Monmouth Real Estate Investment Corporation A Public REIT Since 1968 NYSE: MNR www.mreic.reit Bell Works 101 Crawfords Corner Road, Suite 1405 Holmdel, New Jersey 07733 732.577.9996 Monmouth Real Estate Investment Corporation 2019 Annual Report M o n m o u t h R e a l E s t a t e I n v e s t m e n t C o r p o r a t i o n 2 0 1 9 A n n u a l R e p o r t Economic survival is dependent upon the creation of goods and services. There are three essential ingredients needed in order to create these goods and services: Labor, Capital, and Land. Because real estate ownership directly provides one of these required elements, it has proven to be a very sound long-term investment. Today, Monmouth owns 115 industrial properties containing 22.9 million rentable square feet, situated on 2,725 total acres. These mission-critical assets are geographically diversified across 30 states. With a weighted average building age of only 9.1 years, and a current occupancy rate of 99.2%, our portfolio of properties, built one high-quality asset at a time, is one of the best around. Our real estate is home to some of the world’s largest companies, including Amazon, Anheuser-Busch, Beam Suntory, Coca-Cola, FedEx, Home Depot, International Paper, National-Oilwell Varco, Sherwin-Williams, Siemens, Toyota, Ulta Beauty, United Technologies, and more. Because 80% of our rental revenue is derived from long-term leases to investment-grade tenants, our earnings quality is among the strongest in the REIT industry. Directors Kiernan Conway Director of Research and Corporate Engagement Alabama Center of Real Estate Chief Economist, CCIM Institute Brian H. Haimm Chief Financial Officer and Chief Operating Officer Active Acquisitions, LLC Eugene W. Landy Founder and Chairman of the Board Daniel D. Cronheim Attorney-at-Law President David Cronheim Mortgage Corp. Catherine B. Elflein Senior Director — Risk Management Celgene Corporation Neal Herstik Attorney-at-Law Gross, Truss & Herstik, PC Matthew I. Hirsch Attorney-at-Law Law Office of Matthew I. Hirsch Michael P. Landy President and Chief Executive Officer Samuel A. Landy Attorney-at-Law, President and Chief Executive Officer UMH Properties, Inc. Scott L. Robinson Managing Director Oberon Securities Kevin S. Miller Chief Financial and Accounting Officer, and Treasurer Gregory T. Otto Chief Strategy Officer Seabury Maritime, LLC Stephen B. Wolgin Managing Director U.S. Real Estate Advisors, Inc. Officers and Management Eugene W. Landy Founder and Chairman of the Board Allison Nagelberg General Counsel Michael P. Landy President and Chief Executive Officer Kevin S. Miller Chief Financial and Accounting Officer, and Treasurer Michael D. Prashad General Counsel Richard Molke Vice President of Asset Management Susan M. Jordan Vice President of Investor Relations Becky G. Coleridge Vice President of Investor Relations Allison Viscardi Vice President of Property Management Katie Rytter Controller Laura Teman Assistant Controller Ayaris Drouet Administrative Assistant Crystal Glas Executive Assistant Yulia Hatch Senior Accountant Ashley Tripodi Assistant Property Manager Matthew R. Santonocito Information Technology Manager Corporate Information Corporate Office Bell Works 101 Crawfords Corner Road Suite 1405 Holmdel, NJ 07733 Independent Auditors PKF O’Connor Davies, LLP 665 Fifth Avenue New York, NY 10022 m o c . n o s i d d a . w w w n o s i d d A y b n g i s e D Transfer Agent & Registrar American Stock Transfer & Trust Company 6201 15th Avenue Brooklyn, NY 11219 Common Stock Listing NYSE:MNR www.mreic.reit – 1 – 2019 Annual Report Through the Looking Glass “ Creativity is what makes humanity move. We were created to participate.” – Keith Jarrett, Composer January 2020 Dear Fellow Shareholders, The time has come to talk of many things as we peer through the looking glass and inspect our Company, Monmouth Real Estate Investment Corporation. In so doing, we must also analyze aspects of the broader market and even the world at large, as Monmouth, like any other living organism, does not exist in a vacuum. Having just completed our 52nd year as a public REIT, we move into the future with our PAST by our side. We will look back at our upbringing in order to understand the time-tested principles that have enabled us to thrive through so many business cycles. Because in order to succeed, one must first survive. Drilling down on the PRESENT will of course be done, as it is essential to understanding our story. However, it is important to point out that it is impossible to do so in isolation. Like a single melodic note, its true meaning is dependent on that which came before it and that which will come after it. As our reliable progress continues to build to a crescendo, investors in our Company will best prosper by investing for the long term. Importantly, we will also peer further out beyond the horizon, into that real yet imagined place we call the FUTURE. Though abundant clouds of uncertainty obscure its landscape these days, visualizing what the future will bring is the secret to successful investing. Pricing mechanisms reflect upon the balance of supply and demand based primarily upon what is known today. Tomorrow is another story. – 2 – Monmouth Real Estate Investment Corporation During Fiscal 2019, the Company’s many accomplishments include the following: • Increased our Gross Revenue by 14.1% to • Maintained a sector-leading occupancy $173.7 million, • Increased our Net Operating Income by 14.3% to $131.2 million, • Reduced our Net Debt to Adjusted EBITDA to 5.9x from 7.1x, • Maintained a conservative AFFO dividend payout ratio of 80%, • Reduced our General and Administrative expenses as a percentage of gross revenue to 5.2% from 5.8%, • Achieved $2.6 billion in total market capitalization at fiscal yearend, • Acquired 824,000 square feet of high- quality industrial space for $138.6 million, comprising three brand new Class A, built-to-suit properties, all leased long- term to investment-grade tenants, • Completed one 155,000 square foot building expansion for $8.6 million, generating additional rental revenue and resulting in a 15-year lease extension, • Increased our gross leasable area (GLA) by 5.1% year-over-year to 22.3 million square feet, • Entered into commitments to acquire five new Class A, build-to-suit properties containing 1.6 million total square feet, all leased long-term to investment- grade tenants, rate of 98.9% at fiscal yearend, representing our fourth consecutive year with above 98% occupancy, which increased to 99.2% subsequent to fiscal yearend, • Renewed seven leases comprising 1.1 million square feet for a weighted- average lease term of 7.2 years, • Achieved a weighted average lease maturity of 7.6 years as of the current fiscal yearend, which subsequently increased to 7.8 years, • Increased our annualized average base rent per occupied square foot by 3% to $6.20 from the prior year, • Raised $132.3 million in net proceeds in a Common Stock Offering in October 2018, • Raised 58.2 million in equity through our Dividend Reinvestment and Stock Purchase Plan, representing a 26% participation rate, • Raised $58.2 million in net proceeds through our Perpetual Preferred Stock ATM Program, • Maintained the weighted-average debt maturity on our fixed-rate debt at 11.3 years, and • Subsequent to yearend, purchased one new Class A built-to-suit property comprising 616,000 square feet for $81.5 million. – 3 – 2019 Annual Report Competition for acquiring U.S. industrial real estate this past year has been fierce, driven by unprecedented demand from tenants and investors alike. It is a seller’s market if ever there was one. The largest industrial REIT, Prologis, and the giant private equity firm, Blackstone, have both been aggressively acquiring industrial property portfolios and consolidating our industry to the point where they now control 10% of the total U.S. industrial space market. Sovereign wealth funds and other large institutions have been favoring our property type as well. This has resulted in continued cap rate compression. It is estimated that industrial real estate values have more than doubled during the past ten years and have increased by 15% in the past year alone. Consequently, the value of our properties has appreciated substantially. The main catalyst driving this feeding frenzy continues to be Ecommerce. Pioneered by Jeff Bezos in the mid-1990s, first with book sales and then with music, Amazon has rapidly grown to become “The Everything Store.” Many of the large retailers have finally woken up to the wide-spread disruption resulting from ever increasing internet sales. To keep pace, many of these retailers have been busy reconfiguring their supply chains to accelerate the distribution of goods both directly to the consumer, as well as through their traditional brick-and-mortar store networks. This new approach, known as “Omni-channel distribution,” is here to stay as consumer spending the world over has embraced the unlimited product selection and increased efficiencies that the digital marketplace provides. Monmouth was early in seeing this changing of the guard driving massive demand for industrial real estate, and today our portfolio is greatly benefiting from the secular shift to Ecommerce. Formed in 1968, Monmouth is one of the oldest publicly-traded REITs. We are also one of the most specialized. Our focus is on single-tenant, net-leased industrial properties on long-term leases to investment-grade tenants. Over our long history, valuable relationships have been forged that have been instrumental to our success. We have assembled a best-in-class industrial property portfolio with an all-star tenant roster that includes Amazon, Anheuser-Busch, Beam Suntory, Coca-Cola, FedEx, Home Depot, International Paper, Milwaukee Tool, National Oilwell Varco, PP&G, Sherwin-Williams, Siemens, Toyota, Ulta Beauty, United Technologies, among other high- quality companies. With 80% of our rental revenue derived from investment-grade rated tenants and the other 20% secured by strong non-rated tenants, our operating earnings quality is among the highest in the REIT industry. Our property portfolio now contains 22.9 million rentable square feet, consisting of 115 properties, geographically diversified across 30 states. Our weighted average lease maturity is currently 7.8 years, providing visible earnings for many years to come. Our land-to-building ratio is 5.2:1 which allows us ample capacity for building expansions as our tenants continue to grow their strong businesses. Building age is an increasingly important metric in the industrial real estate sector these days, as newer, modern buildings are benefiting the most from the secular shifts in consumer spending brought on by Ecommerce. As you can see from the pictures in this report, our portfolio is Class A. The highly automated infrastructure inside of our buildings is substantial and involves considerable capital investment borne by our tenants. Our properties are mission critical to our tenants’ needs and, therefore, we have historically benefited from high tenant retention rates. The weighted average building age of our portfolio is only 9.1 years old, making it the youngest and most state-of-the-art in the industrial REIT sector. It is no coincidence that we consistently achieve the highest occupancy rate in our sector, which is currently at 99.2%. – 4 – Monmouth Real Estate Investment Corporation “ Diversification may conserve wealth, but concentration builds wealth.” – Warren Buffett, CEO of Berkshire Hathaway FedEx is by far our largest tenant and we wouldn’t want it any other way. Goods move quickly in a continuous manner throughout the world thanks in part to their vast and highly efficient networks. Their world-class services are as integral to global trade as our vascular systems that deploy blood to our organs are to our survival. Monmouth currently owns 60 properties leased to FedEx with more under construction. We now have 10.4 million square feet serving FedEx, representing approximately 45% of our 23 million square foot portfolio. It is estimated that the total U.S. parcel market will double from 50 million packages per day currently to 100 million packages per day by 2026. Because of this surging demand, FedEx recently announced that they will begin delivering packages seven days a week all year round. This means that our mission critical properties leased to FedEx have now become more mission critical than ever before. – 5 – 2019 Annual Report Movement of the Yield Curve 10/15/19 7/17/19 10/15/18 ) % ( s d l e i Y 3.5 3.0 2.5 2.0 1.5 1.0 3 month 6 month 2 year 5 year 10 year 30 year The theme of last year’s letter was “Balancing Forces,” in which we looked at how irrational behavior and biased thinking can create capital misallocations, and how natural forces have a way of self-correcting these imbalances over time. If there was only one single tool that investors could use to guide their decision-making in order to benefit from these imbalances, it should be the yield curve. The yield curve is a looking glass of its own, containing more information about the market sentiment than all other surveys combined. For much of this past year the U.S. yield curve has either been very flat or inverted. From a historical perspective this represents rare imbalances. America does have the distinction of having only positive nominal interest rates. The rest of the world is even more imbalanced with a number of countries exhibiting negative nominal rates. When factoring in just minimal inflation, the resulting amount of global debt with negative real interest rates becomes staggering. In times like these, it makes sense to lock in the longest- term financing possible. For the first time ever, this year Germany issued negative yielding 30-year bonds, while back home the 30-year U.S. Treasury Bond fell to a record low of under 2%. Many countries have issued ultra-long bonds that don’t mature for 50 or even 100 years. So, let me now turn to how Monmouth has utilized this protracted period of historically low rates and yield curve imbalances to our advantage. – 6 – Monmouth Real Estate Investment Corporation Global: 10-Year Government Bond Yields 1.6% 1.2% 0.7% 0.3% 2.0% 1.8% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% S U a d a n a C y a w r o N K U i n a p S e c n a r F n e d e w S n a p a J -0.1% -0.1% -0.2% -0.2% -0.4% y n a m r e G -0.6% d n a l r e z t i w S s d n a l r e h t e N By financing our growth with a combination of low cost, long term, fixed-rate mortgage debt and perpetual preferred equity, we’ve made our fortress balance sheet stronger than ever. At fiscal yearend, our capital structure consisted of approximately $840 million in debt, of which $745 million was property-level fixed-rate mortgage debt, with a weighted average interest rate of 4.0%, and a weighted average maturity of 11.3 years. This represents one of the longest average debt maturities reported in the entire REIT sector. We also had a total of $348 million in perpetual preferred equity at yearend. Our Series C Preferred shares have a dividend rate of 6.125% and while these preferred shares are redeemable at our discretion in a few years, they never mature and can go all the way out in perpetuity, to eternity and back. We always recommend financing long-term assets with long-term capital, and this is especially true in the current interest rate environment. There is no longer term, fixed-rate instrument than perpetual preferred. We’ve also been building up our unencumbered asset pool. This year we increased and extended our credit facility while reducing the interest rate. As a result, our new facility provides for up to $400 million in borrowing capacity. Our overall debt ratios have improved substantially this year with our net debt to adjusted EBITDA reduced from 7.1x to 5.9x at fiscal yearend. Given our 7.8 year weighted average lease maturity and the fact that our cash flow is secured by investment grade tenants, our balance sheet is very conservatively levered. Further enhancing our liquidity, we ended the year with $185.3 million in REIT securities and $20.2 million in cash. – 7 – 2019 Annual Report REITs are a total return vehicle. They provide income plus capital appreciation. Inflationary forces can build quietly off in the distance, out of sight and out of mind. However, when inflation does appear, great wealth can quickly be confiscated through the erosion of purchasing power. Because real estate is a hard asset, with the power to preserve value during inflationary periods through rising rents and rising replacement costs, it offers a unique safe harbor from this cruelest tax of all. In addition, Monmouth’s Net Operating Income is further protected during inflationary periods given our net lease structure, whereby the tenant bears the responsibility for rising real estate taxes, insurance, and operating expenses. One of the unique aspects of our business model is that in addition to investing in hard assets, we also invest in liquid real estate. Our primary motive for so doing is Liquidity. The most common cause of real estate investors failing from one cycle to the next is they get over-burdened with debt. Having a balance sheet with not only free and clear hard assets but also unencumbered liquid assets allows us quick access to capital even during the most difficult points in the cycle. In the past, we limited our REIT securities investments to no more than 10% of gross assets. Following the implementation of a new accounting rule in October 2018, the impact of quarterly mark- to-market fluctuations of our REIT securities portfolio shifted from our balance sheet onto – 8 – our income statement, thereby introducing increased volatility into some of our key earnings and other valuation metrics. Consequently, in order to mitigate some of this volatility, we have recently decided to opportunistically reduce our securities investments over time down to a target threshold of 5% of our undepreciated assets. We hope that investors can see through the quarterly noise of these mark-to-market adjustments and understand the long-term benefits of owning liquid assets. By taking a long-term view we have realized substantial gains on our securities investments since we implemented this program in the mid-1990s. In addition to providing us with access to liquidity, our portfolio also generates dividend income. Monmouth Real Estate Investment Corporation “ A zero tariff, zero subsidy global trade environment is the most powerful economic growth engine there is.” – Frederick Smith, CEO of FedEx The two-way street of free and fair trade has become gridlocked. When access to global markets is unfettered, new businesses are created, jobs are added, economies grow, and living standards improve. Global per capita GDP has risen dramatically due to unrestricted access to the goods and services produced in all markets and in all regions throughout the world. Total trade, imports plus exports, has grown in the U.S. from $50 billion annually in the late ‘60s to over $4 trillion today. While America benefits by having the largest economy, 80% of the world’s purchasing power resides beyond our borders. The recent trade disputes between the U.S. and China have constrained both economies. Hopefully these issues will soon be resolved, and goods and services will flow freely in a reciprocal manner. National economies will never come close to realizing their full potential if protectionism and mercantilism isolate them from the rest of the world. – 9 – 2019 Annual Report Monmouth’s rental and reimbursement revenues for the year were $158.5 million compared to $139.2 million, or an increase of 13.9% from the prior year. Net Operating Income increased $16.4 million to $131.2 million, reflecting a 14.3% increase from a year ago. Funds from Operations (FFO) for fiscal 2019 were $81.2 million, or $0.87 per diluted share, as compared to $69.8 million, or $0.89 per diluted share last year, representing a 2% per share decrease. A primary focus of ours is on growing our recurring earnings, or what is commonly referred to as Adjusted Funds from Operations (AFFO). AFFO excludes gains or losses on the sale of real estate and gains or losses on the sale of REIT securities, as well as lease termination income and the effects of straight-lined rent adjustments. Therefore, we believe AFFO serves as the best proxy for recurring cash earnings. Over the prior three-year period, our AFFO per share increased at an average annual rate of 14%, thereby allowing us to increase our common stock dividend by 13% during that period. This year our AFFO per diluted share decreased slightly to $0.85 from $0.87 in the prior year, representing a 2% decrease. Our financial results were modestly impacted by the timing of our equity issuance in October 2018 and by a 70-basis point reduction in our occupancy rate. Given our current $180 million acquisition pipeline as well as our occupancy gains subsequent to fiscal yearend, we expect our per share earnings and cash flow to increase going forward. During this ultra-competitive period, we were once again very pleased with our ability to successfully source high-quality acquisitions. Of course, we could always have a larger acquisition pipeline which would enable us to generate faster growth in total assets, but with so much of our own “skin in the game,” we always hold true to our conservative principles and wait until we find what has become known as “A Monmouth Asset.” What defines a Monmouth asset is the following: 1. The tenant must have an investment grade rating or, if non- rated, must be deemed by us to be of equivalent investment-grade quality. 2. The lease must be of a long duration of 10 or more years. 3. The lease must be a solid net-lease that requires the tenant to be responsible for all taxes, insurance, and operating expenses. Taking our stringent investment criteria a few steps further, the property must be a modern building. I discussed earlier the reasons why the supply chain has shifted to these smart, highly automated, omni-channel capable buildings. Last but certainly not least, the property must be well-located. I spent several pages in last year’s annual report on the topic “Location, Location, Location.” We invest in business-friendly states as these areas enjoy greater population growth and greater per-capita GDP growth. We also focus on logistics centers. These are areas near international airports, seaports, inland ports, or rail hubs. With 70% of the U.S. population residing east of the Mississippi River, our portfolio is strategically very well-positioned (see Property Locations map, pages 18–19 of this report). We have shown great discipline in building our portfolio of mission- critical industrial properties one high quality asset at a time. Today our portfolio is second to none. – 10 – Monmouth Real Estate Investment Corporation Reliable Dividends $0.58 $0.57 $0.60 $0.70 $0.68 $0.66 $0.64 $0.62 $0.60 $0.58 $0.56 $0.54 $0.52 $0.50 $0.68 $0.64 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 “ Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn’t pays it.” – Albert Einstein, Physicist The mistaken belief that so much is vulnerable to the forces of disruption is in itself disruptive and therefore, self-fulfilling in the short term. New economy stocks have soared while old economy stocks have been battered. Unicorn companies are commanding valuations that appear one step removed from reality. But hope and patience do not spring eternal and sooner or later a focus on profitability returns. Perhaps the best proof of the strength of our qualitative business model is our dividend track record. Even during the depths of the Global Financial Crisis our shareholder dividends were paid without missing a beat. We passed that stress-test with flying colors and have since raised our dividend by 13%. Our AFFO dividend payout ratio this year was 80%, which given our high-quality tenant base and our 7.8 year weighted average lease maturity, provides for a very safe and well-protected dividend. With reliable dividends should come patience and less volatility. Warren Buffet has compared life to a snowball. All that is needed, he says, is some wet snow and a really long hill. It is empirically proven that Monmouth possesses both of these key ingredients for tapping into the wonders of compounding investment returns over the long term. – 11 – 2019 Annual Report Total Return Performance MNR S&P 500 MSCI US REIT (RMS) ) % ( n r u t e R l a t o T 350 300 250 200 150 100 50 0 -50 -100 277.60% 184.17% 146.23% 7 0 0 2 / 1 3 / 2 1 8 0 0 2 / 1 3 / 2 1 9 0 0 2 / 1 3 / 2 1 0 1 0 2 / 1 3 / 2 1 1 1 0 2 / 1 3 / 2 1 2 1 0 2 / 1 3 / 2 1 3 1 0 2 / 1 3 / 2 1 4 1 0 2 / 1 3 / 2 1 5 1 0 2 / 1 3 / 2 1 6 1 0 2 / 1 3 / 2 1 7 1 0 2 / 1 3 / 2 1 8 1 0 2 / 1 3 / 2 1 9 1 0 2 / 1 3 / 2 1 Looking at our total return performance over the past 12-year period we see that Monmouth has handily outperformed both the MSCI US REIT Index and the S&P 500. The algorithms that play an increasing role in the public markets these days are known for their hyper-active trading. Given our consistent fundamental performance, Monmouth’s more recent trading pattern shown above has become much too volatile and perhaps even predictably so. Real estate is a long-term cyclical asset class that can deliver the type of compounded returns over time that will outperform all other asset classes. Just because the robots are superfast does not mean that high-speed dating is a superior “investment” strategy. Instead of creative destruction, the computer engineers who have infiltrated the public arena may ultimately end up with a legacy of destructive creation. Long- term investing should be defined by a substantial amount of years, not quarters. Much time and thought has gone into writing this letter to shareholders, and I am grateful for the time you are taking to read it. Unfortunately, not a single millisecond will be spent on it, or anyone else’s shareholder letter for that matter, by the robo- advisors who are out there controlling so much of the public market today. And that, my fellow human beings, is a sad commentary. – 12 – Monmouth Real Estate Investment Corporation Percentage of Bonds Trading at Negative Yields 100% 100% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 89% 75% 72% 66% 64% 54% 50% GER NET FIN FRA AUS IRE BEL POR SPA 0% ITA “ It’s no easy thing trying to shout down a mass delusion!” – James Grant, Writer Who is crazy enough to be investing in negative yielding bonds? Due to the widespread proliferation of index funds, the answer could very well be, YOU ARE!!! With 25% of the total fixed income instruments yielding less than zero during much of the past year, anyone in a global bond ETF is exposed, whether wittingly or unwittingly, to these negative nominal interest rates. This long period of financially repressed markets has made low-cost, passive investing the dominant force in portfolio management today. Compounding the situation, many “active” investors are really not very active at all, as their holdings intentionally mirror those of the largest index funds. Therefore, the amount of assets under management owned by the truly active investors is much lower than most people think. Having stock ownership more widely dispersed to both active human investors as well as index funds would provide for a more balanced market structure. The current situation in which giant ownership concentrations can be found in just a handful of passive funds is a much less stable environment. Innovation is an enlightened act. Imitation is far less so. While index funds do serve a useful purpose, I believe that balancing forces will at some point reappear, and active investing will once again return to its preeminent place in the sun. – 13 – 2019 Annual Report “ Wisdom is the son of failure, and the father of success.” – Isaac Bashevis Singer, Writer It is no secret that without the wisdom, intuition, vision, guidance, and judgement of our Founder, my father and mentor, Eugene Landy, Monmouth would not be what it is today. There is so much to admire about his leadership. So much to aspire to, and to emulate, both in business and beyond. The words to define it have not yet been created. Please know that a better example there could never be. It must also be stated that working alongside our exceptional Team over many years, we have built upon our strong foundation and taken Monmouth to places far beyond what was capable before. So, thank you to my teammates. Your hard work, dedication, and deep concern for all things Monmouth is truly a blessing. To our Directors, for your vigilant oversight. There can be no more effective judge of things than time itself. Thank you for looking out for Monmouth’s long-term interests and for understanding the enduring principles that have made us one of the oldest and best performing REITs in the world. – 14 – Monmouth Real Estate Investment Corporation Lastly, it has been said that the surest proof of intelligent life existing on other planets is that they’ve never come to visit us. One can imagine intergalactic space aliens peering through a looking glass of their own, down at our little world today. What an upside-down place they would see. One of the many faults of human nature is that sometimes in order to understand the true value of things, we first need to throw them away. Only when it’s too late do we understand how blinded we’d become, as the thing to remember about looking glasses is, that in order to truly see the world clearly, one must also look within! The forces of Creative Destruction have been unleashed by the Digital Revolution, and they will continue to select the winners from the losers, or in today’s parlance, the disruptors from the disrupted. Let us all strive to be on the side of CREATION. For those who can anticipate what tomorrow will bring, prosperity awaits. Here’s to a Healthy and Prosperous New Year! Sincerely, Michael P. Landy President and Chief Executive Officer – 15 – 2019 Annual Report Consistent Growth Gross Assets Gross Revenue $2.2 $2.0 $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $200 $175 $150 $125 $100 $75 $50 $25 s n o i l l i B n i $ s n o i l l i M n i $ $2.122 $1.925 $1.616 $1.379 $1.041 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 $174 $152 $123 $103 $81 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 – 16 – Monmouth Real Estate Investment Corporation Common Equity Perpetual Preferred Equity Debt ) s n o i l l i B n i $ ( n o i t a z i l a t i p a C t e k r a M l a t o T e r a h S r e P O F F A $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $2.548 $2.577 $2.182 $1.788 $1.171 Capital Structure FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 $0.87 $0.85 $0.76 $0.70 $0.57 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 – 17 – Adjusted Funds from Operations 2019 Annual Report Property Locations Monmouth’s property portfolio is exclusively located right here in the continental United States. With over 70% of the U.S. population residing east of the Mississippi River, Monmouth’s assets are clearly on the path of progress. The recently expanded Panama Canal has resulted in America’s East Coast and Gulf Coast ports experiencing much higher growth rates than those on the West Coast. Our 22.9 million square foot industrial property portfolio is strategically very well positioned near major rail hubs, major seaports, major intermodal ports, international airports, interstate highways, and manufacturing plants that are integral to our tenants’ operations. Because business-friendly states tend to have greater population growth, better employment rates, and higher standards of living, this too is factored into our investment decision-making process. Existing Properties (115) Future Acquisitions Under Contract (5) Main Railroads Population Density (#/sq. mi.) 1.74 2,891 – 18 – Monmouth Real Estate Investment Corporation – 19 – 2019 Annual Report Featured Properties FedEx Dallas, TX 352,000 SF Milwaukee Tool Memphis, TN 862,000 SF Beam Suntory Lexington, KY 600,000 SF – 20 – Monmouth Real Estate Investment Corporation Amazon Indianapolis, IN 616,000 SF Coca-Cola Phoenix, AZ 283,500 SF Ulta Beauty Indianapolis, IN 672,000 SF – 21 – 2019 Annual Report Featured Properties (continued) FedEx Trenton, NJ 347,000 SF Actavis Memphis, TN 235,000 SF Best Buy Cleveland, OH 368,000 SF – 22 – Monmouth Real Estate Investment Corporation Amazon Oklahoma City, OK 300,000 SF B. Braun Daytona Beach, FL 400,000 SF FedEx Indianapolis, IN 328,000 SF – 23 – 2019 Annual Report – 24 – Monmouth Real Estate Investment Corporation Monmouth Real Estate Investment Corporation is one of the oldest REITs in the world. Our history, which spans more than five decades of creating exceptional value for our shareholders, is characterized by transparency, accountability, fairness, and integrity throughout every facet of our business. This annual report is our official log charting our voyage to date. What a magnificent journey it has been. Today we own a modern portfolio of industrial properties secured by long- term leases to some of the strongest companies in the world. Our team, headed by Michael Landy, has created one of the finest industrial REITs around. Your Chairman has been in your service for fifty- two years. Indeed, I was there at the founding of the REIT industry. REITs were formed to give small investors the opportunity to become real estate investors. They were also formed to create large pools of capital to finance the construction needs of the nation. Today, in almost every segment of the real estate industry, there is ample capital available to create the new space that is needed in order to meet the demands of our growing economy. I am grateful to our shareholders who have entrusted their funds to our stewardship. Our total return, which is in excess of 1,100% achieved over the past two decades, is evidence of our diligence. I would like to also extend thanks to our Board of Directors who have served our Company well over many decades. A knowledgeable and experienced board is an asset to every company. Experience allows us to overcome the challenges presented by recessions, inflation, or any of the other difficulties that inevitably appear, as life is not always “fair winds and smooth seas.” We listen to the economic experts such as Jim Grant and believe their cautionary advice is well reasoned. We also believe that prior to any period of contraction there will be a period of prosperity, rising values and property prices. Our Company is well positioned to prosper, both in good times and in bad. Sincerely, Eugene W. Landy Founder and Chairman of the Board – 25 – 2019 Annual Report Financial Highlights The following is a calendar yearend common stock review: Year 2019 2018 2017 2016 2015 Share Volume Opening Price ($) Closing Price ($) Dividend Paid ($) Appreciation (Depreciation) Total Return 109,021,600 114,711,400 80,472,400 80,440,900 53,003,500 12.40 17.80 15.24 10.46 11.07 14.48 12.40 17.80 15.24 10.46 0.68 0.68 0.65 0.64 0.61 16.8% 22.6% -30.3% -26.4% 16.8% 21.9% 45.7% 53.5% -5.5% 0.3% The shares of common stock of Monmouth Real Estate Investment Corporation are traded on the New York Stock Exchange (NYSE:MNR). The following is a 5-year dividend payment and Core FFO analysis: Fiscal Year Ended September 30 Core Funds From Operations ($) Dividends Per Share ($) 2019 2018 2017 2016 2015 81,196,801 69,841,849 57,088,302 50,270,633 35,276,535 0.68 0.68 0.64 0.64 0.60 – 26 – Monmouth Real Estate Investment Corporation – 27 – 2019 Annual Report Economic survival is dependent upon the creation of goods and services. There are three essential ingredients needed in order to create these goods and services: Labor, Capital, and Land. Because real estate ownership directly provides one of these required elements, it has proven to be a very sound long-term investment. Today, Monmouth owns 115 industrial properties containing 22.9 million rentable square feet, situated on 2,725 total acres. These mission-critical assets are geographically diversified across 30 states. With a weighted average building age of only 9.1 years, and a current occupancy rate of 99.2%, our portfolio of properties, built one high-quality asset at a time, is one of the best around. Our real estate is home to some of the world’s largest companies, including Amazon, Anheuser-Busch, Beam Suntory, Coca-Cola, FedEx, Home Depot, International Paper, National-Oilwell Varco, Sherwin-Williams, Siemens, Toyota, Ulta Beauty, United Technologies, and more. Because 80% of our rental revenue is derived from long-term leases to investment-grade tenants, our earnings quality is among the strongest in the REIT industry. Directors Kiernan Conway Director of Research and Corporate Engagement Alabama Center of Real Estate Chief Economist, CCIM Institute Brian H. Haimm Chief Financial Officer and Chief Operating Officer Active Acquisitions, LLC Eugene W. Landy Founder and Chairman of the Board Daniel D. Cronheim Attorney-at-Law President David Cronheim Mortgage Corp. Catherine B. Elflein Senior Director — Risk Management Celgene Corporation Neal Herstik Attorney-at-Law Gross, Truss & Herstik, PC Matthew I. Hirsch Attorney-at-Law Law Office of Matthew I. Hirsch Michael P. Landy President and Chief Executive Officer Samuel A. Landy Attorney-at-Law, President and Chief Executive Officer UMH Properties, Inc. Scott L. Robinson Managing Director Oberon Securities Kevin S. Miller Chief Financial and Accounting Officer, and Treasurer Gregory T. Otto Chief Strategy Officer Seabury Maritime, LLC Stephen B. Wolgin Managing Director U.S. Real Estate Advisors, Inc. Officers and Management Eugene W. Landy Founder and Chairman of the Board Allison Nagelberg General Counsel Michael P. Landy President and Chief Executive Officer Kevin S. Miller Chief Financial and Accounting Officer, and Treasurer Michael D. Prashad General Counsel Richard Molke Vice President of Asset Management Susan M. Jordan Vice President of Investor Relations Becky G. Coleridge Vice President of Investor Relations Allison Viscardi Vice President of Property Management Katie Rytter Controller Laura Teman Assistant Controller Ayaris Drouet Administrative Assistant Crystal Glas Executive Assistant Yulia Hatch Senior Accountant Ashley Tripodi Assistant Property Manager Matthew R. Santonocito Information Technology Manager Corporate Information Corporate Office Bell Works 101 Crawfords Corner Road Suite 1405 Holmdel, NJ 07733 Independent Auditors PKF O’Connor Davies, LLP 665 Fifth Avenue New York, NY 10022 m o c . n o s i d d a . w w w n o s i d d A y b n g i s e D Transfer Agent & Registrar American Stock Transfer & Trust Company 6201 15th Avenue Brooklyn, NY 11219 Common Stock Listing NYSE:MNR www.mreic.reit Monmouth Real Estate Investment Corporation A Public REIT Since 1968 NYSE: MNR www.mreic.reit Bell Works 101 Crawfords Corner Road, Suite 1405 Holmdel, New Jersey 07733 732.577.9996 Monmouth Real Estate Investment Corporation 2019 Annual Report M o n m o u t h R e a l E s t a t e I n v e s t m e n t C o r p o r a t i o n 2 0 1 9 A n n u a l R e p o r t