John Massocca • B. Riley Securities

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EVP Bill Reiman and CEO David Gladstone detailed their proactive strategy to mitigate SGMA risk by investing heavily in water storage infrastructure, which they believe gives their portfolio a significant advantage and supports property values. CFO Lewis Parrish stated that in a worst-case scenario, crop insurance would cover the approximately $25 million invested in growing the crops and could provide a small profit. Parrish also confirmed the company has about $150 million in available liquidity and aims to maintain a minimum of $50 million in availability to cover operating needs and debt service.

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Lewis Parrish (executive) and David Gladstone (executive) outlined several options for the $60 million preferred stock, including using cash from potential farm sales or refinancing, though they noted current refinancing costs are high. Regarding water assets, Gladstone expressed confidence in their current supply, stating the bigger concern is high interest rates. He also commented that while some crop prices have improved, the farm transaction market remains stalled by the high cost of capital, despite many distressed properties being available.

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CFO Lewis Parrish stated he expects operating expenses to decrease from Q4 levels, citing the sale of problematic Michigan farms and non-recurring catch-up tax payments. He quantified the annual NOI impact from Q1 '25 sales at approximately $1.5 million to $1.7 million and later clarified that the hybrid-structure farms represent about 15% of the California portfolio's value. Regarding NAV, Executive David Gladstone explained the decision was driven by the high cost (around $300,000 annually) and unreliability of appraisals, indicating the company would re-evaluate its reporting approach.

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Executive Lewis Parrish confirmed the Michigan farms were a significant NOI drag, costing about $125,000 quarterly plus interest, and that the sale proceeds would cover the associated debt. He clarified the $20 million swing in rent structure is tied to four pistachio and wine grape farms and will shift revenue from fixed base rent to back-end loaded participation rent in 2025 and 2026. Regarding the market, CEO David Gladstone noted that low prices for nuts and grapes have hurt farm values, while Parrish added that water access remains the key driver of value in California.

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President and CEO Samuel Landy stated the low end of guidance is achievable through rental income growth alone, with accelerated sales providing upside. EVP and COO Brett Taft explained that the sales margin compression was a deliberate strategy to build momentum at new expansions, with margins expected to increase as communities fill. Samuel Landy expressed strong optimism that positive HUD policy changes would begin to materialize as early as September 2025.

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EVP and CFO Anna Chew confirmed that communities with rentals can receive GSE debt, but the loan value is based only on the site rent income, not the value of the home, resulting in a lower LTV on that component. She also stated refinancings may occur in tranches. EVP and COO Brett Taft explained that the addition of 800 rental homes will ramp up significantly in the stronger second and third quarters to meet the full-year target.

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EVP & COO Brett Taft projected a stabilized yield of 6.5% to 7% on the acquisition pipeline over five years. EVP & CFO Anna Chew confirmed that bad debt remains stable at approximately 1%. Brett Taft expects same-property occupancy to continue rising but noted that overall occupancy could be diluted by new value-add acquisitions. President & CEO Samuel Landy explained that JVs are used for development and turnaround deals to avoid diluting FFO per share. Executive Craig Koster provided an update on a potential JV with a national homebuilder to develop 131 acres in New Jersey for luxury single-family homes.

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President and CEO Samuel Landy and Chairman Eugene Landy attributed the optimism to a lower cost of capital and a long-term investment horizon that allows them to see value others miss. Regarding leverage, Samuel Landy noted debt is currently minimal and future capital strategy will be flexible, utilizing debt, equity, and refinancing proceeds as conditions warrant. He clarified that self-storage will remain a necessary accessory use to enhance their communities, not a standalone focus, as the company is committed to providing affordable housing.

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CFO Gary Gerson outlined several options for the revolver balance, including using ATM equity proceeds, refinancing into a term loan, or a potential private placement. President Buzz Cooper noted that recent office sales occurred at cap rates that were accretive for recycling capital into industrial assets. Gerson clarified that the variable rental revenue was seasonal and not influenced by any significant one-time items in the quarter.

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President Buzz Cooper explained that one disposition was an industrial property where the tenant exercised a purchase option, and the other was a non-core office asset. He noted that while office occupancy is over 93%, some assets like call centers are targeted for sale. On the Austin property, he mentioned tracking several requirements and RFPs. He affirmed a strong preference for light manufacturing, which aligns with their long-held onshoring and reshoring investment thesis.

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CFO Gary Gerson confirmed that while not the primary financing mode, the company intends to continue with private placements if the market is willing. President Arthur 'Buzz' Cooper added that Q4 leasing involved both office and industrial assets with positive rent increases. He characterized 2025 CapEx as manageable and largely 'positive,' as it's tied to renewals that drive higher rents.

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President Arthur Cooper attributed the CapEx and commission spike to a large, highly accretive re-tenanting of an asset in Lehigh Valley. He confirmed the 2024 expiration is covered by a new tenant who is expected to exercise a purchase option in early 2025. For 2025, he detailed active discussions and plans for the four expiring properties, noting a mix of office and industrial assets. He also observed that smaller PE firms are becoming more active, though still somewhat cautious, which is increasing sale-leaseback opportunities.

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CFO Matthew Jordan stated that RMR has good visibility into its residential portfolio and does not foresee significant asset sales in the next 9-12 months, supporting a stable AUM and revenue run-rate. President and CEO Adam Portnoy estimated the on-balance-sheet retail portfolio would need to grow to about $100 million in equity, a process expected to take multiple quarters, before a capital raise. He confirmed RMR is focused on its three seeded strategies (residential, credit, retail) but could expand the model to other sectors in the future. He also affirmed that the potential incentive fee calculation is based on the maximum fee from DHC and ILPT.

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President and CEO Adam Portnoy responded that private capital partners are seeking higher, mid-to-high teen returns, which aligns with RMR's pivot to value-add strategies. He noted that while the fundraising environment is challenging, investors are still active, and a more stable interest rate outlook should spur allocations. CFO Matt Jordan stated that while more on-balance sheet investment is possible, the key to growth is raising third-party capital. Adam Portnoy clarified the value-add retail portfolio target is approximately $100 million, which is a pipeline number, with only the initial $21 million acquisition closed. Finally, Matt Jordan confirmed the construction revenue guidance is all-inclusive and already accounts for planned dispositions and related spending changes.

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President and CEO Adam Portnoy estimated a less than 50% chance of drawing on the revolver in fiscal 2025, stating it was established for flexibility to accelerate seed investments if opportunities arise. He expects the vast majority of future residential investments to be in a JV structure, though one or two could be on-balance-sheet to seed a future fund. Portnoy projected that launching these funds is likely a 2026 event, with the necessary groundwork being laid throughout fiscal 2025.

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CEO Mark Decker affirmed the company's interest in growing its JV with Heitman, attributing the pace of activity to a disciplined and selective investment approach by both parties. CFO Robert Kiernan detailed that the East Orange property's previous ABR was about $1.2-$1.3 million and is now at 40% occupancy, approaching a cash flow break-even point. Decker added that future cash flow from East Orange and the Christus lease will help offset higher interest costs from the upcoming refinancing.

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Chief Investment Officer Alfonzo Leon confirmed they are actively pursuing opportunities for the Heitman JV. Chief Financial Officer Bob Kiernan provided an update on the small former Steward assets, expressing optimism for re-leasing them by June 30. CEO Jeffrey Busch highlighted the portfolio's resilience, noting its recession-proof nature and strong rent collection during the pandemic, which underscores the stability of its Medicare-focused tenant base.

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EVP & CFO Vincent Chao explained the higher expenses are due to a slower resolution of certain vacancies as the company prioritizes higher long-term value over immediate leasing. President and CEO Stephen Horn confirmed this can lead to higher near-term carry costs. Chao reiterated that shorter-term debt is a tool for asset-liability management.

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CFO Vincent Chao explained the $8.2M Q1 fee was unusually high and driven by one tenant, but noted such fees are a recurring, albeit unpredictable, part of active portfolio management. CEO Stephen Horn added that new tenants in former furniture stores are performing very well initially and that vacant restaurant sites are attracting strong interest from car washes, convenience stores, and QSRs, with redevelopment as a key option.

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CFO Kevin Habicht stated that 2025 lease expirations are not expected to have adverse outcomes, with a concentration in solid-performing convenience stores. CEO Stephen Horn explained that while M&A is picking up, their pipeline is not dependent on it, as tenants also grow through self-development. Habicht added that percentage rent from the re-leased Frisch's properties should begin to ramp up in the second half of 2025, as the new leases commence on May 1.

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CFO Kevin B. Habicht confirmed the partial rent from Frisch's was new in Q3, as they paid in full in Q2. He also affirmed the connection between higher potential rent loss and higher property expense assumptions. Executive Stephen Horn explained that the high lease termination income is a result of active portfolio management, where NNN works with tenants to exit leases, often with a backfill tenant or buyer already identified, thereby strengthening the overall portfolio.

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CFO & Treasurer Matthew Brown confirmed a minor one-time benefit in Q2 but noted it was less material than in Q1. Vice President Anthony Paula attributed the lower CapEx guidance to dispositions and timing. President & CEO Chris Bilotto detailed that the current $280 million in agreements represents the bulk of the disposition plan, with only minor sales expected thereafter. Bilotto also explained that Five Star's outperformance stems from operational improvements, capital investments, and favorable property locations. He clarified that occupancy is expected to build gradually, not in a 'hockey stick' fashion, toward the year-end target.

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CFO and Treasurer Matthew Brown noted that while SHOP expenses were sequentially flat, they are expected to trend higher for the full year, and mentioned insurance premium savings as a factor. Vice President Anthony Paula stated that CapEx is weighted to the second half of the year, justifying the reaffirmed guidance. Regarding debt, Brown estimated a sub-7% rate for future secured financing and targeted Q4 for execution, after dispositions. President and CEO Christopher Bilotto added that asset sales will significantly reduce the amount of financing required.

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Matthew Brown, CFO and Treasurer, confirmed the interest rate on the new financing could fluctuate with market rates before closing. He stated that guidance does not include assumptions for unpredictable weather events. Brown described the buyer base for dispositions as a mix of operators, private equity, and regional groups, who generally arrange their own financing. He also affirmed that DHC anticipates opportunities for additional agency financing after the current round is complete.

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CFO Scott Hogan clarified that the forecast assumes normal leasing activity. CEO Dave Holeman added that same-store NOI growth naturally trails leasing activity, and they are bullish on future results based on recent remerchandising. Hogan noted that while renewal spreads were slightly lower, they came with reduced TI costs, and new lease spreads exceeded 40%. Holeman affirmed a commitment to strengthening the balance sheet while growing earnings and stated that acquisitions are not contingent on dispositions closing first, as they have access to their credit facility.

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CEO David Holeman estimated that occupancy would be roughly flat quarter-over-quarter if the new leases at Terravita were included. Both Holeman and President & COO Christine J. Mastandrea confirmed that the portfolio is heavily weighted towards service-based tenants, with less than 15% of space dedicated to hard goods, mitigating tariff risks. Mastandrea also clarified that the company's exposure is to true Dollar Tree stores, not Family Dollar.

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CFO J. Scott Hogan stated the ultimate leverage goal is the high 5x to low 6x range, with timing dependent on Pillarstone proceeds. COO Christine Mastandrea confirmed no exposure to recent bankruptcies like Party City, citing their strategic focus on smaller spaces. Mr. Hogan noted that about $1 million in Pillarstone-related G&A costs from 2024 is expected to recur in 2025 before tapering. He also explained that while a base level of termination fees is in guidance, the 2025 forecast is lower as fewer large terminations are currently on the radar.

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CEO David Holeman and CFO J. Scott Hogan clarified that the Q4 forecast isn't due to a slowdown but reflects a comparison against a particularly strong Q4 2023. On acquisitions, Holeman emphasized a disciplined approach, using available liquidity only for accretive opportunities. Regarding strategic alternatives, he stated the Board continuously evaluates all options to maximize shareholder value and highlighted the positive feedback received for their strong FFO growth.

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CFO & Treasurer Tiffany Sy explained the recent refinancing was prioritized due to its higher interest rate, while they have more time on the JV loan. President & COO Yael Duffy added that the JV portfolio is nearly 100% occupied and operationally ready for a refi. Duffy clarified that lower Hawaiian renewal spreads were driven by smaller 'space leases' and that new lease rent roll-ups were very strong. She also noted increased prospect activity for the Indiana property but slow progress on the complex Hawaii land parcel.

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CFO and Treasurer Tiffany Sy clarified that Q1 had a $0.02 one-time benefit to FFO, while Q2 guidance includes a $0.01 benefit, with the low end of guidance accounting for unforeseen leasing changes or operating expenses. President and COO Yael Duffy stated that tariffs have positively impacted tenant retention, as uncertainty around construction costs discourages tenants from relocating. Duffy also asserted that the Hawaii portfolio has minimal exposure to tourism, as its tenants primarily serve the local economy, a fact demonstrated during COVID-related travel restrictions.

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President & CEO John Albright attributed the occupancy dip to vacancies from national bankruptcies like Party City and Joann's. CFO Philip Mays specified the Staples vacancy will impact Q4 and that any payment from Fidelity will be amortized into future rent under GAAP, with no expected roll-down in net rent for the property. He also stated that a new term loan would likely be timed closely with any new acquisition to manage liquidity.

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Executive John Albright reported that cap rates for retail centers have remained stable or compressed, unaffected by market events, due to strong investor demand. He described the non-same-store portfolio's NOI growth as positive, driven by rent roll-ups. He anticipates seeing significant mark-to-market impacts from recent acquisitions beginning in the middle of 2026.

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Executive Philip Mays explained the CapEx is incremental to the normal run rate. Executive John Albright stated the new leases would have 10-to-15-year terms and that the timeline is typical for securing higher-quality national tenants. Philip Mays noted that without the vacancies, 2025 same-store NOI growth would have been 2-3% instead of the guided 1%. For 2025 expirations, John Albright anticipates positive rent roll-ups in the 10% range.

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Executive John Albright explained the higher cap rate for Jordan Landing was driven by the 'at home' tenant situation. He clarified that the WeWork space is about one-third leased to a high-end social club, with plans to demise the rest for smaller tenants. Albright noted some softness in restaurant sales but strong demand for second-generation restaurant spaces. He deferred providing 2025 same-store NOI guidance until year-end, citing many positive moving parts.

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John Albright, President & CEO, stated that early loan repayments are unlikely as they are inefficient for sponsors. Philip Mays, SVP, CFO & Treasurer, confirmed new investments are expected later in the year and that no specific negative impact from At Home is baked into guidance, as they expect to continue collecting rent.

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Philip Mays, an executive, stated that guidance assumes zero rent from the vacant assets, but their potential sale is included in the high end of disposition guidance. John Albright, an executive, specified the 'at home' financing was at ~65% LTV and that the Germfree Labs property is a highly fungible industrial asset in Central Florida, acquired at an attractive basis.

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CEO John Albright clarified that a 'fair amount' of the guidance is already under negotiation but remains conservative due to the lumpy nature of deals. He noted acquisition yields are steady to higher, while structured finance yields may have compressed slightly. CFO Philip Mays confirmed a small general credit loss reserve is in guidance. John Albright attributed the higher real estate expense to the Reno theater lease expiring in November.

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Executive John Albright estimated remaining investments would be roughly one-third loan investments and two-thirds core properties. He stated they target cap rates of 7.5% and higher for non-investment grade assets but would consider dipping into the 6% range to opportunistically add a high-quality tenant like Lowe's back to the portfolio. He described their approach to investment-grade exposure as 'agnostic' but opportunistic. He also estimated the three new restaurant assets represent about 20-25% of the tenant's (Crabbys) total business.

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COO Max Jenkins advised not to read into the slow start, attributing it to summer seasonality and confirming a strong pipeline of ~$290M. CFO Mark Patten reiterated that the bond market is their preferred long-term debt source and their strong liquidity allows them to be opportunistic about timing a potential issuance in the second half of 2025.

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CEO Peter Mavoides confirmed they are currently 'living' the cap rate compression, with deals in the pipeline reflecting mid-to-high 7% cap rates negotiated in late 2024. He stated that no Zips properties were sold in Q4, as assets with imminent credit issues become illiquid. He explained the Q4 carwash sales were driven by a dual purpose: to create breathing room below their 15% industry cap and to proactively sell assets they no longer wished to own for the long term.

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CEO Peter Mavoides described competition as a dynamic 'overall sense' from deal negotiations, fluctuating with interest rates and spreads. He confirmed tenant financing demand is overwhelmingly for growth (M&A and development), not refinancing. For restaurants, he noted that while top-line sales are pressured, margin expansion from moderating costs is providing a buffer, leading to flattish or slightly down rent coverage.

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Executive Chairman Paul Pittman explained that guidance updates are routine quarterly refinements based on observing actual crop conditions, not major shifts. He detailed that the California water issues stem from the SIGMA law's local implementation, which is about 75% complete, and that write-downs were taken after final rules emerged in specific districts. President and CEO Luca Fabbri described cash management as an ongoing optimization between buybacks and debt repayment. Pittman added that the cash is currently invested at a positive spread above the cost of the preferred units, making it profitable to hold.

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Executive Chairman Paul Pittman and executive Luca Fabbri responded. Pittman stated that with the stock trading at a significant discount to NAV, the company is more likely to prioritize stock buybacks over land acquisitions. He also explained that many specialty permanent crops could actually benefit from tariffs due to reduced import competition. Both Pittman and Fabbri confirmed they will likely renew the Farmer Mac facility to maintain liquidity and strategic flexibility.

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Executive Chairman Paul Pittman explained the additional sales were of farms in Western Arkansas to a buyer focused on timber and carbon offsets. He noted that the company has the capacity for a few more transactions this year under its 7-transaction limit. Pittman confirmed the remaining cash is intended for stock buybacks after the blackout period, potential further debt repayments, and funding the special dividend.

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