Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Modiv Industrial Inc (MDV, Financial) reported a 17% increase in adjusted funds from operations (AFFO) for the second quarter, reaching $3.9 million compared to $3.3 million in the same period last year.
- The company successfully reduced property expenses by $834,000 and general and administrative expenses by $179,000, contributing to the increase in AFFO.
- Modiv Industrial Inc (MDV) maintains a strong portfolio with a weighted average lease term of 13.6 years, and 34% of its tenants or their parent companies have an investment-grade rating.
- The company has a fixed interest rate on 100% of its indebtedness, with a weighted average interest rate of 4.52%, providing stability in a changing interest rate environment.
- Modiv Industrial Inc (MDV) declared a cash dividend of $0.095 per common share for July, August, and September 2024, representing an annualized dividend rate of $1.15 per share, yielding 7.79%.
Negative Points
- Rental income for the second quarter decreased by 4% to $11.3 million, primarily due to a decrease in tenant reimbursements related to property sales.
- The company experienced a $25,000 increase in cash interest expense compared to the previous year, partly due to unrealized non-cash net losses on swap valuations.
- Modiv Industrial Inc (MDV) has a leverage ratio of 47%, which may pose risks in a volatile market environment.
- The company has no immediate plans to monetize its KIA asset, potentially delaying capital recycling opportunities.
- There is uncertainty regarding the timing and execution of strategic partnerships and joint ventures, which could impact future growth and revenue streams.
Q & A Highlights
Q: Can you provide more details on the joint venture (JV) and whether Modiv Industrial Inc will derive any management fees from it?
A: Aaron Halfacre, CEO, stated that they are not disclosing specific statistics about the JV at this stage. The JV is not intended as a fee generation venture; instead, Modiv will participate in the income and expenses without seeking management fees.
Q: What trends are you observing in the industrial manufacturing transaction market?
A: Aaron Halfacre, CEO, noted that the market has been choppy, with one-off deals occurring throughout the year. Attractive cap rates often come with underlying issues, such as thin credit or urgent cash needs. Modiv is selective, focusing on durable products and market segments, which narrows their acquisition universe.
Q: Can you discuss the expected timing and Modiv's role in the non-Miami-centric Battleship deal?
A: Aaron Halfacre, CEO, indicated that if the deal progresses as planned, it will likely close before the end of Q3. Modiv will manage the assets, handling property management and accounting, while the private equity sponsor will take a more passive role.
Q: How is Modiv Industrial Inc planning to handle the potential sale of the KIA asset?
A: Aaron Halfacre, CEO, mentioned that the KIA property is a strong asset with a great lease and tenant. Selling it in the current rate environment would not be advantageous. The sale would likely be tied to a 1031 exchange, possibly involving new assets or a JV, but there are no immediate plans for a sale.
Q: How does Modiv Industrial Inc view tenant credit exposure and asset pricing in the current market?
A: Aaron Halfacre, CEO, explained that while investment-grade (IG) ratings are important, they don't always apply to industrial manufacturing. Modiv focuses on durable tenants with essential products and a strong market presence. Asset pricing is currently choppy, with some properties priced attractively due to desperation, while others are overpriced based on past market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
