Modiv(US:MDV)2025-05-07 16:02Financial Data and Key Metrics Changes - Rental income for Q1 2025 was $11.7 million, a 2% decrease from $11.9 million in the prior year period, attributed to the disposition of two properties with expiring leases [14] - Adjusted funds from operations (AFFO) increased by 18% to $3.9 million compared to $3.3 million in the year-ago quarter, primarily due to a $195,000 increase in cash rental income and a $200,000 decrease in cash interest expense [14][15] - AFFO per diluted share rose to $0.33, up from $0.29 in the previous year, reflecting an increase in the weighted average number of fully diluted common shares outstanding [15] Business Line Data and Key Metrics Changes - The portfolio consists of 43 properties with an attractive weighted average lease term of 14.2 years, with 39 industrial properties representing 80% of annualized base rent (ABR) [16][17] - Annualized base rent totals $39.4 million as of March 31, 2025, with approximately 30% of tenants having an investment-grade credit rating [17] Market Data and Key Metrics Changes - Total cash and cash equivalents were $6.2 million, with $280 million of debt outstanding, consisting of $31 million in mortgages and $250 million in borrowings on a credit facility [17] - The company has no debt maturities until January 2027, and 100% of its indebtedness held a fixed interest rate with a weighted average of 4.27% [17] Company Strategy and Development Direction - The company is focused on maintaining a stable portfolio and is cautious about acquisitions in a volatile market, preferring to wait for compelling opportunities [20][24] - Management emphasizes risk management and discipline in investment decisions, indicating a narrow focus on specific manufacturing assets [24][25] - The company is exploring capital recycling opportunities rather than increasing leverage, indicating a preference for stability in its financial profile [100] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current market volatility and uncertainty, expressing confidence in the stability of their asset class and tenant performance [7][36] - Conversations with tenants indicate a cautious approach to capital placement due to market conditions, with potential opportunities for consolidation and expansion in the future [92][95] - The company remains committed to its long-term strategy, focusing on maintaining strong margins and effective expense controls [43][100] Other Important Information - The Board of Directors declared a cash dividend of $0.09 per share for April, May, and June 2025, representing an annualized yield of 8% based on the recent closing price [18] - Management has reduced headcount from 12 to 9 employees, which is expected to lower general and administrative expenses in future quarters [16] Q&A Session Summary Question: Can you talk about the cap rates that you're seeing on deals? - Cap rates are currently tighter than in previous quarters, with a sweet spot of 7.5% to 8.25%, but many assets are not compelling enough to justify purchases [47][48] Question: Were you considering doing deals under the ATM when shares were in the $16 range? - The company was in a blackout period and missed opportunities, but is constantly evaluating the market for potential equity issuance [54][56] Question: Any update on the sale of the Costco property? - The sale process is moving forward, with regular updates from the buyer, and the timeline remains on track [76][78] Question: Is there an expectation for more preferred share repurchases? - Future repurchases will depend on market conditions, but the company is open to opportunities if they arise [83][86] Question: What is the view on transaction activity among mid-market tenants? - Tenants are cautious due to macro uncertainty but are looking for opportunities, indicating potential future deal flow [92][95]