Modiv Industrial (NYSE:MDV) Q4 2025 Earnings call March 25, 2026 04:30 PM ET Company ParticipantsAaron Halfacre - CEOJay Kornreich - VP of REIT Equity ResearchRay Pacini - CFOSarah Grisham - Chief Accounting OfficerConference Call ParticipantsGaurav Mehta - Managing Director and Senior Equity Research AnalystJohn Massocca - Senior Equity Research AnalystOperatorPlease note this event is being recorded. I would now like to turn the conference over to Sarah Grisham, Chief Accounting Officer. Please go ahead.S ...

Modiv Industrial (NYSE:MDV) Q4 2025 Earnings call March 25, 2026 04:30 PM ET Speaker3Please note this event is being recorded. I would now like to turn the conference over to Sarah Grisham, Chief Accounting Officer. Please go ahead.Speaker5Thank you, operator, and thank you everyone for joining us for Modiv Industrial's fourth quarter and full year 2025 earnings call. We issued our earnings release after market close today, and it's available on our website at modiv.com. I'm here today with Aaron Halfacre, ...

Financial Data and Key Metrics Changes - The company reported GAAP net income of $68.3 million and AFFO of $99.7 million for Q4 2025, with AFFO per share totaling $0.49, representing a 9% increase compared to Q4 2024 [2][12][13] - The company increased its 2026 AFFO per share guidance range to $1.99-$2.04, implying a growth rate of about 7% at the midpoint and 8% at the high end [4][15] Business Line Data and Key Metrics Changes - The company executed $296 million in investments during Q4 2025, with an average initial cash yield of 7.7% and a GAAP yield of 9.1% [3][10] - Same-store rent growth was reported at 1.6%, with a robust rent coverage of 3.6 times [4][7] Market Data and Key Metrics Changes - The company ended the quarter with investments in 2,300 properties leased to over 400 tenants, maintaining a weighted average lease term of approximately 14 years [5] - Tenant concentration declined, with the top 10 tenants comprising only 16.5% of ABR, and the top 20 representing 27.1% of ABR [9] Company Strategy and Development Direction - The company continues to focus on its differentiated investment strategy, sourcing 85% of its investments through existing relationships while adding new operator relationships [3][4] - The company expects modest cap rate compression in the latter half of 2026, with competition stabilizing based on current visibility [5][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the health of the portfolio, noting better-than-expected credit trends and a strong investment pipeline [4][20] - The company remains committed to maintaining a well-capitalized balance sheet with low leverage and significant liquidity to support future growth [15][19] Other Important Information - The company declared a cash dividend of $0.31 in Q4 2025, resulting in an AFFO payout ratio of 63% [13] - The company sold 19 properties for $48.1 million in net proceeds at a 6.9% weighted average cash yield during Q4 [8] Q&A Session Summary Question: Changes in Guidance Range - The CFO explained that the guidance range was adjusted due to better-than-expected portfolio credit trends and same-store rent growth [19][20] Question: Impact of Stabilizing Competition - Management clarified that stabilization in competition has led to a slower decrease in cap rates, which is beneficial for earnings but does not change their investment strategy [22][23] Question: Acquisition Trends - Management noted that the strong start to the year in acquisitions was partly due to deal slippage from Q4, and they remain cautious about reading too much into early-year performance [28][29] Question: Tenant Credit Events - Management confirmed that the only notable credit event was with American Signature, which is expected to recover within normal ranges [35][36] Question: Dividend Growth Expectations - The CFO indicated that while the dividend is expected to grow, the decision will ultimately be made by the board, balancing current returns and retained capital [37][38] Question: Cap Rate Stabilization Across Industries - Management confirmed that cap rate stabilization is observed across all industries they invest in, with no significant deviations [30][31] Question: Future Investment Pipeline - Management expressed confidence in the investment pipeline, indicating that their desire to create shareholder growth drives their investment volume rather than the opportunity set [90]

Group 1 - Nearly half of U.S. real estate investors (44%) plan to grow their portfolios in the near term, consistent with the 45% reported in Q2 2025 [2][3] - 65% of real estate investors find it frustrating to locate cash flow deals, with this frustration being more pronounced among West Coast landlords (75%) [3] - 59% of investors are unwilling to purchase properties unless the cap rate is at least 6.00% [3] Group 2 - 63% of surveyed investors would only accept a mortgage rate of 6.00% or lower for their next purchase [3] - 51% of real estate investors self-manage their properties [3] - 21% of investors initially look at off-market deal sources [3] - 19% of self-managing investors are considering switching to professional property management within the next 12 months [3]

Financial Data and Key Metrics Changes - The company reported Q3 AFO of $0.45 per share, a 3% increase from Q3 last year [17] - Q3 cash rental income was $66.1 million, representing a growth of 12.6% compared to the same quarter last year [18] - Annualized cash-based rent for leases in place as of quarter end is $255.6 million, with a weighted average five-year annual cash rent escalator of 1.4% [18] Business Line Data and Key Metrics Changes - The company acquired 28 properties in Q3 for $82 million at a blended cap rate of 6.8%, with a weighted average lease term of 12 years [10] - Over the first 10 months of 2025, the company acquired 77 properties for $229 million, also at a blended 6.8% cap rate [10] - The in-place portfolio has zero exposure to problem retailers or sectors, maintaining a rent coverage of 5.1 times for the majority of the portfolio [6][18] Market Data and Key Metrics Changes - The company has diversified its rent sources, with Olive Garden and LongHorn Steakhouse now accounting for 32% and 9% of rent, respectively, down from a combined 94% at spin-off [8] - 35% of rents now come from sectors outside of casual dining, including automotive service (13%), quick service restaurants (11%), and medical retail (10%) [8] Company Strategy and Development Direction - The company aims to continue its acquisition strategy while maintaining a focus on quality tenants and properties, avoiding sacrificing quality for volume [5] - The company has a strong competitive advantage in its ability to modulate acquisition pace based on the cost of capital [5] - The company is well-positioned with $270 million in combined dry powder to fuel growth before reaching a mid-five times leverage target [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current acquisition pipeline and the improved debt market, indicating a favorable environment for growth [9][28] - The company has maintained a strong balance sheet with a net debt to Adjusted EBITDA ratio of 4.7 times, near a seven-year low [16] - Management noted that the portfolio remains resilient, with strong occupancy and collection rates, and low bad debt expense [56] Other Important Information - The company has implemented a new disclosure on its website, providing a full list of properties with detailed data to enhance transparency for investors [20] - The company has a healthy fixed charge coverage ratio of 4.7 times and no debt maturities until the end of 2026 [17] Q&A Session Summary Question: On underwriting standards and potential adjustments - Management indicated that they do not foresee lowering their strict underwriting standards, emphasizing the importance of maintaining a high-quality portfolio [23] Question: Funding pipeline with remaining forward equity - Management clarified that the remaining $100 million in forward equity, combined with $170 million in debt capacity and retained cash flow, provides substantial acquisition capacity [24] Question: Assessment of the acquisition environment - Management expressed a favorable view of the current acquisition environment, noting a capable team and a strong balance sheet to support accretive acquisitions [28] Question: Confidence in Darden lease renewals - Management expects very high renewal rates for Darden leases, citing strong coverage and the value of their menu offerings [30] Question: Competition in the net lease sector - Management acknowledged increased competition from private equity but emphasized their diverse sourcing strategy, which includes both large portfolios and smaller acquisitions [45]

Financial Data and Key Metrics Changes - The company reported AFFO per share of $0.44, which is up 2.8% from Q2 last year [20] - Rental income for Q2 was $64.5 million, representing growth of over 11% compared to the same quarter last year [20] - The net debt to adjusted EBITDAre was 4.5 times, which is below the stated guidance of 5.5 to 6 times [18] Business Line Data and Key Metrics Changes - In Q2, the company acquired 24 properties for $84 million at a blended cap rate of 6.7% [12] - The automotive sector accounted for 68% of total acquisition volume, indicating a strong focus on this area [12] - The company has diversified its portfolio, with 34% of rent now coming from sectors outside casual dining [8] Market Data and Key Metrics Changes - The company noted that same-store sales for Olive Garden and LongHorn grew nearly 7% for the quarter ended May 2025 [8] - Chili's reported a same-store sales growth of 32% for the quarter ended March 2025, indicating strong performance in the casual dining sector [7] Company Strategy and Development Direction - The company aims to maintain a defensive portfolio focused on central retail and services, which are seen as tariff resistant [9] - The strategy includes modulating acquisitions based on the cost of capital, allowing the company to protect spreads without compromising portfolio quality [6] - The company is committed to maintaining high-quality standards in acquisitions and has a strong competitive advantage in its ability to fluctuate acquisition volumes [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience, highlighting a strong track record with low bad debt expense and effective releasing results [65] - The company anticipates a pullback in consumer spending due to potential recession or high inflation but believes it is well-positioned with low rents [9] - Management indicated that the current market conditions allow for continued execution of the company's strategy, with significant available capital for acquisitions [65] Other Important Information - The company has raised nearly $505 million in equity over the last twelve months, providing significant capacity for acquisitions [17] - The portfolio occupancy remains strong at 99.4%, with 99.8% of base rent collected for Q2 [22] Q&A Session Summary Question: Inquiry about acquisition team capacity - Management stated that the company is appropriately staffed and has the capacity to do more acquisitions if favorable pricing is available [25][27] Question: Impact of cap rate changes on acquisition opportunities - Management indicated that a 25 basis point decrease in cap rates could significantly increase acquisition opportunities, potentially by $100 million to $200 million [29][30] Question: Darden exposure and acquisition strategy - Management confirmed that while they have diversified Darden exposure, they will not hesitate to acquire Darden-related assets if the pricing is favorable [31][32] Question: Deal flow and competitive landscape - Management noted that deal flow has been consistent, but pricing remains a key factor in determining acquisition activity [48][49] Question: Future of veterinary retail property acquisitions - Management expressed interest in the veterinary retail sector, indicating it is a space they are comfortable exploring further [61]

Financial Data and Key Metrics Changes - Curbline Properties acquired $415 million of properties in Q2 2025 and raised $300 million of debt capital [5][15] - NOI increased over 8% sequentially, driven by organic growth and acquisitions [16] - Same property NOI rose 6.2% for the quarter and 4.4% year-to-date [18] Business Line Data and Key Metrics Changes - Leasing volume reached almost 50,000 square feet, the highest since tracking began, with a lease rate of 96.1% [10][18] - Blended straight-line leasing spreads were 22% for the trailing twelve months [10] Market Data and Key Metrics Changes - Average household incomes for Q2 investments were nearly $137,000, with a weighted average lease rate over 96% [15] - Curbline's top five markets (Miami, Atlanta, Phoenix, Orlando, Houston) represent 44% of ABR [58] Company Strategy and Development Direction - Curbline focuses on convenience properties, emphasizing capital efficiency and high tenant renewal rates [6][8] - The company aims to acquire properties in affluent markets and is expanding into new submarkets like Dallas and New York Metro [13][14] - The company has a unique capital structure and received an investment-grade credit rating from Fitch, enhancing its competitive position [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth potential, citing a strong pipeline of acquisition opportunities and favorable market conditions [5][15] - The company raised OFFO guidance to a range between $1 and $1.03 per share for 2025, driven by better-than-projected operations [19] Other Important Information - Curbline's CapEx as a percentage of NOI was just over 7%, with expectations to remain below 10% for the full year [18] - The company has acquired over $750 million of assets since its spin-off, demonstrating strong acquisition volume [11] Q&A Session Summary Question: Can you comment on cap rate trends and the acquisition pipeline? - Management noted that cap rates have remained stable, blending to about a 6% on forward twelve-month NOI, with half of the pipeline being off-market opportunities [26][27] Question: Any commentary on tariff impacts and leasing spreads? - Management indicated no significant impact from tariffs on leasing economics or volume, with leasing spreads expected to remain consistent with 2024 [30] Question: Will there be any dispositions as you ramp up portfolio acquisitions? - Management confirmed there is no disposition pipeline and they are not buying assets they do not want to own long-term [34][35] Question: What is the current thought process on entering new markets? - Management is open to acquiring in various markets as long as the properties meet their criteria, with a focus on understanding and believing in the market [36][82] Question: How do you manage occupancy costs across your portfolio? - Management stated that occupancy costs are monitored primarily for local or regional tenants, with limited visibility for national tenants [79] Question: Will the shared service agreement with Site Centers impact Curbline? - Management indicated that the shared service agreement allows for efficient management of expenses, and any changes in Site Centers' plans would not significantly impact Curbline [61][62]

Financial Data and Key Metrics Changes - The company reported a sequential increase in Net Operating Income (NOI) of over 8%, driven by stronger base rent, recoveries, and other income [14][15] - Same property NOI increased by 6.2% for the quarter and 4.4% year-to-date [17] - Capital expenditures (CapEx) as a percentage of NOI was just over 7%, with expectations to remain below 10% for the full year [17][21] Business Line Data and Key Metrics Changes - The company achieved its highest quarterly new leasing volume since tracking began, with almost 50,000 square feet of new leases signed [9] - The lease rate increased to 96.1%, among the highest in the sector, with blended straight-line leasing spreads of 22% for the trailing twelve months [9][14] - The company acquired 19 properties for $155 million in the second quarter, continuing to focus on affluent markets [12][13] Market Data and Key Metrics Changes - Average household incomes for second quarter investments were nearly $137,000, with a weighted average lease rate of over 96% [13] - The company has been active in both primary and secondary markets, with significant acquisitions in Houston, Chicago, Phoenix, and Atlanta [12][57] Company Strategy and Development Direction - The company focuses exclusively on convenience properties, which have shown strong financial performance and high tenant renewal rates [6][10] - The strategy includes acquiring properties that share common characteristics with the existing portfolio, emphasizing visibility, access, and compelling economics [10][12] - The company aims to leverage its strong balance sheet and investment-grade credit rating to continue scaling and acquiring assets [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential, highlighting a robust pipeline of acquisition opportunities and strong demand for leasing [4][14] - The company raised its Operating Funds From Operations (OFFO) guidance for 2025 to a range between $1 and $1.03 per share, driven by better-than-expected operations [18] - Management noted that while leasing spreads may experience volatility, overall leasing activity remains elevated [16][30] Other Important Information - The company has raised $300 million in debt capital and has a net cash position of almost $430 million, providing substantial liquidity for future acquisitions [13][21] - The company received its inaugural investment-grade credit rating from Fitch, which is expected to lower borrowing costs [20] Q&A Session Summary Question: Can you comment on cap rate trends and the acquisition pipeline? - Management indicated that cap rates have not changed dramatically, blending to about a 6% on forward twelve-month NOI, with half of the pipeline being off-market opportunities [26][27] Question: Any commentary on tariff impact and leasing spreads? - Management noted that there has been no change in the tone surrounding tariffs, and leasing spreads are expected to remain consistent with previous years despite some quarterly volatility [30] Question: Are there plans for dispositions as acquisitions ramp up? - Management clarified that there is no disposition pipeline and they do not expect to engage in capital recycling, focusing instead on long-term acquisitions [35][36] Question: What is the current thought process on entering new markets? - Management expressed a willingness to enter new markets if the right opportunities arise, emphasizing the importance of understanding market dynamics [37][38] Question: How do you view the Midwest market for acquisitions? - Management stated that acquisitions are based on financial returns, and they are open to opportunities in the Midwest as long as they meet their criteria [80] Question: Are occupancy costs used as key metrics for managing rents? - Management indicated that occupancy costs are minimally used, primarily for local or regional tenants, as most of the portfolio consists of national credit tenants [78][79]