Ladies and gentlemen, good day, and welcome to the Modiv Industrial Inc. First Quarter 2024 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Star, followed by zero. On today's call, management will provide prepared remarks, and then we will open up the call for your questions. To ask a question, analysts may press Star, then one on their touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key, and to withdraw your question, please press Star then two. Please note, this event is being recorded. I would now like to turn the conference over to John Raney, Chief Operating Officer and General Counsel. Please go ahead, sir. Thank you, operator, and thank you everyone for joining us for Modiv Industrial's First Quarter 2024 Earnings Call. We issued our earnings release before market open this morning, and it's available on our website at modiv.com. I'm here today with Aaron Halfacre, Chief Executive Officer, and Ray Pacini, Chief Financial Officer. On today's call, management will provide prepared remarks, and then 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, potential strategic partner discussions, are also forward-looking statements. Our actual financial condition and results of 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-K and 10-Q. With that said, I would like to turn the call over to Aaron Halfacre. Aaron? Thanks, John. Hello, everyone. Hope you're doing well. First quarter, right around the corner from fourth quarter results. You know, in the tradition I've done the last couple of quarters, I've put it all out there in the earnings release for the most part. So instead of me jabbing away, first, let's go to Ray, and then I'll catch up at the end. Ray? Thank you, Aaron. I'll begin with an overview of our first quarter operating results. Rental income for the first quarter was $11.9 million, compared with $10.3 million in the prior year period. This 15.4% increase reflects the impact of 12 industrial manufacturing property acquisitions during 2023, partially offset by 14 noncore property dispositions in August 2023 and 2 additional noncore dispositions during the first two months of 2024. First quarter adjusted funds from operations, or AFFO, was $3.3 million, up 6.6% when compared with three point one million in the year ago quarter. The increase in AFFO primarily reflects the increase in rental income and a decrease in property expenses, which were partially offset by increases in straight line rents and interest expense. On a per share basis, AFFO was $0.29 per diluted share for this quarter, which reflects an increase of 1 million shares in the weighted average number of fully diluted common shares outstanding, compared to $0.30 per diluted share in the year ago quarter. The increase in fully diluted shares is attributable to performance shares earned by management during 2023 and shares issued during April 2023 in connection with a property acquisition through an upfront transaction. Property expenses decreased $723,000 compared with the year ago quarter, primarily reflecting the disposition of properties with modified gross leases and double net leases in August 2023. Excluding the impact of swap valuations, cash interest expense increased by approximately $1.3 million, reflecting greater borrowings outstanding during 2024, given that during the year ago quarter, we only had an average of $157 million outstanding on our credit facility. While G&A increased by $91,000 compared to the year ago quarter, the increase was entirely due to non-recurring costs for our transfer agent and legal fees related to the distribution of GIPR's common stock to our stockholders in January. We expect general and administrative expenses to be lower in future quarters, since the first quarter of each year includes higher costs for audit and tax professionals, along with higher Social Security taxes for employees who reach the Social Security maximum tax during the first quarter. Now, turning to our portfolio. Following the January and February dispositions of two non-core assets, our 42-property portfolio has an attractive weighted average lease term of 13.9 years, and approximately 34% of our tenants or their parent companies have an investment-grade credit rating from a recognized credit rating agency of BBB- or better. Annualized base rent for our 42 properties totals $39.9 million as of March 31, 2024, with 38 industrial properties representing 75% of ABR, three office properties representing 14% of ABR, and one retail property representing 11% of ABR. With respect to our balance sheet and liquidity, as of March 31, 2024, total cash and cash equivalents was $18.4 million, and we had $281 million of debt outstanding. Our debt consists of $31 million of mortgages on two properties and a $250 million term loan outstanding on our $400 million credit facility, and we do not have any debt maturities until January of 2027. Based on interest rate swap agreements that we entered into during 2022, 100% of our indebtedness as of March 31st, 2024, held a fixed interest rate with a weighted average interest rate of 4.452%, based on our leverage ratio of 48% at quarter end. We're exploring various alternatives to extend or restructure the December 31st, 2024, cancellation options on our existing swaps. As previously announced, our board of directors declared a cash dividend for common share of approximately $0.095 for the months of April, May, and June 2024, representing an annualized dividend rate of $1.15 per share of common stock. This represents a yield of 7.72% based on the $14.90 closing price of our common stock as of May 1st, 2024. I'll now turn the call back over to Aaron. Thanks, Ray. You know, I'd say pretty straightforward quarter. You know, I think if we look at a lot of REITs coming out, very similar theme. A lot of volatility. Doesn't make sense to be actively acquiring too much. Those who have distressed assets seem to be disposing of them. For us, it was, you know, it was mainly a quarter of patience. Sort of like a duck on the surface of the water, it may look calm, but, you know, furiously sort of kicking the legs. The bulk of that time being spent on, you know, the aforementioned strategic partner conversations. These take a lot of time, a lot of effort, a lot of thinking, but primarily a lot of patience. I think we feel constructive on the company. It's probably the best we've ever been in a position. We feel like we have no gun to our head. We don't have to do anything. We'd love the capital markets to open back up, but, you know, everyone on this call would love the same. It's been a long trough. You know, our entire public existence has been, you know, eating, you know, nuts and berries and never having a steak. So, you know, we're keeping the faith and doing quite fine. You know, it's a crazy time now for people to make decisions. You know, was it three weeks ago? We had 300 missiles coming over, you know, into the Middle East. We've got campus riots. We've got, well, I think it was December, at the end of December, you know, the market was pricing six cuts in. We've had a lot of volatility, and I think the stability that we've shown is worth something. I think, you know, we're. I think we're still massively undervalued. That's why I'm, you know, I have a big, big personal position. I'm very comfortable with that, and about closing that gap. The NAV that we came out with, look, you know, some people may have disdain for appraisals, but, you know, they're, they're a legitimate part of the real estate space. We chose two very high-profile, legitimate appraisers to go out and appraise our portfolio of assets as well as our fixed rate mortgages, and we used that information to come up with an NAV. I think if you look at the history of our NAV, you can find, you know, along a lot of them in our S-11 that we did two years ago, but, you know, obviously, we came out with an NAV last year. I think directionally, they show the right trend, right? Unlike, say, BREIT or SREIT out there in the non-traded space, you know, our valuations have gone down from last year, so that passes the smell test to my perspective, because we have had wider cap rates and higher rates, so you should see that in your appraisals. But I think it just clearly shows that, you know, our lack of float, the fact that the vast majority of our legacy investors do not even pay attention to the share price, do not even remotely consider trading it. If you look at a percentage of our shares outstanding, our, you know, is what trades, ours is like a tenth of what a normal REIT is. So we have very thin volume, and we understand that we have to address that. We've had many conversations with people in the institutional space who really like what we're doing, like our theme, but there's no way right now for them to find a way to get in. And so we just have to be patient. You know, we don't have our ATM open right now. We're not looking at that. We did try it out, you know, in prior quarter just to try to grease the skids. But we're just being patient, operating with what we have, you know, minding our P's and Q's, saving every penny that we can to get something done, and we're optimistic that we can get something done. We just don't know when it will happen. You know, this is this environment, again, to say this, like, for the fifth time, requires patience. But that said, optimism is high, focus is strong, and, you know, ready for some Q&A. Operator? Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question, please press star and one on your telephone keypad. We will wait for a moment while we poll for questions. Our first question is from the line of Robert Stevenson with Janney Montgomery Scott. Please go ahead. Good morning, guys. Aaron, where are you on the Kalera asset in St. Paul? Is that looking like a sale or a release at this point? It's a great question. I think we've been actively exploring both of those. And candidly, the reason why I don't have enough progress on that yet is we still haven't got it fully rejected from Kalera. We've been in contact with them. We're waiting for them. We presume that they will fully reject it, but they haven't yet, and until such time that they do, it kind of hog-ties us on the margin. That said, we've been proactive speaking to brokers in that market in developing strategies. We've spoken to other growers as well who know the property and express interest. A little, an interesting fact is, you know, US Foods has a significant presence there, and in the original context, they were going to be providing microgreens to US Foods. And so that has spurred a lot of what seems to be some interest. That said, you know, it's a that's a very unique space and in terms of vertical growers. The building itself is a great box. I mean, they over-improved it. I think upwards of $15 million of capital improvements they put into this property. There's also equipment that we had purchased from them originally that's in there. So we're in addition to looking at sale/lease as, as a vertical grower, we're also contemplating the concept of sale/lease as an empty box, and then that part would require us to sell off the equipment. So we're actively exploring all those things. We're a bit of a holding pattern, we're waiting for them to reject, and then after that, we'll probably be able to get a little bit more momentum. Are they currently paying you? No. So they haven't gotten out, and they haven't paid? They're not in it. They're not in it, so they're not occupying it Okay. It's just stuck up in the bankruptcy proceedings. Okay. And then, I believe the window just opened for the tenant purchase option on the State of California asset in Rancho Cordova. What's the likely play there at this point? Yeah, so, Whether or not they're gonna take it. Yeah, we reached out to them about last week. They said they're having they have a meeting scheduled to discuss it. So we probably won't hear back if they're gonna start their option process for, you know, a little bit more time, call it, you know, this quarter, second quarter, probably. Our view is, so, a couple of things that on our calculus, which may or may not be their calculus, candidly, but from ours, when they originally did it, you know, they, you know, California had a big budget surplus. That's not the case now. The purchase price isn't gonna move the needle in terms of, you know, their budget, but we think about those things in terms of there's a political element in terms of, you know, when do they do this? Our view is, you know, when we talked to them, I guess it was probably late last year, and they indicated that they were likely to start the process in May. We called them again, and he said it's on the docket for the discussion. How it has to go. They, you know, they have to go through their real estate department, which has very finite resources in terms of people who can do acquisitions and things like that. It goes to their acquisitions department, and then they come up with evaluation mechanism, which we have one embedded, and basically there's a price in the lease, that if it's plus or minus 10% of that, they can just move forward. If it's outside of that price range, then they have to make, you know, we have a back-and-forth process between us if we want to agree to this different price. I don't see any issues with that mechanism. From there, it then goes to the various state departments to get approval, and then once it's approved, it's put on the budget, and then the budget would not get approved until next year. So they've clearly told us the process would take at least 12-14 months whenever they did initiate it. Our view is if they tell us they're gonna initiate it, we'll be patient. If they say that they're not sure they're gonna initiate it, 'cause they have a couple of year window to do it, then we're probably just gonna take it to market. You know, because it does have, you know, it's a triple A rated credit, or at least a double A plus rated credit, and, you know, it's got term and, and so no sense in holding it, particularly if we get rid of the Costco property, 'cause then we're, you know, then we're down to the last bits. But so I guess we'll. I assume we'll have a, a better update for the next, on second quarter earnings. Okay, and then last one for me. How significant are the acquisition opportunities at, you know, similar rates to the Tampa acquisition if you had access to more decently priced capital at this point? I mean, is it a lull like we're seeing in other asset classes, or is there a lot of opportunity, and it's just a matter of the capital for you guys? So I think there is a lull. There's less being shown than, you know, there was a year ago. But there is. I saw a great, it was a great opportunity, probably gonna be an 8-cap, but it was $100 million. It was a multi-site portfolio, not anything that we're talking about, just a straight-up brand new sale-leaseback. So, you know, you could definitely put money to work. I think, you know, the logic for us when you think about industrial manufacturing sale-leaseback, which is really what you're seeing, you're not seeing hardly any existing leased properties being put on the market right now. Occasionally, but not much. And they're more like, you know, HVAC guys and things like that, which to me, it's not necessarily that strategic. But on the strategic sale-leasebacks, you know, the genesis to decide that you want to move this off balance sheet, and take money is a lengthy one, right? If it was, you know, assuming that we haven't had much in the way of private equity transactions that take out the small middle-market companies in the last 18 months because it doesn't pencil for them. They're not a catalyst because typically, when a PE shop gets hit, that's one of the first things they'll do. And if you have an owner-operator who decides they want to free it up, you know, it's a lengthy process to say, "Hey, wait a minute, this is my, this is my goose that lays the golden egg. Why would I, why would I sell this, right?" And it's a concept, believe it or not, that's pretty foreign for some people, even in the day and age where we've had sale-leasebacks for generations. So that journey probably takes upwards of, you know, at least 12 months, probably 24 months for them to make the decision. And so when we were acquiring assets last year, those were decisions made in 2021 or 2022, and, you know, the environment was different. And so they had kind of already... the momentum was going and was committed. When you have deals coming out now, you know, I think it's suggestive of they have a real need for the capital. In the case of the Photonics one we did, they are doing an actual international merger, and so they found this as a better source of capital than trying to get bank lending, so they could get scale, and so that's why it worked, right? If it's somewhere where someone's wanting to do this and they just want to cash it out, and they're trying to, you know, do a dividend out or do something like that, then those are red flags because to us in this environment. So we expect a lull in the volume, but that said, you know, and now, are they all eights? No, but north of 7.5, I think you could I, you know, I could, I could, you know, I could replicate the size of the company, probably, if I had the capital. Okay, that's helpful. Appreciate the time this morning, guys. Thank you. Our next question is from the line of Bryan Maher with B. Riley Securities. Please go ahead. Thanks. My first question was just answered in kind of how deep the acquisition pipeline kind of could be. But, you know, when we look at your, your release this morning and you talk about, you know, the three ships scenario, can you assign any probability as to how you think it plays out? I mean, I know you discussed it, you know, kind of the yin and the yang of it, but where is your head thinking that this ends up? Well, attorneys won't let me give you any probabilities, so I won't. You know, I think the four scenarios that are laid out are kind of. Look, I don't have any, neither do I or do these other two participants have any forced deadlines. So I think that's the right environment to be in, is that we're all on our own regards, capable of weathering the storm, and so there's no need to do something that is detrimental to one party and beneficial to the other. I think if that were the case, then that, you know, it would be far easier to do a deal. So I'd say to start off with that. So I think the dialogues with these parties has been, you know, didn't just start in, you know, the last few months. We know these portfolios quite well. We have had on and off dialogues with these portfolios since we've been public. I think the dialogue that we've had in the last, call it four months or so, three months or so, have been really specifically about, "Okay, yeah, let's, let's roll up our sleeves." I can tell you that, you know, the parties have shared information about their portfolios. We have a working model that, you know, allows us to see the impact to the, you know, the combined enterprise. We have actively spoken about, you know, cap rates and share prices and governance mechanics. So, you know, I can tell you that there has been some legal dollars spent. So I would say this isn't, you know, a wet finger in the wind. But, you know, if you can tell me the probability of geopolitical risk and economic risk and the election cycle, then I could probably dial it in better for you. But it's just a really. It's, you know, I literally had a CEO of another REIT text me yesterday, and he goes: "This must be what quicksand feels like." Because it's just been, you know, it's been a unique market. That said, we're all very constructive. I think the portfolios are very complementary. There's one portfolio is, you know, a little bit lumpier, but it's got some real great sort of center of excellence assets in it. The other portfolio is smaller in size, but similar to us, has more diversification. I think from an industry component, they like, they make sense. I think from, you know, from a, they're both candidly, you know, they're both shorter WALTs, their existing portfolios, but they have good leases. So, you know, look, we're gonna keep working at this. And, you know, candidly, you know, speaking to one of the attorneys, you know, this probably, this quarter, this what we said here is about all we're gonna be able to say until next quarter, and in fact, we're not actually gonna go to NAREIT. Just because we're in the throes of discussions, and we don't wanna be openly talking about it much. But again, I can't give you a probability just because the market is just, I mean, in the last 60 days, our share price has been north of 16, in the 14s, in the 15s. You know, it's a fucking yo-yo. So we'll keep at it, and hopefully we'll come up with something. All right, that, that's helpful. But, you know, buried in that commentary, I don't think I heard anything regarding kind of the size of these portfolios. I mean, can you give us some aspect? Is it 50? Is it 100? Is it 500? I mean, what zip code are we talking about the size of these two entities? That's a very great question. Can't give you an answer. All right. Thanks. Appreciate it, Aaron. Thank you. Our next question is from the line of Gaurav Mehta with Alliance Global Partners. Please go ahead. Yeah, thank you. Good morning. I wanted to follow up on the partnership discussion. You know, as you think about these, you know, looking at different partnerships, do you anticipate the quality of the assets in the partnership to be comparable to what you would have in your wholly owned portfolio? I'd say that, I would say that the quality is very comparable. You know, if you think about manufacturing, you're, you know, sometimes you have rated credits, sometimes you don't. I'd say I think, so I wouldn't, I can't really discern one being, you know, lower quality. Well, if there was, I wouldn't be talking to them, candidly. I'd say they're all comparable quality. You know, some might be stronger tenants, but with shorter leases, some might be stronger tenants with, you know, that are lumpier, bigger assets. Some might be, you know, perfectly fine tenants, but, you know, more diversification. I would say that the best thing that I see from it, if it were to come about in either one direction or the three-way direction, is that they're very complementary. I think there's to me, I could sleep well at night, on any combination. I think, you know, I think they think the same. You know, I think the fact that we're having this conversation is really related to the fact that people are, besides the political rhetoric, people understand that manufacturing is a viable asset class. I don't think we... You know, no one ever until heretofore really had done it in a purely dedicated space. There are certainly people who have been buyers of it for a long time, but have not gone pure play, at least not as of yet. And so I think they see, you know, motive as a natural end state because these portfolios would eventually be selling them anyway. You know, it's just a matter of time. And so I think there's a complementary fit there. And I think, you know, it is conducive to getting to that more scale and index inclusion and institutional ownership, which would create more flow, which will allow more people to actually participate in this strategy, and presumably with less equity volatility as a result. And so I think there's a lot of different benefits. But I think the portfolios are very complementary. They're it seems very strategic, and I think it would open the door to others. I mean, there was a fourth battleship that we've you know talked to at length, and just given where they're at in their cap stack, they just couldn't be a participant at this time. And so, you know, that's a someday maybe. You know, if we're successful here, you know, God willing, and we've gotten more size, then, you know, I wouldn't be surprised if we wouldn't have a conversation with that other portfolio that fourth battleship down the road. So there is opportunities out there. Uniquely enough, about manufacturing, most of the manufacturing portfolios, with the exception of what STORE owns and what, you know, what O now owns from what it acquired from whatever they were. I can't even think of the name. Then Spirit, excuse me. Besides those, most of the portfolios are in private hands, and so having a public currency longer term, I think is something to be looked at strategically. Okay. And you know, you talk about, you know, exchange of your equity possible for this portfolio. So are we talking like common stock or like OP units? You know, I look at those ubiquitously, candidly. One provides tax protection, but you know, these are institutional players, so generally speaking, and I would, you know, I'm not ruling it out, but generally speaking, they're less tax sensitive by the nature of their money. But to be clear, we're talking about sort of that common equity element. Okay. All right. Thank you. That's all I had. Thanks so much. Thank you. Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and one. As there are no further questions, I would now hand the conference over to Aaron Halfacre for his closing comments. Aaron? Thanks, operator. Thanks, everyone. You know, trying to be candid as best we can, trying to get you guys, you know, real dialed in on what we're doing. We think that, you know, I think a lot of environments or operators are uncomfortable with transparency. If you don't like what you hear, you're gonna make a decision either way. If you, you know, I think we're delivering results, we're being transparent, so you can try the best you can, understand where we're headed, what we're thinking. You know, I'm very confident that, you know, we have the right team to get things done. I have no ability to predict the markets, and so, like you, we're rolling with the punches. But, you know, I think we're onto something in this company and look forward to talking to you again at the next earnings release. Thanks, everyone. Thank you. The conference of Modiv Industrial has now concluded. Thank you for your participation. You may now disconnect your lines.