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For those well capitalized REITs that can routinely access the common equity markets and acquire income producing assets well below their cost of capital, then no qualms. However, for those REITs less endowed, why not pick your spots? We’ve all known those REITs that just have to scratch the itch to buy real estate by issuing costly equity, relying on preferred issuance, pulling off their revolver, or, worse, selling perfectly good existing assets (too often at worse prices than they paid) to buy the latest quarterly du jour.

In this high-interest rate, super volatile economic and geo-political environment, which hasn’t been particularly favorable to hard asset strategies, it seems to me that Warren Buffett’s "no called strikes" philosophy is the prudent path. Namely, look at all the opportunities that come across the plate but don’t feel compelled to mindlessly swing at every pitch. For us, we have done just that. We’ve evaluated plenty of deals but have not seen deals that make us want to overextend ourselves. Even though our potential acquisition pipeline is robust, we must be extra disciplined given our size, and through discipline, we know we can achieve even greater growth over time.

All that said, we have transacted very selectively. One small $2 million asset sold last week, and one small $6 million asset being acquired this month. Our sale of our Endicott, New York, asset back to the tenant was unplanned and recent. They approached us about the possibility, we felt it made sense for their business and our balance sheet, and we cleanly processed the sales transaction. The acquisition via the UPREIT transaction of the Jacksonville, FL MSA industrial asset will close no later than March 14, 2025. We negotiated a longer closing timeframe so that we could evaluate the potential of the adjacent vacant parcel that is included in the transaction, and, with this extra time, we have been able to identify a compelling future development opportunity that can lead to an even greater yield on this very soon-to-close UPREIT transaction. Prudent and disciplined activity – nothing more.

How should we think about 2025?

We have two primary active ways to grow AFFO – acquiring positive income producing assets and continuously improving expense efficiency. Knowing full well that a near-term patient, disciplined acquisition strategy was in place, we have spent a considerable amount of time over the recent months to identify even more ways to be even more efficient with every dollar of expenditure. The beauty of being a small and disciplined REIT is that we fully understand that every dollar really does matter, and we have the bandwidth to focus on every single dollar. Our internal efficiency efforts have positioned us to be a small, special forces caliber team that tightly communicates on every facet of process and expenditure. This process has resulted in our achieving well over $1.4 million in cash savings for 2025 to include interest expense savings, a material reduction in unused revolver fees, some service contract negotiations and a reduction in employee G&A. For example, we are now saving $300k annually by rightsizing our revolver to a level that is in line with our balance sheet discipline. Also, for the next five years, I personally will not receive any salary or bonus. My interests are now completely aligned with investors – growing the dividend, growing the share price, or, ideally, both.

Some of you might not have been following us in 2022 and don’t know this, but we provided guidance that year to be like the bigger REITs. We beat that guidance. Guess what? No one really cared. Bigger market forces were at play, and we had too small of a following. Our following has grown, including analyst coverage and institutional ownership, but I am still not a huge fan of guidance for a company like ours given the reason that we could literally be a materially different company overnight by doing one transformational deal (and, as you know, we are focused on trying to do transformational deals). That said, a few years have passed, our balance sheet has evolved, and I have noticed that analyst estimates have all started to drift. For example, based on the three current analyst estimates for Modiv’s 2025 AFFO, their consensus is $1.15 per fully diluted share. I don’t know about you, but that number looks anemic. So, to provide a bit of course adjustment in order that the collective community has a proper base line, I am here to let you know that our internal AFFO modeling estimates us earning $1.37 per fully diluted share (including the shares to be issued in the forthcoming UPREIT transaction) by assuming we do nothing but stare at our navel (e.g. zero net acquisition activity, no transformative deals, no additional efficiencies, etc.). You can take it with a grain of salt if you so choose, but if you want to bet on us doing nothing at all during the year, then you get a 2025 AFFO estimate that is 19% higher than the street consensus.

Looking forward to sharing more color on our earnings call.

Grit, grind, get it done!" Aaron Halfacre, CEO of Modiv Industrial

Conference Call and Webcast

A conference call and audio webcast with analysts and investors will be held on Tuesday, March 4, 2025, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time, to discuss the fourth quarter and full year 2024 operating results and answer questions.

Live conference call: 1-877-407-0789 at 11:00 a.m. Eastern Time, Tuesday, March 4, 2025

Webcast: To listen to the webcast, either live or archived, please use this link: https://viavid.webcasts.com/starthere.jsp?ei=1707091&tp_key=90a8b3a220 or visit the investor relations page of Modiv’s website at www.modiv.com.

About Modiv Industrial

Modiv Industrial, Inc. is an internally managed REIT that is focused on single-tenant net-lease industrial manufacturing real estate. The Company actively acquires critical industrial manufacturing properties with long-term leases to tenants that fuel the national economy and strengthen the nation’s supply chains. For more information, please visit: www.modiv.com.

Forward-looking Statements

Certain statements contained in this press release, other than historical facts, may be considered forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements regarding our plans, strategies and prospects, both business and financial. Such forward-looking statements are subject to various risks and uncertainties, including but not limited to those described under the section entitled "Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 4, 2025. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this press release and in the Company’s other filings with the SEC. Any forward-looking statements herein speak only as of the time when made and are based on information available to the Company as of such date and are qualified in their entirety by this cautionary statement. The Company assumes no obligation to revise or update any such statement now or in the future, unless required by law.

Notice Involving Non-GAAP Financial Measures

In addition to U.S. GAAP financial measures, this press release and the supplemental financial and operating report included in our Form 8-K dated March 4, 2025 contain and may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are provided below.

AFFO is a measure that is not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See the Reconciliation of Non-GAAP Measures later in this press release.

In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts ("Nareit") promulgated a measure known as FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding gains and losses from sales of depreciable operating property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated investments, preferred dividends and real estate impairments. Because FFO calculations adjust for such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current Nareit definition or may interpret the current Nareit definition differently than we do, making comparisons less meaningful.

Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. AFFO excludes non-routine and certain non-cash items such as stock-based compensation, amortization of deferred rent, amortization of below/above market lease intangibles, amortization of deferred financing costs, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, and write-offs of due diligence expenses for abandoned pursuits. We also believe that AFFO is a recognized measure of sustainable operating performance of the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies. Management believes that AFFO is a beneficial indicator of our ongoing portfolio performance. More specifically, AFFO isolates the financial results of our operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results. By providing FFO and AFFO, we present information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.

For all of these reasons, we believe the non-GAAP measures of FFO and AFFO, in addition to income or loss from operations, net income or loss and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. AFFO is useful in assisting management and investors in assessing our ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods. However, a material limitation associated with FFO and AFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and AFFO. Therefore, FFO and AFFO should not be viewed as a more prominent measure of performance than income or loss from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

Neither the SEC, Nareit, nor any other applicable body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, the SEC or Nareit may decide to standardize the allowable exclusions across the REIT industry, and we may have to adjust the calculation and characterization of this non-GAAP measure.

We define Net Debt as gross debt less cash and cash equivalents. We define Adjusted EBITDA as GAAP net income or loss adjusted to exclude real estate related depreciation and amortization, gains or losses from the sales of depreciable property, extraordinary items, provisions for impairment on real estate investments and goodwill, interest expense, non-cash items such as stock compensation and write-offs of transaction costs and other one-time transactions. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA is not a measure of financial performance under GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA as an alternative to net income or cash flows from operating activities determined in accordance with GAAP.

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Contacts

Inquiries:
management@modiv.com