Modiv Inc.

day and welcome to motive industrial inc third quarter 2025 conference call 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 we will open up the call for your questions to ask the question analysts may press start and one on your touchstone phone If you are using a speakerphone, please pick up your handset before pressing the key. And to withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to John Rainey, Chief Operating Officer and General Counsel. Please go ahead, sir.

Thank you, Chloe, and thank you, everyone, for joining us for Motive Industrial's third quarter 2025 earnings call. We issued our earnings release after market closed today, and it's available on our website at motive.com. I'm here today with Erin Haffaker, Chief Executive Officer, and Ray Piccini, Chief Financial Officer. Before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal securities laws. 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 and business plans, 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 or result to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-K and 10-Q. With that, I'd like to turn the call over to Aaron. Aaron?

Thanks, John.

Hello, everyone. Hope you're doing well. This time we're going to do it, we're doing everything a little bit differently. Certainly had the call on a Friday in the afternoon. I'm surprised to see as many of you dialed in as you did. Hopefully you have a cocktail in your hand. But we're not going to do prepared remarks. I put a little more context into the press release. So we're going to free for all the questions, but I think what I'll say is of an iteration i i you know it's it's really grindy and i and i really like that um you know we purposely waited toward the end of the earnings season because some of the early reporters it was interesting to see them come out like wow it's pretty solid and then you know they just got on in the markets and i was like okay let's see what else works come comes out and so it was it was really i really wanted to spend some time observing because i Candidly, it doesn't really move the needle when we come out. And typically when we come out, you know, you're stacked four deep and you guys don't have a chance to breathe. And I wanted to give you a chance to breathe. And so that's the only reason. So there's nothing else into it other than that. We won't do this that often. But, you know, I feel generally optimistic. I mean, look, no one knows where Powell will be in December. You know, are they done or not? But I think we all... probabilistically underwrite that there's going to be a new Fed regime come May. And that regime has a high propensity to be easing. So at some point in the future, we should see easing. And so motive share price is very easy to predict in a five-minute pattern and probably on a five-year pattern, but not sort of in between. But if you think you've got easing, you think you've got a long period of capitulation, we started to see sort of non-equity, and when I say non-common equity, I guess, we've seen preferred and debt deals being done, which I think are, you know, are tea leaves of capital market activity. You know, I think July we saw, I think, well, at least I got a palpable sense that there was some interest, and, you know, we saw the deals like we saw with the fundamental deal, and we saw the pre-version of the Plymouth deal announced and we saw the sort of Elm tree and we were starting to see pipeline. And then it kind of went like sideways and late August, September, early October, where it's just like people got spooked and their shadows were seen. For instance, we saw, we were, we were in process bidding on a pipeline deal that we liked. And it was, it was a company that was, doing a propco sell along with an opco transaction. And they were like guns a blazing and then they pulled it. We've seen some of that stuff over the course of the last quarter. So it was a bit of sort of a volatile quarter where people thought they had a look and then the market gave them a head fake. And then they're like, Oh, you know, pausing on the margin. But I think, you know, we get this real palpable sense that there's still a lot of money on the sidelines. I think still right now, a lot of people just want like, you know, bloodbath returns. They want to, they really want to, you know, shiv people who they think that are desperate. And, you know, some of those people are being picked off, right? We're seeing more REIT stuff that, you know, I think either they waved the white flag or they just didn't have the wherewithal or whatever. But, you know, so I think that capital still really sort of, let's just be patient and let's just only get the super, super sweetheart deals. But if we start to see real easing and we start to see some consistent trends for REITs, I don't know if that means we need consolidation on the rest of the S&P and NASDAQ to get that or not. It's hard to say because you could argue that until tech and some of these names cool off, then no one's really going to ever consider boring REITs. But at the same time, if they force correct, is that just going to drag everyone back down? So it remains to see. It's pretty cloudy. But even despite that cloudiness, I feel pretty optimistic that about what I'm seeing. And again, it's because I'm gritty and grindy and I like that. So that doesn't mean we're off to the races, but it does feel like, I mean, for us, I mean, we're like a goddamn cockroach that could survive a nuclear war. There's no real fundamental reason why we should be as durable as we are, given how small we are now in the context. I mean, there's a reminder, and I've said this before, we came out two weeks before Putin invaded Ukraine. And we came out like, what was it, three and a half weeks before the Fed started raising rates. So the entire publicly traded existence of us has been like, you know, dog shit. Yet we, I feel like our balance sheet is stronger. I feel like our AFO is better. I feel, I just, I have much more clarity now than I did even a year ago. And so I think that leads to optimism.

But enough of me rambling. Let's open up to questions, shall we?

Ladies and gentlemen, we will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. And if you are using a speakerphone, please pick up your handset before pressing any keys. So we draw your question, please press star then the number 2. We'll pause for a moment as callers join the queue. Our first question comes from the line of Craig Kuchera from Blue Seed Capital Markets. Your line is open.

So, Craig. Hey, guys. Good afternoon. Just a few for me. Were there any one-time revenue adjustments in your other property income, and how should we think about that going forward?

Ray? Yes. Can you hear me?

Yeah, I'm trying to get Ray to respond.

Yeah, there was a $300,000 fee that we obtained for...

terminating some easement rights that are north of property, and that's it.

So to add a little clarity to that, so our north of property, which is in Melbourne Space Coast, there was a large piece of sort of underutilized, near-vacant land, and it was a former, I don't know what to call it, like a kid's park or something, like an amusement park. And that's getting redeveloped into a housing project, a townhouse type of arrangement. And the prospective buyer had come to us because there were certain easements and they wanted certain rights. And so we negotiated. It took a while, candidly. I would say we probably negotiated for nine to 12 months. They basically gave us a fee to sign a paper. And so that's what that was. Got it. Will that all recognized here in the third quarter, or will we expect any additional fees going forward? One time. Okay. Yeah, one time. Okay. Got it. It looks like you added another asset to the held-for-sale bucket. Can you give us some color on what you're looking to sell here, and are you actively marketing that for sale as well? Yeah. So, obviously, we've had Costco in the held-for-sale up until this point, and then... I guess about six weeks ago, we formally engaged a broker to sell Calera. So Calera is held for sale. And we're in the process right now of, I think, our anticipation is that we would try to get this sold either by the end of the year or probably early January. So that's the other property that's been held for sale. Got it. And speaking of the Costco property, I think KB Home was expected to extend a couple times until maybe December. Are you getting any change in sort of their viewpoint on the asset that they still expected to close? Yeah, so they did extend to December. We've had some conversations recently about they're wanting to time the closing for a demolition permit. But, you know, they've got to go through their process. But as it stands right now, per the agreement, you know, we have not been heard that they're going to extend beyond December 15th. So they have one more extension that would take us through to, I think, February 15th. But right now it's through December 15th.

Got it. My bet is they'll close by then.

Okay. Fair enough. And just one more for me. I feel like last quarter you were saying you were seeing an increasing number of acquisition opportunities. I'm just sort of curious, you know, based on your opening commentary, it sounds like things are maybe – we're loosening up, but now it's sort of seized. Is that sort of your viewpoint currently, or do you think things are coming back? So it's interesting. So I would say that we were seeing some stuff in, you know, that sort of July timeframe, and then – and we started throwing out some bids, and then it kind of contracted because we got a little sideways. And I would say we've seen more in the last week and a half than we had probably in the prior month and a half. So I don't know what it was about it. I mean, if the markets were this volatile, maybe it was because the end of summer, maybe it was because we knew we had the September decision. I'm not sure. But, you know, we didn't see much, and now we're starting to see more. Like, now it actually feels... look, I'm measuring it by quantity, not quality. It's starting to feel healthier. Like, there's definitely, I mean, I think, John, Ray, I'm thinking, we've probably looked at, you know, four or five deals in the last week, right? Now, quantity is, yeah, quantity is, I mean, quality is still challenging, right? I mean, we, I think the one thing that I, like, you know, if you imagine us as a, As a steel blade or a knife, you know, we're constantly sort of sharpening and sharpening on a grindstone and getting better at what we want, knowing better what we want. And so our box, our buy box has probably gotten a lot tighter. And there's stuff that I probably would have, you know, been willing to bid on two years ago. I'm like, eh, fuck it. I'm out. I don't want to bother. So we've gotten much more selective, but that said, you know, it feels right now at least, and it's usually odd because candidly, you don't tend to see a lot at year end. You tend to see them waiting early January, right? That's where pipeline tends to pick up normally. Like now you would generally think it's going to slow down because, you know, these take anywhere from 30 to 60-ish days to close. And so then you're like smacking the holidays and you're like, so I think that's an interesting sign. I think some of, I think what we are seeing sort of key lead wise is there's probably more PE activity going on, which I think is always an indicator, an early indicator, right? PE and hedge funds sometimes tend to, you generally consider them to be smarter capital, maybe not smart capital, than sort of, you know, people who have just, you know, got long bias or doing 1031s or something like that, where they're forced by mandate to do something. These guys are looking for something. So we have seen a little bit of PEA activity pick up.

Okay, great. Thank you.

Our next question is from Gaurav Mehta from Alliance Global Partners. Your line is open.

Yeah, thank you. Following up on your comments on acquisitions, Can you comment on where the cap rates are for the kind of properties you're looking at?

Cap rates are mainly seven handles. That's first year, right? We've seen some eight, but mainly seven handles. Not necessarily low seven handles, but seven handles. I think brokers are certainly asking for the moon, and that's their job, and they get it. On a weighted average basis, those are probably tens. Now, I guess, in fairness, we've seen some wider ones, but you're like, I don't own that. Have we seen any tighter ones at all?

I don't know that I have right now, to be honest with you.

Okay. Thanks for that, Keller. Second question on... I guess, you know, asset recycling as the acquisition market picks up for your target assets. Should we expect that you may sell more assets to fund those acquisitions?

You should expect that we will be deliberate and systematic about asset recycling. If you think back, right, so we did the... the asset recycling, the GIPR, which is a large bulk. And so just for everyone's education purposes, you know, generally speaking, if you sell, if you do seven individual transactions to seven individual buyers in a given year, that's sort of the limit from an IRS perspective. If you go over that, you tend to have to get on what is called a private letter ruling to sort of get exempted relief because otherwise it might be deemed a traitor you're dealing. And so... So when we sold that big bunch of, you know, office and dollar stores to GPR, that was one transaction. And then, you know, that was sort of kicked it off in earnest. We sold the one in Nashville. We sold one out in California. And then, you know, it just kind of got really super volatile. And we've been sitting on the KB thing for, you know, the Costco purchase for a while. Looking forward to that closing soon. um you know as i said oes has this purchase option so we can't do anything with that until we actually have conversations with them and their process is you know they have time on their clock so that one just wasn't going to happen immediately and then um and then um you know the solar property we've been with just been four years of trying to get a to get a lot split. So San Diego is like really difficult to work with in terms of doing anything. So that's taken on. So it's felt really like long in a tooth. Like we haven't really shown much recycling. And I think at the same time we have other assets we could, they would fly off the shelf, right? They would just immediately go. And what I say to these other assets is obviously there's the Kia asset, which is a non-core, but we also have in our industrial bucket, some legacy assets, not all, there's a handful of, that are not absolute that I don't like because it's leakage and it's not scale efficient. Some of them are just not the very focused, sharpened knife blade of manufacturing that we want. And so those would have flown off the shelf in this period of time. But at the same time, we're saying they're not hurting us. They're very comfortable credits. Let's see if we get a little bit of more stability in the cap rate markets. If the cap rates start to start to tighten, then we can comfortably roll those off and we're not like leaving a lot of chips on the table. And so I think what you'll see over the next period of time is we will continue to do that, start recycling those. And I think it'll be systematic and we'll use and since those have a long legacy that we'll have to, we'll have in terms of a low basis, we've held them for a long time, that they will be 1031 or they'll be tax sensitive. So we will be sort of timing, rolling into new acquisitions. with the advent of those being sold. Does that make sense?

Okay, thanks for that, Keller. That's all I had.

Cool.

Our next question is from John Mosoka from B-Riley Securities. Your line is open.

Good afternoon.

As we think about maybe over a longer time horizon, the outlook for for like true growth. What's kind of interesting maybe is the Fed dynamic changes a little bit in terms of a sources of capital perspective. And I just may be hoping on, you know, your preferred stocks had a little bit of a run. There's been some smaller REITs that have been out there in the preferred market. But that would, in some people's mind, be a leveraging transaction if you did raise in that market. It's just kind of curious. where we should be thinking about sources of kind of external growth capital in the future if and when the market gets a little more accommodative? Well, I think when we know the market is accommodative, I think that would be a better time to ask that question. I think for us, and I've kind of alluded to this, that question predates that we have to grow and we have to find sources for it, right? And I kind of rebelled against that question earlier. in general right now. And I know the answer is underwhelming. Like, well, if you don't have external growth capital, you can't really grow. And I was like, eh, I don't, you know, I have several assets that are, you know, can trade low sixes and then can rotate them into mid to high sevens. And so that's growth, right? And that's something to do in the near term until it makes it clear that we're the trend. Because, you know, you think about we're in a downward trend in REITs, or we have been, generally speaking, and, you know, it's correlated to rates. And so until we have clarity on where rates are, then I think we'll start to see, you know, where pricing is. And another way I think, a couple ways I think about it, right? And I'll talk about the preferred stuff too in a second. But, you know, look at O or WDK. I mean, I think their dividend yields are like high fives, right? Mid fives, high fives. You know, and we're, what, eight. So we're roughly 250 basis points off of them, 250 basis points. That doesn't seem terrible to me. I don't like it. I think we're certainly undervalued. right, from a standpoint, but arguably everyone is, right? I mean, it was, oh, it's forever. It was like, you know, sub four dividend yield and they're trading fairly wide. I mean, that's much wider than a money market and do they have a lot of risk in them? I don't, I mean, they have risk that they may not grow, but so I think We need to see, you know, the broader, more liquid, the more easily bought, the easily loved names, right? The big names to start to see some love from the broader institutional community, which they haven't seen because flows into REITs have not been good. When you start to see that, then the next sign would be, okay, are we, you know, we're the tail. Do we start to see that, right? So obviously... price of our share price, if it's at a realm that's accretive, then we would start to access that. But we're not there yet. And so until it is, I can't do anything with that, right? The strategic capital stuff, look, we're always looking. I think, look, we've seen three preferred deals really in the last week, GMRE, we saw Pine, and we saw Frontview. I thought the deal that Preston and Fitzgerald did was really good. I like that. That was clever, right? I'd love to have conversations with them and reach out to them and do it, but I think that was a clever deal. I think that one is a constructive deal that will cause growth. If I look at GMREs and pines, look, I get it. It's cheaper. That 8% preferred is cheaper than your equity was, but you've got to step back. And so that answers the question, which source of capital do I want to use? And I want to step back to the primary question and say, should I be using either of those? And if I have a hammer and the hammer says, you know, hammer every nail that says growth on it, then you're going to use capital. But think about it. If you just pull back on a time horizon and you underwrite that we could be in an easy environment and that this time next year our returns, our share prices could be better as a category, then won't it feel a little... like a chump to have issued a bunch of perpetual preferred at 8% when you could have just waited and your, maybe your dividend deal and your equity could have been issued at seven and a half or seven. But clearly I get that they will, they will make that accretive. So it's not like it's bad. It's not like they're going to destroy themselves by, by no means. I mean, they're probably finding paper that's, I mean, investments that are wider than that eight. So it's going to be accretive, but they are also just burdening their franchise with this thing that they're going to have to deal with. And so it's, To me, I just want to step back and say, hey, does it really make sense? Do I need to post stats for the quarter because that's what everyone else does? But that was kind of my framework about being a small REIT is the bigger guys, yeah, I get it. They've got super low cost of capital. They do need to show activity, right? But our smaller folks, I mean, is that the right blueprint? So many small cap REITs just try to follow this bigger mantra of the normalized REIT, and they're just not. and I know it's a, it's a circular thing. Like you said, well, if you don't grow, then you're never going to get capital. And therefore you're always going to be small. And I'm like, well, maybe, but maybe you could actually create a really valuable franchise that, you know, people will buy. And, you know, but that just, that's it. That's an experiment that we're doing. I fundamentally take the view that if I improve the real, the durability and quality of the income coming in, and I sort of right size the balance sheet and make it stronger, not weaker. And that I, continuously do the right things over time that, you know, as I think Warren Buffett says, when the tide goes out, you know, you'll see who doesn't have their swim trunks on. And so right now, I don't know where those buckets of, I know the categories of where those buckets of capital is, but I don't have a line of sight to tell you, yeah, I've got someone who's going to give me equity at $18 a share. Because if I did, I would just, you know, I would take it and I would go put it to work. But, you know, I haven't seen it happen in the big REITs, so I don't expect it to happen for us necessarily right now.

Okay.

With the in-place portfolio, just kind of broadly, what's the feeling amongst tenants as you reach out, you know, given maybe we have a little more certainty even versus the last earnings call around the tariff outlook and still some uncertainty, but just kind of curious, how they're feeling, and if there's anything maybe notable from a tenant credit perspective worth calling out. Now, look, most of these operators, you know, quarters don't move that much, right? They look annually. They look at cycles. They're getting orders. I think the tariff news is, if anything, it's old, right? I mean, the volatility is certainly tempered. I mean, you tell me. I don't think we've heard a verdict yet on the Supreme Court. And even if we do, there's two other tariffs that he can implement. And so no one fucking knows, right? But what we do know is it hasn't, there's no been, there's no blood in his streets and our businesses are operating. I mean, most of our businesses buy U.S. and sell U.S., right? We own a lot of durable businesses. So we haven't seen anything, we haven't seen anything new on the radar that says, oh, oh no, this is, you know, tariffs are going to squeeze us. I think, look, people would love to have clarity on tariffs. I think tariffs do economically impact you. But the near-term noise is there's not really been anything. And we kind of said, I think, two quarters ago, that most of our, the vast majority of our tenants learned from COVID and then the first Trump administration, you know, it's not the first time he's talked about tariffs, that they didn't want to have dependencies on places that could get squeezed, a.k.a. China, right? And so... a lot of them over the ensuing years have mitigated that risk as this is good business practice. And that happens to look like a good reaction to the near-term conversations about tariffs, but we haven't heard anything recently or at all. Since our first conversations, I think everyone was alarmed because, like, Liberation Day, people are charged, right? And now it's like, yeah, okay, let's wait until we actually know something else, and then maybe we can then sort of re-forecast. But nothing yet. And then on just kind of a line item by line item basis, you know, probably more likely into 2026, what's the potential impact to property operating expense, maybe even typically like a net property operating expense from completing the former Costco headquarters transaction and even maybe even the Calera if you're able to sell Calera's former property? So I would give you characteristics that, you know, right now, um, as we roll, I'd say that Costco Delta on operating expense piece would be the fee, right? So the expensive piece is we're probably running, we're probably bleeding about $40,000 a month on that, on that property. Right. Um, so, uh, You're not going to – so there's a fair amount of CapEx, but we have also gotten these extension fees that sort of offset that from an AFO perspective. But there's probably about $40,000 a month bleed on that, how we think about it in sort of third quarter. Calera actually is – it's been lumpy. You've got security fences in there, things like that. If we get that flushed out, I don't think you're going to see – And, Ray, you correct me if I'm wrong. I don't think we're going to see world-changing property expenses go down just because those clear out. We're fairly neutral on that. But, I mean, there's a little bit of movement in 2026. I think, you know, as we get rid of some of – we have, like I said, a small handful of non-absolute triple nets. I think on the margin that could reduce property expense next year. But, Ray, what are your thoughts on property expenses?

I think it'll go down a bit, you know, maybe 100K or so. But I think as we sell some of the other properties, as we do the recycling, there are some others where there's some leakage. And so over time, it'll probably go down a little bit further.

Does that help? That's very helpful. I appreciate all the detail. That's it for me. Thank you very much. Great. Thanks.

Our next question is from Steve Chick from Sabi's Garden Capital. Your line is open.

Hey, thanks. Guys, I'm wondering if you could or if you know of what the same store rental income would be. No, rental income is down 2%, but I think there's a an overhang obviously from Costco and solar is probably in there as well. Do you calculate what same store rental income would be or a figure like that?

We don't. And I think the general view of reason why is because there's so much movement in our portfolio that we have, you know, but I think it's fair that once we complete a recycling that that would be, and we think we're largely baked, particularly if we don't have external growth capital. I think it's fair that we would start implementing same store. You know, we may try to run that for you and publish that sometime before year end or something like that, but I don't think we have a handy writing to you.

No, but I'd say that, you know, our overall average is 2.5% rent growth a year just based on escalations in the leases. So that gives you some idea of what's happening there.

Yeah, and I would characterize it as we recycle those. A lot of the legacy ones have the lower bumps. They're twos or they're every five kind of thing, every five years. So I think that if you look at – there's a pie chart on our website that shows kind of the weighting of those. A lot of the stuff that we put in the last two years or the last three years sort of averaged north of 2.5%. So I think over time that could – or the same story could –

could trend that way.

Okay. That's helpful. And then I, can you say, I didn't catch it on solar. Did you say when you thought that property would, would be resolved or sold?

We're a lot, lot closer than we ever were. I mean, so we literally started this process in 2021 where we engaged consultants and went through the process. And so we're four years into it. We, We're doing some last, so we had to get the split and negotiate certain easements and then have the city look at it. And ultimately, I don't have the details 100%, but at a high level, we had to do some modest construction work to the entrance of the driveway to meet the new ADA compliance standards of the city. And so it took us a while to get them to give us the green light to do the construction. The construction is now underway, which is not a very long job. It's probably a couple weeks. But then we have to go back and then get approval of all that stuff. But my guess right now, it's been a constant debate internally. There are some people who think we can get it done by year end, and I generally sort of hedge the downside so i think it's a first quarter event uh ideally it's an early first quarter event but who knows but once it's once we're like locked and loaded then then we'll we'll that property will be taken to market so that'll be another held for sale and it's like the tenant is just finished you know they they left in september in their lease end of september they cleaned it all out it's a beautiful box inside you know it's good um you know we've had people um We've had brokers, you know, come and looking at it. You know, our intent is not to lease it, but it's to sell it to an owner user.

And we think that's the best end result for that property. Okay. All right. Thanks. That's helpful. I appreciate it.

There are no questions at this time. I would now like to turn the conference back to Mr. Halfacre. Please go ahead.

Great. Thank you, everyone. Appreciate what you've – for you dialing in and listening. We look forward to giving you updates as time goes ahead. I hope you have a great weekend, and I hope you can all rest up for the Thanksgiving holiday. And for those who are curious, we will not be at Navy. I don't want to go to Dallas in December, and it's just not relevant for us, I think, at this point. But enjoy the conference, and I wish you guys all the best.

This concludes today's conference call thank you for participating you may now disconnect.