8-K: Modiv Industrial Announces Fourth Quarter Results Release Date and Updated Net Asset Value

Modiv Industrial will release its fourth quarter and full-year 2024 results on March 4, 2025, and announces an updated Net Asset Value (NAV) of $24.11 per share as of December 31, 2024.

Summary

• Modiv Industrial, Inc. will report its Q4 and full-year results for the year ended December 31, 2024, on March 4, 2025.
• The company has announced an updated Net Asset Value (NAV) of $24.11 per share as of December 31, 2024.
• Cushman & Wakefield conducted an appraisal of Modiv's 43 properties and valued its three fixed-rate mortgages to determine the NAV.
• The company believes its stock price represents a significant opportunity relative to fair value.
• Modiv acknowledges marketplace speculation about a potential sale of the company but states it has no knowledge of any potential takeover transactions.
• The CEO expresses openness to M&A if it can close the value gap sooner than the company can on its own.
• The company has been approached by bankers to initiate communications with Plymouth Industrial, Gladstone Commercial Corp, and a private non-traded REIT, but no deal has materialized.
• Modiv's management team has experience with M&A and views it as a valuable tool for growth.
• The company is ready for potential M&A opportunities, including a hypothetical merger where the company is renamed 'Persistent Industrial Manufacturing Properties' with the ticker 'PIMP' if it benefits investors.
• The company is also open to Elon Musk contributing a Tesla Gigafactory or SpaceX manufacturing facility to turn MDV into the 'X REIT'.
• The estimated fair value of the company's 42 wholly-owned real estate properties is $566,365,000 as of December 31, 2024.
• The estimated fair value of the property held in the tenant-in-common (TIC) interest is $43,200,000 as of December 31, 2024.
• The estimated fair value of the company's two consolidated real estate mortgages is $27,964,226 as of December 31, 2024.
• The estimated fair value of the mortgage on the property in the TIC interest is $11,678,501 as of December 31, 2024.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The announcement of the NAV and the CEO's optimistic comments about the company's potential and openness to M&A contribute to the positive sentiment. However, the acknowledgment of marketplace speculation and the challenges faced by REITs in the current environment temper the overall outlook.

Positives

• Independent appraisal by Cushman & Wakefield provides transparency into the company's asset value.
• Management is actively seeking ways to close the value gap between the stock price and NAV, including considering M&A opportunities.
• The company has a history of paying a fully covered $1.17 per share annual dividend.
• The company's management team has experience with M&A, which could be beneficial in pursuing strategic opportunities.
• The company is open to creative M&A solutions, even if it means renaming the company or changing the ticker symbol, if it benefits investors.

Negatives

• The company's stock price is currently trading at a discount to its NAV, indicating potential market skepticism or undervaluation.
• The company acknowledges marketplace speculation about a potential sale, which could create uncertainty for investors.
• The company has been approached by bankers to initiate communications with Plymouth Industrial, Gladstone Commercial Corp, and a private non-traded REIT, but no deal has materialized.

Risks

• The company's NAV is based on estimates and assumptions that may not prove to be correct.
• Changes in economic or market conditions, interest rates, or the supply and demand for commercial real estate properties could negatively impact the company's NAV.
• The company's tenants' financial condition could deteriorate, leading to lease defaults and reduced rental income.
• The company's forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated in the statements.

Future Outlook

The company aims to close the value gap between its stock price and NAV, either through internal efforts or potential M&A opportunities. Management is focused on taking Modiv along the journey from good to great, patiently, intelligently, and strategically.

Management Comments

• 'This year we engaged Cushman & Wakefield to conduct an appraisal of our 43 properties and to value our three fixed rate mortgages.'
• 'Our latest NAV represents the 12th independent, third-party appraisal of our portfolio of assets in the past eight years.'
• 'This latest appraisal, like the other forms of valuation of Modiv (e.g. discounted cash flow models, analysts consensus targets, cap rate analysis and P/AFFO metrics), highlights that our prevailing stock price represents a tremendous opportunity relative to fair value.'
• 'I believe every publicly listed company is de facto for sale either in the open market by individual sellers, by the corporation itself issuing shares via an ATM or other offering, or, as has been speculated on SeekingAlpha by selling to another suitor (e.g. M&A).'
• 'As both a CEO and a large individual shareholder, I believe we can systematically close the value gap over time, thereby bringing our share price closer and closer to our NAV.'
• 'I have said it in the past, and I will say it again, if an external party can close the value gap of a company and offer investors something that truly reflects fair value far sooner than the alternative, then any credible M&A offer should be taken seriously.'
• 'We do not fear it and, in fact, view any potential M&A opportunities as a valuable tool to grow a company and a tool we hope to use ourselves.'

Industry Context

The announcement highlights the ongoing challenges faced by REITs in a 'rate-spooked, risk-off environment,' where stock prices may not accurately reflect underlying asset values. The CEO's comments on potential M&A activity reflect a broader trend in the REIT industry, where consolidation and strategic combinations are seen as ways to unlock value and achieve greater scale.

Comparison to Industry Standards

• The company's engagement of Cushman & Wakefield for independent appraisals is a common practice among public REITs to provide transparency and validate asset values.
• The CEO's discussion of potential REITmanteaus involving companies like Realty Income, W.P. Carey, and NNN REIT reflects the ongoing debate and analysis of potential M&A synergies in the net lease sector.
• The company's openness to considering M&A opportunities aligns with the broader trend of REITs exploring strategic alternatives to enhance shareholder value.
• The company's implied cap rate of Cushman's real estate appraised values is 6.73% and 6.93% as of December 31, 2024 and January 31, 2024, respectively.

Stakeholder Impact

• Shareholders: The announcement provides updated information on the company's NAV, which is relevant for assessing the value of their investment.
• Potential Investors: The announcement may attract investors who believe the company is undervalued and see potential for future growth.
• Employees: The company's strategic direction and potential M&A activity could impact employees, depending on the outcome of any transactions.
• Tenants: The company's focus on acquiring critical industrial manufacturing properties with long-term leases benefits tenants by providing stable and reliable real estate solutions.

Next Steps

• Modiv Industrial will report its fourth quarter and full-year 2024 results on March 4, 2025.
• Management will host a conference call on March 4, 2025, to discuss the results.

Key Dates