[Company Overview](index=4&type=section&id=Company%20Overview) [Company Overview](index=4&type=section&id=Company%20Overview) Modiv Industrial is a REIT specializing in acquiring, owning, and managing single-tenant net-lease industrial manufacturing properties - Modiv Industrial is a REIT focused on acquiring critical single-tenant net-lease industrial manufacturing properties with long-term leases[8](index=8&type=chunk) - The company emphasizes a strong corporate governance structure, led by a management team and board with extensive institutional real estate experience[9](index=9&type=chunk) [Financial Results](index=5&type=section&id=Financial%20Results) [Earnings Release](index=5&type=section&id=Earnings%20Release) Q1 2025 results were in line with plans, featuring an **18% year-over-year AFFO increase** and a 10-year FujiFilm lease renewal Q1 2025 Financial Highlights | Metric | Value | Note | | :--- | :--- | :--- | | Revenue | $11.8 million | - | | Net Income (to common stockholders) | $2,000 | - | | AFFO | $3.9 million | Increased 18% year-over-year | | AFFO per Diluted Share | $0.33 | Beat consensus estimates | | Preferred Stock Repurchased (YTD) | 275,000 shares | At an average price of $23.74 | - Executed a **10-year lease renewal** with FujiFilm in Santa Clara, CA, securing a **6.75% initial rent increase** and **3% annual escalations**[17](index=17&type=chunk)[18](index=18&type=chunk) - The company's CEO believes that despite recent news on tariffs, the impact on its manufacturing tenants has been minimal due to factors like producing non-consumer discretionary products, preparedness from past disruptions (COVID-19), and the immateriality of affected components[24](index=24&type=chunk)[28](index=28&type=chunk) - Management sees a long-term positive trend for U.S. manufacturing, viewing these assets as a critical infrastructure play that will see increased utilization rates as companies seek to reduce supply chain uncertainty[20](index=20&type=chunk)[22](index=22&type=chunk) [Consolidated Statements of Operations - Last Five Quarters](index=9&type=section&id=Consolidated%20Statements%20of%20Operations%20-%20Last%20Five%20Quarters) Q1 2025 saw **$11.8 million total income** and **$2,000 net income** to common stockholders, with increased stock compensation expense Q1 2025 Statement of Operations (in thousands) | Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Income | $11,793 | $11,967 | | Total Expenses | $7,141 | $8,496 | | Operating Income | $4,736 | $6,659 | | Net Income (Loss) | $829 | $4,637 | | Net Income (Loss) Attributable to Common Stockholders | $2 | $2,802 | - Stock compensation expense increased to **$484,000** in Q1 2025, primarily due to the award of **895,043 Class X OP Units** to employees, a significant increase from the preceding three quarters[35](index=35&type=chunk)[37](index=37&type=chunk) - Depreciation and amortization expense decreased in Q1 2025 because the office property leased to Costco was classified as held for sale as of December 31, 2024[37](index=37&type=chunk) [Consolidated Statements of Comprehensive Income (Loss) - Last Five Quarters](index=11&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20-%20Last%20Five%20Quarters) Q1 2025 comprehensive income was **$397,000**, lower than net income due to a **$966,000 unrealized loss** on interest rate derivatives Comprehensive Income Reconciliation - Q1 2025 (in thousands) | Item | Value | | :--- | :--- | | Net Income (Loss) | $829 | | Unrealized Loss on Interest Rate Derivatives | ($966) | | Amortization of Off-Market Interest Rate Derivatives | $784 | | Amortization of Unrealized Holding Gain on Interest Rate Swap | ($250) | | **Comprehensive Income (Loss)** | **$397** | [Earnings (Loss) Per Share - Last Five Quarters](index=12&type=section&id=Earnings%20%28Loss%29%20Per%20Share%20-%20Last%20Five%20Quarters) Modiv reported a **($0.01) basic and diluted loss per share** in Q1 2025, despite positive net income, due to Class X OP Unit distributions Earnings Per Share - Q1 2025 vs Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Basic EPS | $(0.01) | $0.33 | | Diluted EPS | $(0.01) | $0.33 | - The **($0.01) loss per share** in Q1 2025 occurred because distributions of **$163,000** paid to Class X OP Units were deducted from the net income attributable to common stockholders when calculating EPS[38](index=38&type=chunk)[40](index=40&type=chunk) [FFO and AFFO - Last Five Quarters](index=13&type=section&id=FFO%20and%20AFFO%20-%20Last%20Five%20Quarters) In Q1 2025, AFFO attributable to common stockholders and OP Unit holders was **$3.9 million**, or **$0.33 per fully diluted share**, an **18% increase** in total AFFO year-over-year FFO and AFFO Per Share/Unit (Fully Diluted) | Metric | Q1 2025 | Q1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | FFO Per Share/Unit | $0.33 | $0.43 | -23.3% | | AFFO Per Share/Unit | $0.33 | $0.29 | +13.8% | Q1 2025 AFFO Reconciliation (in thousands) | Item | Value | | :--- | :--- | | Net Income (Loss) Attributable to Common Stockholders and OP Unit Holders | $2 | | FFO Adjustments (Depreciation, Gain on Sale, etc.) | $3,923 | | **FFO Attributable to Common Stockholders and OP Unit Holders** | **$3,925** | | AFFO Adjustments (Stock Comp, Amortization, etc.) | ($13) | | **AFFO Attributable to Common Stockholders and OP Unit Holders** | **$3,912** | [Adjusted EBITDA - Last Five Quarters](index=14&type=section&id=Adjusted%20EBITDA%20-%20Last%20Five%20Quarters) Q1 2025 Adjusted EBITDA was **$9.4 million**, with Net Debt to Adjusted EBITDA at **7.5x** due to decreased cash Adjusted EBITDA and Net Debt Ratio | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Adjusted EBITDA | $9,378,000 | $9,984,000 | | Net Debt | $283,202,000 | $277,970,000 | | Net Debt / Adjusted EBITDA | 7.5x | 7.0x | [Leverage Ratio](index=15&type=section&id=Leverage%20Ratio) As of March 31, 2025, the company's leverage ratio was **47.6%**, well below the **60% maximum** covenant requirement Leverage Ratio Calculation (as of March 31, 2025) | Component | Value (in thousands) | | :--- | :--- | | Total Asset Value | $608,122 | | Total Indebtedness | $289,735 | | **Leverage Ratio** | **47.6%** | [Balance Sheets and Capitalization](index=16&type=section&id=Balance%20Sheets%20and%20Capitalization) [Capitalization](index=16&type=section&id=Capitalization) Modiv's enterprise value was **$521.1 million**, with **53% debt** and **100% fixed-rate debt** for 2025 at **4.27%** Capitalization Structure (as of March 31, 2025) | Category | Value (in thousands) | % of Total | | :--- | :--- | :--- | | Preferred Equity | $44,875 | 9% | | Implied Equity Market Capitalization | $201,611 | 38% | | Total Debt | $280,781 | 53% | | **Total Capitalization** | **$527,267** | **100%** | - **100% of the company's total debt** is fixed-rate for 2025, achieved through new swap agreements on its **$250 million Term Loan**, fixing the rate at **4.25%**[48](index=48&type=chunk) - The company reduced its Revolver line of credit from **$150 million to $30 million** in December 2024 to save on annual unused fees[48](index=48&type=chunk) [Consolidated Balance Sheets](index=17&type=section&id=Consolidated%20Balance%20Sheets) Total assets were **$506.8 million** as of March 31, 2025, with a decrease in cash and stable liabilities and equity Key Balance Sheet Items (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Real Estate Investments, Net | $474,080 | $473,906 | | Cash and Cash Equivalents | $6,165 | $11,530 | | **Total Assets** | **$506,802** | **$507,829** | | Total Liabilities | $293,426 | $293,779 | | Total Equity | $213,376 | $214,050 | | **Total Liabilities and Equity** | **$506,802** | **$507,829** | - A property with a net value of **$22.4 million** is classified as 'Real estate investments held for sale' as of March 31, 2025, consistent with the prior quarter[49](index=49&type=chunk) [Debt Overview](index=18&type=section&id=Debt%20Overview) Total debt was **$280.8 million** as of March 31, 2025, with **100% fixed-rate** for 2025 at a **4.27% weighted average** Debt Composition (as of March 31, 2025) | Debt Type | Outstanding Balance (in thousands) | Interest Rate | | :--- | :--- | :--- | | Mortgage Notes | $30,781 | 3.85% - 4.85% | | Term Loan | $250,000 | 4.25% (fixed via swap) | | Revolver | $0 | 6.16% (variable) | | **Total Debt** | **$280,781** | **4.27% (weighted avg.)** | - The **$250 million Term Loan's** interest rate is fixed at **4.25%** for the year ending December 31, 2025, through interest rate swap agreements[50](index=50&type=chunk) [Credit Facility and Mortgage Notes Covenants](index=19&type=section&id=Credit%20Facility%20and%20Mortgage%20Notes%20Covenants) Modiv was in full compliance with all financial covenants, maintaining a **47.6% leverage ratio** against a **60% maximum** Unsecured Credit Facility Covenant Compliance (as of March 31, 2025) | Covenant | Requirement | Actual | | :--- | :--- | :--- | | Maximum Leverage Ratio | < 60% | 47.6% | | Minimum Fixed Charge Coverage Ratio | > 1.50x | 1.83x | | Maximum Secured Indebtedness Ratio | < 40% | 7% | [Real Estate Portfolio](index=20&type=section&id=Real%20Estate) [Real Estate Acquisitions](index=20&type=section&id=Real%20Estate%20Acquisitions) From Jan 2024 to Mar 2025, Modiv acquired two Florida industrial properties for **$11.2 million** at an **8.0% initial cap rate** Acquisition Activity (Jan 2024 - Mar 2025) | Tenant and Location | Acquisition Date | Acquisition Price (thousands) | Initial Cap Rate | | :--- | :--- | :--- | :--- | | Torrent, Seminole, FL | July 2024 | $5,125 | 8.0% | | Science First, Yulee, FL | March 2025 | $6,100 | 8.0% | | **Total** | | **$11,225** | **8.0%** | [Real Estate Dispositions](index=21&type=section&id=Real%20Estate%20Dispositions) Between Jan 2024 and Mar 2025, the company disposed of three properties and one land parcel for **$17.6 million** Disposition Activity (Jan 2024 - Mar 2025) | Tenant and Location | Property Type | Disposition Date | Disposition Price (thousands) | | :--- | :--- | :--- | :--- | | Levins, Sacramento, CA | Industrial | January 2024 | $7,075 | | Cummins, Nashville, TN | Office | February 2024 | $7,950 | | Lindsay, Canal Fulton, OH | Industrial (Land) | September 2024 | $240 | | Producto, Endicott, NY | Industrial | January 2025 | $2,362 | | **Total** | | | **$17,627** | [Top 20 Tenants](index=22&type=section&id=Top%2020%20Tenants) The top 20 tenants account for **89% of total ABR**, with Lindsay being the largest at **14% of ABR** - The top 20 tenants contribute **89% of total ABR**[59](index=59&type=chunk) Top 5 Tenants by ABR % | Tenant | ABR as a % of Total Portfolio | | :--- | :--- | | Lindsay | 14% | | KIA of Carson | 11% | | State of CA OES | 7% | | AvAir | 6% | | 3M | 5% | [Property Type](index=23&type=section&id=Property%20Type) The portfolio is **80% industrial core** by ABR, with non-core properties representing **20% of ABR** Portfolio by Property Type | Property Type | % of Total ABR | % of Total Square Feet | | :--- | :--- | :--- | | Industrial core | 80% | 93% | | Non-core | 20% | 7% | - Non-core properties include a legacy Costco property under a purchase and sale agreement with homebuilder KB Home, and a legacy OES property where the tenant has indicated interest in exercising a purchase option[61](index=61&type=chunk) [Tenant Industry Diversification](index=24&type=section&id=Tenant%20Industry%20Diversification) Portfolio diversified across 13 industries, with Infrastructure, Automotive, and Industrial Products as top three by ABR Top 5 Industries by ABR % | Industry | % of Total ABR | | :--- | :--- | | Infrastructure | 24% | | Automotive | 15% | | Industrial Products | 14% | | Aerospace/Defense | 13% | | Government | 7% | [Tenant Geographic Diversification](index=25&type=section&id=Tenant%20Geographic%20Diversification) Properties are spread across 15 states, with California, Ohio, and Arizona accounting for **54% of total ABR** Top 5 States by ABR % | State | % of Total ABR | | :--- | :--- | | California | 30% | | Ohio | 13% | | Arizona | 11% | | Illinois | 9% | | Florida | 7% | [Lease Expirations](index=26&type=section&id=Lease%20Expirations) The portfolio has a well-staggered lease expiration schedule, with only **3% of ABR expiring in 2025** Cumulative ABR Expiration | Year of Expiration | Cumulative % of ABR Expiring | | :--- | :--- | | 2025 | 3% | | 2026 | 6% | | 2027 | 8% | | 2028 | 10% | | 2034 | 41% | | Thereafter | 100% | - A recent **10-year lease extension** with Fujifilm Dimatix, Inc. moved its expiration to 2036, contributing to the long-term stability of the portfolio[64](index=64&type=chunk) [Appendix](index=27&type=section&id=Appendix) [Disclosures Regarding Non-GAAP and Other Metrics](index=27&type=section&id=Disclosures%20Regarding%20Non-GAAP%20and%20Other%20Metrics) This section defines non-GAAP financial measures like FFO, AFFO, and Adjusted EBITDA, used for assessing operating performance - FFO is a Nareit-defined measure that excludes items like depreciation and gains on property sales to facilitate operating performance comparisons between REITs[67](index=67&type=chunk) - AFFO further adjusts FFO by excluding non-routine and certain non-cash items (e.g., stock compensation, amortization of deferred rent) to provide what management believes is a recognized measure of sustainable operating performance[68](index=68&type=chunk) - Adjusted EBITDA is defined as net income adjusted for depreciation, amortization, interest expense, and other non-cash or non-recurring items to provide a widely used industry measure for comparing operating performance[71](index=71&type=chunk)

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) Presents Modiv Industrial, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Modiv Industrial, Inc.'s unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, operations, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total real estate investments, net** | $474,080 | $473,906 | | **Cash and cash equivalents** | $6,165 | $11,530 | | **Total assets** | $506,802 | $507,829 | | **Total liabilities** | $293,426 | $293,779 | | **Total equity** | $213,376 | $214,050 | Condensed Consolidated Statement of Operations Highlights (in thousands) | Account | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | **Total revenue** | $11,793 | $11,967 | | **Operating income** | $4,736 | $6,659 | | **Net income** | $829 | $4,637 | | **Net income attributable to common stockholders** | $2 | $2,802 | | **Basic Earnings (loss) per share** | $(0.01) | $0.33 | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $3,050 | $2,987 | | **Net cash (used in) provided by investing activities** | $(864) | $14,682 | | **Net cash used in financing activities** | $(7,551) | $(2,393) | | **Net (decrease) increase in cash** | $(5,365) | $15,276 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies and specific financial statement items, covering real estate investments, debt, derivatives, and equity - The company's portfolio as of March 31, 2025, consists of **43 real estate properties**, with approximately **80% of its Annual Base Rent (ABR)** derived from **39 industrial properties**[31](index=31&type=chunk) - In Q1 2025, the company acquired **one industrial property in Florida for $6.1 million** and sold **one industrial property in New York for $2.4 million**[50](index=50&type=chunk)[52](index=52&type=chunk) - In January 2025, the company entered into **two interest rate swap agreements totaling $250.0 million** to fix the SOFR rate at **2.45%** for its Term Loan through December 31, 2025, paying a **$4.2 million premium** to buy down the rate[76](index=76&type=chunk)[83](index=83&type=chunk) - A stock repurchase program for Series A Preferred Stock was authorized on March 4, 2025. Through March 31, 2025, **205,000 shares were repurchased for $4.9 million**[38](index=38&type=chunk)[101](index=101&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operations, and cash flows, covering strategic focus, market uncertainties, liquidity, and non-GAAP measures [Overview and Recent Events](index=30&type=section&id=Overview%20and%20Recent%20Events) The company, an internally managed REIT, focuses on acquiring industrial manufacturing properties and has mitigated interest rate risk with new swap agreements - The company's strategic focus is on acquiring **critical industrial manufacturing properties** to strengthen national supply chains[132](index=132&type=chunk) - As of March 31, 2025, the portfolio had a weighted average remaining lease term (WALT) of **13.8 years** and a **98% occupancy rate**[138](index=138&type=chunk) - To mitigate interest rate risk, the company entered into new swap agreements in January 2025, fixing the rate on its **$250 million Term Loan at 4.25%** for the year ending December 31, 2025[137](index=137&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company plans to fund acquisitions and debt payments through bank borrowings, property sales, and equity offerings, maintaining a $280 million credit facility - Primary sources of capital include the credit facility, mortgage debt, property sales, and equity offerings. The company expects to have **adequate liquidity for the next 12 months**[144](index=144&type=chunk)[146](index=146&type=chunk) - Through April 30, 2025, the company has raised **$10.4 million in net proceeds** from its ATM Offering, with **$38.1 million remaining available** for issuance[147](index=147&type=chunk) - The company's credit facility maturity was extended to **January 2027** for both the Revolver and Term Loan. The Revolver capacity was reduced to **$30.0 million** to lower unused fees[149](index=149&type=chunk)[150](index=150&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Rental income remained stable in Q1 2025, while stock compensation expense decreased significantly and other expenses increased due to higher interest Comparison of Key Expenses (in millions) | Expense Category | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Rental Income | $11.7 | $11.9 | -1.7% | | General & Administrative | $2.0 | $2.0 | 0% | | Stock Compensation | $0.5 | $1.4 | -65% | | Depreciation & Amortization | $3.8 | $4.1 | -8% | | Other Expense | $3.9 | $2.0 | +95% | - The decrease in stock compensation expense was primarily due to the **full vesting of Class P and Class R OP Units** at the end of March 2024[182](index=182&type=chunk) - The increase in Other Expense was mainly driven by a **$1.7 million increase in interest expense**, reflecting the absence of a prior-year unrealized gain on a derivative and the amortization of new off-market derivative premiums[186](index=186&type=chunk) [Funds from Operations and Adjusted Funds from Operations](index=35&type=section&id=Funds%20from%20Operations%20and%20Adjusted%20Funds%20from%20Operations) Reconciles net income to non-GAAP measures FFO and AFFO, with Q1 2025 FFO per share at $0.33 and AFFO per share at $0.33 FFO and AFFO Reconciliation (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net income attributable to common stockholders and OP Unit holders | $2 | $3,715 | | **FFO attributable to common stockholders and OP Unit holders** | **$3,925** | **$4,846** | | FFO Per Share/Unit (Fully diluted) | $0.33 | $0.43 | | **AFFO attributable to common stockholders and OP Unit holders** | **$3,912** | **$3,318** | | AFFO Per Share/Unit (Fully diluted) | $0.33 | $0.29 | [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - Not applicable as the company is a **smaller reporting company**[199](index=199&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of March 31, 2025[201](index=201&type=chunk) - No **material changes to internal control over financial reporting** occurred during the quarter ended March 31, 2025[202](index=202&type=chunk) [PART II - OTHER INFORMATION](index=42&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) Presents other information including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company reports it is not a party to any material legal proceedings - As of March 31, 2025, the Company is not a party to any **legal proceeding that could have a material adverse effect** on its business[109](index=109&type=chunk)[203](index=203&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the company's Annual Report on Form 10-K - No **material changes** have been made to the risk factors disclosed in the Annual Report filed on March 4, 2025[204](index=204&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the issuance of Class C OP Units for a property acquisition and the repurchase of Series A Preferred Stock - On March 7, 2025, the Company issued **344,119 Class C OP Units valued at $5.9 million** in connection with a property acquisition, exempt from registration under Section 4(a)(2) of the Securities Act[205](index=205&type=chunk) Issuer Purchases of Series A Preferred Stock (March 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 1-31, 2025 | 205,000 | $23.661 | [Other Information](index=43&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q1 2025 - No directors or officers adopted or terminated a **Rule 10b5-1 or non-Rule 10b5-1 trading arrangement** in Q1 2025[207](index=207&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) Provides an index of exhibits filed with or incorporated by reference into the Quarterly Report on Form 10-Q - The report includes an **exhibit index** listing all documents filed with the report, such as certifications and XBRL data[208](index=208&type=chunk)[211](index=211&type=chunk)

Group 1 - The recent months have significantly altered global trading norms due to the implementation of tariffs, leading to a new economic reality [1] - The economy is currently navigating through these changes, indicating a period of adjustment for various industries [1]

Financial Performance - Full year 2024 net income attributable to common stockholders was $2.3 million, or $0.25 per diluted share[14] - Fourth quarter 2024 net income attributable to common stockholders was $0.6 million, or $0.07 per diluted share[14] - Full year 2024 AFFO was $14.99 million, or $1.34 per diluted share, exceeding street expectations by $0.08 per share[14] - Fourth quarter AFFO was $4.1 million, or $0.37 per diluted share, beating consensus estimates by 22%[14] - Total income for Q4 2024 was $11.730 million, compared to $12.388 million in Q4 2023, reflecting a decline of approximately 5.3% year-over-year[30] - Operating income for Q4 2024 increased to $5.330 million from $3.838 million in Q4 2023, representing a growth of approximately 38.9%[30] - The company reported a comprehensive income of $1.387 million for Q4 2024, compared to a comprehensive loss of $2.101 million in Q4 2023[34] - For the three months ended December 31, 2024, Modiv Industrial, Inc. reported a net income of $1,642,000, compared to a net loss of $1,048,000 for the previous quarter[36] - The earnings per share attributable to common stockholders for the latest quarter was $0.07, recovering from a loss of $0.18 in the prior quarter[36] - Funds from Operations (FFO) attributable to common stockholders and Class C OP Unit holders was $5,072,000 for the quarter ended December 31, 2024, up from $2,216,000 in the previous quarter[38] - Adjusted Funds from Operations (AFFO) attributable to common stockholders and Class C OP Unit holders was $4,067,000 for the latest quarter, compared to $3,702,000 in the prior quarter[38] - Modiv's AFFO per share on a fully diluted basis was $0.37 for the quarter ended December 31, 2024, compared to $0.34 in the previous quarter[38] - Annualized adjusted EBITDA for the year was $39,936,000, compared to $38,596,000 in the prior year[40] - Net income for the quarter was $1,642,000, a significant recovery from a net loss of $1,048,000 in the previous quarter[40] Asset Management and Acquisitions - The company plans to grow AFFO through acquiring positive income-producing assets and improving expense efficiency[20] - A small $2 million asset was sold, and a $6 million asset acquisition is expected to close by March 14, 2025[18] - The company has implemented a disciplined acquisition strategy, focusing on evaluating opportunities without overextending itself[17] - The total property acquisition activity from January 1, 2023, to December 31, 2024, includes 1,730,704 square feet with an initial lease price of $134.274 million[54] - The company disposed of properties totaling 405,025 square feet, generating $62.732 million in disposition price[57] - The company completed a non-core acquisition of a KIA auto dealership in Los Angeles County for $32.8 million, structured as an OP Unit transaction at a cost basis of $25.00 per share[63] - The company has a 12-year lease with OES for a legacy asset in Rancho Cordova, California, which includes a purchase option that OES may exercise until December 31, 2026[63] - A legacy property leased to Costco in Issaquah, Washington is under a purchase agreement with KB Home for $25.3 million, with a potential increase of $0.3 million for each additional townhome added before closing[63] Debt and Equity - Consolidated debt as of December 31, 2024, was $280,918,000, with a net debt to adjusted EBITDA ratio of 7.0x[40] - The leverage ratio as of December 31, 2024, was 48.0%, up from 47.6% in the previous quarter[44] - The company reported a total equity of $214,050,000, down from $225,122,000 in the previous year[47] - The weighted average interest rate for total debt outstanding was 4.27% as of December 31, 2024[46] - Total debt as of December 31, 2024, is $279.776 million, with a weighted average interest rate of 4.27%[48] - The company has a maximum leverage ratio of 47.6%, which is below the required limit of 60%[51] - The company reduced its Revolver line of credit from $150 million to $30 million, saving $0.3 million in annual unused fees[49] - New swap agreements were entered into for $250 million, fixing SOFR at 2.45% for the year ending December 31, 2025, resulting in a fixed rate of 4.25%[49] - The company has a minimum consolidated tangible net worth of $281.553 million, exceeding the required $221.737 million[51] Rental Income and Portfolio - Total rental income for Q4 2024 was $11.664 million, a decrease from $12.289 million in Q4 2023, attributed to the sale of 14 properties in August 2023 and two properties in Q1 2024[30] - The top 20 tenants contribute $35.439 million in annual base rent (ABR), representing 88% of the total portfolio[59] - Industrial core properties account for 78% of the total ABR, with 39 properties and 4,196,496 square feet[61] - California accounts for 30% of the total ABR, with 11,925 thousand dollars, while Ohio contributes 12% with 4,866 thousand dollars[65] - Lease expirations indicate that 5% of ABR, amounting to $1.812 million, is set to expire in 2025, with cumulative expirations reaching 100% by 2034[66] - The company holds 43 properties with an Annual Base Rent (ABR) of $39.638 million, representing 100% of the total portfolio[64] Impairment and Depreciation - The impairment charge for Q4 2023 was related to an office property in Nashville, Tennessee, which was sold in February 2024[32] - The impairment charge for the fourth quarter of 2023 was related to an office property in Nashville, Tennessee, which was sold on February 28, 2024[42] - The company experienced a depreciation and amortization of real estate properties totaling $4,163,000 for the quarter ended December 31, 2024[38] Definitions and Metrics - The company defines Funds from Operations (FFO) as net income excluding gains/losses from sales of depreciable property, plus real estate-related depreciation, providing a clearer view of operating performance[69] - Adjusted Funds from Operations (AFFO) excludes non-routine and certain non-cash items, offering insight into sustainable operating performance[70] - The leverage ratio is defined as total debt as a percentage of the aggregate fair value of real estate properties, including cash and cash equivalents[76] - The initial cap rate for property acquisitions is defined as the initial annual cash rent divided by the purchase price of the property[78]

Financial Performance - Funds from Operations (FFO) for the year ended December 31, 2024, was $16.802 million, compared to $10.175 million in 2023, reflecting an increase in operating performance [244]. - Adjusted Funds From Operations (AFFO) for 2024 was $14.988 million, slightly up from $14.673 million in 2023, indicating stable operating performance [244]. - Total rental income for the year ended December 31, 2024 was $46.5 million, a decrease of $0.4 million or 1% compared to $46.9 million in 2023, primarily due to the sale of properties [263]. - The company reported net cash provided by operating activities of $18.241 million in 2024, an increase from $16.579 million in 2023 [256]. - Interest income increased to $0.5 million in 2024 from $0.3 million in 2023, primarily due to higher interest rates on cash and proceeds from property sales [270]. - Dividend income decreased to $0.1 million in 2024 from $0.5 million in 2023, reflecting reduced dividends from GIPR preferred stock [271]. - Interest expense rose to $16.2 million in 2024 from $13.8 million in 2023, driven by increased interest rates and larger outstanding balances [273]. - The gain on sale of real estate investments was $3.4 million for the year ended December 31, 2024, compared to a loss of $1.7 million for 2023 [269]. Investment Strategy - The company’s primary investment objectives include providing attractive growth in Adjusted Funds from Operations (AFFO) and sustainable cash distributions [209]. - The company’s focus for future acquisitions is on critical industrial manufacturing properties with long-term leases to tenants [206]. - The company plans to acquire an industrial property for $6.1 million, with an initial cap rate of 8.00%, expected to close by March 14, 2025 [234]. - The percentage of Annual ABR from industrial core properties increased from 76% in 2023 to 78% in 2024, reflecting a strategic shift towards industrial manufacturing properties [247]. - In 2024, the company acquired one industrial manufacturing property and sold two non-core properties, resulting in 78% of the portfolio being industrial properties and 22% non-core properties as of December 31, 2024 [249]. Liquidity and Capital Structure - The company reported a leverage ratio of 47.6% as of December 31, 2024, with an aggregate of $250.0 million in new swap agreements fixing the Secured Overnight Financing Rate (SOFR) at 2.45% for the year ending December 31, 2025 [212][226]. - The company has $30.0 million of borrowing capacity available under its Credit Facility, which may be utilized for attractive investment opportunities [218]. - The company expects to maintain adequate liquidity to meet cash requirements for the next 12 months and beyond, funded by internally generated funds [219]. - The company’s Credit Facility includes a $280.0 million line of credit, with a $30.0 million revolving line of credit and a $250.0 million term loan [222]. - The company had $30.0 million in unused capacity on its Revolver as of the date of the Annual Report, which can be utilized for real estate investments and repositioning properties [230]. - The company is expected to incur $3.0 million in tenant improvements in 2025, funded from cash on hand and operating cash flow [238]. Property Management and Operations - The company successfully negotiated lease extensions for six properties during the years ended December 31, 2024, and 2023, despite potential future declines in rental rates and economic conditions [214]. - The company has two leases expiring on July 31, 2025, for properties leased to Costco and Solar Turbines, which may impact future cash flows [213]. - The weighted average lease term (WALT) for the company's properties was approximately 13.8 years as of December 31, 2024 [247]. - General and administrative expenses decreased by $0.3 million or 5% year-over-year, totaling $6.3 million in 2024 compared to $6.6 million in 2023 [264]. - Stock compensation expense significantly decreased by $9.6 million or 86% year-over-year, amounting to $1.6 million in 2024 compared to $11.2 million in 2023 [265]. - Depreciation and amortization expense increased by $1.0 million or 7% year-over-year, totaling $16.6 million in 2024 compared to $15.6 million in 2023 [266]. - Property expenses decreased by $1.5 million or 30% year-over-year, totaling $3.6 million in 2024 compared to $5.2 million in 2023 [267]. Portfolio Management - The company disposed of 14 non-core properties in 2023 for aggregate contract sales prices of $47.5 million, resulting in net proceeds of $44.4 million and a net loss on sales of $1.7 million [236]. - The company sold 14 properties in August 2023 and two properties in the first quarter of 2024, reflecting its ongoing portfolio transformation strategy [261]. - The total investments in real estate property as of December 31, 2024 were $393.488 million for industrial core properties and $108.200 million for non-core properties [252]. Market Conditions and Risks - The company anticipates potential impacts from inflation and interest rates, which may affect future operating results and liquidity [210][211]. - The company monitors real estate properties for impairment indicators, which may involve significant management judgment and assumptions [277]. - The company allocates purchase prices of acquired properties based on estimated fair values, impacting revenue and expense recognition timing [276]. - The company is classified as a smaller reporting company, thus not applicable for certain market risk disclosures [280].

Core Insights - The individual has a strong background in finance and investment, holding a bachelor's degree in Finance and Banking and a master's degree in Financial Management and Investment, which provides a solid academic foundation for investment analysis [1] - The investment strategy focuses on a contrarian approach, targeting unloved and undervalued assets while maintaining a long-term perspective [1] - The individual has achieved notable results in investing since starting at age 18 in 2018, emphasizing value investing principles and stable cash flow sectors such as consumer defensive, utilities, and real estate [1] Academic and Professional Credentials - The individual has earned certifications as a Capital Markets and Securities Analyst and a Financial Modeling & Valuation Analyst, showcasing specialized skills in evaluating complex financial instruments [1] - Successfully passed CFA Level 1 in May 2023 and CFA Level 2 in September 2024, with plans to take CFA Level 3 in August 2025, indicating a commitment to further expertise in investment analysis and portfolio management [1] Investment Philosophy - The investment philosophy is centered around identifying equities trading below their intrinsic value, with a focus on long-term appreciation and dividends [1] - There is a strong preference for sectors that provide stable cash flows, which aligns with the overall investment strategy [1] Engagement with the Investment Community - The motivation for contributing to Seeking Alpha is to enhance understanding of financial markets through company analysis and sharing insights with experienced investors [1]

Group 1 - Modiv Industrial's preferred stock (NYSE: MDV.PR.A) is largely overlooked by investors due to its low trading volume and the small market capitalization of the REIT, which stands at $167 million [3]

Core Viewpoint - Modiv Industrial, Inc. (MDV) has received a Zacks Rank 2 (Buy) upgrade, indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Rising earnings estimates for Modiv Industrial suggest an improvement in the company's underlying business, likely leading to increased stock prices [5][8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7][9]. - Modiv Industrial's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10][11]. Recent Earnings Estimate Revisions - For the fiscal year ending December 2024, Modiv Industrial is expected to earn $1.32 per share, reflecting a -0.8% change from the previous year, but the Zacks Consensus Estimate has increased by 4.3% over the past three months [8].

Group 1 - Real estate investment trusts (REITs) exhibit a variety of strategies and structures, often presenting themselves as comprehensive investment solutions [1] - The author has over ten years of experience in the real estate sector, including roles in an S&P 500 REIT and a Big Four consulting firm, indicating a strong background in the industry [1] Group 2 - The article emphasizes the importance of diverse strategies within the REIT sector, suggesting that investors should consider a range of options when evaluating potential investments [1]

Financial Data and Key Metrics Changes - Rental income for Q3 2024 was $11.6 million, down from $12.5 million in the prior year, primarily due to the sale of 16 properties [7] - Adjusted funds from operations (AFFO) remained stable at $3.7 million, with AFFO per share increasing to $0.34 from $0.33 in the previous year [8][9] - Interest expense increased to $3.2 million compared to the same period in 2023, influenced by unrealized non-cash losses on swap valuations [10] - Total cash and cash equivalents were $6.8 million, with $280 million in debt outstanding, and no debt maturities until January 2027 [12] Business Line Data and Key Metrics Changes - The portfolio consists of 43 properties with an annualized base rent totaling $40.2 million as of September 30, 2024, and a weighted average lease term of 13.8 years [11] - Approximately 33% of tenants or their parent companies have an investment-grade rating of BBB- or better [11] Market Data and Key Metrics Changes - The company noted a challenging market for REITs, with most experiencing sell-offs, while Modiv Industrial's stock showed slight gains [6] Company Strategy and Development Direction - The company aims to focus on acquiring durable manufacturing assets while being disciplined about taking on additional debt [24] - Management is committed to increasing communication with retail investors, recognizing the low institutional ownership of less than 9% [21] - The company is actively evaluating the interest rate environment and plans to enter new swap agreements to maintain a fixed interest rate on its debt [13][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the acquisition pipeline, noting an increase in opportunities despite a previously dry summer [24] - The company is focused on maintaining a solid portfolio and is not rushing into decisions, emphasizing patience and discipline in a volatile market [15][16] - Management highlighted the importance of supporting American manufacturing and the potential for increased onshoring under the current political climate [42][44] Other Important Information - The Board of Directors declared a cash dividend of $0.0975 per common share for the first quarter of 2025, representing a 1.7% increase from the previous annualized dividend rate [14] - The company is preparing to formally market the Kalera property, which has been vacant since bankruptcy proceedings [36] Q&A Session Summary Question: How active is the pipeline today? - Management is encouraged by the current pipeline, noting that pricing for manufacturing assets is in the high-7s to low-8s range, with fewer buyers in the market [24] Question: Is the $6 million OP unit asset the entire purchase price? - Yes, the $6 million is the total purchase price with no additional cash element [27] Question: When is the right time to sell the Kia asset? - Management is considering the timing carefully, with a focus on a stable rate environment to maximize the asset's value [30] Question: What is the current tenant performance? - The Kalera property is currently vacant, and management is preparing to market it, while other tenants are performing well [36] Question: How does the election outcome affect acquisition strategies? - Management believes there will be continued support for American manufacturing, which aligns with their acquisition strategy [42][44] Question: What are the expectations for new hedges? - New hedges are expected to have similar or better terms than the expiring swaps, without cancellation features [50][53] Question: What is the company's approach to capital raising? - The company prefers to raise capital through retail investors rather than institutional investors, focusing on maintaining intrinsic value [66][70]