Modiv Inc.

Good day and welcome to the Modiv's second quarter 2022 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. On today's call, management will provide prepared remarks and then they will open up the call for your questions. To ask a question, Analyst may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the key and to withdraw your question, please press star, then 2. Participants may also ask a question by emailing ir at modif.com. Please note, this event is being recorded. I would now like to turn the conference over to Megan McGrath, Investor Relations for Motiv. Please go ahead, ma'am.

Thank you, Operator, and thank you all for joining us today to discuss Motiv's second quarter 2022 financial results. We issued our earnings release and investor supplement before market opened this morning. These documents are available in the Investor Relations section of our website at Motiv.com. I'm here today with Aaron Haffaker, Chief Executive Officer of Motiv, and Ray Puccini, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we will open up the call for your questions. Participants may also ask a question by emailing ir at motive.com. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities law. 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, 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-Q. With that, I would now like to turn the call over to Erin Haffaker, Motive's Chief Executive Officer. Erin, please go ahead.

Thank you, Megan. Hello, everyone, and thank you for joining our second quarter earnings call. Joining me today is Ray Puccini, our CFO, who will cover our financial results in detail following my opening remarks. Then I will close with a few more thoughts on the market before we open the line for Q&A. First, some highlights from the quarter. We grew our second quarter adjusted funds from operations by 18% to $3.6 million this while our total revenues grew by 14% to $10.4 million, driven by growth in our portfolio. We maintained a lean and disciplined cost structure and remained laser focused on our goal of transforming and growing our portfolio while driving attractive long-term shareholder returns. We approached the second quarter with patience and discipline. On last quarter's earnings call, we mentioned a disruption in the real estate transaction markets characterized by delays and deal cancellations as buyers and sellers adjusted to the extreme volatility in interest rates and inflation. From a deal perspective, it's been a slow summer, with both buyers and sellers pausing in the marketplace to find an equilibrium. Since we are not encumbered by specific acquisition targets or liquidity concerns requiring us to buy or sell properties, we were patient, remained committed to our investment discipline, and paced our transaction activity until we found opportunities in the latter part of the quarter. Early in the second quarter, we completed one acquisition, Lindsay Precast, for $56 million at an 8.5% weighted average cap rate, which we outlined for you on last quarter's call. We also completed the disposition of one office property during the quarter, MCOR, for $6.5 million at a 7.8% cap rate. Following the close of the quarter, when we felt the market had achieved a more balanced posture, we completed two additional acquisitions in the industrial manufacturing space and have signed an agreement for another office property disposition, our property Williams-Sonoma, which we expect to close later this month. Year-to-date, we have made great progress executing on our long-term strategy to exit non-core office properties and shift into industrial and select retail assets. The Motive team has completed $162 million in acquisitions at an 8.2% blended weighted average cap rate and has completed four office dispositions for total proceeds of $47 million, excluding the anticipated Williams-Sonoma disposition. I am proud of the progress we continue to make on the strategic repositioning of our portfolio, even during these volatile times. We continue to punch above our weight and remain heads down on execution. We remain focused on diversifying our assets, increasing our vaults, growing our portfolio, and generating long-term earnings power for our shareholders. We have made significant headway on these goals in a short amount of time, and we know that these results will, over time, resonate with the investment community and eventually be reflected in our share price. I want to take a moment to discuss our three most recent acquisitions, Lindsay Precast, Producto, and Volteer. and how they are a great representation of the type of property Motives is focused on. All three of these companies are involved in industrial manufacturing. Lindsay, as previously mentioned on our last call, is an industry-leading precast concrete manufacturer and steel fabricator. Producto, with its two locations in upstate New York, is a precision manufacturer for the medical, semiconductor, aerospace, and defense markets. And Voltaire, with locations in Ohio, South Carolina, Texas, and Utah, manufactures commercial highway products such as guardrails and barriers. When we evaluate opportunities in the industrial manufacturing space, we focus on mission-critical properties where value is being created on-site. We look for manufactured products where demand is consistent and relatively defensive in nature, such as infrastructure and components. Another key factor is that the property location is vital to the manufacturing business, and a positive economic contributor to the local community, all contributing to the sticky nature of the property and the long-term value of the real estate. We believe there is and will continue to be a trend toward reshoring of manufacturing in the U.S., especially following the supply disruptions witnessed from the global pandemic and recent armed conflicts. Additionally, we believe this subsector of industrial assets is far more resilient to speculative overbuilding, thereby metering the supply that comes online. As a result, we believe it is reasonable to expect to see continued opportunities in industrial manufacturing that are valuable and accretive. Finally, some thoughts on the markets as we continue to navigate uncertain economic times. While we do not have a crystal ball into the economy, we are more convicted than ever in our decision to continue to transform our portfolio with a focus on longer leases and sustainable long-term industries that can perform throughout economic cycles. We believe that the market will continue to seek clarity from the Fed as we make our way through the summer and into the fall. We anticipate that the overall deal volume is likely to pick back up in September, allowing cap rates and funding rates to level off as volatility recedes. We are continually evaluating a robust pipeline of small and large acquisition opportunities that we believe will create meaningful long-term value for our shareholders. In fact, though we are reaffirming our 2022 AFFO guidance for the year, We do believe we will exceed the $50 million acquisition target we announced last quarter, potentially by as much as $25 million of late fourth quarter acquisitions. In summary, in the second quarter, Motive continued to execute on our strategy during a meaningfully volatile period of time in the markets. Our patience and strong work ethic have allowed us to deliver on our long-term strategic plan while also driving adjusted funds from operation growth for our shareholders. I have the utmost confidence in our experienced management team who have successfully navigated multiple economic cycles in the past and continue to find attractive opportunities that meet our strategic goals. I will now turn the call over to Ray Pacini for his remarks.

Thank you, Aaron. And hello, everyone. I will now discuss our operating results for the second quarter and first half of 2022, provide an update on our portfolio, and cover our balance sheet and liquidity. As Erin mentioned, second quarter AFFO increased 18% to $3.6 million or $0.35 per diluted share from AFFO of $3 million or $0.34 per diluted share in the second quarter of 2021. AFFO for the first half of 2022 increased 25% to $6.6 million or $0.64 per diluted share from AFFO of $5.3 million or $0.59 per diluted share in the first half of 2021. The primary drivers of the increase are recent accretive acquisitions and the rent bumps of the portfolio. Total second quarter revenue increased 14% to 10.4 million from 9.1 million in the year-ago quarter. Total revenue for the first half of the year increased 11% to 20 million from 18.1 million for the first half of 2021. These revenue increases largely reflect the rental income contribution from the property acquisitions made during the second half of 2021 and first half of this year, partially offset by the decrease in rental income from five dispositions during 2021 and four dispositions in February 2022. On the expense side, G&A costs were $1.6 million in the second quarter, down from $1.9 million in the second quarter of last year. as the company continues to focus on maximizing efficiency in our operations and undertaking process improvements. G&A costs were 3.7 million for the first half of the year, down from 4.6 million for the first half of last year. These reductions in G&A also reflect the impact of our exit from the crowdfunding business. Property expenses were 2 million in the second quarter, an increase from 1.9 million in the prior year period, and were 4.7 million the first half of the year, up from 3.6 million for the first half of last year, reflecting higher property and other taxes due to growth in our portfolio. Property expenses for the first half of both 2022 and 2021 were 1% of average real estate assets during the respective periods. Most of these expenses are reimbursed by tenants, with at least 80% reimbursed each year. 53% of the increase in property expenses for the first six months of 2022 compared with the same period of 2021 reflects the one-time write-off of $587,000 related to the canceled acquisition of 10 properties leased to Walgreens in the first quarter, given changes in market conditions and the failure of the mortgage servicer to approve our assumption of the related CMBS loan prior to the contract termination date of February 18, 2022. Now turning to our portfolio, as Aaron stated in his remarks, we continue to focus on acquisitions primarily in the industrial manufacturing sector, while keeping an opportunistic eye on the retail sector as we continue to execute on our long-term strategic plan to reduce our office exposure. During the second quarter, we acquired an eight property portfolio leased to Lindsay Precast for a total of 56.1 million at an initial cap rate of 6.65% and a weighted average cap rate of 8.52%. These properties are located in Colorado, Ohio, Florida, and North and South Carolina. As Aaron mentioned, following the close of the quarter, we completed two industrial manufacturing acquisitions in sale and leaseback transactions with Producto Holdings and Valtier LLC, which was formerly known as Trinity Highway Products, for a total purchase price of $28.7 million and a blended weighted average cap rate of 9.55%. The Producto acquisition comprised two properties in upstate New York, and the Valtier acquisition included four properties located in South Carolina, Texas, Utah, and Ohio. The Producto acquisition has a 20-year lease term and annual lease escalations of 2%. The Valtier acquisition includes a 25-year lease term for the South Carolina and Ohio properties, with a 15-year lease term for the Texas and Utah properties and annual rent escalations of 2.25%. Including these transactions, our year-to-date acquisition activity totals $162 million at a weighted average cap rate of 8.2%. We have a strong pipeline of potential acquisitions under review, and we will continue to patiently pursue accretive opportunities that make sense for our portfolio and our shareholders. Now I'll provide some color on our portfolio management activities, which are also a key component of our ability to generate long-term returns for our shareholders. During the second quarter, we sold one office property for $6.5 million. We are also under contract to sell an additional office property, which we expect to close by the end of this month. When including the successful closure of our two pending sales, On a year-to-date basis, we will have sold five office properties and one flex property. As we execute on our plan to reduce non-core assets in our portfolio, the exit cap rate for the five office asset sales was 7.69%. Taking into account these recent acquisitions and the pending disposition, as of today's date, our portfolio consists of 48 properties located in 19 states. The portfolios comprise the 26 industrial properties, which represent approximately 51% of the portfolio based on annual base rent, 13 retail properties representing approximately 19% of the portfolio, and nine office properties representing approximately 30% of the portfolio. We expect to continue to opportunistically sell office properties for the portfolio, but will remain patient and disciplined in this process. Now turning to our balance sheet and capital markets activities. As of June 30th, 2022, we had total cash and cash equivalents of $11.7 million and $201.4 million of outstanding indebtedness consisting of $44.6 million in mortgages and $156.8 million outstanding under our credit facility, including $6.8 million on the revolver. The company's leverage ratio as of June 30th was 38% and 42% when including the recent acquisitions, but not including the pending property sale. In accordance with the terms of our key bank credit facility, we define leverage ratio as debt as a percentage of the aggregate fair value of our real estate properties plus the company's cash and cash equivalents. We are targeting leverage of 40% or lower over the long term once we achieve scale of roughly 1 billion or more in assets. However, we will consider higher leverage in the near term if we identify attractive acquisition opportunities in advance of completing dispositions or raising additional equity. As we reported during last quarter's call, in May we executed a five-year interest rate swap on our $150 million term loan, resulting in a fixed 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 dividends for common shares of approximately 9.6 cents for the months of July, August, and September, representing an annualized dividend rate of $1.15 per share of common stock. Based on recent trading prices, this dividend equates to a greater than 7.4% annual dividend yield. As Aaron mentioned, we have reaffirmed our 2022 annual AFFO guidance in the range of $1.26 to $1.36 for diluted share. The upper end of this range assumes that we complete an additional $22 million of acquisitions between now and the end of the year. I will now turn the call back over to Aaron.

Thank you, Ray. Before we turn to Q&A, I would like to share some thoughts on Motive's share price. The summer months have not been overly kind to NetLease stocks overall. particularly unkind for a thinly traded small cap rate with a still too large allocation to the office sector. Motive's current trading prices remain well below fair value should you measure it on either NABE or the multiple research analysts' price targets. Heck, we even trade below book value. Despite these rather depressed prices, the management team and board of directors do not feel panic. we understand that at some point our story will resonate with a broader institutional investor base and our share price will regain normalcy. That said, being patient is not the same as being idle, and Motive continues to take deliberate action to deliver results that will resonate with institutional investors. In less than 10 months, since September 30th of 2021, we have increased our wealth from under six years to over 11 years, We've reduced our office exposure from 50% to only 30% of the portfolio and increased our annual base rental revenue by $7 million to $36 million. These are impressive statistics, and we believe we will be able to deliver even more results in the near future. The quality, resilience, and long-term earnings power of our portfolio continues to improve. As a longtime participant in the REIT markets, I know all too well the perils of the small-cap conundrum Motiv is currently presented with. Some small cap REITs, or really the management teams that run them, stay small cap REITs forever, finding that their skills could only bring them public but were not sufficient to bring them to scale. Other small cap management teams, in an emotional or egoistic desire to be bigger, chase scale with poor capital allocations that either destroy their balance sheet or perennially lock them into a dilution spiral. REIT history has shown us that small cap REITs can emerge as attractive, scalable enterprises. Agri, Essential, and NetStreet are just a few examples of this. For us here at Motive, we are ardent students of the marketplace, both past and present, and we combine our acumen with patience, knowing full well that at the right time, we will be able to advance beyond the small cap conundrum into a realm of greater and greater investor following. We continue to look at all opportunities, big or small, knowing that the right opportunity will present itself and we have the expertise to capitalize upon it. With that, I'd like to thank everyone for joining us today and we'll now turn the call over to the operator for questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Gaurav Mehta with EF Hutton. Please go ahead.

Thank you. Good morning. I wanted to go back to your prepared remarks on transaction market where you talked about some slowdown in 2Q and then achieving balance after 2Q. I was wondering if you could maybe provide some color on how much have the cap rates moved before the interest rate hike cycle and what your expectations are going forward.

Hey, Guam. This is Aaron. Sure. I think one way to cast this is thinking about all the activity that we've gone through our investment committee where we've submitted LOIs, where we've been seeing cap rates go, those that we've been willing to win, others that we've been willing to pass on. I'll talk about it in a quarter context with fourth quarter of last year being the baseline. We bid probably on over $100 billion of deals in the fourth quarter of last year. And we saw cap rates in the mid to high fives for a lot of the deals. And then as we went into the first quarter, we were obviously busy with the IPO. We did take down uh, Kia, which was an off market transaction in Calera, but then the other ones that we've been on, we, and I didn't say we've been on a little bit less volume because I think that the supply started to slow in February and March of that quarter. But we saw, uh, you know, things largely hold up. Maybe they were, they were, they were low sixes, um, six, six and a quarter kind of, kind of temporary. And by the way, I'm, I'm characterizing mainly an industrial manufacturing, cause that's what we've been focused on buying. Then we entered into the second quarter, and what we saw was a lot of deals come back that we wouldn't chase. At certain cap rates, we just don't love them, and we didn't chase them. We saw these deals come back from the brokers, and we saw several deals that had been tied up that had fell apart. In fact, the Voltaire transaction is one of those where we'd seen it the first time. We did not like the pricing. We liked the asset, didn't like the pricing. It had been tied up. There was a series of retrades going on, and the sponsor did not. They wanted to go in a different direction. We got another look. We were very much a straight candid shooter. We said, hey, here's the cap rates we're at for this asset, and we got something done. The Producto one was one where this was – a sponsor who was closing on these properties and the acquisition of the businesses as well. And so the sell lease back financing was timed to it. And I think candidly, the timing of their closing didn't really coincide very well with where the rates were at. And so, you know, I think that deal had been marketed a much tighter cap rate, but there were not a whole lot of buyers who were willing to execute in a timeframe that made sense for them. And so the cap rate that we saw on these deals, I think we saw a lot of opportunities with seven handles. Not all of them were worth sevens, but we saw a lot of them. So we saw what we thought was a pretty significant jump in cap rates. I'd say that in the last – and I give you – this is fresh off the press. In the last two weeks, we've been on quite a bit of other assets – And I won't talk to you what we have under LOI right now, but I will say that we have seen some deals go back to being tighter. We've seen clearing prices back in the sixes, some in the low sixes, which to me at first blushes a little bit of a head scratcher. But I do know that rates have backed in a little bit so that financing is a little bit more affordable. But the sense that I get And it's not nearly as bad as it's just so much money that has to go to work that people are back to chasing deals. They panicked for a couple months. And, you know, and sort of in August, really late July and August, we're seeing people starting to, you know, just bid aggressively like we saw in the fourth quarter and first quarter. To the point where sometimes I just, I just, you know, it doesn't make sense to me. I'm not saying they're wrong. It just doesn't make sense to me. We also have seen a lot more deals come back on the pipeline. These are new deals. These are deals that we had been, you know, had rumored that were going to come on. I'd say in the last week, I've probably seen six more. And there was like crickets for most of July. So it is, you know, I think we're still all finding our way, filling it out. Yeah. I haven't had a chance right now to read all the other net lease peers and where they were in acquisitions. I've read some of them. I know that some of the people that are bidding on these are our peers. Some of them are private. Right now, the cap rates actually feel as if you were to ask me to take a temperature today, they feel a little bit tighter than they were a month ago. They're still wide from where they were in the first quarter, so I think that's logical and conducive, given what we've seen in rate movement. But some of the pricing feels competitive in a way that feels more desperate than opportunistic.

OK, that's great. Thank you. Maybe I have one more question on Vaultier 1. The cap rate on that acquisition is over 9%. Can you provide some color on that specific property, why the cap rate is higher on that property?

On which one, I'm sorry?

Vaultier 1.

Oh, yeah. So Vaultier 1 is the 15-year term. These assets are the ones in Texas and Utah. look, the entire portfolio was available. Those two assets after we had done, and I, along with our Bill Broms, our chief asset officer, I cite through all our assets, and we cite through the assets, and we just thought that the facilities in those were a little more tired, a little less critical on the margin, but the land was in the path of development. They're in really nice areas, industrial areas that are growing, And so we went to them and said, look, we'd rather structure a shorter lease on these and adjust the pricing appropriately compared to the other ones. And they were receptive. They wanted to close the deal, and we were thoughtful about how we structured it. And I think that's the approach we take. We're very methodical in looking at the math, but then we go in and structure something holistically that wins for both parties. And so we were comfortable with shorter-term leases here because, You know, candidly, that provides us some marginal optionality. They have the ability to extend if they want to. But if my hypothesis is right, that this is marginally less critical to them, it's in the path of development, and that land value is far greater for us 15 years from now. And so it's a way to balance the risk profile and seize on opportunity.

Okay. Thank you for taking my questions.

Thanks, Rob.

Thank you. Our next question comes from Brian now with BYD Securities. Please go ahead.

Good morning, Aaron and Ray. I was hoping to drill down a little bit more on the manufacturing industrial properties versus industrial warehouse, which it just seems like everybody wants to bid on. And Given that some of those assets that you're buying are different, they have different layouts, et cetera, that are just not a big metal box, what kind of a premium on a cap rate basis do you expect to get in general for those type of assets over just buying big box warehouses like so many REITs are doing?

I think it's a significant premium. I couldn't quantify it because we simply don't look at distribution assets. Most of them, the cap rates are much tighter than if they're good quality. And you're absolutely right. Everyone, you know, wants to be in distribution. And there's a lot of players who can do a great job, and there's a plethora of good assets. I just have two sort of semi-cynical views of it. One is, you know, I think Prologis is going to do it better than anyone. But aside from that, Prologis can't serve all clients. And two is my cost of capital or our cost of capital doesn't work, right? I can't buy five and a half cap distribution assets just because I love them. I think the other element to it is the stuff that we could buy, the stuff that is, you know, let's call it, you know, I think our guidance underwrites a six and a quarter, which we've clearly exceeded in terms of a cap rate. But let's say we could buy it at six and a quarter or we could buy it at a six and we could hold our nose. It tends to be the older outdated stuff. that people, you know, just because it has a single term, you know, a triple net lease in it, you know, it's trading too tight of a cap rate. It just doesn't make sense to me. You know, I remember this many years ago, and I used to live in Pennsylvania, and I forget what Turnpike Exit was, and there was a developer I had lunch with, and, you know, he had developed a concrete tilt-up warehouse off one of the Turnpikes. He signed a 10 year lease with a, some, you know, I don't know, it was a food distributor or whatever. I can't even remember what it was. And then he told his story about 15 years, 12 years later, he went down to the next county, got a tax abatement on the next, on the same turnpike, another exit and built another one and moved the tenant. And when you can do that kind of stuff and you can spec build and you can move people down the road and it doesn't really impact their business. How is that sticky for me? Where's my leverage? I think if I look at a prologist model where they're actually really providing logistics solutions to clients, then it's not just a box. But a lot of times the older stuff are boxes. And I just don't know where I have a lever to pull when it comes to lease negotiations. In some ways I liken it on the margin. Yes, we have this big e-commerce demand overall and distribution demand. But on the margin, it's the same conundrum you have with office, right? If there is no demand, if that demand's not there, then you have hardly any levers. And so when I contrast it to industrial manufacturing, you can't spec build a factory. Most of these have been around for 20-plus years or greater, and it is a function of the private equity model typically where they're doing a sell-lease pack. And so it's really, I see a lot of manufacturing assets that we pass on. Like I don't need someone that makes dog food because I don't know what the demand for dog food is. Right. Or, or candles or something like that. I want things that are really sort of germane to the, to our economy. And an example of this is product. Uh, there's two assets, one's in Jamestown, one's in Endicott. And we went to, I went to the Endicott one and they were talking to, they were making these, um, sort of bore scope, uh, lens housings for drones. and they make them out of these aluminum tubes. They used to get their aluminum tubes from Ukraine, and they cannot get them now. And the client of theirs who needs these aluminum tubes created for the lens housings said, well, you have to find a solution. He goes, well, I can buy solid blocks, tubes of aluminum, and I can bore them out, but it's going to cost you like 2x. And the client goes, great, do it, because I have to get these made. And so I wouldn't have even thought about the supply chain issue. And another one in our Lindsay precast, I was visiting them in South Carolina, and they use sand as an aggregate to make concrete. But a part of their potash they get typically comes from Turkey, and Turkey doesn't have the coal that they get from Ukraine to grind up all the stuff to do it. And these supply chain issues are really interesting. So their pricing power went up because they could find other sources of it and they can charge the clients a lot more. They're very sticky businesses. They're dirty businesses, though. Let's be clear. I'm not going to win any ESG awards this week on some of these. But they're really essential to our economy. And most people don't look at them. I mean, look what LXP did, right? In a rush to get rid of all their stuff, they spun out their industrial manufacturing to They're Davidson Kempter, like a 7-2 cap. I think people are loved. Humans tend to be in trends. They love distribution right now. I have no faults with it. I just can't buy it. And I like these. They fit my blue-collar nature. And I think they're assets that you may not see pretty pictures. You may not be able to, you know, immediately, you know, turn off your thinking because it's got, you know, a CVS or a Walmart investment-grade status. You have to do the credit homework, which we do. but you have assets that are sort of underappreciated and we're finding cap rates that are better for them.

That's really helpful. The second question I have is on retail. You've not discussed much, it seems, of late in buying retail, although you have a decent amount of Dollar Generals. You bought the Raising Cane not too long back. What are your thoughts on that asset segment over the next two to four quarters?

Yeah, you know, so we did the very large Kia this year. So that, I mean, that was a big quantum of retail. And, you know, that was, you know, cost advantage all day long because we issued OP units at 25 and got it at a cap rate wider than it appears. But that was, from an allocation standpoint, that was a big chunk of retail to do. We haven't been spending time on sort of smaller retail assets. They're out there. We get shown them. The cap rates are tight. I think what I... I look at retail opportunistically. The Raising Cane's is an example that we bought in July of last year. We bought it. It had six years left. We knew that Raising Cane's wanted to buy the asset. We knew that there was demand for it. It was the last asset in the insurance company's portfolio, and we bought it probably 100 basis points wide. So we were optimistic. I think Kia is an example of that. The reason I'm optimistic in it, and I will look at that, and I'll look at technically almost all sectors if we think we can make our investors money. And that's where we kind of take sort of a hedge fund approach or an active asset management approach. But generally speaking, there are a lot of peers that are buying a lot of retail, and they have better cost of capital, and they're buying in scale. And so how am I adding value if I go buy the same things that NetStreet or Essentials or, you know, NNN or O or Pine or whoever are buying and may marginally have better cost of capital. I also just, I don't get overly inspired. I love what we have. It's fine. You know, but at the same time, if someone wants to pay me a dear cap rate, I'm also cognizant that, you know, I can sell it. I just think we're selective on it. So we haven't seen anything overly compelling in the retail side that makes sense for us. And it's not a disparagement of it at all. It just doesn't seem to fit for us right now, but we always look opportunistically.

Okay, thank you. That's all for me.

Thank you. A reminder to all participants, to ask a question, you may place a star and one on your touchtone telephone. Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Alan Halfaker for closing remarks.

Thank you, operator. Thank you, everyone, for joining us today. You know, it was a pretty straightforward quarter. You know, we matched funds, basically. We sold some office. We bought some industrial. I think that's a steady rate quarter. Hope to do it again for you in future quarters and appreciate your attendance. Thanks so much.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.