Modiv Inc.

Thank you, Megan. Hello, everybody, and thank you for joining our first quarter earnings call. Joining me today is Ray Piccini, our CFO, who will cover our financial results in detail following my opening remarks. Then I will close with a few more thoughts before we open the line for Q&A. First, some highlights from the quarter. As you saw, we grew our first quarter AFFO by 33% to $3 million. We grew total revenues by 7% to $9.7 million. We are pleased with these results and the accretive acquisitions that drove them. Being cognizant of the fact that past results do not always indicate future performance and also understanding that this quarter is really the baseline for investors looking ahead, I balanced my positivity with the belief that the combination of our experienced team and the small size of our company will enable Motive to produce similarly strong results in the future as we continue to execute methodically quarter after quarter. As a management team, we have decades of real estate experience and have managed real estate through multiple economic cycles. Despite the recent extreme volatility in the capital markets, our team has been disciplined and focused on improving our company every day. We've been heads down, executing on our long-term strategic priorities, including diversifying our assets away from non-core office properties, increasing our vault, further refining our processes, and in generating long-term earnings power for our shareholders. At our core, we are a no-frills team that balances intellectual curiosity, a belief in the shareholder, a strong worth ethic, and years of hard earned experience with our character traits of discipline, prudence, and patience. The result is a team that is punching well above its proverbial weight class and achieving results typically only seen in much larger enterprises. Case in point, in only the first five months of this year, our team of only 13 individuals has acquired $133 million of properties at favorable cap rates, sold $40 million of properties as part of our strategic plan, structured a new $250 million credit facility, and listed on the New York Stock Exchange. Additionally, we are pleased to include with this quarter's results our first earnings supplement, as well as our inaugural AFFO guidance, both examples of added disclosure that are not normally associated with a small-cap REIT that has been publicly listed for less than 100 days. We are very optimistic about Motive's future, not because we are optimists, but because we know how to put in the work. Before I delve into our 2022 AFFO guidance, I want to say a few words on the current market environment. The instability and uncertainty we are witnessing in the public REIT market has also translated into the real estate transaction markets. We are witnessing delays or deal cancellations, both on acquisitions and dispositions, as market participants wrestle with a rising rate environment and a cloudy economic outlook. We've already seen cap rates gap 25 to 50 basis points on several deals, while other deals are simply getting pulled from the market without any pricing whatsoever. We don't believe that the market or cap rates have found solid ground yet, but we certainly do expect that cap rates could widen should the turmoil progress. As an adjunct, we believe Motive's share price is suffering from some obvious drivers to include, one, a broad sell-off of the net lease REIT sector over the past three months, two, the fact that our stock is extremely thinly traded, three, our legacy retail investors selling via market orders, though that is starting to decline on the margin, and four, a general lack of awareness from the institutional investor community due to natural market-driven bandwidth distractions. In total, these drivers are weighing on our share price and have created a substantial discount to NAV. Based on our recent $28 appraised NAV per share, our current trading price levels imply a discount of greater than 40%. We believe institutional investors are attracted to our name, but given that we are thinly traded, it is extremely hard to build a position. As an anecdote, Just the other day, I saw that a tiny 250 share transaction moved our stock by more than 2%. We are focused on changing this dynamic as the summer rolls along. On the bright side, nearly 60% of our legacy investors have already moved their holdings into street name, which will facilitate liquidity. And we are also responding to the reverse increase of institutional investors seeking to build a position. However, until the broader market turmoil subsides, we do not necessarily expect any immediate meaningful change in trading behavior. At Motive, we believe that disciplined patience is the right strategy at this moment in the market. We strongly believe our current share price offers a compelling investment opportunity. We also are not feeling pressured to meet any particular acquisition goal in terms of our real estate acquisition. We remain selective in choosing the right time and the right properties. This is true for both our acquisitions and our dispositions, and we are being prudent in finding the most accretive options on both sides. We also recognize that action is required at other times in a volatile market. To this end, we responded to the rising rate environment by recently instituting a swap position on our $150 million term loan that resulted in a fixed rate of less than 3.9% at current debt levels and now positions our entire debt stack at 93% fixed rate. Ray will provide more detail on this in his remarks. Lastly, a moment on our 2022 AFFL guidance. It was not without hesitation that we released guidance so early after going public. We do so with the belief that disclosure is instrumental in helping reduce our implied share price discount and helping investors make sense of our recent financial results. For the full year 2022, we are providing an AFFO range per fully diluted share of $1.26 to $1.36. To achieve the higher end of the range will require us to achieve at least another $50 million of acquisitions. The lower end range would result from a successful sale of more of our non-core assets as part of our long-term strategic repositioning plan of reducing office exposure and seeking industrial and select retail properties with annual rental growth. As mentioned previously, we remain patient, prudent, and disciplined with our goals and will not seek to chase any unbalanced results. Overall, I'm proud of how our company has navigated this turbulent market environment this year. From avoiding a dilutive IPO in February, to allowing all 7.6 million of our shares to be freely traded without lockups, and to completing significant transformational acquisitions to our portfolio that further shore up our balance sheet. All these factors solidify our ability to offer long-term accretive growth to our shareholders. I will now turn the call over to Ray Pacini for his remarks.

Thank you, Aaron. Hello, everyone. I will now discuss our first quarter 2022 operating results, provide an update on our portfolio, and cover our balance sheet, recent capital markets, transactions, and liquidity. As mentioned, first quarter AFFO increased 33% to $3 million, or $0.29 per diluted share, from AFFO of $2.2 million, or $0.25 per diluted share, in the first quarter of 2021. The primary drivers of the increase are our recent accretive acquisitions and the rent bumps of the portfolio. Given the relatively low denominator due to our current size, it is reasonable to see meaningful increases in AFFO as we continue to acquire assets. Total first quarter revenue increased 7% to $9.6 million from $9 million in the year-ago quarter, reflecting growth in our portfolio. The revenue increase largely reflects the rental income contribution from the four property acquisitions made during the second half of 2021 and January of this year, partially offset by the decrease in rental income from five dispositions during 2021 and four dispositions in February 2022 associated with our long-term strategic reduction in office. On the expense side, G&A costs were $2.1 million in the first quarter, down from $2.7 million in the first quarter of last year. This reduction is intentional as we are mindful of G&A and are focused on maximizing the value of every dollar of expense. The year-over-year decreases primarily came from reductions in marketing, legal and consulting fees, and technology services, resulting from our exit from the crowdfunding business and our continued process improvements now that we are a listed company. Our property expenses were 2.8 million in the first quarter, an increase from 1.8 million in the prior year period. The increase in property expense reflects higher property and other taxes during the current year quarter as our portfolio grew, although most of these expenses are offset by tenant reimbursements included in revenue. The increase in property expenses also includes a one-time write-off of approximately half a million dollars related to the canceled acquisition of 10 properties leased to Walgreens given changes in market conditions and the failure to obtain the mortgage servicer's approval prior to the contract termination date of February 18th, 2022. Our first quarter results also included a one-time non-cash goodwill impairment charge of $17.3 million related to our legacy crowdfunding business, which we acquired in 2019 from our former sponsor. We closed this crowdfunding business as a result of our listing event in February. The impairment charge, taken in accordance with GAAP, resulted from the current market value of the company's common stock being materially below both the historical net asset value and the book value of our equity. Now turning to our portfolio. Before discussing the first quarter, I'd like to take a moment to provide some history on our strategy. During 2020 and early 2021, we were focused on repositioning our portfolio and monitoring the potential impacts of the COVID-19 pandemic. In mid-2021, with the portfolio stable, we began to ramp up our acquisition activity. We have also repositioned our portfolio to focus on properties primarily in the industrial sector and also in select retail assets, while continuing to execute upon our long-term strategic plan to reduce our exposure to office properties. In January of this year, we invested $77 million in two properties at an average initial cap rate of 5.8% and a weighted average cap rate of 7.5%. The first acquisition was an Upreet transaction for one of the three largest Kia auto dealerships in the US, located in the 405 freeway in Carson, California, on the way to LA. This transaction resulted in 32.8 million of equity being issued at $25 per share. The second acquisition we completed in January was an industrial property in Minnesota, leased to Calera Inc, a company that performs indoor vertical farming at an initial cap rate of 7% and a weighted average cap rate of 8.9%. Subsequent to quarter end on April 19th, we acquired an eight property portfolio leased to Lindsay Precast for a total purchase price of 56.1 million at an initial cap rate of 6.7% and a weighted average cap rate of 8.5%. Lindsay is an industry leading precast concrete manufacturer and steel fabricator. and the portfolio has properties in Colorado, Ohio, Florida, and North and South Carolina. Including this transaction, our year-to-date acquisition activity totals $133 million at a blended weighted average cap rate of greater than 7.9%. We have a strong pipeline of potential acquisitions under review, and we will continue to patiently pursue accretive opportunities subject to both market conditions and balance sheet disciplines, as the year progresses. Now I'll provide some color on our portfolio management activities, which are a key component of our ability to generate long-term returns for our shareholders. During February, we sold three office properties and one industrial property for $40 million and net proceeds of $16.9 million after repayment of the related mortgages, commissions, and closing costs. These proceeds were redeployed into the Lindsay acquisition via a 1031 exchange. Taking into account these recent acquisitions and dispositions, as of today's date, our portfolio consists of 44 properties located in 16 states. The portfolio is comprised of 20 industrial properties representing approximately 46% of the portfolio based on an annual base rent. 13 retail properties representing approximately 19% of the portfolio, and 11 office properties representing approximately 35% of the portfolio. Six months ago, our non-core office exposure was 50%, and further reductions are planned over future quarters. Now turning to our balance sheet and capital markets activities. On January 18, 2022, we obtained a $250 million credit facility, We use this facility to refinance $108 million of our property mortgages, refinance a $36 million mortgage on the Kia Auto dealership, which we acquired on the same day, and refinance the $8 million balance of our previous credit facility. An additional $22 million of mortgages were repaid in connection with our February asset sales. After taking into account the new credit facility, the two acquisitions in January and four dispositions in February this year, The company's pro forma leverage as of March 31, 2022, was 34%. We define leverage as debt as a percentage of the aggregate fair value of the company's real estate properties, plus the company's cash and cash equivalents, which conforms with the definition in the key bank credit agreement. Over the next 12 months, we are targeting a leverage ratio of approximately 40%, although we may exceed that if we identify attractive acquisition opportunities in advance of completing dispositions or raising capital. Once we achieve greater scale of roughly $1 billion in AUM, we expect to reduce our leverage ratio to be increasingly more in line with our larger peers. As of March 31st, 2022, we had total cash and cash equivalents of 25.3 million and 166 million of outstanding indebtedness, consisting of 45 million in mortgages and 121 million outstanding under our credit facility. Following the Lindsay acquisition, where we drew 44 million under the credit facility, borrowing capacity on the credit facility today is $36 million. In May, we also executed a five-year interest rate swap on our $150 million term loan, resulting in a fixed interest rate of 3.858% when our leverage ratio is less than or equal to 40%. Based on the current balance sheet, approximately 93% of the company's indebtedness now holds a fixed interest rate. As previously announced, our board of directors declared multi-month cash dividends for our common shares of approximately 9.6 cents for the months of April, May, and June, representing an annualized dividend rate of $1.15 per share of common stock. Based on our recent trading price, this dividend equates to greater than a 6.5% annual dividend yield. As Erin mentioned, we have introduced 2022 annual AFFO guidance in the range of $1.26 to $1.36 for diluted share. In future quarters, as our company becomes more broadly followed by the institutional investment community, we will explore expanding both our guidance and disclosures to even further align ourselves with industry best practice. I will now turn the call back over to Aaron. Thank you, Ray.

At Motive, we continue to be relentlessly committed to pursuing our long-term strategic goals. Although the market and the economy has thrown some curveballs this year, we have proven ourselves to be flexible, innovative, and laser-focused on our priorities. Our share price has not been immune to the recent downturn in the market resulting from inflationary fears and rising rates. And we understand that this can be a stressful time for investors. However, we would point out that our underlying real estate assets are solid. We undertake significant due diligence and look for resilient businesses and locations when choosing our acquisitions. Our tenants are in good health and have emerged from the pandemic stronger than ever. And our monthly dividend is well covered, providing a steady stream of cash and returns to our investors. Thank you all for participating today, and I will now turn the call over to the operator for questions.