Modiv(MDV) - 2024 Q3 - Earnings Call Transcript

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]