RELATED PARTY TRANSACTIONS

The Company pays the members of its board of directors who are not executive officers for services rendered by issuing shares of Class C common stock to them. The total amount incurred was $372,500 and $167,835 for the years ended December 31, 2019 and 2018, respectively, of which $57,500 and $0 was unpaid as of December 31, 2019 and 2018, respectively.

In conjunction with the Self-Management Transaction effective December 31, 2019, the Advisory Agreement was terminated. The Advisory Agreement entitled the Former Advisor to specified fees upon the provision of certain services with regard to investments in real estate and the management of those investments, among other services, and the disposition of investments, as well as entitled the Former Advisor to reimbursement of organizational and offering costs incurred by the Former Advisor or Former Sponsor on behalf of the Company, such as expenses related to the Offerings, and certain costs incurred by the Former Advisor or Former Sponsor in providing services to the Company. In addition, the Former Advisor was entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Former Sponsor also served as the sponsor for REIT I and BRIX REIT. Effective February 3, 2020, our indirect subsidiary, modiv Advisors, LLC, became the advisor to BRIX REIT.

During the years ended December 31, 2019 and 2018, no business transactions occurred between the Company and REIT I or BRIX REIT, other than as described below or elsewhere herein, and those relating to the Company’s investment in REIT I before the Merger, as described in Note 5.

Summarized below are the related party costs incurred by the Company, including those incurred pursuant to the Advisory Agreement before its termination on December 31, 2019, for the years ended December 31, 2019 and 2018, respectively:



	Year Ended December 31, 2019			December 31, 2019				Year Ended December 31, 2018			December 31, 2018
	Incurred			Receivable		Payable		Incurred			Receivable		Payable
Expensed:
Asset management fees (1)	$	2,777,021		$	—	$	—	$	2,004,760		$	—	$	—
Reimbursable operating expense	528,000			—		—		—			—		—
Subordinated participation fees	—			—		—		839,050			—		839,050
Fees to affiliates	3,305,021			—		—		2,843,810			—		—
Property management fees*	224,922			—		—		174,529			—		96,792
Directors and officers insurance and other reimbursements **	250,892			—		—		128,512			—		30,164
Expense reimbursements (from) to Former Sponsor (2)	(332,337		)	—		—		(1,136,469		)	16,838		—
Capitalized:
Acquisition fees	746,459			—		—		2,752,339			—		—
Financing coordination fees	107,500			—		—		262,050			—		—
Reimbursable organizational and offering expenses (3)	1,206,881			—		—		1,503,062			—		13,168
Other:
Due from BRIX REIT (4)	—			1,378		—		—			—		—
Due from TIC	—			954		—		—			—		—
Notes due to Chairman of the Board	—			—		630,820		—			—		—
				$	2,332	$	630,820				$	16,838	$	979,174


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


**	Directors and officers insurance and other reimbursements are classified within general and administrative expenses on the 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 years ended December 31, 2019 and 2018, no fees were waived by the Former Advisor.

(2)

Includes payroll costs related to Company employees that answer questions from prospective stockholders. See “Investor Relations Compensation Expense Reimbursements 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 through September 30, 2019. The expense reimbursements from the Former Sponsor for the years ended December 31, 2019 and December 31, 2018 also include a refund of $40,914 and the cost of $261,370 of employment related legal fees which the Former Sponsor also agreed to reimburse the Company, respectively. The receivable related to these costs is reflected in “Due from affiliates” in the consolidated balance sheet as of December 31, 2018.

(3)

The Former Sponsor incurred $9,224,997 of organizational and offering costs on behalf of the Company. 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. The Company reimbursed a total of $5,429,105 through September 30, 2019, the effective termination date of the Former Sponsor's obligation to fund organizational and offering costs.


(4)	The amount includes unpaid asset management fees of $285,818 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.

Organizational and Offering Costs

The Company was obligated to reimburse the Former Sponsor or its affiliates for organizational and offering expenses (as defined in the Advisory Agreement) paid by the Former Sponsor on behalf of the Company. The Company reimbursed the Former Sponsor for organizational and offering expenses up to 3.0% of gross offering proceeds. Pursuant to an amendment of the Advisory Agreement dated October 14, 2019, the Company agreed to pay all future organization and offering costs, and to no longer be reimbursed by the Former Sponsor for investor relations personnel costs after September 30, 2019, in exchange for the Former Sponsor's agreement to terminate its right to receive 3.0% of all offering proceeds as reimbursement for organization and offering costs paid by the Former Sponsor.

The Former Sponsor and its affiliates were responsible for any organizational and offering expenses to the extent they exceeded 3.0% of gross offering proceeds through September 30, 2019. As of December 31, 2019, the Former Sponsor had incurred organizational and offering expenses in excess of 3.0% of the gross offering proceeds received by the Company. Through September 30, 2019, the Company reimbursed the Former Sponsor $5,429,105 in organizational and offering costs. The Company’s maximum liability for organizational and offering costs through December 31, 2019 was $5,429,105, of which $0 was payable as of December 31, 2019.

Investor Relations Compensation Expense Reimbursements from Former Sponsor

The Company employs investor personnel to answer inquiries from potential investors regarding the Company and/or its Registered Offerings. The payroll expense associated with the investor relations personnel was reimbursed by the Former Sponsor through September 30, 2019. The Former Sponsor considered these payroll costs to be offering expenses. The payroll expense reimbursements from the Former Sponsor for the years ended December 31, 2019 and 2018 were $373,251 and $875,100, respectively. The reduction in reimbursements during the 2019 period corresponds primarily to the reimbursement being in effect for nine months during 2019 as compared with 12 months during 2018 and a reduced number of investor relations personnel during the first nine months of 2019.

Acquisition Fees

The Company paid the Former Advisor a fee in an amount equal to 3.0% of the contract purchase price of the Company’s properties plus additions to real estate investments, as defined, as acquisition fees. The total of all acquisition fees and acquisition expenses was reasonable and did not exceed 6.0% of the contract price of the property. However, a majority of the directors (including a majority of the independent directors) not otherwise interested in the transaction had the authority to approve fees in excess of these limits if they determined the transaction to be commercially competitive, fair and reasonable to the Company.

Asset Management Fees

The Company paid the Former Advisor, as compensation for the advisory services rendered to the Company, a monthly fee in an amount equal to 0.1% of the total investment value, as defined in the Advisory Agreement (the “Asset Management Fee”), as of the end of the preceding month plus the book value of any properties acquired during the month pro-rated based on the number of days owned. The Asset Management Fee was payable monthly on the last business day of such month. The Asset Management Fee, which was required to be reasonable in the determination of the Company’s independent directors at least annually, was to be taken or waived, in whole or in part as to any year, in the sole discretion of the Former Advisor. All or any portion of the Asset Management Fee not paid as to any fiscal year was allowed to be deferred without interest and paid in such other fiscal year as the Former Advisor determined. On August 9, 2019 the board of directors approved renewing the Advisory Agreement through December 31, 2019. At the same time, the board of directors also approved amendments to the Advisory Agreement which eliminated the Subordinated Participation Fee (as defined in the Advisory Agreement).

Additionally, 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 of its monthly Asset Management Fee that was up to 0.025% of the total investment value of the Company’s assets. The total amount of Asset Management Fees incurred for the years ended December 31, 2019 and 2018 was $2,777,021 and 2,004,760, respectively, of which $0 was waived. No Asset Management Fees were payable at December 31, 2019 and 2018.

Financing Coordination Fee

Other than with respect to any mortgage or other financing related to a property concurrent with its acquisition, if the Former Advisor or an affiliate provided a substantial amount of the services (as determined by a majority of the Company’s independent directors) in connection with the post-acquisition financing or refinancing of any debt that the Company obtained relative to a property, then the Company paid to the Former Advisor or such affiliate a financing coordination fee equal to 1.0% of the amount of such financing. The Company paid and capitalized an aggregate of $107,500 related to two loans during the year ended December 31, 2019 and an aggregate of $262,050 related to three loans during the year ended December 31, 2018.

Property Management Fees

If the Former Advisor or any of its affiliates provided a substantial amount of the property management services (as determined by a majority of the Company’s independent directors) for the Company’s properties, then the Company paid the Former Advisor or such affiliate a property management fee equal to 1.5% of gross revenues from the properties managed. The Company also reimbursed the Former Advisor and any of its affiliates for property-level expenses that such tenant paid or incurred to the Company, including salaries, bonuses and benefits of persons employed by the Former Advisor, except for the salaries, bonuses and benefits of persons who also served as one of the Company’s executive officers or as an executive officer of such person. The Former Advisor or its affiliate were entitled to subcontract the performance of its property management duties to third parties and pay all or a portion of its property management fee to the third parties with whom it contracted for these services. The Company provided property management services for 10 properties in its portfolio during each of the years ended December 31, 2019 and 2018.

Disposition Fees

For substantial assistance in connection with the sale of properties, the Company was to pay the Former Advisor or one of its affiliates 3.0% of the contract sales price, as defined in the Advisory Agreement, of each property sold; provided, however, that if, in connection with such disposition, commissions were paid to third parties unaffiliated with the Former Advisor or its affiliates, the disposition fees paid to the Former Advisor, the Former Sponsor, their affiliates and unaffiliated third parties could not exceed the lesser of the competitive real estate commission or 6% of the contract sales price. There were no disposition fees incurred during the years ended December 31, 2019 and 2018.

Subordinated Participation Fees

The Company paid the Former Advisor or an affiliate a subordinated participation fee calculated as of December 31 of each year through December 31, 2018 and paid (if at all) in the immediately following January. The subordinated participation fee was only due if the Preferred Return, as defined in the Advisory Agreement, was achieved and equal to the sum of (using terms as defined in the Advisory Agreement):


(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.

The Company calculated a subordinated participation fee of $839,050 which was accrued as of December 31, 2018 and paid in cash during the first quarter of 2019. On August 9, 2019, the Advisory Agreement was amended to eliminate the Subordinated Participation Fee.

Leasing Commission Fees

If a property or properties of the Company became unleased and the Former Advisor or any of its affiliates provided a substantial amount of the services (as determined by a majority of the Company’s independent directors) in connection with the Company’s leasing of a property or properties to unaffiliated third parties, then the Company paid the Former Advisor or such affiliate leasing commissions equal to 6.0% of the rents due pursuant to such lease for the first ten years of the lease term; provided, however (i) if the term of the lease was less than ten years, such commission percentage applied to the full term of the lease and (ii) any rents due under a renewal of a lease of an existing tenant upon expiration of the initial lease agreement (including any extensions provided for thereunder) accrued a commission of 3.0% in lieu of the aforementioned 6.0% commission. There were no leasing commission fees incurred during the years ended December 31, 2019 and 2018.

Other Operating Expense Reimbursement

Under the Company's charter, total operating expenses of the Company were limited to the greater of 2% of average invested assets or 25% of net income for the four most recently completed fiscal quarters (the “2%/25% Limitation”). If the Company exceeded the 2%/25% Limitation, the Former Advisor was required to reimburse the Company the amount by which the aggregate total operating expenses exceeded the limitation, or the Company was required to obtain a waiver from the Company's conflicts committee. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, reserves for bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company, as determined by GAAP, that are in any way related to the Company’s operation including asset management fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based upon increases in NAV per share; (f) acquisition fees and acquisition expenses (including expenses, relating to potential investments that the Company does not close); and (g) disposition fees on the sale of real property and other expenses connected with the acquisition, disposition and ownership of real estate interests or other property (other than disposition fees on the sale of assets other than real property), including the costs of insurance premiums, legal services, maintenance, repair and improvement of real property. The total reimbursable operating expenses incurred were $528,000 and $0 during the years ended December 31, 2019 and 2018, respectively.

The Company was in compliance with the 2%/25% Limitation for operating expenses for the four fiscal quarters ended December 31, 2019 and 2018.

Due to Affiliates

In connection with the Self-Management Transaction, the Company assumed two notes payable aggregating $630,820 on December 31, 2019 owed to Mr. Wirta, the Company's Chairman. The secured notes payable are presented under due to affiliates in the Company's consolidated balance sheet as of December 31, 2019. The notes payable have identical terms including a fixed interest rate of 10% paid semi-monthly and a maturity date of April 23, 2020. At maturity, a remaining principal payment of $218,931 is due for each note, aggregating $437,862.

Related Party Transactions with Unconsolidated Entities

The Company’s portion of Former Advisor fees paid relating to the TIC Interest for the years ended December 31, 2019 and 2018 was as follows:



	Years Ended December 31,
	2019		2018
Asset management fees	$	191,907	$	191,907

The acquisition fees were paid pursuant to the Advisory Agreement and were capitalized as a component of the Company’s investment in the TIC Interest. The advisory agreement with the entity that owns the TIC Interest property was assigned to the Company's taxable REIT subsidiary following the Self-Management Transaction and the Company will earn a monthly management fee equal to 0.1% of the total investment value of the property from this entity.

The Company’s portion of Former Advisor fees paid relating to REIT I for the years ended December 31, 2019 and 2018 were as follows:



	Years Ended December 31,
	2019		2018
Expensed:
Asset management fees	$	34,968	$	38,903
Other	16,800		32,274
Total	$	51,768	$	71,177

Acquisition of Intellectual Property From the Former Sponsor and Website Hosting Agreement With BRIX REIT

Effective October 28, 2019, the Operating Partnership acquired certain software and related assets of the Former Sponsor in order for the Operating Partnership to develop and operate a new online platform for BRIX REIT. The Operating Partnership entered into a website hosting services agreement with BRIX REIT effective October 28, 2019, pursuant to which the Operating Partnership hosted the online platform at http://www.brix-reit.com for BRIX REIT. In connection with such hosting services, BRIX REIT paid the Operating Partnership service fees equal to the direct cost paid by the Operating Partnership to third parties for services related to the Operating Partnership’s hosting of the online platform, plus the then-current time and materials rates charged by the Operating Partnership for the services of its personnel. The website hosting services agreement had a term of three years following its effective date and would have automatically renewed for successive one-year periods unless either party notified the other of termination on or before 90 days prior to the end of the term, or unless the agreement was terminated earlier due to a material breach by either party of the agreement, either party became insolvent or the Operating Partnership transferred or assigned all of its right, title and interest in the online platform to a third party that was not a direct or indirect subsidiary of the Operating Partnership. Since BRIX REIT paid all of the direct costs of third parties that developed and hosted the BRIX REIT online platform, the Operating Partnership did not receive any fees under the website hosting services agreement. On January 31, 2020, the Company's taxable REIT subsidiary entered into an advisory agreement to provide services to BRIX REIT including website hosting services, and the website hosting services agreement was terminated.