MODIV INDUSTRIAL, INC. Q3 FY2024 earnings call

• Portfolio: Had lease extensions with WSP USA and LabCorp, resulting in a 13.8-year weighted average lease term. 33% of tenants have investment grade ratings. Annualized base rent is $40.2M.
• Balance Sheet: Cash and cash equivalents $6.8M, debt $280M, no maturities until 2027. Interest rate swaps evaluated for renewal to maintain fixed rates.
• Dividend: Board declared a higher annualized dividend rate of $1.17 per share.
• Pipeline: Focus on UPRE transaction nearing closure and managing interest rate swaps. Also, ongoing work with assets like Kia and addressing other properties like Kalera.

Rental income for the third quarter was $11.6 million compared with $12.5 million in the prior year period. Adjusted funds from operations (AFFO) was $3.7 million, comparable to the year-ago quarter. AFFO per share was $0.34. Annualized base rent for the 43 properties totals $40.2 million as of September 30, 2024. The portfolio has an attractive weighted average lease term of 13.8 years, with approximately 33% of tenants having an investment grade rating. Cash and cash equivalents were $6.8 million, debt outstanding was $280 million, with no maturities until January 2027. The Board declared a cash dividend per common share of $0.0975 for January, February, and March 2025, an annualized rate of $1.17 per share.

• UPRE transaction: Site visit completed, anticipated to close barring unforeseen issues.
• Swaps: Anticipating renewal of swaps at same or better rates, avoiding put features and hedging to maturity dates to reduce FFO volatility.
• Growth: Aiming to grow through accretive capital raises and smart asset management.

• Interest Rate Risk: Uncertainty around swap renewals and potential impact on interest expense.
• Asset-Specific Risks: Potential issues with assets like Kalera, though working through them; unknown unknowns remain a risk.
• Market Volatility: Impact of market conditions on asset pricing and acquisition decisions.

Q: Beyond the Jacksonville asset, how active is the pipeline and thoughts on asset pricing?

A: Pipeline is encouraged, with some opportunities seen, but pricing talk on manufacturing assets is high-7s to low-8s, and being disciplined with capital.

Q: About the Jacksonville OP unit asset and Kia asset sale timing?

A: Jacksonville OP unit is all in with no cash. Kia is a high-quality asset; timing depends on rate environment and other asset resolutions like Costco and OES options.

Q: Tenant performance and impact of election on acquisitions?

A: Portfolio is solid with no major concerns, and election outcomes may increase onshoring, which is favorable for industrial manufacturing acquisitions.

Q: Thoughts on expiring swaps and new hedges?

A: Expect new hedges to be at same or better rates, avoiding cancellation features and hedging to debt maturities.

Q: Stock price impact on acquisitions and capital raises?

A: Focus on retail investors, incremental capital raises to grow without diluting value, and patient approach to avoid hasty deals that harm intrinsic value.