Earnings call transcript: Modiv Inc Q2 2025 misses EPS forecast

Modiv Inc reported its Q2 2025 earnings, revealing a significant earnings per share (EPS) miss. The company posted an EPS of -$0.32, falling short of the forecasted $0.05, representing a surprise of -740%. Revenue also slightly missed expectations, coming in at $11.8 million compared to the anticipated $11.83 million. Despite the earnings miss, Modiv’s stock remained stable in aftermarket trading, closing at $14.44, a slight increase from its previous close. According to InvestingPro analysis, the stock appears overvalued at current levels, though it maintains an impressive 8.1% dividend yield.

Key Takeaways

• Modiv Inc’s Q2 2025 EPS significantly missed expectations.
• Revenue for the quarter came in slightly below forecasts.
• The stock remained stable in aftermarket trading despite earnings results.
• The company is exploring asset recycling and strategic financing options.
• Modiv has a strong focus on disciplined growth and value creation.

Company Performance

Modiv Inc’s overall performance in Q2 2025 showed some positive aspects, such as a 4% increase in revenue from the prior year, reaching $11.8 million. The company’s adjusted funds from operations (AFFO) also saw a substantial 22% increase, amounting to $4.8 million. While the significant miss on EPS overshadowed these gains, InvestingPro data reveals an exceptional gross profit margin of 92.56%. Modiv continues to focus on disciplined growth and value creation, positioning itself as relatively stable compared to other small-cap real estate investment trusts (REITs). For deeper insights into Modiv’s financial health and growth prospects, InvestingPro offers 10 additional key tips and comprehensive analysis.

Financial Highlights

• Revenue: $11.8 million, a 4% increase from the prior year.
• Adjusted Funds from Operations (AFFO): $4.8 million, a 22% increase.
• AFFO per share: $0.38, a 12% increase.
• Total cash and cash equivalents: $5.8 million.
• Debt outstanding: $280 million, with a leverage ratio of 48%.

Earnings vs. Forecast

Modiv Inc’s EPS of -$0.32 was a significant miss compared to the forecasted $0.05, resulting in a surprise of -740%. This marked a notable deviation from expectations and is a key factor for investors to consider. Revenue was also slightly below the forecast, with an actual figure of $11.8 million against an expected $11.83 million, a minor surprise of -0.25%.

Market Reaction

Despite the earnings miss, Modiv’s stock price remained stable in aftermarket trading, closing at $14.44, a slight increase from its previous close. The stock’s performance was within its 52-week range, with the high at $18.11 and the low at $13.62. Notably, InvestingPro analysis shows the stock has a beta of -0.32, indicating it often moves inversely to the broader market. This stability suggests that investors might be focused on the company’s strategic initiatives rather than short-term earnings fluctuations. Analyst price targets range from $17 to $19, suggesting potential upside from current levels.

Outlook & Guidance

Looking forward, Modiv Inc is exploring $150 million in asset recycling, which could potentially lead to 100 basis points of accretion. The company is also evaluating financing options and monitoring potential interest rate changes. Future EPS forecasts for the upcoming quarters show modest expectations, with projections of $0.03 in Q3 2025 and $0.08 in Q4 2025.

Executive Commentary

CEO Aaron Halfacre emphasized the company’s commitment to increasing value, stating, "Our sole purpose is to increase the value." He also addressed the company’s cautious approach to issuing shares, saying, "We’re not going to issue any [shares] at those prices, and we won’t." These comments highlight Modiv’s strategic focus on disciplined growth and shareholder value.

Risks and Challenges

• Market Environment: A cautious market environment and capital market uncertainties could impact decision-making.
• Tariffs: Potential impacts of tariffs are being monitored, which could affect tenant operations.
• Interest Rates: Changes in interest rates could influence the company’s financing strategies.
• Small-Cap REIT Challenges: Modiv faces challenges common to small-cap REITs, including market volatility and competition.

Q&A

During the earnings call, analysts raised questions about potential asset sales and the lending market conditions. Discussions also included the impact of tariffs on tenants and the impairment of Calera equipment. These questions underscore the areas of concern and interest for investors and analysts alike.

Full transcript - Modiv Inc (MDV) Q2 2025:

Conference Operator: Good day, and welcome to Motive Industrial Inc. Second Quarter twenty twenty five Conference Call. All participants will be in a listen only mode. On today’s call, management will provide prepared remarks, and then we will open up the call for your questions. Please note this event is being recorded.

I would now like to turn the conference over to John Rainey, Chief Operating Officer and General Counsel. Please go ahead, sir.

John Rainey, Chief Operating Officer and General Counsel, Motive Industrial Inc.: Thank you, operator, and thank you, everyone, for joining us for Motive Industrial’s Second Quarter twenty twenty five Earnings Call. We issued our earnings release before market opened this morning, and it’s available on our website at

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: motive.com. I’m here

John Rainey, Chief Operating Officer and General Counsel, Motive Industrial Inc.: today with Aaron Halfacre, Chief Executive Officer and Ray Piccini, Chief Financial Officer. As the operator noted, we issued our we’ll start today’s call with prepared remarks, and we’ll open up the call for your questions. Before we begin, I would like to remind you that today’s comments will include forward looking statements under the federal securities laws. Forward looking statements are identified by words such as will be, intend, believe, expect, anticipate or other comparable words and phrases. Statements that are not historical facts, such as statements about our expected acquisitions or dispositions and results of our operations may vary materially from those contemplated by such forward looking statements.

Discussion of the factors that could cause our results to differ materially from these forward looking statements are contained in our SEC filings, including our reports on Form 10 ks and 10 Q. With that, I’d like to turn the call over to Aaron Halfager. Aaron?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Thanks, John. Welcome, everyone, to the second quarter twenty twenty five earnings release. I think in past practice, I’ll just hand it over to Ray first, and then I’ll add some comments and then we’ll just kind of get into questions and I assume we’ll have some this quarter. Ray?

Ray Piccini, Chief Financial Officer, Motive Industrial Inc.: Thank you, Aaron. I’ll begin with an overview of our second quarter operating results. Revenue for the second quarter was $11,800,000 compared with $11,400,000 in the prior year period. This 4% increase primarily reflects the impact of two industrial manufacturing property acquisitions since 06/30/2024. Second quarter adjusted funds from operations or AFFO was $4,800,000 up 22% when compared with the 3,900,000 in the year ago quarter.

The $900,000 increase in AFFO reflects a $576,000 increase in cash rents, a $217,000 decrease in G and A and $126,000 decrease in preferred stock dividends. AFFO per share increased 12% from $0.34 per share in the prior year period to $0.38 per share for the 2025. The increase in AFFO per share was less than the 22 increase in AFFO due to a $1,200,000 increase in diluted shares outstanding, which reflects 895,043 Class X operating partnership units issued during the 2025 and 03/4119 Class C operating partnership units issued in connection with a property acquisition in March 2025. Cash interest expense for the quarter was $255,000 less than the comparable period of 2024, reflecting a decrease in the weighted average fixed rate as set by the respective swap agreements from 4.53% at 06/30/2024 to 4.25% at 06/30/2025, along with a decrease in unused commitment fees that resulted from our decision to reduce the size of our revolver. Now turning to our portfolio, our 43 property portfolio has an attractive weighted average lease term of fourteen point four years.

Though the majority of our tenant credits are private, approximately 29% of our tenants or their parent companies have an investment grade credit rating from a formerly recognized credit rating agency of BBB minus or better. Annualized base rent for our 43 properties closed $39,000,000 as of 06/30/2025 with 39 industrial properties representing 81% of ABR and four non core properties representing 19% of ABR. With respect to our balance sheet and liquidity, as of 06/30/2025, total cash and cash equivalents were $5,800,000 and we have $30,000,000 available to draw on a revolver. Our $280,000,000 of debt outstanding consists of $31,000,000 of mortgages on two properties and $250,000,000 of outstanding borrowings on our $280,000,000 credit facility and we do not have any debt maturities until January 2027. Based on interest rate swap agreements we entered into during January 2025, 100% of our indebtedness as of 06/30/2025 of a fixed interest rate with a weighted average interest rate of 4.27% based on our leverage ratio of 48% at quarter end.

As previously announced, our Board of Directors declared a cash dividend for common shares of $9.75 for the months of July, August and September 2025, representing an annualized dividend rate of $1.17 per share of common stock. This represents the yield of 8.1 based on the $14.44 closing price of our common stock as long as 06/2025. I’ll now turn the call back over to Aaron.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Thanks, Ray. I kind of said in the press release this quarter was a little boring. I would say for me personally, it was probably a little frustrating. But, you know, I think hard work and patience can be frustrating at times. And it was boring in a context, probably on a relative basis to others and as well as to our past quarter.

Right. So we didn’t choose to be very active this quarter. We obviously got the lease extension in Northrop. We’ve been working on some things. We certainly did.

We’re pursuing a particular property right now, but the process doesn’t fit neatly within a quarter. And obviously, you’ve seen our share price, I think, almost to the day, sixty days before the Russell inclusion, when it’s pretty much known and calculable that you’re going to get in, we fell off a cliff. So we were in the sixteens, and we’ve been in the fourteens now for about ninety days. So our exponential moving averages are now sort of set to those levels. And we’re going to be disciplined.

We’re not going to issue. We didn’t issue any at those prices, and we won’t. And so it a quarter where there was a lot of volatility. There was a lot of opportunities to buy. I think I probably purchased 4,000 or 5,000 shares myself.

It’s ridiculously cheap. Mean, I think some more money analysts probably has the implied cap rate, but it’s like in the mid-eight. And there’s no way you can buy these properties with any handle. They’re low sevens or mid sevens. Some of them are high sixes.

So comforting in that regard, but it’s also frustrating. That’s the troubles of being a small cap name. And again, patients begets patients, right? And so we’re playing a long game here. Not much to report.

I’m sure we’ll talk a little bit about Claire and the questions. I’m sure you’ll talk about some of my comments that I’ve made the release. But it was a solid quarter. I think the decisions we’ve made repeatedly and consistently is why we had a large beat. So the decisions, even the absence of activity this quarter, my belief is that that’ll pay dividends when we’re talking this time next year.

And I think that the process is just to be really patient, understand our strengths, understand our weaknesses, be able to maneuver nimbly and quickly as needed. I think there’s a real need for what we’re offering out there. And I think we’re starting to consistently build a tribe. It’s a retail tribe. It’s increasingly an institutional tribe, but it’s largely a retail tribe where people they like what we’re doing.

They like the no bullshit. They like the consistency. They like the effort. And we’re seeing traction there and we like that. So even though I’m a little frustrated with the quarter, I would love to be a bigger REIT.

I would love to be able to do more things. But I don’t want to do stupid things. And you guys don’t pay us to do stupid things. And so we’re going to do smart things, and we’re going to keep doing them every day of the week. So with that, let’s, operator, open it up to questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Gaurav Mehta of Alliance Global Partner. Your line is now open.

Gaurav Mehta, Analyst, Alliance Global Partner: Yes. Thank you. Good morning. Good morning. Hey.

I wanted to ask you on some of the remarks that you made in the earnings release about asset recycling. It seems like the environment is getting better for you guys. Maybe getting closer to sell some of those assets. Can you maybe provide some more color on on, I guess, on what you’re seeing as far as recycling and then the $150,000,000 asset that you mentioned? You know, what kind of asset is it going to be 20% noncore that you would sell?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Yeah. It’s a good question. Questions. So the assets that we would sell would be largely legacy assets. So these are they could be core and noncore.

The budget of the non core is in process, right? So as you know, KB Homes is under contract to buy Costco. We expect them to extend at least one extension. That one is in process. It’s just a matter of timing.

The reason why they extend is that they’re just finalizing the paperwork with the city. And it’s a reminder that I think they’re $1,700,000 hard money already. And so that one is one of the non cores that’s in the process of liquidating. We’ve mentioned in the past, OES has the option to purchase the property. They are in the throes of their very lengthy appraisal process.

And so we don’t think that would even self liquidate the earliest until next year anyway, just given the process. And this has always been known to us and always communicated. So those, I’m not talking about. Those, candidly, are not going to be accretive spread. Mean, we can liquidate them.

They’ll produce cash. But you’re probably treading water after you sell them and replace them. And some of the other ones we’re talking about, these are I’m not going to call them out specifically because we have to be strategic about when we take them to market. But there are some assets that don’t quite fit our box. Most of them are industrial.

They are legacy assets. Would be very accretive. So they would be selling in the high fives, low sixes. And we would redeploy these in sevens. And they’re fairly liquid.

And they’re also properties that we’ve also received unsolicited offers in the past. And we’ve kind of gauged the unsolicited offers because one, if someone goes out of way to make you an offer, then they clearly find the property attractive. And then not every not every problem, no one’s doing that for Clara. So so we understand the difference. And we’ve been able to note over periods of time how those cap rates that have been unsolicited have tightened.

And so we think that kind of in the broader picture of this pivot point that I talked about, that we’re starting to see a little bit more fluidity in people’s desires to do things. And so now maybe or be approaching the time to start doing that. And so that’s probably, I think, in fairness, we talked about that at a big level, $150,000,000 of proceeds, which I think could generate close to 100 basis points, if not more than 100 basis points of accretion, has given us a calm, right? Because if we didn’t have some of that and we’re trading in the fourteens and we’re not issuing, we would be really in a box. I don’t feel the pressure to be in a box because I know I have these things.

We’re still shaving off expenses. We’re getting tighter. We’re growing AFFO. We’re doing all the things that we need to do. We just may not be acquiring a ton right now, which is like, you know, the cocaine of the world.

And we’re not doing that, but we feel comfortable that we have additional levers to pull. So I don’t feel any despair. Don’t I feel the frustration I talked about earlier just because I just like to grind. I like to do shit. Right?

And that’s the frustration. It’s not like, oh, we don’t have any options. We have options. We’re being patient. We’re being disciplined.

I think that’s why we don’t worry about the share price right now. We’re not reclumped. I believe that we will see that recover. And I think the recycling of those assets will help do that. Me mentioning it means that we’re poised.

We’re thinking a lot about it. We’ve been thinking about it, but we’re thinking the timing is right. It does just to be clear, it does not mean I’ve already launched something. And if I do a recycling, you will know it. I will tell you when it’s done.

But we’re getting to that next stage, which I think is probably over the course of the next year or so that that makes the right time to do that.

Gaurav Mehta, Analyst, Alliance Global Partner: Okay. Thanks for that perspective. Maybe a follow-up. I think you also made some comments about the lending market. It seems like you are exploring even the term loan is not expiring till 2027.

You have been exploring different options. Just wondering, I know you said there’s lending available, but just wondering, what kind of terms and rates are you seeing in the market?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Yeah, so I like to work. I’m just a very blue collar. I just like to work. I’ve never really developed any other habits other than running and working out a little bit, but I don’t golf. I don’t.

I just like to work. And so in a quarter where you have to be patient and there’s not a lot of grindy stuff to do necessarily, I’m going to spend that time thinking twelve and eighteen and twenty four and thirty six months down and just iterating, iterating what could go here, what could do there. Some of big as you guys all know, I’m a big, fan of capital market history. I know what REITs have done in the past, but I love this industry. I’ve been in it for a long time.

So I spent a lot of time. And look, there’s certain things, you know, you know, we’re not reinventing the wheel here. And so during this quarter, spent a lot of time. One of the natural things to do is to say, we’ve got on event horizon, we have, you know, we have a term loan maturity, a credit facility maturity. And so let’s get started talking earlier.

We’ve talked to, you know, obviously, our bank syndicate. We talked to others and look, we are seeing that, the environment for, a new term loancredit facility would be the same or better than what we had. And I think that helps the fact that we’ve shown tremendous AFFO growth over the last three years. The balance sheet has become very solid. Remember, when we put that first term loan on, it was pre listing, and we still had a shit ton of office.

So we’ve really transformed. So I think the lenders feel good. And I think we’re exploring the full gamut of how to finance. Because to me, I like data. I like optionality.

I like to understand what are all the choices? What if I do this now? What does that mean later? So we feel encouraged. We’re going to be taking more steps towards that.

I think the wildcard clearly for anyone here is what are the broader what’s the Fed going to do? Are we going to see treasuries come down? Are we going to see SOFR come down? Are going to see that? That’s going to drive the needle.

You see it. You see where a robustly levered small cap name, and then there’s a Fed fart in the news, and we whipsaw. And so if we do find rates coming down, which I think everyone’s going make their own bets over the course of the next twelve to eighteen months, then that’s going to be a positive. But as it relates to the terms and the structure, we do not see anything negative in our conversations. And if something comes up that changes that, well, then you’re going to hear it from me.

But right now, feel encouraged by it. And we are early, I think. I don’t feel any pressure about I know some people get really sort of contemplative about maturities that are eighteen months out, but I feel really good about this. Got fourteen plus Walt. And that includes things like two months on solar, that included the shortening of Costco.

You remove those things. Our WALT’s more like an eighteen nineteen year WALT. So that real core portfolio is solid with bumps and growing, and so it’s very attractive to the lenders.

Gaurav Mehta, Analyst, Alliance Global Partner: Okay. Thank you. That’s all I had.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Thanks.

Conference Operator: Your next question comes from Craig Kucera from Lucid Capital Markets. Your line is now open.

Craig Kucera, Analyst, Lucid Capital Markets: Yes. Good morning, guys. You had a pretty sizable pickup in income recognized from your joint venture or your take interest, I should say. Can you give us some color there and what you expect going forward?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Greg?

Steve Chick, Analyst, C.B.S. Garden Capital LLC: Hello?

Ray Piccini, Chief Financial Officer, Motive Industrial Inc.: Yeah, that reflects the impact of extending the lease. The way straight line rent works is in the early years of a lease, you’re picking up rent that’s going to be received down the road. So that was a ten year increase in the lease term with 3% annual bumps. So that’s what’s driving it.

John Massocca, Analyst, B. Riley: Okay.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: I would say that what we’re as we’ve noted in prior quarters, we are in active dialogue and discussion with our tick partner. It’s important for us that we, in a timely manner, end the tick. There’s a variety of ways to end that tick. But ticks ticks are are a throwback of probably the, you know, pre GFC construct, and you don’t see a lot of ticks anymore, even though they’re somewhere around and they’re just not as fluid for a beat. And so our goal longer term and I don’t again, longer term is longer than, this month is to get rid of that tick, and we will get that done one way or another.

And so that will change a little bit of the dynamic, but there shouldn’t be any more pickup after now that we signed the lease. I got it. That’s helpful.

Craig Kucera, Analyst, Lucid Capital Markets: And changing gears, you know, you took the impairment charge. It looks like that was taken on the Calera equipment. I I guess, are you moving closer to maybe a sale there versus trying

Steve Chick, Analyst, C.B.S. Garden Capital LLC: to lease it? Or is that just to Yes.

Craig Kucera, Analyst, Lucid Capital Markets: How are you thinking about that asset?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Yes. So we’ve had it’s on the market and we’ve had a variety of things people going through. And so what I think what we’ve learned increasingly one is I don’t I just don’t know that I want to lease it. Just kind of I think we want to sell it and free up our capital and get redeployed. I think that what we’ve learned over time is that there’s as many different types of growing technologies as there are growers, as there are leafy greens.

And so the growing technology that was in this equipment is now progressively several years older, and we’re finding last of the market for it unless you find that particularly growing style. So we decided to take the impairment against that. Doesn’t mean that we might not find a buyer that values it and has some residual value, but we just figured that was a cleaner way to go. And yeah, our goal is to my ideal context is that property’s gone. If if all if, you know, if I have any powers within me to get rid of that property by the end of the year.

Craig Kucera, Analyst, Lucid Capital Markets: Got it. When the tariffs first started being announced, you had mentioned that your discussions with them indicated that they really thought the impact would be limited, you I’m curious kind of as they’ve been shifting around in the marketplace and you’re looking at their financials, are you seeing that case as you

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: have the discussions with your tenants?

Ray Piccini, Chief Financial Officer, Motive Industrial Inc.: Yeah. So, we’re just

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: now gathering, there’s always a little bit of lag. We’re now gathering second quarter financials from them and doing an analysis. The ones that we have seen, it’s a good chunk of them. Yeah, it’s well, one, I’d say, too, is we really haven’t I mean, the tariff dance has just kind of kicked down the street this summer. And so we have really not seen a ton of definitive tariffs until like earlier this week or last week.

But the impact has been as we underwrote, right? You know, I think there’s not been any cost squeeze. There’s not been anything like that. I think what we have the commentary we’ve noticed, and it’s not it’s a forward looking, so you don’t see it in the numbers, is some of them are saying that some of the bigger capital decisions that their clients are opining on or deciding on are a little bit delayed because everyone’s like, everyone is waiting to see, well, what does the world look like? Right?

And so that that seems normal to me. And so the conversations are not that their clients aren’t pulling the trigger. They’re just not ready to pull the trigger yet. Right. So we haven’t seen it.

I think there’s, you know, again, I still don’t know exactly where Canada shakes out, right, on this. But the countries that have announced, we don’t really have exposures to. I think the China deal, if it gets solidified the way we think it’s going get solidified, I think that’s probably a win. And so I just don’t see an issue on tariffs our particular set. It doesn’t mean that they’re not going to be impacted, but they’re not going to be disproportionately impacted from what we can see.

Craig Kucera, Analyst, Lucid Capital Markets: Got it. I want to circle back to Costco. That lease was scheduled to expire at the July. Can you give us a sense of the annual rent they were paying? Did you receive the first extension fee from KB Home?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: KB has until August 15. So we’ve been in conversations with them. They told us that they will be doing at least one extension. They may be doing two. And so they’re targeting some possibly closing in in this in December.

And it the the reason is is purely logistics with the city. It it is not sort of a contemplative thing from what we’ve gathered. It’s just the city has got a process. They have personnel that have been taking vacations and doing this and that, and that process is taking longer than and you can’t push a push a string. So, they, they have another eight days before they need to, you know, officially do the extension.

We expect them to do that. The rent, right, you have the rent on hand that Costco’s paying.

Ray Piccini, Chief Financial Officer, Motive Industrial Inc.: Yeah, it was running about 2,400,000.0.

Craig Kucera, Analyst, Lucid Capital Markets: Got it. Finally for me, late last year, you’re looking at a number of transformational transactions you didn’t close, but they were still potentially out there and may come back. Are you looking at anything out there that’s similar or any other large portfolio transactions?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: I would say that transformative transactions are still definitely on the table. I think for all parties, it just needs to be the right environment. And it feels like we could be getting closer environments that are conducive to those. So there are still conversations, but they’re more well, the last first half of the year, they’ve been sort of more checking in conversations, right, because a lot of moving parts. And it’s just really hard for teams and balance sheets across the spectrum to pull triggers and make decisions without maybe a few data points a little bit more solidified.

So I’d say they’re still on the table. I think they have to be too, right? Because, we can’t just stroll down the lane and do this little bitty stuff forever. We’re too small of a REIT, so we have to do something transformational at some point. I don’t think it has to be today.

But if we were $150,000,000 market cap REIT in five years, then you should shoot us. Is not how the capital markets work. And they never do work that way. Unless it’s someone who’s not interested in shareholders, unless someone who’s just that’s not us, right? We care about our shareholders.

That’s all I am as a shareholder, even though I’m the CEO, all my compensation is shares, right? And so we’re completely aligned in that regard. And so transformative transactions probably will never be done. Just not going to bring them up unless they are baked this time.

Craig Kucera, Analyst, Lucid Capital Markets: Got it. I appreciate your candor. That’s it for me. Thanks.

Conference Operator: Your next question comes from John Massocca from B. Riley. Your line is now open.

John Massocca, Analyst, B. Riley: Good morning. Good morning. It’s always kind of a difficult question to ask in this context, but I think given the answers you gave to the last question and some of the commentary on the earnings call. I mean, do you think there is maybe an opportunity given some of the loosening of capital broadly out there in the markets to maybe market motive in its entirety as kind of a portfolio and platform or either or?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: So I’ve talked about this before. Look, we and I think I did it in the context when we released our appraisal. So every year we get our portfolio appraised. It’s a tradition we had when we were pre public as a non traded REIT, right? And where we were And unlike a Blackstone REIT or Starwood REIT, they have liquidity windows, that’s what we used to have.

We used to have liquidity windows, and we would have set arm’s length in appraisal. And we continue that tradition on. Even though there’s a little bit of cost to it, I think it’s been useful. And I think the last two years it’s been roughly $24 a share, dollars 23.75, dollars 24, something like that. And look, that’s done by Cushing and Wakefield, very respectable.

But if you look at indices, sort look at relative to we know there’s lags. So look, I’m not here to suggest to you that I know for a fact that we’re worth $24 a share. But I sure as fuck know we’re worth more than 14. And we’re going to work diligently to close that loop with the actions that we can take. And I’ve said, and I think I stated this in February, if someone comes over the top and can close that value gap definitively, then we have to listen.

That’s our duty. That’s our job. Are we going go solicit that? I don’t think that would make the most sense right now because candidly, if I was going to solicit and go sort of and again, bug me, it’s just the board decision, and I’m just one member of that board, is that soliciting that would mean that we’re waving a flag that we think that we capitulated. And I don’t want to see predatory sort of characters coming into play.

I can remember back when we were at $9.53 and we got 3,000 shares trading. It was a mess. This was early like late twenty twenty two. We had a lot of people sniffing in, but they wanted to go pay $10 a share. It was like, fly tight.

Because in four years of dividends, that’s like half the value you’re saying. And so we understand that this is a tough time in the broader market, small cap REITs in particular. We’re holding up relatively well. If you look at us compared to some of the other small cap REITs, for various reasons, look at Playmist and I look at Good and I look at Pine and I look at Frontview and I look at these guys. We’re whole other than when we fell off a cliff right before the Russell announcement.

We’ve been holding up pretty well. And I think that resonates the tribe. And so our view is we’re going to keep climbing that mountain, we’re going keep delivering dividends, and we’re going to try to close that value gap and smart money will know that if they want to close that value gap sooner, we’re going to listen. And so I think that’s the approach we’re going to take. Because I think our investors deserve us to fight for them not to be cute, not to have hubris, not to be ego.

If I lose my job tomorrow, so be it. That’s how I set this up. So it’s so hard to do things in REIT land. We’re going to be smart about it, and we’re not going to be obstinate about it. But we’re not also going to be, you know,

John Massocca, Analyst, B. Riley: begging. Okay. And then how do you kind of think about understanding that kind of in the volatile kind of capital markets and cost of capital moving around, you have to be mindful of that and the impact that acquisitions and the like have on bottom line results. But how are you thinking about maybe weighing that against, right, the positive impacts of increased scale either on your valuation as a public company or maybe even based on what I talked before about maybe being more attractive as something for private capital to come and look at?

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Repeat that question a little bit again, a little bit simpler. I couldn’t follow your question. What is the question?

John Massocca, Analyst, B. Riley: Well, I guess so you’re right. Obviously, you passed a lot of acquisitions. You’re trying to make smart transactions given kind of where your cost of capital is, but there’s also an argument to be made that, right, part of the reason why your cost of capital is where it is because you’re kind of subscale. And so how are you kind of weighing those two against each other? And I guess that also maybe impact your attractiveness based on kind of what we’re previously talking about.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Got it. Yeah. So I think our attractiveness, if we continue to do our job, which is to increase value, we’ll only continue to be attractive. Right? If we only do if we do what’s right for the shareholders, which is don’t make stupid decisions, grow the money, protect the money, protect the house, get it to be more valuable, then those will always mean that we’ll be retracted.

We could triple in size tomorrow and we’re still bite sized. So I think from public or private spectrum, we are going to be in that box of always someone’s appetizer for a quarter or the meal for the year depending on the size of the other. We’re always going to be on that thing until such time that we are not. And to me in this market, I think that unless you are a billion dollar market cap or larger, you’re on the food chain. Right?

So I’m cognizant that our existence is going to be one where we are always going to be you know, alive and people are always going to check on us unless, you know, REIT gods line up and we kind of suddenly are, you know, huge. But I don’t have any ego to do that. I have my sole purpose is to increase the value. And so what we do during the day to day is we make sure we take decisions that increase the value. Because if we recycle legacy assets, and we have, I think, one or two double net leases that we didn’t acquire.

If we recycle shorter WALT stuff and we end up being a very ironclad battleship of a WALT of eighteen years and a clean balance sheet and we’re operating well and we’re smooth, that’s just going to make us even more attractive and more valuable. And in the meantime, we’re doing that, our investors are getting paid a dividend. So I’ll give you an example. Let’s just say, know, Wild Blue REIT came tomorrow and said, we want to buy you for $15 a share. We’ll be like, well, that’s not much of a premium.

And they wanted to pay cash. I imagine our investors would say no. They’d say no because chances are in two or three years, we could very least be worth $15 if not more. And we’d also have made over $3.5 worth of dividends. So that economic value becomes $18 or $19 or $20 And so I think for us, we’re going to stay our course.

If we keep doing the right thing, we’re going to continue to be more valuable. And it just either we’ll get there. I don’t think it’s a matter of we’re not and I bring this up on the office thing. Even the office people are getting bids, but we’re not office. We have actually a very attractive portfolio.

We’re cognizant of that. But our mission is solely do right by our shareholders. If we do that, everything else would get taken care of.

John Massocca, Analyst, B. Riley: Okay. And then on a much more kind of micro basis, the property in Washington with KB Homes, is there any risk that the city doesn’t zone that for KB Homes or some kind of regulatory reason that falls out? I’m just thinking is the delay purely kind of bureaucratic inactivity? Or is there some kind of debate going on in the municipality as to whether to greenlight that project or not?

Ray Piccini, Chief Financial Officer, Motive Industrial Inc.: So It’s the bureaucracy of the city. I mean, they have entitlement rights that the city can’t disregard those. It’s it’s it’s zoned to allow additional housing.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Yeah. The the zonings aren’t there. This is this is sort of a plan approval. I I believe it’s bureaucracy and logistics. That said, there’s always, I think until the what I do know for sure is there’s 1.7 that they can’t get back.

Do I have concerns that they’re not going to close? I don’t, but probabilistically, there’s some small probability waiting that that that is an outcome until it’s done. Right? I think about all probabilistic weightings. I don’t think it’s I think it’s, you know, it’s on tail.

It’s, you know, it’s a lot of pertussis in that in that assumption, but I don’t I think it’s happening.

John Massocca, Analyst, B. Riley: Okay. That’s it for me. Thank you very much.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Great. Thanks.

Conference Operator: There are no further questions at this time. Will now turn the call back over to Aaron Halfacre, Chief Executive Officer. Please continue.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: Danny, it looks like we do have a question from Steve Chick. Do you want to go ahead and get that?

Conference Operator: Yep. One more question from Steve Chick of C. B. S. Garden Capital LLC.

Please, your line is open.

Steve Chick, Analyst, C.B.S. Garden Capital LLC: Hey. Thanks. Just to to clarify on the 150,000,000 of, you know, recycled assets that you’ve kind of soft circled. The Costco property, the 25,000,000 you’re expecting from Costco isn’t in that. And can you kind of highlight how many properties that kind of refers No,

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: I cannot. I will not. Let’s put that. I surely can, but I won’t because and the reason is, is that we if you’re taking these properties to market, you want to preserve a little bit of the because we are a public company, right? And anyone can go read up on us.

And so we like to preserve a little bit of that optionality. Suffice to say they’re legacy properties, and they are properties that don’t quite fit our box. But they’re very attractive properties. That’s what I will say. And, it does not include the KB or the Costco, excuse me.

Costco one. Yeah, the Costco one is like, you know, it’s great that they’re buying it. And as you recall, there was other homebuilders that bid on that process. They were the top bid. So the destiny of that property is to be housing for people in a housing constrained market.

So we feel good about that. I don’t think the proceeds from that, they don’t move the needle, candidly. After we pay back the loan, there’s just not a ton of proceeds. It should be good to be free of it and move on because that was technically an office. But these other ones we’re talking about, these are things that we, again, receive unsolicited offers for in the past.

They would be construed as very liquid. And so that sensitivity on recycling and so which no one’s asked really is because these are legacy properties, they all have very low tax basis. And so you have to think about them in terms of ten thirty one exchanges. And to do a ten thirty one exchange so you don’t incur tax liability, which is a no no for a REIT, is you have to be very thoughtful and very line things up. And part of that is what do you replace them with is just as important.

I think the decision to sell them is an easy one to do. It is not one that will take long. And I do not think that we’ll be wringing our hands worried about the resulting cap rates that we get for them. I think the more thought comes in is, Okay, how do we sequence and place them into something that’s really going to make the portfolio more valuable? And so that’s the other part of this equation that we’re starting to see come into play is that you go back fourth quarter of last year, first quarter of this year, there was just not much inventory being available to acquire.

Certainly not like we like. I mean, some some deals are getting done, but some of the deals look like crap. And it’s like, I don’t want to buy a crap deal just for a crap deal. So I think what we’re seeing is a little bit of a fall. It’s also starting to see people say, hey, we’re willing to go put our properties out again.

And so now it’s giving us the other side of the equation because we could have sold these $150,000,000 of properties a year ago, probably wouldn’t have suffered that much on the cap rate side, but we would have had trouble deploying. And I think so it’s a balancing act there. Suffice to say, legacy properties, valuable properties, things that shouldn’t test.

Steve Chick, Analyst, C.B.S. Garden Capital LLC: Okay. That’s very helpful. And then a second, if I could. In your comments about kind of the numerous unsolicited overtures they’ve received for your properties, you kind of also you say and beyond. I’m just kind of curious.

Don’t want look into that too closely. But I mean, that mean the market around you or is it are you have you gotten overtures Better beyond just sheer properties.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: You read it pretty accurately.

Steve Chick, Analyst, C.B.S. Garden Capital LLC: Okay, great. Thank you.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: There was no, there was no double entendre there. So doesn’t mean there doesn’t increase right? Sniffing a tower describe it. Right. Obviously, if there’s something that was, You know, very, very specific and very formal, then that would be a different type of disclosure.

Steve Chick, Analyst, C.B.S. Garden Capital LLC: Right. Okay. Thanks. Thanks guys.

Aaron Halfacre, Chief Executive Officer, Motive Industrial Inc.: All right, Danny, I think we’re there. I will run with it now. Everyone, thank you so much. You know, it’s so much more enjoyable to just answer questions. You know, I’ve been reading so many frames releases that transcripts me.

I can’t suffer going on people’s calls anymore because all they do is read things and they just regurgitate what was in the queue. And I know that’s protocol. I know that’s probably the best way to go, but it just does not work with my personality. And so I prefer these questions because there’s more insight. And the job for me to have a dialogue with an analyst or an investor is to help create understanding.

Again, our balance sheet is pretty straightforward. There’s only 43 properties. Most of you guys have the numbers down. What you’re trying to do is get into my head, And to the head of Ray and the head of John and everyone here to see how do these people because what are my motivations? What are what are what are proclivities?

What are our what’s our past history? How all these things that everyone has and makes up who they are, make the impact of decisions. And so as a reminder, I think I’m an 8.9% shareholder of the company. I have put all my eggs in this basket. I watch this basket 20 fourseven.

I love thinking about it all the time. I want to do I treat every dollar that’s in there as if it was my grandmother’s God bless her souls. He’s not here anymore. My grandmother’s money. Right?

And it damned if I’m not gonna screw that up. And so that’s how we think about it. And I think it’s refreshing. It’s refreshing to me. And I know increasingly we get comments from people that Wall Street people are looking forward to seeing what Aaron’s going to say.

Look, I’m a bit uncharacteristic in my writing style and maybe my speaking style, but I hope it resonates. I’m preaching to deaf ears on one side and a tribe on the other, but let’s just get this done. Great grind back to the grindstone, and we’ll see what comes in the next quarter. Thanks, everyone.

Conference Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.

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