreciation.'
Types of investments Modiv offers
The REIT you invest in via Modiv invests in income-producing commercial real estate nationwide. The number of properties owned by the REIT will grow as more investors provide capital, and at the time of this writing their website lists 38 properties in the portfolio (you can see a spreadsheet showing all of the properties here). The targeted mix is described in their Offering Circular:
In pursuit of our primary investment objectives, we maintain the ability to expand beyond our traditional single-tenant portfolio of triple-net leased properties, and seek to acquire a diversified portfolio of income-generating commercial real estate investments throughout the United States diversified by corporate credit, physical geography, product type, and lease duration. These may include multifamily, retail, office, hotel and industrial assets, as well as others, including, without limitation, healthcare, student housing, senior living, data centers, manufactured housing and storage properties.
What do you get when investing with Modiv?
Investors in the REIT offered by Modiv receive common stock, valued at $26.05 per share at the time of this writing. The actual properties may be owned directly by the REIT, or via wholly-owned subsidiary partnerships. Investors are entitled to receive dividend distributions, and unlike many of the real estate investment crowdfunding investment choices, also receive some voting rights (one vote per share) along with their investment.
How does Modiv make money?
Part of the Modiv value proposition is that they’re sidestepping many of the typical fees associated with REITs, in particular sales commissions paid to brokers (Motiv primarily uses direct marketing rather than sell via brokers). Modiv (or one of its subsidiaries) receives 2.5% of the proceeds from the offering, and North Capital Securities, the broker-dealer managing the offering receives 0.5% of the offering.
There are no other direct fees associated with the offering, though Motiv also controls a number of subsidiaries, including some that could earn income from tenants or from providing other services related to property management and acquisition.
Potential returns and cashflow
Investors receive monthly distributions, as authorized by the REIT’s board of directors. Also, all REITs are required to distribute 90% of their taxable income annually to retain the favorable tax treatment REITs receive from the IRS (in short, they don’t pay income taxes as long as they distribute at least 90% of their annual income back out to shareholders).
In addition to the monthly distributions (which you can choose to have automatically re-invested), in 2021 Modiv introduced a “13th dividend” which according to the company “will enable Modiv to pay an extra dividend at the end of each year, based on the success of the company’s business activities for that year.”
Breadth of offerings on Modiv
As of this writing, Modiv offers one REIT option (“Modiv, Inc”). The REIT currently owns 38 properties throughout the US, with a mix of office, industrial, and retail properties. You can view the full list of properties on the Modiv website.
As more investment flows into the REIT, more properties would be acquired (though there is of course the risk that they receive capital to invest faster than they can sensibly deploy it, which would potentially drag down returns).
Regulatory framework and due diligence expectations
Modiv is offering shares in their REITs to all investors, inluding non-accredited investors, under SEC Regulation A+, and the offering is being made through North Capital Securities, which provides broker-dealer services to quite a few investment crowdfunding platforms. Broker-dealers are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!).