MDV-PA — Modiv Inc.

Summary of Modiv Industrial, Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Rental Income: $11 million for Q4 2025, down from $11.7 million in Q4 2024, primarily due to lease expirations with Costco and Solar Turbines.
• Adjusted Funds from Operations (AFFO): $4 million, a slight decrease from $4.1 million year-over-year. AFFO per share fell from $0.37 to $0.32, attributed to an increase in diluted shares outstanding.
• Interest Expense: Increased by $1.1 million compared to Q4 2024, mainly due to amortization of off-market interest rate swaps.
• Balance Sheet: Total cash and cash equivalents stood at $14.4 million, with $30 million available on the revolver. Consolidated debt amounted to $262.1 million, with a fixed interest rate of 4.15%.

2. Strategic Updates and Business Highlights

• Asset Recycling: Plans to sell non-core assets, particularly office properties, are underway. The company is close to finalizing a parcel split for a property in San Diego to facilitate its sale.
• Market Positioning: Modiv Industrial aims to transition to a 100% pure-play manufacturing industrial portfolio within the next 24 months, contingent on market conditions.
• Acquisition Strategy: The company is focusing on identifying high-quality manufacturing assets while being cautious about the current market volatility.

3. Forward Guidance and Outlook

• 2026 Expectations: The company anticipates increased asset recycling activity, although the current market environment presents challenges for both buyers and sellers due to fluctuating interest rates.
• Long-term Vision: Management remains optimistic about achieving a more solid portfolio and believes that the timeline for reaching their strategic goals could be shortened if market conditions stabilize.

4. Bad News, Challenges, or Points of Concern

• Declining Metrics: The decrease in rental income and AFFO per share indicates potential challenges in maintaining revenue streams.
• Market Volatility: Uncertainty in the acquisition environment due to fluctuating interest rates and geopolitical tensions could hinder growth and asset sales.
• Lease Expirations: The expiration of significant leases has negatively impacted rental income, raising concerns about tenant retention and future cash flows.

5. Notable Q&A Insights

• Acquisition Offers: Management received multiple offers but chose not to pursue one due to a lack of a secure path forward. They emphasized the importance of protecting investor interests.
• Strategic Alternatives Process: There was discussion about whether to consider a strategic alternatives process sooner than the previously indicated 24-month timeline, but management expressed a preference to polish the portfolio first to maximize value.
• Interest in Modiv: Increased interest from potential acquirers was attributed to the perceived value of the portfolio and the company's ability to clean up and enhance its asset quality.

Overall, while Modiv Industrial faces challenges in the current economic landscape, management remains focused on strategic initiatives to enhance portfolio quality and navigate market conditions effectively.