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MI

MODIV INDUSTRIAL, INC. (MDV)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered disciplined execution: AFFO rose 22% year-over-year to $4.78M ($0.38 per diluted share), which management stated beat consensus; total revenue was $11.83M and net loss to common was $(2.82)M, driven by a $4.0M impairment on a Minnesota asset .
  • Operations strengthened with a 5-year Northrop Grumman lease renewal (Melbourne, FL) with 2% annual escalators and portfolio WALT of 14.4 years; cash interest expense fell versus 2024 on lower fixed rates and rightsized revolver fees .
  • Balance sheet remains conservative: 100% fixed-rate debt via swaps at a 4.25% fixed rate on the term loan, leverage ratio at 48.0%, and net debt/Adjusted EBITDA at 6.9x .
  • Management highlighted an emerging “lending thaw” and a potential $150M asset recycling program that could add at least 100 bps to AFFO growth in ~12 months if executed, creating medium-term catalysts alongside optionality on M&A and platform bids .

What Went Well and What Went Wrong

What Went Well

  • AFFO scale and efficiency: “Second quarter AFFO of $4.8 million, or $0.38 per diluted share, a 22% year-over year increase, beating consensus estimates.” (Aaron Halfacre, CEO) .
  • Lease renewal and WALT: 5-year Northrop Grumman renewal with 2% escalations; portfolio WALT is 14.4 years, with ~29% tenant/parent investment grade credits ≥ BBB- noted on the call .
  • Cash interest and liquidity: CFO cited cash interest expense down ~$255K YoY from lower fixed rates (4.25% vs. 4.53%) and reduced unused revolver fees; $30M revolver availability and no maturities until Jan-2027 .

What Went Wrong

  • Impairment-driven GAAP loss: A $4.0M impairment on a Saint Paul, Minnesota asset pushed GAAP net loss to $(2.63)M and net loss to common to $(2.82)M; FFO per share declined YoY to $0.36 from $0.41 .
  • Equity volatility: CEO flagged share price pressure into Russell inclusion and small-cap REIT headwinds; management refrained from issuing equity at depressed levels, citing discipline over dopamine .
  • Legacy asset friction: Calera equipment sale/lease challenges—management took impairment and aims to sell and redeploy capital by year-end; Costco Issaquah disposition timing depends on city logistics (rent ~$2.4M) .

Financial Results

Core results vs prior periods

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($USD Millions)$11.73 $11.79 $11.83
Net Income to Common ($USD Millions)$0.63 $0.00 $(2.82)
Diluted EPS (GAAP) ($)$0.07 $(0.01) $(0.32)
FFO Per Share (Diluted) ($)$0.46 $0.33 $0.36
AFFO Per Share (Diluted) ($)$0.37 $0.33 $0.38

Consensus vs actual (S&P Global)

MetricQ2 2025 ConsensusQ2 2025 Actual (S&P)Q1 2025 Actual (S&P)Q3 2025 Consensus
Revenue ($USD)$11,860,000*$12,018,000*$11,936,000*$11,732,000*
Primary EPS (GAAP) ($)$0.03*$0.1009*—$0.00*
EPS Normalized ($)$0.04*$0.1009*—$0.00*
FFO/Share (REIT) ($)$0.378*——$0.342*
Primary EPS - # of Estimates3*——1*
Revenue - # of Estimates3*——4*

Values retrieved from S&P Global.*
Note: Company-reported Q2 revenue was $11.83M (vs S&P “actual” $12.02M), reflecting classification differences; GAAP diluted EPS was $(0.32) vs S&P “actual” EPS normalized $0.1009 .

Adjusted EBITDA and leverage

MetricQ4 2024Q1 2025Q2 2025
Adjusted EBITDA ($USD Millions)$9.98 $9.38 $10.30
Net Debt / Adjusted EBITDA (x)7.0x 7.5x 6.9x

Portfolio and segment mix

Property Type# PropertiesABR ($USD ‘000)% of ABRLeasable Area (Sq Ft)% of Sq Ft
Industrial core (incl. TIC)39$31,662 81% 4,213,823 93%
Non-core4$7,302 19% 302,442 7%
Total43$38,964 100% 4,516,265 100%

KPIs and capital structure

KPIQ2 2025
WALT (years)14.4
ABR ($USD Millions)$38.96
Leverage Ratio (%)48.0%
Debt Outstanding ($USD Millions)$280.64
% Fixed-Rate Debt100%
Term Loan Fixed Rate (2025 via swaps)4.25%
Weighted Avg Interest Rate (Total Debt)4.27%
Net Debt / Adjusted EBITDA (x)6.9x
Cash & Equivalents ($USD Millions)$5.81
Revolver Availability ($USD Millions)$30.00

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Monthly Common Dividend ($/share)Jul–Sep 2025$0.0975 (in place since Jan 31, 2025) $0.0975 Maintained
Series A Preferred Quarterly Dividend ($/share)Q2 2025$0.4609375 $0.4609375 Maintained
Term Loan Fixed RateFY 20252024 rate +28 bps higher 4.25% fixed via swaps Lowered vs 2024 (by ~28 bps)
Internal AFFO Modeling (non-formal)FY 2025Street consensus $1.15/share Company model $1.37/share (no acquisitions) Company sees higher base case

Note: Company did not issue formal revenue/EPS guidance in Q2 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Capital markets and lendingRightsized revolver saving ~$300K annually; pursuit of efficiencies “Lending thaw” with banks more willing to refinance/acquire; exploring options despite 2027 maturity Improving optionality
Asset recyclingSelective activity; Endicott NY sale; cautious pipeline Considering ~$150M recycling of legacy assets; potential ≥100 bps AFFO accretion within ~12 months Turning more favorable
Tariffs/macroDetailed tenant-level tariff readthrough; limited impacts, prepared playbooks Monitoring recent tariff announcements; no broad squeeze observed; some client capex delays Neutral-to-cautious
Portfolio actions (leases)10-year FujiFilm renewal at Santa Clara with 3% bumps 5-year Northrop Grumman renewal at Melbourne with 2% bumps; TIC discussions ongoing Ongoing optimization
Legacy dispositionsCostco Issaquah sale PSA with KB Home; buyer deposits $1.7M KB likely to extend; target closing by year-end; rent ~$2.4M Progressing administratively
Calera equipment—$4.0M impairment; plan to sell and redeploy capital by year-end Exit path defined

Management Commentary

  • CEO tone on discipline and market backdrop: “We stuck to our discipline… needed to deliver the 22% year-over year increase in quarterly results.” .
  • On asset recycling potential: “Modiv has about $150 million of assets… could produce at least 100 basis points of AFFO growth within 12+ months from a green light.” .
  • On equity issuance and valuation: “We’re going to be disciplined. We’re not going to issue… at those prices.” .
  • CFO on interest expense and dividend: “Cash interest expense for the quarter was $255,000 less… weighted average fixed rate… 4.27%… Board declared a cash dividend of $0.0975 for Jul–Sep 2025.” .
  • On Costco Issaquah: “KB has until August 15… they will be doing at least one extension… rent… about 2,400,000.” .

Q&A Highlights

  • Asset recycling: Legacy-heavy pool, high-5s/low-6s sale cap rates with redeployment in 7s; management expects accretion and is sequencing 1031 exchanges to maximize value .
  • Lending market: Early discussions indicate terms equal/better than prior facility; timing to be driven by rate path; balance sheet materially improved since pre-listing/office-heavy days .
  • TIC and FujiFilm lease accounting: Elevated straight-line rent from 10-year extension with 3% bumps; goal is to end TIC structure in due course .
  • Calera impairment strategy: Preference to sell rather than lease given aging technology; intent to exit by year-end if possible .
  • Costco Issaquah transaction: City logistics drive timeline; buyer has $1.7M non-refundable deposits; rent ~$2.4M .

Estimates Context

  • Q2 revenue: S&P consensus $11.86M vs S&P “actual” $12.02M*; company reported $11.83M (press release/8-K). Classification differences likely (e.g., total revenue vs S&P captured figure) .
  • Q2 EPS: S&P consensus Primary EPS $0.03 vs S&P “actual” normalized EPS $0.1009*; company GAAP diluted EPS was $(0.32) .
  • REIT per-share metrics: FFO/share consensus $0.378* vs company FFO/share $0.36; management explicitly stated AFFO/share beat consensus, but AFFO consensus data not available via S&P in our pull .

Values retrieved from S&P Global.*

Where estimates may need to adjust:

  • Given impairment-driven GAAP loss and lower FFO/share vs consensus, near-term FFO/EPS estimates may drift lower; however, AFFO strength (22% YoY) and fixed-rate term loan (4.25%) could support AFFO trajectory into 2H if recycling executes .

Key Takeaways for Investors

  • AFFO growth and cost discipline are intact; despite GAAP noise from impairment, cash earnings power improved and dividend coverage remains solid .
  • The 5-year Northrop renewal and 14.4-year WALT reinforce defensive cash flow; TIC and Costco actions should simplify and de-risk the portfolio over time .
  • 100% fixed-rate debt at ~4.25–4.27% and a 48% leverage ratio provide rate and liquidity insulation heading into 2026–2027 maturities .
  • A potential $150M asset recycling program is the key medium-term catalyst; management targets ≥100 bps AFFO uplift within ~12 months if markets remain receptive .
  • Near-term estimate dispersion likely: GAAP EPS and FFO/share could be pressured by impairments and mix, while AFFO is trending up; watch sell-side shift toward AFFO-centric models.
  • Trading setup: Small-cap REIT sentiment and index flows are volatile; disciplined capital allocation and tangible recycling could be stock catalysts into 2H 2025–2026 .
  • Risk checks: Execution risk on recycling/1031 timing, city administrative timing on Costco, and macro tariff/interest-rate uncertainty—monitor quarterly tenant health and cap rate trends .