SQL Server Email Pastes Literal HTML
From the documentation, you can see there's a @body_format option.


  [ @body_format= ] 'body_format' Is the format of the message body. The
  parameter is of type varchar(20), with a default of NULL. When
  specified, the headers of the outgoing message are set to indicate
  that the message body has the specified format. The parameter may
  contain one of the following values: TEXT HTML Defaults to TEXT.


Set it to HTML.

EXEC msdb.dbo.sp_send_dbmail
    @profile_name = 'Mod',
    @from_address = 'modis@modisglobal.com',
    @recipients= 'rsmith@gmail.com',
    @subject= 'Test Email', 
    @body = @body1,
    @body_format = 'HTML'