Q4 2024 Modiv Industrial Inc Earnings Call

Operator: Good day and welcome to Modiv Industrial Incorporated fourth quarter and full year 2024 conference. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star zero.

Good day, and welcome to motive and industrial incorporated fourth quarter and full year 'twenty 'twenty four conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star zero. Okay. On today's call management will provide prepared remarks, and then we'll open up the call for questions to Alaska question analysts May Press Star one on your Touchtone phone to get into the queue.

Operator: On today's call, management will provide prepared remarks and then we'll open up the call for questions. To ask a question, analysts may press star 1 on your touchtone phone to get an If you're using a speakerphone, please pick up your handset before pressing. To withdraw your question, please press star 2 on your television. Please note, this conference is being recorded.

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Speaker Change: Please note. This conference is being recorded I would now like to turn the conference over to your House, John Rainey, Chief Operating Officer and General Counsel. Please go ahead Sir.

John Raney: I would now like to turn the conference over to your host, John Raney, Chief Operating Officer and General Counsel. Please go ahead.

John Raney: Thank you, Rob, and thank you, everyone, for joining us for Modiv Industrial's fourth quarter and full year 2024 earnings call. We issued our earnings release before market open this morning and it's available on our website at modiv.com.

John Rainey: Thank you Rob and thank you everyone for joining us for motive industrial's fourth quarter and full year 2024 earnings call.

John Rainey: We issued our earnings release before market opened this morning, and it's available on our website at motive dotcom.

John Raney: I'm here today with Aaron Halfacre, Chief Executive Officer, and Ray Pacini, Chief Financial Officer.

Speaker Change: I'm here today with air and a half acre Chief Executive Officer, and Ray for Genie Chief Financial Officer.

John Raney: On today's call, management will provide prepared remarks and then we'll open up the call for your questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal security 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 our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-K and Form 10-Q.

Speaker Change: On today's call management will provide prepared remarks, and then we'll open up the call for your questions.

Speaker Change: Before we begin I would like to remind you that today's comments will be will include forward looking statements under federal Securities laws.

Speaker Change: Forward looking statements are identified by words, such as well.

Speaker Change: I believe expect anticipate or other comparable words and phrases.

Speaker Change: Statements that are not historical facts, such as statements about our expected acquisitions or just.

Speaker Change: <unk> business plan are also forward looking statements.

Speaker Change: Our actual financial condition and results of operations may vary materially from those contemplated by such forward looking statements.

Scott: Scott some 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-K and Form 10-Q.

John Raney: With that said, I would like to turn the call over to Aaron. Aaron, please go ahead.

Aaron: That said I would like to turn the call over to Aaron.

Aaron: Aaron Please go ahead.

Aaron Halfacre: Thanks, John.

Aaron: Thanks, John.

Aaron Halfacre: Hello, everyone. Welcome. What a great day to come out with earnings the same day we got tariffs gone. We timed these things perfectly for your entertainment. I am going to have some comments this time.

Speaker Change: Hello, everyone and welcome a what a great data coming out of the earnings the same day, we got tariffs gone we can't time these things perfectly for your entertainment.

Speaker Change: I am going to have some comments this time, but let's first jumped to Ray and then I'll I'll make comments after that and then we'll do Q&A right.

Aaron Halfacre: But let's first jump to Ray and then I'll make comments after that and then we'll do Q&A.

Ray Pacini: Ray? Thank you, Aaron. I'll begin with an overview of our fourth quarter operating results. Revenue for the fourth quarter was $11.7 million. Fourth Quarter Adjusted Funds from Operations, or AFFO, was $4.1 million on a per-share basis. AFFO was $0.37 per diluted share for this quarter, which is $0.08 above the average of the analyst's estimate.

Ray: Thank you Erinn I'll.

Speaker Change: I'll begin with an overview of our fourth quarter operating results.

Ray: Revenues for the fourth quarter was $11 7 million.

Ray: Fourth quarter adjusted funds from operations or <unk> was $4 $1 million on a per share basis. <unk> was 37 cents per diluted share for this quarter, which is eight cents above the average of the analysts' estimates.

Ray Pacini: compared with 40% for diluted share in the prior year period.

Ray: Paired with 40 cents per diluted share in the prior year period.

Ray Pacini: I'll now discuss our full-year operating results. Rental income for the full year was $46.5 million. ASFO for the full year was $14.99 million, and ASFO for a fully diluted share was $1.34 for 2024.

Ray: I'll now discuss our full year operating results.

Ray: Rental income for the full year was $46 5 million.

Ray: For the full year was 14 $99 million.

Ray: I think it's oh per fully diluted share was $1 34 for 2024.

Ray Pacini: The $400,000 revenue decrease in properties sold in the first quarter of 2024 was offset by a corresponding decrease in straight-line revs.

Ray: The 400000 revenue decrease from properties sold in the first quarter of 2024.

Ray: It was offset by a corresponding decrease in straight line rents.

Ray Pacini: The increase in AFFO reflects a full year of decreased property expenses following the disposition of 14 properties in late 2023, many of which were not triple net leases, and a $300,000 decrease in G&A, primarily due to reduced employee compensation. Now turning to our portfolio, annualized base rent from our 43 properties totals $39.6 million dollars as of December 31st, 2024, with 39 industrial properties representing 78 percent of ABR and nine core properties representing 22 percent of ABR. Our portfolio has an attractive weighted average lease term of 13.8 years, and approximately 32% of our tenants or their parent companies have an investment grade rating from a recognized credit rating agency of BBB- or better.

Ray: The increase reflects the full year decreased property expenses following the disposition of four key properties.

Ray: Late 2023.

Ray: Many of which were not triple net leases and a $300000 decrease in G&A, primarily due to reduced employee compensation.

Ray: Now turning to our portfolio annualized base rents from our 43 properties totaled $39 $6 million as of December 31, 2024.

Ray: 39, industrial properties, representing 78% of ABR and noncore properties, representing 22% of ABR.

Ray: Our portfolio has an attractive weighted average lease term of 13 eight years and approximately 32% of our tenants or the parent companies have an investment grade rating from a recognize credit really rating agency, a triple b minus or better.

Ray Pacini: Now turning to our balance sheet and liquidity. As of December 31st, 2024, total cash and cash equivalents were $11.5 million, and we had $280 million of debt outstanding, which consists of $31 million of mortgages on two properties and $250 million of outstanding borrowings on our term loans. Based on interest rate swap agreements we entered into in January 2025, 100% of our indebtedness is the December 31st, 2024 of a fixed interest rate with a weighted average interest rate of 4.27% based on our leverage ratio of 47.6% a year end.

Ray: Now turning to our balance sheet and liquidity.

Ray: As of December 31, 2020 for total cash and cash equivalents were $11 $5 million and we had $280 million of debt outstanding which consists of $31 million of mortgages on two properties and $250 million of outstanding borrowings on our term loan.

Ray: Based on interest rate swap agreements, we entered into in January 2025, 100% of our indebtedness as of December 31st 2024, while the fixed interest rate with a weighted average interest rate of four.

Ray: Two 7%.

Ray: Based on our leverage ratio of 47, 6% a year as well.

Ray Pacini: We also have $30 million of availability on a revolver, which we reduced from $150 million in December 2024 in order to save $300,000 per year in unused fees. As previously announced, our Board of Directors declared a cash dividend for common shareholders of approximately 9.75 cents per share for the months of January, February, and March 2025, representing an annualized dividend rate of $1.17 per share of common stock. This represents a yield of 7.5% based on the $15.55 closing price of our common stock as of March 3rd, 2025.

Ray: Also have a $30 million of availability on our revolver, which we reduced from $150 million in December 2024 in order to save $300000 per year and unused fees.

Ray: As previously announced our board of directors declared a cash dividend for common shareholders of approximately.

Ray: 975 cents per share for the months of January February and March 2025.

Ray: Presenting an annualized dividend rate of $1 17 per share of common stock.

Ray: This represents a yield of seven 5% based on the $15 five closing price of our common stock as of March 3rd 2025.

Aaron Halfacre: I'm now going to call back over to Aaron. Thanks, Ray.

Eric: And now I'll turn the call back over to Eric.

Ray: Thanks, Alright.

Aaron Halfacre: So I wanted to go over a couple different areas that, you know, didn't feel like writing them out extensively in the press release, but wanted to talk about them on the call. And it may either prompt following questions or preempt some preliminary questions. I think first let's look at transactions, right? I think you clearly understand now that we don't feel compelled to do things just for the sake of doing them. We look at a lot of things, but we've been picking our spots. I'd say when we released third quarter earnings in November to now, it's been quite an opaque economic landscape with a lot of vacillation between fear and euphoria.

Eric:

Eric: So wondering if over a couple of different areas that you know.

Eric: It didn't feel like writing them out extensively in the press release, but I wanted to talk about them on the call and it may either prompt follow on questions or preempt.

Eric: Some some preliminary questions I think first let's let's look at transactions.

Eric: Transactions right.

Eric: Dolby.

Eric: I think you're.

Speaker Change: You clearly understand now that we don't feel compelled to do things just for the sake of doing them, we look at a lot of things.

Eric: But we've.

Speaker Change: Picking our spots I'd say.

Speaker Change: When we released third quarter earnings in November too. So now we've had it's been a.

Speaker Change: Quite opaque economic landscape with you know a lot of vacillation between you know fear and.

Speaker Change: You for you and so just just didn't really see anything you know usually how it works in the property markets.

Aaron Halfacre: And so just didn't really see anything. Usually how it works in the property markets, the available inventory dies down sort of early December and it starts picking back up sort of mid later January. And so we saw some, we kicked the tires on some, but just didn't see anything that said, Oh, geez, let's, let's go, you know, extend ourselves or let's, you know, let's do something just for the sake of doing it. So clearly we've shown patience, you know, obviously, you know, we're now probably a year away from the sort of $200 million of acquisitions we had done in aggregate and sort of a 12 month timeframe.

Speaker Change: They the.

Speaker Change: The available inventory dies down sort of early December and it started picking back up sort of mid later January and so we saw some we kicked the tires on some but just didn't didn't see anything that said Oh geez, let's let's go you know extend ourselves so, let's let's do something.

Speaker Change: Just for the sake of doing it. So clearly we've shown patients. Obviously you know we're now probably a year away from the sort of $200 million of acquisitions. We had done in aggregate, it's sort of a 12 month timeframe. So we've kind of slowed it down.

Aaron Halfacre: So we've kind of slowed it down. But that doesn't mean we're not looking, it doesn't mean we won't do transactions. I just, you know, it's, it's a real lesson in patience. And, and I think my point about maybe reach on growth stocks is the fact that at the end of the day, you know, we have to grow really prudently and we, and each decision we make on the balance sheet we're living with for a long period of time. And we've all seen others out there who make decisions that are a little bit And they will either issue out some costly preferred public or private, they will, you know, unwind some of their portfolio to read redeploy it into other areas, or they'll issue, you know, a large amount of equity that just doesn't really pencil and I just, I don't faulting them, they all have their own reasons for doing things like that.

Speaker Change: But that doesn't mean, we're not looking at it doesn't mean, we won't do transactions.

Speaker Change: I just.

Speaker Change: It's it's a real lesson in patients and and I think my point about maybe reach our gross doctors and the fact that at the end of the day.

Speaker Change: We have to grow really prudently and each decision we make on the balance sheet, we're living with for a long period of time and we've all seen others out there who make decisions that are a little bit more near term and they will either issue out some toxic preferred and public or private they will.

Speaker Change: Unwind some of their portfolio to redeploy it into other areas or they'll issue.

Speaker Change: A large amount of equity that just doesn't really pencil I just.

Speaker Change: Faulting and they all have their own reasons for doing something like that but for us I just think any of those decisions would be a far greater.

Aaron Halfacre: But I, for us, I just think any of those decisions would be a far greater drag on us than it would the benefit from buying a property. So we're just being thoughtful about that.

Speaker Change: A drag on us than it would the benefit from buying a property. So we're just being thoughtful about that but as we look for the course of the year.

Aaron Halfacre: But as we look for the course of the year. It does, I do not intend to stare at my navel. And as most of you should know, we don't. It just means we're looking, we're diligently working to try to get something up that makes sense. So for a couple reasons.

Speaker Change: It does I do not intend to stare at my navel and as most of you should know we don't.

Speaker Change: This means we're looking we're diligently working to try to get something up that makes sense. So for a couple of reasons. So pipeline wise you know.

Aaron Halfacre: So pipeline wise, you know, You've noticed that we've reduced the revolver, and that's a material savings. We had contemplated doing it last year, but last year, early part of the year at least, we were contemplating. We thought about it, but we weren't sure, and we wanted to hold off because there was a lot of battleship conversations, and would we need the revolver for those. And then I think as we worked through more of those battleship conversations, which I'll In fact, there would be other sources of debt that would probably be more favorable. And so the revolver was nice to have, but you wouldn't buy your car with a credit card.

Speaker Change: You've noticed that we've reduced the revolver.

Speaker Change: And that's a material savings we had contemplated doing it last year, but last year.

Speaker Change: Our early part of the year at least we are contemplating.

Speaker Change: We thought about it but we werent sure and we wanted to hold off because there was a lot of idle ship conversations what do we need the revolver for those and then I.

Speaker Change: As we work through more of those Dallas up conversations, which I'll touch on in a second we realize that you probably wouldn't need the revolver in fact that there would be other sources of debt that would probably be more favorable and so the revolver was a nice to have but you wouldn't you wouldn't put buy your car with a credit card right.

Aaron Halfacre: And I actually look at the revolver kind of like a credit card. And for me, for instance, personally, I put everything on my credit card for the month, and I pay it off at the end of the month. So I always view it as it's going to be extinguished right away. And at $150 million revolver, I mean, that's 100% of our market cap. And so how am I supposed to pay it off if I have it dangling in front of me? So we downsized it to what I thought was a reasonable amount, $30 million. That's 20% of, if we ever had to pull off and we found something that was super compelling, it's like, oh, geez, it's a nine cap, and our revolver paper is only a six and a half, and we're going to get the spread, and then I got to backfill that somehow.

Speaker Change: And I actually look at the revolver kind of like a credit card.

Speaker Change: And you know for me for instance, personally I put everything on my credit card for the month and I pay it off of the other months I always view it as it's going to be extinguished right away and at $150 million revolver. I mean, that's the 100% of our market cap and so how am I supposed to pay it off if I have a dangling in front of me. So we we.

Speaker Change: Downsized it to what I thought was a reasonable amount $30 million, that's 20% of if we ever had to pull off if we found something that was super compelling and it's like Oh Geez, It's a nine cap and you know our our our revolver papers only a.

Speaker Change: Six and a half and we're going to get the spread and then I got a backfill that somehow I didn't want it to be too large of a backfill that caused us to choke on the chicken bone. So we reduced the revolver that saved money, but that revolver is the I think used for us to think about timing purposes right. So if it's a mismatch in timing we could use that we don't want to use the revolver for big.

Aaron Halfacre: I didn't want it to be too large of a backfill that caused us to choke on a chicken bone. So we reduced the revolver, that saved money. But that revolver is, I think, used for us to think about timing purposes, right? So if it's a mismatch in timing, we could use that. We don't want to use a revolver for big acquisitions. Like I said, big acquisitions, there are other, we've now identified plenty of other sources of financing that we could use that would be less costly. So it does not foretell that we're not able to grow or that we won't grow.

Speaker Change: We like I said big acquisitions. There are other we've now identified plenty of other sources of financing that we could use that would be less costly. So it does not foretell that we're not able to grow or that we won't grow. It just means we won't grow with that mechanism.

Aaron Halfacre: It just means we won't grow with that mechanism. But we'll use that mechanism for its intended purposes, which is, you know, a lot of times we see revolvers that are a billion or one and a half billion dollars, which is great, but I don't know if they're always used. And we were paying, what, $300,000 a year for something that wasn't being used. And so we right-sized that, but, and I right-sized it very specifically. We have probably. comfortably $80 million worth of properties that are in the portfolio right now that we have, you know, uh... have the ability to recycle and we would pick up at least at least 125 basis points on that $80 million in AFFO.

Speaker Change: But we'll use that mechanism for its intended purpose, which is a lot of times, we see revolver or is that a 1 billion or one and a $1 billion, which is great, but I don't know if they're always used and we were paying what $300000 a year for something that wasn't being used and so we we rightsize that but and I right sized it very specifically we have probably.

[noise] comfortably $80 million worth of properties that are in the portfolio right now that we have.

Speaker Change: <unk>.

Speaker Change: Have the ability to recycle.

Speaker Change: And we would pick up.

Speaker Change: At least at.

Speaker Change: At least 125 basis points on that $80 million in Africa and.

Aaron Halfacre: And that would be sans bill. And that wouldn't require any change of things. And we don't have that model. That wasn't in the 137. I don't know that we'll do that. We've had several unsolicited offers on some of these properties. One of the reasons why I haven't sold now is I just think that the better clarity we have in the rate environment, the better pricing is across the board. And that might mean that pricing is tighter on the purchases, but the pricing is also tighter on your sales. And so our view, if any one of those properties that we wanted to recycle and we had a mismatch because we wanted to do a 1031, that the revolver would be useful.

Speaker Change: And that would be sent standstill and that wouldn't require any change.

Speaker Change: Changing things in what we do.

Speaker Change: Have that model that wasn't in the 137 I don't know that we will do that we've had several unsolicited offers on some of these properties.

Speaker Change: Hmm.

Speaker Change: One of the reasons why I Havent sold now as I, just think that the better clarity we have in the rate environment that better pricing is across the board.

Speaker Change: It might mean that pricing is tighter on their purchases, but the pricing is also tighter.

Speaker Change: On yourselves and so I view, if any one of those properties that we wanted to recycle and we had a mismatch because we wanted to do a 10 31 that the revolver would be useful. So we do think that we can use the revolver for acquisitions.

Aaron Halfacre: So we do think that we can use a revolver for acquisitions, but they would be ones that we would self fund. or could immediately fund. And so that we would not put ourselves in any sort of leverage situation. And I've been pretty adamant that I don't want leverage to really go up unless it's something that was super significant and positive. And I had a path of a line of sight to retire it.

Speaker Change: But they would be ones that we would self fund.

Speaker Change: Or it could immediately fund and so that we would not put ourselves in any sort of leverage situation and I've been pretty adamant that I don't want leverage to really go up unless it's something that was super significant and positive.

Speaker Change: And I had a path of a line of sight to retire it on.

Aaron Halfacre: As it relates to the battleship conversations, you know, they're not over. I'm not going to get play by plays like I did. I think, you know, we were down the line on that one. It didn't get done. That portfolio is still out there. We have had other battleship conversations. I think I think collectively us and the other parties all realized that we were in a super volatile market. Everyone had to roll into swaps or caps at the end of the year. They had to reset sort of their their their interest expenses. You know, so I think those portfolios are still there.

Speaker Change: As it relates to the balance sheet, our conversations you know they're not over.

Speaker Change: Not going to get play by play like I did I think you know we were down a line on that one that didnt get done that portfolio is still out there.

Speaker Change: We've had other battleship conversations I think.

Speaker Change: I think collectively us and the other parties all realized that we were in a super volatile market, everyone had to roll into swaps or caps at the end of the year.

Speaker Change: As a reset sort of they're there they're interest expenses.

Speaker Change: So I think those portfolios are still there I still think theres conversations to be had.

Aaron Halfacre: I still think there's conversations to be had. So. Those are certainly a potentiality. I think we're receptive to them. I think someone asked the question to me offline, you know, well, it seems pretty straightforward. Why wouldn't you get one done? You know, the sponsor would just need to take a mark to market hit, and then they get your equity and then have huge upside. And I agree with that on paper. But you got to get a sponsor to take a mark to market hit. And so I think that's, it's a little bit of a time.

Speaker Change: So.

Speaker Change: Those are certainly a potentiality.

Speaker Change: I think we're receptive to two to them I think someone asked the question to me offline.

Speaker Change: It seems pretty straightforward why wouldn't you get one done.

Speaker Change: The sponsor, we just need to take a mark to market hit and then they get your equity and then have huge upside and I agree with that on paper.

Speaker Change: But you've got again, the sponsor to take a mark to market hit and so I think that's it's a little bit of a time.

Aaron Halfacre: You know, we're obviously, if we were issuing out equity, we'd be doing so below NAV. So we would be taking out a hit. No one's going to take our equity at $24. And but at the same time, they have to. So like, I think those could happen, potentially, or one of them could happen. But I'm not not not cooking that number anywhere. It's not anywhere in our horizon, other than it's a potentiality. I'd say that, you know, we're, we want to acquire, we just want to be really balanced. Because at some point here, I don't know when and your guys is guess is as good as mine, we're going to, we're going to move away from this risk off trade in this asset.

Speaker Change: We're obviously, if we were issuing that equity would be doing so below NAV. So we would be taking out of someone's going to take our equity at $24.

Speaker Change: And but at the same time they ask it so like I think those could happen.

Speaker Change: Potentially or one of them could happen, but I'm not not not.

Speaker Change: Looking that number anywhere it's not anywhere in our horizon other than it's a potentiality.

Speaker Change: I'd say that you know, where we want to acquire and we just want to be really balance because at some point here I don't know when and your Guy's guess is as good as mine, we're going to we're going to move away from this risk off trade in this asset class.

Aaron Halfacre: and it's been sort of bottled soil, you know, on, off, on, off, on, on, given the day or given the hour. And at some point we should, we'll, we'll start to see activity. You know, we're starting to see little tea leaves, you know, you saw the BSR Blackstone thing, we've seen Ackland with, you know, Hughes, you're starting to see a little rumblings of activity. Obviously, Navy wants to profess that, you know, IPOs are going to pick back up, even though I think, you know, line choked on that one a little bit. So I, look, I think once we see better activity and we're better poised and pricing is a more normalized, I want to be in a right position to, to, to act.

Speaker Change: And it's been sort of volatile.

Speaker Change: On off on off on off given the day are given the hour and at some point, we should we will we will start to see activity and now we're starting to see little tea leaves you know you saw the DSR Blackstone thing, we've seen acland with Hughes, you're starting to see a little rumblings of activity, obviously NAREIT wants to profess that you know.

Speaker Change: Ipos are going to pick back up even though I.

Speaker Change: Thank you know line choked it on that one a little bit. So look I think once we see better activity and we're better poised in pricing as a more normalized I want to be in a position to tap.

Aaron Halfacre: I don't want to act before that, because think about it. What if we had pulled the trigger on something a year ago? We would just, would have been absolutely dragged through the mud and, and beat about, right? And the market has been, and all of you have been very stern with your capital as it relates to other REITs who don't make good decisions. You punish them, right? We're still suffering from the same quagmire that we've suffered from for three years is that, you know, we're, we don't trade a lot. We don't have a lot of following.

Speaker Change: I don't want to act before that because think about it what if we had pulled the trigger on something a year ago or even just but again, absolutely drag to the mud in and beat about right and the market has been.

Speaker Change: And all of you have been very stern with your capital as it relates to other Reits, who don't make good decisions you punish it right. We're still suffering from the same quagmire that we've suffered from for three years is that we were we don't trade a lot. We don't have a lot of fall away and we have not done a big issuance ever.

Aaron Halfacre: We have not done a big issuance ever. And we're okay with that. Our dividend's solid. Our investors who have been with us for a long time are there. We are adding new and new investors as time goes on. The volume is, you know, up probably. I mean, if you go back, like, I mean, at one point in our history, public history, we were like $9 and change. right, and we were trading maybe two or 3000 shares a day. And now we're, you know, consistently higher volumes, much more stable price. Greater following, certainly a lot of potentiality in the name.

Speaker Change: And we're okay with that and our dividend solid our investors who have been with us for a long time are there we are adding new investors as time goes on that volume is probably I mean, if you go back like.

Speaker Change: I mean at one point in our history public history, we were like $9 and change.

Speaker Change: And we were trading maybe two or 3000 shares a day.

Speaker Change: And now we are consistently higher volumes much more stable price greater following Stewart certainly a lot of potentiality in the name and so we're comfortable with that and we recognize that by not making bad decisions that preserves us to be able to make a good decision when the market environment is conducive to that and so that's how we're thinking about that so that maybe a little under.

Aaron Halfacre: And so we're comfortable with that, and we recognize that by not making bad decisions, it preserves us to be able to make a good decision when the market environment is conducive to that. And so that's how we're thinking about that. So that may be a little underwhelming for the machine in terms of we don't have X volume for the quarter, but I wanted to share that logic that that doesn't mean we're not doing anything. It doesn't mean we're just going to sort of float around the ocean without a rudder or a motor. We have intent, and that intent includes patience.

Speaker Change: Coming toward the machine in terms of we don't have volume for the quarter, but I wanted to share that logic that that doesn't mean, we're not doing anything that doesn't mean, we're just going to sort of float around the ocean without a rudder of our motor we have intent and bad intent includes patients though.

Aaron Halfacre: I think one of the things I think it's poignant to talk about today, given the fact that we now officially have tariffs in place, and I guess it's, I don't fully understand it, but I guess I kind of understand there's been a lot of concern that, oh, tariffs are bad for someone like us. And so we've actually gone out and talked to our tenants. You know, we get quarterly financials from them. So we use that opportunity to talk to CFOs. And we've asked them how they think about tariffs and how the tariff rhetoric. Granted, up until now, we haven't really had tariffs.

Speaker Change: I think one of the things I think it's pointing you to talk about today given the fact that we now officially have tariffs in place.

Speaker Change: And then I guess it's.

Speaker Change: I don't fully understand it but I guess I kind of understand theres been a lot of concern that Oh tariffs are bad for someone like us.

Speaker Change: And so we've actually gone out and talked to our tenants, we get quarterly financials from them. So we use that opportunity to talk to Cfos and we've asked them, how they think about tariffs and how tariff the tariff rhetoric and I've got it up until now really have chairs I'll be had as the threat of tariffs.

Aaron Halfacre: All we've had is the threat of tariffs. And I would say that There was two instances where they said some of their metals input costs would be higher because of tariffs, but they would simply pass those on. And so they weren't concerned. They did note that some of their input costs as it relates to the metals that they're using would be higher, but they would have no problem passing those on in their contracts to their clients. And so there was a concern. That was the only thing we found that anyone said negatively about. Some people have said, and like, you know, give you give an example, some of some of our things are very domestic manufacturing productions, right?

Speaker Change: And I would say that.

Speaker Change: There was two instances, where they said some of their metals input costs would be higher because of tariffs, but they would simply pass those on and so they weren't concerned they did note that.

Speaker Change: Some of their input costs as it relates to the metals that they were using would be higher but they would have no problem passing those on and their contracts to their clients and so there was it wasn't a concern.

Speaker Change: That was the only thing we've found that anyone said negatively about tariffs.

Speaker Change: Some people have said it.

Speaker Change: Like you know give you give you. An example, some of some of our things are very domestic manufacturing productions right, So guardrails and.

Aaron Halfacre: So guardrails and some precast concrete, they're sort of they had no opinion, like it doesn't affect them, right? They sell domestically, they source domestically. No, no problems there. There's others who said that they've actually found quite a bit of pickup So they have a lot of, they found, particularly some of them that manufacture some things that could be manufactured, example, in Canada or Mexico, some of those jobs have now, the people have been coming to them saying, we want to source jobs from you domestically. And so... And there's a degree of optimism in that, that they think order pickups would come.

Speaker Change: Some precast concrete.

Speaker Change: There are sort of they had no opinion like it doesn't affect them right. They sell domestically they sourced domestically now no problems there theres, others who've said that they've actually found quite a bit of.

Speaker Change: Pick up an inquiry so they they have a law they found particularly some of them that manufacture some things that could be manufactured at example, in Canada or Mexico. Some of those jobs have now that people have been coming to them, saying, we want a source jobs from you domestically and so.

Speaker Change: And there's a degree of optimism in that that they think order pickups would come most of the people view that they will that will be either a slight benefit or agnostic to the tariffs. So we don't see any steer loading as it relates to tariffs I don't think we're going to catch him a massive win from from from all these things I mean.

Aaron Halfacre: Most of people view that they will, that will be either a slight benefit or agnostic to the tariffs. So we don't see any fear and loathing as it relates to tariffs. I don't think, you know, we're going to catch a massive wind from one of these things. I mean, I think that would take time. And I think you'd have to have real trade shutdown, which I don't expect to happen at all. This is a lot of... political positioning and alignment. And I don't think this has anything to do with actual trade systems, you know, grinding to complete halts.

Speaker Change: I think that.

Speaker Change: It will take time, and I think you'd have to have real.

Speaker Change: Trade shut down, which I don't expect to happen at all I think this is this is a lot of.

Speaker Change: Political positioning and in alignment and I don't think this has anything to do with actual trade systems grinding to complete holds but our our tenant base does not seem to be bothered at all by by tariffs and in fact.

Aaron Halfacre: But our tenant base does not seem to be bothered at all by tariffs, and in fact, expects sort of at least an interim uplift in order demand. We do have two tenants who have come to us and asked us to expand their footprints, so physically add on to their, their, their sites. And so we're talking to them about capping that out and growing, you know, providing dollars to them in a way that, you know, increase our rent at a favorable cap rate allows them to consolidate. So we think that's a positive. It's a, you know, but we're basically like a, like a real hard rock, you know, the rock doesn't move very fast, but it's really a rock hard and solid.

Speaker Change: That's sort of a at least in the near term uplift in order demand. We have do you have two tenants come to us and ask us to expand their footprints so physically add onto their sites and so we're talking to them about caffeine that out and growing providing dollars to them in a way that increase our rent at a favorable cap rate.

Speaker Change: Allows them to consolidate.

Speaker Change: So we think that's a positive.

Speaker Change: But we're basically like a like a real hard rock.

Speaker Change: Rock doesn't move very fast, but it's really hard and solid and its a good base and good foundation. So we feel good about that we don't have much concern about that.

Aaron Halfacre: And it's a good base and good foundation. So we feel good about that. We don't have much concerns about that, if any.

Speaker Change: If any.

Speaker Change: The swap, let's talk a little bit about the swap.

Aaron Halfacre: Let's talk a little bit about the swap. So three years ago, when we put the swaps in place, we elected to take this ability to do an option that could put it back to us, that put option saved us over 50 basis points in rate. So, you know, if you look back, our sort of our run rate was sort of four, five, two, it would have been well over 5% on a locked basis. So that would have been, you know, roughly one in 1.25, $1.3 million. Each year of added interest expense over the last three years, we saved that.

Speaker Change: So three years ago, when we put the swaps in place we we elected to take it this ability to do an option that could put it back to us that put option saved us over 50 basis points and rate so.

Speaker Change: If you look back our sort of our run rate was sort of four five to it would've been in well over 5% on a lot basis. So that would have been roughly one and a 1.25 $1 $3 million.

Speaker Change: Each year of added interest expense over the last three years, we save that it was you know with the options, you're obviously you could kind of take.

Aaron Halfacre: It was, you know, with options, you're obviously gonna take, you know, you've got a Delta to play with. And, you know, I don't think anyone underwrote in early 22 where rates would be. And so as we rolled into third and fourth quarter last year, you know, we, actually it was August when the Fed cut and rates got really low, there was a really good probability that one of our swaps was not gonna get put back. And so we had to wait. And we so we had sort of had to wait and we we had established a budget.

Speaker Change: You've got a delta to play with and you know I don't think anyone underwrote and early 'twenty, two where rates would be.

Speaker Change: And so as we rolled into fourth third and fourth quarter of last year, we actually it was August when when the fed cut rates got really low there was a really good probability that one of our swaps was not going to get put back to us and so we have to wait.

Speaker Change: And we so we had sort of have to wait and we had established a budget that.

Aaron Halfacre: That budget was the for four to actually was slightly more than that we had budgeted and that was for Just throwing the swaps into flats, sort of the same sort of four, five, three blended. And we sort of monitored it on a daily basis. I want to thank our banks who, you know, meticulously provided us daily quotes on these swaps, that was tedious. We monitored, we monitored, you know, rates really, really ran up. The 10-year was going crazy. SOFR was going crazy. And so there was a monetary, sort of momentary dip in the rates. We elected to use our budget that, by doing so, allowed us to pay down a little bit to four and a quarter.

Speaker Change: That budget was the 442 actually it was slightly more than that that we had budgeted and that was for.

Speaker Change: Willing to swap into flat sort of the same sort of $45 three blended and we sort of monitor on a daily basis I want to thank our banks who.

Speaker Change: Meticulously provided this daily quotes on these swaps.

Speaker Change: That was tedious, we monitor we monitored rates really really ran up the tenure was going crazy so far was going crazy.

Speaker Change: And so there was a monetary sort of momentary dip in the rates, we elected to use our budget.

Speaker Change: By doing so allowed us to pay down a little bit the four in a quarter.

Aaron Halfacre: And. So I think in that regard, we benefited from it, but we had kind of underwritten this all away.

Speaker Change: And.

Speaker Change: So I think in that regard.

Speaker Change: Benefited from it but we had kind of underwritten. This all away we only did a one year, we could've done a two year, but our view was is.

Aaron Halfacre: We only did a one year, we could have done a two year, but our view was. You know, the time we were doing this at the end of the year, beginning of January, that there was going to be more to shake out. Clearly, the 10 years receded quite a bit since then. So that's a good sign. A lot more ground to cover before year end. So we'll evaluate fresh as it comes to next year. But, you know, our view was didn't want to float it, wanted to hedge it. We told you prior that we would.

Speaker Change: At the time, we were doing this at the end of the year beginning of January.

Speaker Change: There was going to be more to shake out clearly the tenures receded quite a bit since then so that's a good sign a lot of a lot more ground to cover before year end. So we will evaluate fresh as it comes to next year.

Speaker Change: But our view was.

Speaker Change: Didn't want to float it wanted to hedge it we told you prior that we would we had a little bit of a budget allowed for it and so we took the benefit and so I think so.

Aaron Halfacre: We had a little bit of our budget allowed for it. So we took the benefit. So I think that sort of shared. I think that decision, along with the revolver, was us just being really tight about, you know, the near term wins and volatility in the market and just being smart about our balance sheet. You know, as you saw, we did issue equity in the fourth quarter on the ATM. You know, it doesn't sound like much compared to some of our peers at two hundred and eighty seven thousand shares. That was four point six million dollars at sixteen sixteen.

Speaker Change: Sure I think that decision along with our revolver was off just being really tight about.

Speaker Change: The near term wins and volatility in the market and just being smart about our balance sheet.

Speaker Change: As you saw we did issue equity in the fourth quarter on the ATM.

Speaker Change: It doesn't sound like much compared to some of our peers at 200, and I think 287000 shares that was $4 $6 million at $60 <unk>, that's 3% of our market cap so under the radar completely accretively.

Aaron Halfacre: That's three percent of our market cap. So under the radar, completely creatively at prices that we can comfortably, you know, the yield on that equity from a common is far below the yield that we could buy a property at. So we knew we could do that. And so we grew the market cap by three percent in a quarter with no one really even knowing the difference. And so that's something that we're proud of. We think that little tiny actions we're making, like last year when we bought the units back at fourteen eighty that we'd issued at twenty five.

Speaker Change: Prices that we can comfortably the yield on that equity from a common it's far below the yield that we could buy a property out. So we knew we could do that.

Speaker Change: And so we grew the market cap by 3% in a quarter with no one really even knowing the difference and so that's something.

Speaker Change: Something that we're proud of we think that little tiny actions, we're making like last year. When we bought the O P units back at $40 80 that we had issued at 25, we're doing little transactions like that that again art headline grabbing heart big but each dollar that we were recruiting and creating on that is money that's going into our investors' pockets. So.

Aaron Halfacre: You know, we're doing little transactions like that, that, again, our headline grabbing aren't big, but each dollar that we were accruing and creating on that is money that's going into our investors pockets. So I think, you know, discipline wise, we're excited about where we're at. I think there's going to be some opportunities here. It feels I don't know when, but it feels like there's going to be some good, good action in the land. I hope it's in this year. Maybe it rolls into twenty six. But, you know, the status quo I don't see for the industry.

Speaker Change: I think just one wise, where we're excited about where we're at I think there's going to be some opportunities. This year. It feels I don't know when but it feels like there's going to be some good good action in REIT land I hope it's in this year, maybe in the rolls into 'twenty six but you know the status quo I don't see.

Speaker Change: For the industry I think we're going to see a lot of change and Andrew we're ready for it and receptive to it.

Aaron Halfacre: I think we're going to see a lot of change and we're ready for it and receptive to it.

Operator: So with that operator, why don't we open up for Q&A? Thank you. At this time, we'll be conducting a question and answer session.

So with that operator, why don't we open up for Q&A.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone. Any confirmation, tell them to indicate your line is in the question. You may press star 2 if you'd like to remove your question. One moment, please, while we poll for questions.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the Q1 moment. Please while we poll for questions.

Rob Stevenson: Our first question comes from Rob Stevenson with Jammie Montgomery Scott. Please proceed with your question. Good morning. Aaron, any updates on the timing of the sale of the Costco asset and the solar turbine split and sale at this point?

Rob Stevenson: Our first question comes from Rob Stevenson with Janney Montgomery Scott. Please proceed with your question.

Rob Stevenson: Good morning.

Speaker Change: And any updates on the timing of the sale of the Costco as said in the solar turbines split himself at this point yeah, Yeah. So costco.

Aaron Halfacre: Yeah.

Aaron Halfacre: So, Costco, you know, we expected to Closed on its original thing, which I want to say is incredibly wrong, right? July. They do have three options. And the three options, the first option, they get, I think it's split, where half, if they pay the extension option. The other half of it goes towards their purchase price, the other half we keep. The other two options we get to keep fully. We've had conversations with them a couple of weeks ago, in fact, everything looks like a go. The only reason they might delay a little bit would be just because of logistics with the city, but everything looks to be fine.

Rob Stevenson: We we expect it to.

Rob Stevenson: Close on its original thing, which I want to say it's great.

Rob Stevenson: All right July they do have three options and the three options.

Rob Stevenson: First auction.

Rob Stevenson: They get a I think its split where have they if they pay the extension option.

Rob Stevenson: Half of it goes towards their purchase price that would have we keep the other two options we get to keep fully we've had conversations with them a couple of weeks going back.

Rob Stevenson: Look everything looks like a go but the only reason they might delay a little bit would be just because of logistics of the city, but everything looks to be fine in the in the scenario where they they do extend there. So just to be clarify there $1 $7 million hard already so they can't get that back and if they do.

Aaron Halfacre: In the scenario where they do extend, so just to be clarified, they're $1.7 million hard can't get that back. And if they do hit their extensions, that's $650,000 additional in our pocket. So in some ways, we'd be fine if they extended, but I don't think they will.

Rob Stevenson: Their extension that's $650000 additional in our pocket.

Rob Stevenson: So.

Rob Stevenson: In some ways, we'd be fine if they extended.

Rob Stevenson: But I don't think they will as it relates to solar and Wsb's split we're going through that with the city.

Aaron Halfacre: As it relates to solar and WSP split, we're going through that with the city. It's been a long process. I think we're getting near and near that end. There is a potential. We don't know for sure, but Solar said they might want to uh... have a little bit longer on the lease to clean things out. So they might add three or four months to that lease just to kick it out a little bit longer for them to do what they need to do in their move out. But we've had several excellent unsolicited offers on that property, but we're waiting to get it split.

Rob Stevenson: That's been a long process I think we're getting near near that and are there.

Rob Stevenson: There is a potential we don't know for sure, but solar so they might want to.

Rob Stevenson: Had a little bit longer on the lease to clean things out so they might add three or four months to that lease just to kick it out a little bit longer for them to do what they need to do in their move out but.

Rob Stevenson: But we've had several excellent unsolicited offers on that on that property, but we're waiting to get it split and we think theres going to be more value extraction from that because of the solar property would be you know an owner owner user most likely flex space and then the woods the AWS T property, which already has it already.

Aaron Halfacre: And we think there's gonna be more value extraction from that because the solar property would be, you know, an owner user, most likely flex space. And then the woods, the WSP property, which already has an in-place lease that we recently needed. So we're moving forward with that.

Rob Stevenson: The in place lease that we recently renewed so we're moving forward with that I'd like to see that that happens in six months, but you know you I don't know how to handicap municipalities. They're just they're just a different beast.

Aaron Halfacre: I'd like to see that that happens in six months, but, you know, I don't know how to handicap municipalities. They're just a different piece.

Aaron Halfacre: Okay, and then what about the schedule closing date is August 15th for Costco. Okay, and then what about the OES purchase option exercise? Is that increasingly likely given the commentary in the supplemental? How are you guys feeling about that? And what would be the timing on that likely at this point? You know, so they've informed us that they started their process to get an appraiser. And so which is the first step, we have not gotten an update as to that, but they would they would get an obtain third party appraiser service, they would get an appraisal, they would evaluate that appraisal relative to the contractual price.

Rob Stevenson: Okay, and then what about me quote the scheduled closing date is August 15 for Costco.

Rob Stevenson: Okay, and then I bet.

Rob Stevenson: And then what about the Oh, yes purchase option exercise is that increasingly likely given the commentary in the supplemental how are you guys feeling about that and what would be the timing on that likely at this point.

Rob Stevenson: You know so.

They've informed us that they started their process to get an appraiser.

And so which is the first step.

Rob Stevenson: We have not gotten an update as to that but they would they would get and obtain a third party appraiser service. They would get an appraisal they would re evaluate that appraisal relative to the contractual prices set forth if theyre in parameters and they decided they wanted to purchase. It then they put it forward into their budget.

Aaron Halfacre: set forth. If they're in parameters and they decide they want to purchase it, then they put it forward into their budget. It gets And then that budget would get approved for the following year. So this has always been contemplated as a long-tailed process. They, we knew they couldn't start the process in earnest last year until after their budget cycle had started. You know, I think some of the wildcards that, you know, could go both ways, and this is, again, I'm trying to read tea leaves, is, you know, obviously the state of California has a fairly large budget deficit for, you know, so does that weigh on their decision to purchase, or the timing of when it?

Rob Stevenson: <unk>.

Rob Stevenson: And in that budget would get approved for the following year. So this has always been contemplated as a long tailed process.

Rob Stevenson: We knew they couldn't start that process in earnest last year until after their budget cycle. It started.

Rob Stevenson: I think some of the Wildcards are that.

Rob Stevenson: You know it could go both ways and this is again I'm trying to read tea leaves US you know obviously the state of California has a fairly large budget deficit.

Rob Stevenson: For.

Rob Stevenson: So does that weigh on their decision to purchase.

Rob Stevenson: Or the timing of when it is the flip side I think we just saw some mandate that government workers go back to the office.

Aaron Halfacre: At the flip side, I think we just saw Newsom mandate that government workers go back to their office, which is an interesting signal for that state. The other thing is, you know, this is the Office of Emergency Services. This is the department that receives both state and federal funding for natural disasters, which we just got one done in the Palisades, and there's quite a few of these at hand. So this is, if there are budget constraints in the broader California budget, this is one that probably is still well-funded because of the severity of natural disasters and the impact that they have on lives.

Rob Stevenson: Which is an interesting.

Rob Stevenson: Signal for for for that state, but the other thing is you know this is the office of emergency services. This is the department that receive both state and federal funding for natural disasters, which we just got one down in the Palisades and Theres quite a few of these at hand. So this is if there are budget constraints in the broader.

Rob Stevenson: California's budget. This is one that probably is still well funded because of the.

Rob Stevenson: The severity of natural disasters and the impact that they have their lives. So we feel comfortable but we are going to be.

Aaron Halfacre: So we feel comfortable, but we are going to be, you know, flying blind because it is a government process, and they have their procedures that they can follow.

Rob Stevenson: Flying blind because it is a government process and Bayer they have the they are procedures that they can follow so my guess is we probably won't know anything if we do know anything at all until summer.

Aaron Halfacre: So my guess is we probably won't know anything, if we do know anything at all, until summer. And then it would, and even if that was the case, then it would probably be, you know, they probably, they always signaled that if they were going to purchase it, it would be, it would be within that first four-year window. That's how the right is to do so. But right now, nothing to suggest that they're not doing it. We're waiting to hear back from them on their, selecting their appraisal, which I think is a good sign, because if they didn't want to do it, they wouldn't have engaged in that process.

Rob Stevenson: And then and even if that was the case then it would probably be they probably they always signaled that they were going to purchase that it would be it would be within that first four year window and that's how the REIT is to do so but right now nothing to suggest that they're not doing it.

We were waiting to hear back from them on their selecting or appraisal, which I think is a good sign because if they didn't want to do it they wouldnt have engaged in that process.

Aaron Halfacre: Okay, that's helpful.

Rob Stevenson: Okay. That's helpful and then in the K you guys indicated at Fuji film.

Aaron Halfacre: And then in the K, you guys indicated that Fujifilm exercise their lease option there. Is that just a standard increase? Or is there anything abnormal about that option exercise that would impact earnings more than or less than what we would think? So, yeah, so they have two seven-year options, it is a, the seven, we have to establish mutually. We have to agree upon a rent. That rent is established at 95% of fair market value. So that's the mechanism in that place. So it's not a contractually predefined dollar amount. So the process will start to, you know, obviously both sides have different opinions of what fair market value is, and we have to sort of come to a compromise and there's a mechanism to do that.

Rob Stevenson: <unk> option.

Exercise their lease option. There is that just a standard increase or is there anything abnormal about that option exercise they would impact earnings more than or less than what we would think.

Rob Stevenson: So yes, so they have $2 seven year options. It is a.

Rob Stevenson: I mean, we have to establish mutually.

Rob Stevenson: Oh, we have to agree upon a rent that.

Rob Stevenson: Rent is established at 95% of fair market value.

Rob Stevenson: So that's the that's the mechanism in place so it's not a it's not a contractually pre defined.

Rob Stevenson: Dollar amount so.

Rob Stevenson: The process will start to.

Obviously, both sides have have different opinions of what fair market value is and we have to sort of come to a compromise and there is a mechanism to do that and then once we do that it'll be the rent going forward for the next seven year option there.

Aaron Halfacre: And then once we do, that'll be the rent going forward for the next seven year option. They're, you know, they're a fantastic tenant. They have been in that building for a while. They have, you know, put a lot of their own capital into that. And we'd love nothing more to see them stay longer. We would have loved to have a longer term lease, but you know, the option seven year and I get it given the financial world and how most CFOs like seven or five years typically. And so we look forward to having that resolved next year quickly.

Rob Stevenson: They are there they are a fantastic tenant they have.

Rob Stevenson: Building that building for a while they have put a lot of their own capital into that.

Rob Stevenson: And we'd love nothing more to just see them stay longer we we would've loved to have a longer term lease, but the options of seven year and I get it given the financial world and how most most cfos like seven or five years typically and so we look forward to.

Rob Stevenson: And having that resolved here quickly.

Aaron Halfacre: Okay, so that'll be a flat lease not no bumps once you establish a price. No, no, that's there's a there's a mechanism for bumps.

Okay. So that'll be a flat lease not no bumps once you establish a price off of that.

Rob Stevenson: No no that's there's a there's a mechanism for bumps as well.

Aaron Halfacre: Okay, and then with that Fujifilm lease done, you know, what are recent conversation with Northrop Grumman, who I think is the other significant expiration you have over the next couple of years that's not in the disposition box? Yeah, so I mean, too soon to have conversations about renewals or exercise, you know, things like that. They, they, they're coming up. So That said, I mean, you, you, you know, you kind of look at what has been done, there was just we just there was just a million dollars of dollars put into replace the generator into that property, they also went to us and told us that they every time they make a change, they have to like interior change, they have to notify us, they don't have to get our approval, but they have to notify us.

Rob Stevenson: Okay, and then with that Fujifilm lease done you know what her recent conversation with Northrop Grumman, who I think is the other significant exploration you have over the next couple of years, that's not on the disposition pool.

Rob Stevenson: Yeah, So I mean.

Rob Stevenson: Too soon to have conversations about renewals or exercise things like that they they they're coming up so.

Rob Stevenson: That said I mean, you you know.

Rob Stevenson: You kind of look at what has been done there was just we just there was just a $1 million or.

Rob Stevenson: Dollars put in to replace the generator and do that.

Rob Stevenson: Property. They also went to us and told US that they had every time they make a change they have to.

Rob Stevenson: Tier change they have to notify us they don't have to get our approval, but they have to notify us and so they have been expanding.

Aaron Halfacre: And so they have been expanding and doing more build out. So they do classified primary electronics in there. And and so they've expanded some of their, they've retrofitted additional space that originally when I think when we bought it, well, we didn't buy it. team had bought it. It was largely like an engineering office slash HR slash it was kind of like a, like an office. And they during COVID, they cleared all that out. And then increasingly, what they've been doing is they've been putting lab space in there. So they'll get a contract, they'll add, you know, 10,000 feet, they'll retrofit that for a lab, they'll do more and more.

Rob Stevenson: And doing more build out so they do classified.

Rob Stevenson: Primary electronics in there.

Rob Stevenson: And so they've expanded some of their they've retrofitted additional space originally when I think when we bought it well we didn't buy the legacy.

Speaker Change: Jim had bought it it was largely.

Speaker Change: Like an engineering office Slash HR slash it was kind of like a like.

Speaker Change: Office and they during COVID-19 they cleared all of that out and then increasingly what they've been doing as they've been putting lab space in there so that will get a contract they will add.

Speaker Change: 10000 feet retrofit that for a lab to do more and more so they are increasingly added more and more lab space into that into that space. We're not even allowed to go into we don't know what theyre doing exactly because you got to have top secret clearance.

Aaron Halfacre: So they've increasingly added more and more lab space into that into that space. We're not even allowed to go in, we don't know what they're doing exactly. So, but they have put in quite a bit of money in the last 12 months into their property. And they, you know, recently expanded some more. So those suggest to us that they probably are here to stay. We're going to have a very open conversation with them as we get closer to that. That's probably not going to be until end of year or early next, just by the nature of how these work.

Speaker Change: So, but they have put in quite a bit of money in the last 12 months ago that property.

Speaker Change: And they recently expanded some more so those suggest to us that they probably are here to stay we're gonna have a very open conversation with them as we get closer to that that's probably not going to be until end of year early next.

Speaker Change: Just by the nature of how these work.

Aaron Halfacre: But other than that, we don't, we don't see. Candidly, if they left, we wouldn't be we won't we won't cry. We've had a lot of interest. We believe it or not, someone would like to develop that in that whole space into apartments. But so we're okay. But we think there's Okay, that's helpful.

Speaker Change: But other than that we don't we don't see.

Speaker Change: Candidly.

Speaker Change: Lastly, we wouldn't be we won't we won't cry.

Speaker Change: We've had a lot of interest.

Speaker Change: Believe it or not someone who would like to develop that in that whole space into apartments.

Speaker Change: But so were okay, but we think they are saying.

Speaker Change: Okay. That's helpful. And then last one for me right how should we be thinking about G&A in 2025. So you've got you know, especially I guess the place. The first place to start is the noncash G&A you've got these class X O P units to management is that just being ratably amortized there.

Ray Pacini: And then last one for me, Ray, how should we be thinking about G&A in 2025? So you've got, you know, especially, I guess, the first place to start is the non-cash G&A, you've got these class X OP units to management, is that just being ratably amortized there over the next five years? And so what should I be looking for versus the 1.6 million that you did in non-cash or stock compensation expense in 24 for 25, given that? Yeah, those will be amortized over the over the service period. So, you know, in round numbers, I think it's around two and a half million a year.

Over the next five years and so what should I be looking for versus the $1 6 million that you did a noncash stock compensation expense in 'twenty four for 25 given that.

Speaker Change: Yeah, those will be amortized over the over the service period.

Speaker Change: So you know in round numbers I think it's around.

Speaker Change: Two and a half a million a year.

Ray Pacini: And then the cash DNA will go down because, you know, we saw it in the 10K, but Sandra Sudo, our chief accounting officer, is going to retire at the end of this month. So, she'll be leaving and then her financial reporting person is also going to be leaving at the end of the month. And then we have one other person leaving at the end of the month. end of April. So we're going to reduce the staff size by three. We'll have nine employees. So that'll provide savings in the GNA fund as well.

Speaker Change: And then the cash G&A will go down.

Speaker Change: Because oh you saw it in the 10-K.

But sandra pseudo our chief.

Speaker Change: Chief Accounting officer, who is going to retire at the end of them.

Speaker Change: This month.

Speaker Change: So she'll be leaving and then her.

Speaker Change: Financial reporting personnel.

Speaker Change: <unk> is also going to be leaving at the end of the month and then we have one other person, leaving your younger.

Speaker Change: End of April so we're going to reduce the staff size by three will have nine employees.

Speaker Change: So that will provide.

Speaker Change: Provide savings on the G&A front as well.

Ray Pacini: Okay. And then I assume that Aaron not getting a salary or bonus will also sort of go to subtract out from the $6.3 million that you guys had this year. Right. Okay, so non-cash goes up two and a half million per year to call it in the neighborhood of four-ish, and then cash goes down. No, you misinterpreted me. Two and a half million is the absolute number, not the increase. Okay. So that's two and a half, and then the cash will go down. for the departures and for Aaron moving from cash to non-cash stocks. Correct.

Speaker Change: Okay, and then I assume they are not getting a salary bonus will also sort of go to subtract out from the $6 3 million that you guys had this year.

Speaker Change: Right.

Speaker Change: Okay. So noncash goes up two and a half million per year to call. It in the neighborhood of four ish and then cash goes no you're misinterpreting.

Speaker Change: Two and a half million dollars is the absolute number about the inquiry okay.

Speaker Change: Okay. So that's two and a half and then the cash will go down.

Speaker Change: For the departures and for air and moving from cash too.

Speaker Change: Noncash stock.

Ray Pacini: Yes.

Speaker Change: Correct, yes, okay.

Ray Pacini: Okay. And then the last one on that, are you guys still running, you know, sort of 30% of the year in the first quarter? Is that still, you know, the way that all of it sort of flushes out with this stuff in terms of the accruals and everything, that it all is going to still happen in the first quarter? And so big number and then subsequently smaller numbers throughout the year? Yeah, I mean, the first quarter includes the, you know, the bulk of the audit expense, and then it includes a lot of tax consulting because we, you know, have to issue K-1 this month and get ready to substantially file the tax return.

Speaker Change: Then the last one on that are you guys still running you know sort of 30% of the year in the first quarter or is that still you know the way that all of it sort of flushes out with this stuff in terms of the accruals and everything but it all it's going to still happen in the first quarter and so a big number and then subsequently smaller numbers throughout the year.

Speaker Change: Yeah, I mean the.

Speaker Change: First quarter includes the you know the bulk of the audit expense.

Speaker Change: And then it includes a lot of tax consulting because we have.

Speaker Change: Nishu K ones this month.

Speaker Change: Get ready to substantially file the tax return.

Ray Pacini: So yeah, it will be front-loaded again, I'm not sure if it's exactly 30%, but it'll include those additional professional fees, which are higher than the rest of the year.

Speaker Change: So yes, it will be promoted again I'm not sure exactly exactly 30%, but it will include those additional professional fees.

Speaker Change: Which are higher than the rest of the year.

Ray Pacini: Okay.

Ray Pacini: Thanks, guys. I appreciate the time this morning.

Speaker Change: Thanks, guys I appreciate the time this morning.

Ray Pacini: Thanks.

Speaker Change: Thanks.

Operator: Our next question comes from Gaurav Mehta with Alliance Global Partners. Please proceed with your question. Thank you. Good morning. I wanted to ask you on the $600,000 acquisition that I think you have under contract. I think in the press release you talked about identifying a development opportunity in land parcels. Is that something you guys plan to do yourself or is that something for the future? Yeah, so just to give clarity, so, you know, obviously, we had alluded to this, a free transaction prior quarter, we had signed an agreement, we were going through due diligence, when we got there, we were like, well, there's a very large attached parcel to it.

Speaker Change: Our next question comes from Gaurav Mehta with Alliance Global Partners. Please proceed with your question.

Gaurav Mehta: Thank you good morning.

Gaurav Mehta: I wanted to ask you on on the $600 acquisition that I think you have under contract I think in the press release, you talked about identifying a development opportunity.

Speaker Change: Atlanta ourselves is that something you guys plan to do yourself or is that something for the future.

Speaker Change: Yeah. So just to give clarity. So you know obviously, we had alluded to this a pre transaction prior quarter.

Speaker Change: We had signed the agreement we were going through due diligence when we got there we like where there's a very large attached parcel to it.

Gaurav Mehta: We wanted a little bit more time to explore, we actually had a conversation with the tenant, the tenant has the existing tenant on the built portion has expressed an interest to take down. We could build approximately 60,000, 60 to 100,000 square foot facility next door. And they expressed an interest in having some of that space so that they could consolidate their operations in one location because they have their leasing somewhere else. And we've, you know, so we spent time talking to them, we spent time talking to some local industrial brokers in the market, we also spent some time looking at sort of developers.

Speaker Change: We wanted a little bit more time to explore we actually had a conversation with a tenant that tenant has the existing tenant on the adult portion as expressed an interest to take down.

Speaker Change: We could build approximately 60060 to 100000 square foot facility next door.

Speaker Change: And they they expressed an interest in having some of that space. So that they can consolidate their operations in one location because they have a they're leasing somewhere else.

Speaker Change: And we've.

Speaker Change: So we spent time talking to them, we spent time talking to some local industrial brokers in the market and we also spent some time.

Speaker Change: Looking at sort of developers so we definitely think there's an opportunity there it.

Aaron Halfacre: So we definitely think there's an opportunity there. It doesn't mean we're going to pull it today, you know, but how we would do that, we would, we have experience in here, we would typically work with a turnkey builder that, you know, would work with us all the way through. So, you know, we're not, we're not the contractor on this, obviously, and have it developed concurrent with leasing activity. Because a lot of the properties we've acquired have large land footprints. And, you know, we, for instance, we have a asset in the Carolinas, we've been approached for a carve out to build an industrial facility.

Speaker Change: It doesn't mean, we're going to pull it today.

Speaker Change: How we would do that we would.

Speaker Change: We have experience in here, we would typically work.

Speaker Change: With a turnkey builder.

Speaker Change: That would work with us all the way through so we're not we're not the contractor on this obviously.

Speaker Change: And habit developed concurrent with wood with leasing activity.

Speaker Change: So we think that's something that we'll do when we do it where we're gonna have to huddle, we're having our offsite strategic team meeting here in April we're going to discuss that some other ones.

Speaker Change: And it also highlights we actually have four of those three others.

Speaker Change: These types of possibilities.

Speaker Change: All of the properties, we've acquired have large land footprints and we for instance, we have a asset in the Carolinas, we've been approached for a carve out to build an industrial facility. So we're looking at those those are ways to obviously.

Aaron Halfacre: So we're looking at those, those are ways to obviously generate AFFO growth without necessarily simply buying something.

Speaker Change: Generate alpha.

Speaker Change: <unk> growth without necessarily simply buying something.

Aaron Halfacre: And, you know, we'll look at those strategically over the course of this year, for sure, and decide which ones we want to pull the trigger on. Okay, great.

Speaker Change: And Joe.

Speaker Change: We'll look at those strategically over the course of this year.

Speaker Change: For sure and decide which ones we want to pull the trigger on.

Speaker Change: Okay, Great second question.

Aaron Halfacre: Second question, Aaron, I wanted to ask you around your comments on the acquisition market. You know, I guess, you know, what are some of the indicators you know, you're looking at to get more active in the acquisition market? Is it like you need like better cap rates or more product flow or maybe better cost of capital to do a creative acquisition? Yeah, you know, I think We've honed and re-honed our strategy as time goes on. I think now, whereas before we bought some smaller assets, you know, $5-$6 million assets, I think now you have to be really sterling white for me to get smaller.

Speaker Change: I wanted to ask you around your comments on the acquisition market.

Speaker Change: I guess you know.

Speaker Change: One of them other indicators, you're looking at to get more active in the acquisition market is it like you need like better cap rates on more product floor, maybe better cost of capital to do accretive acquisitions.

Speaker Change: Yeah, you know.

Speaker Change: I think.

Speaker Change: I see.

Speaker Change: We've honed and Rehomed our strategy as time goes on I think now, whereas before we bought some smaller assets $5 6 million our assets I think now you have to be really Sterling white for me to get smaller or not because I don't have a problem with smaller assets just because I think just generally speaking.

Aaron Halfacre: Not because I don't have a problem with smaller assets, it's because I think just generally speaking they don't appear as institutional. So, we're sort of looking more for that $10-$30 million size. You get above $30 million if it's a single asset, it feels just way too big. Candidly, $30 million is probably too big unless it's something beneficial. You know, if it's a portfolio of assets, like, you know, our Lindsay is multiple assets and so they all break up. But it's sort of that $10-$25 million, I guess, would probably be the sweet spot. So, that's been a filter that we've kind of looked at.

Speaker Change: Third.

They don't appear as institutional so sort of looking more for that 10 tender.

Speaker Change: I would say $30 million size when you get above 30, if it's a single assay that feels this way too big candidly thirties, probably beg unless it's something you know something beneficial you know if it's a portfolio of assets like you know our Lindsay is like multiple asset since over there I'll break up but its sort of that 10 to 25, I guess it'd probably be the sweet spot. So that's been a filter that we kind of looked at.

Aaron Halfacre: And right now, in this environment, you know, looking at some of the deals that are coming out, they're PE-led and you're like, okay, why are you selling this? Such a shitty rating bar. And the answer probably is they, they don't care. They just want the money and they're going to, you know, do something else with it. And that's not necessarily a good reason for a landlord to buy. Right. Uh, and so I think we've been, that's motivation is a big part of it. It's like, okay, well, why are you selling it? Probably one of the darkest hours, uh, you have the absolute most clarity and you're wanting to try, you're just, you know, you just bought this, this company.

Speaker Change: And right now in this environment you know you know looking at some of the deals that are coming out there.

Speaker Change: And you like them.

Speaker Change: Hey.

Speaker Change: Why are you selling this in such a shitty rate environment.

Speaker Change: And the answer probably is they they don't care. They just want the money and theyre going to do something else with it.

Speaker Change: And that's not necessarily a good <unk>.

Speaker Change: Reason for a landlord to buy right.

Speaker Change: And so I think we've been that's motivation is a big part of it it's like okay, well why are you selling it probably one of the darkest hours.

Speaker Change: You have the absolute most clarity and you're wanting to try you. Just you know you just bought this this company.

Aaron Halfacre: And I get it. It's a cash out strategy. Uh, but it's a very, it could be a very expensive one. And so we, we think, worry about, Hey, that might be on, that might be, it might price talk a seven and a half or seven and a quarter, but that might really be a nine cap and you won't find out until after. And so we want to be careful of that, because, you know, look, you have to be cognizant that in the manufacturing space, you have the binary risk is much larger than it is, say, a Walgreens, right?

Speaker Change: And I get it it's a cash out strategy, but it's a very it could be a very expensive one and so we think worry about that might be on that might be a nice price talk a seven and a half or seven in a quarter, but that might really be at nine cap and you won't find out until afterwards, and so we wanted to be careful of that because.

Speaker Change: You have to be cognizant of that in the manufacturing space you have the binary risk is much larger than it is in say a walgreens.

Speaker Change: Re letting it is going to be a lot harder. So you have to be more scrutiny.

Aaron Halfacre: Reletting is going to be a lot harder. So you have to be more scrutiny. So I think some of the, candidly, the inventory we've seen just hasn't been super compelling that says, yeah, screw it, we're gonna go get it. You know, if it, if there's one that looks good, and we've, you know, we want to buy, we're willing to buy it, just that there's no sense in just buying something that doesn't seem really compelling, because I'm not, I'm buying this, look, you know, my net worth is tied to this, all our investors' net worth is tied to this.

Speaker Change: I think some of the candidly the inventory we've seen it just hasn't been super compelling that says yeah. It's good we're going to go get.

Speaker Change: If there's one that looks good and we've you know.

Speaker Change: We want to buy we are willing to buy it just that there's no sense in just buying something that doesn't seem really compelling because.

Speaker Change: I'm not buying us.

Speaker Change: You know my net worth is tied to this.

Speaker Change: All our investors networth tied to this there's a lot of people, who arent institutional who are already named who don't pay attention to what you publish and they don't look at the stock market, but they care very deeply about the sanctity of what they own.

Aaron Halfacre: There's a lot of people who aren't institutional, who aren't owner named, who don't pay attention to what you publish, and they don't look at the stock market, but they care very deeply about the sanctity of what they own. And, you know, that's how we got to, we got to be mindful of, right, that this is real people's money, and that we have to protect it, and protecting it is not the same necessarily as always growing it for the sake of growth, that we do want to grow it, we do want to make it more valuable, but we have to protect the house.

Speaker Change: And you know.

Speaker Change: That's how we got we got to be mindful right that this is real people's money.

Speaker Change: And that we have to protect it and protecting it is not the same necessarily is always growing it.

For the sake of growth that we do want to grow it we do want to make it more valuable, but we have to protect the house.

Aaron Halfacre: And sometimes the best way to do that is not put new shit in the house that isn't good, and, or isn't really compelling. And so, look, cost of capital certainly matters. You know, I think right now it's been a thin pipeline of activity. I think we'll see it more robust, and there'll be a lot more choice, because the really smart folks are going to probably, who want to sell their properties, are going to wait a little bit, if I were them, just like we're waiting a little bit, so that's kind of how we think about it.

Speaker Change: And sometimes the best way to do that is not put new <expletive> in the house that isn't good and or isn't really compelling and so the cost of capital certainly matters.

Speaker Change: You know I think right now it's been a thin pipeline of activity I think we'll see it more robust and there'll be a lot more choice because they're really smart folks are going to probably who want to sell their properties are going to wait a little bit if I were them just like we're waiting a little bit. So that's kind of how we're thinking about.

Aaron Halfacre: All right, thanks for that, Culler. That's all I have. Thank you.

Speaker Change: Alright, thanks for that color, that's all I had.

Speaker Change: Thank you.

Steve Chick: Our next question comes... Yes, our next question comes from Steve Chick with Sebas Capital, Sebas Garden Capital. Please proceed with your question. Hey, thanks. Aaron, we appreciate the patience and I'm glad you discussed the upgrade transaction head on in the press week. So it's helpful.

Speaker Change: A question kind of a more.

Steve: Yes. Our next question comes from Steve <unk> with <unk> capital.

Speaker Change: Garden Capital. Please proceed with your question.

Speaker Change: Hey, thanks.

Speaker Change: Aaron we appreciate the patience and I'm glad you discussed the our pre transaction head on in the press release that was awful.

Ray Pacini: I just have some questions, numbers questions, you know, maybe for Ray. The ABR at the end of the year was a little lower than last quarter, despite the same number of properties. I'm assuming there's kind of some assumptions in there from maybe Costco and Endicott, but can you just kind of reconcile that? That'd be helpful. And that may be actually what you're anticipating within your AFFO guidance for 2025 for ABR. So the decrease reflects the fact that Costco, their lease expires at the end of July and Solar's lease also expires at the end of July.

Speaker Change: I've got some questions numbers questions.

John Rainey: Maybe for Ray.

John Rainey: The ADR for at the end of the year had it was a little lower than last quarter.

John Rainey: Despite the the same number of properties I'm, assuming there's kind of some assumptions in there for maybe Costco and and endocarp, but can you just kind of reconcile that that'd be helpful. And then maybe actually what you're anticipating for within your <unk> guidance for 2025 offer him AVR.

John Rainey: So the decrease reflects the fact that Costco there.

John Rainey: Lease expires at the end of July.

John Rainey: And so as Leafs also expires with the other dogs. So those are the.

Ray Pacini: So those are the things that are driving the decrease. You know, they're partially offset by ongoing rent bumps, but that's basically the drive. And what was the other part of your question? I don't know that we've given ABR for guidance. Yeah, we have a... Well just, I guess, is Endicott in there as well? The small sale? Yes, it was, but it really is a small number. Yeah. Okay. Right. And can you remind me, is this, you know, this kind of steady state ABR number, it doesn't include kind of rent bumps or it's not forward looking.

John Rainey: Things that are driving that decrease.

John Rainey: Were partially offset by ongoing rent bumps, but that's basically the driver.

John Rainey: Hum.

John Rainey: What was the other part of your question.

John Rainey: Don't know that we've given AVR for guidance.

John Rainey: Yes.

John Rainey: We have.

Speaker Change: Well, just I guess, it was endicott and there as well.

John Rainey: The small cell.

John Rainey: Yes, it was but it really is a small number.

John Rainey: Yeah, Yeah, okay.

John Rainey: Right and can you remind me is this this is kind of steady state AVR number. It doesn't include kind of rent bumps or it's not forward looking is it is it can be argued.

Ray Pacini: Is it an ABR kind of... Well, it's the next 12 months. So it's the rent we expect to receive. from January 1st to December 31st of this year. Yeah, so any any any bumps that come into play this calendar year are reflective because that it's what we're basically taking is a 12-month rent roll based on how how we contractual record. Yep. Okay. All right. That's helpful. And then in the assets held for sale at year-end on the balance sheet, it looks like I think it's somewhere in like $22 million. Is Endicott in there and what is in that number?

John Rainey: It's the next 12 months. So it's the revenue you expect to receive.

From January one to December 31 of this year.

John Rainey: Yeah, so any any any bumps that come into play discounter.

John Rainey: <unk> are reflective because that is one of our days, we're taking as a 12 month rent role based on how how we the contractual rents right.

John Rainey: Right.

John Rainey: Yep, Okay, Alright, that's helpful and then in the assets held for sale at year end.

John Rainey: On the balance sheet. It looks like I think it's somewhere in like $22 million is is that a kind of narrow and what what is in that number.

Ray Pacini: It's just Costco. Endicott didn't have to come along until after the year ended it closed. The way the GAAP rules work is you have to be committed to a sale as of the balance sheet date to include it in asset held for sale. So we didn't have discussions with the buyer didn't come to us until January. So that's why Endicott's not in that number. So just Costco. Gotcha.

John Rainey: It's just Costco and because didnt have come along until after the year ended the close.

John Rainey: The way the GAAP rules work is you have to be committed to sale as of the balance sheet.

John Rainey: Included in assets held for sale.

John Rainey: So we didn't have discussion with.

John Rainey: The buyer didn't come to us until January.

John Rainey: That's why the cost is not in that number so just costco.

Ray Pacini: Yeah, I would point out that for first quarter, in January this year, we did, we have taken Calera to market. So that's out in the process right now. So that that will show up for held for sale on first quarter numbers. But it's early I mean, we just took it to market less than a month ago. Oh, gotcha. Okay, that was actually my follow up on that. Do you have a, I mean, are you able to say, you know, with the Cushman valuation that was the appraisal recently done, how did Clara come out within that, I guess, relative to its book value?

John Rainey: Got you yeah, that's all I ever quite out of that for first quarter.

John Rainey: In January of this year, we did we have taken Colorado market. So thats out in the process right now.

John Rainey: So that that will show up for held for sale on first quarter numbers.

John Rainey: But it's early I mean, we just took it to market and a little less than a month ago.

Speaker Change: Oh got you Okay that was actually my follow up on that do you have a.

Speaker Change: Are you able to say with the cushman valuation that Mr. Appraisal recently done how did Clara come out within that I guess relative to its book value can you speak to that.

Ray Pacini: Can you speak to that? No, there was, there was, if you're asking if there was an impairment, there was no related impairment associated with the valuation. So it was the valuation that Cushman did was remains above book value. The marketing process that we're having is first focused on strategic growers of sort of you know, sort of the same ilk. And then from there, the second round is sort of marijuana growers, which are legalized in Minnesota. And then from there, it would be just sort of general industrial use. So we're running through that process right now.

Speaker Change: There was there was if you're asking if there was an impairment there was no related impairment associated with the valuation.

Speaker Change: So it was the devaluation that Cushman did was remains above our book value.

Speaker Change:

The marketing process that we're having is first focus on strategic growers.

Speaker Change: Sort of.

Speaker Change: You know sort of the same ilk and then from there in the second round of sort of marijuana growers, which are legalized and in Minnesota and then from there. It would be just sort of general industrial use so we're running through that process right now.

Ray Pacini: You know, our broker buys, it's probably a six to nine month sales process. It's hard right now in the winter, obviously there. So it's sort of been a little bit of soft marketing, but you know, like I don't know what the outcome will be on that. What I can tell you is that is. Whatever dollar value we get out of that, that is dollars that aren't earning a FFO right now, and so we look forward to getting that redeployed and putting that money to work, and we have not made any assumptions in our numbers of that happening just yet.

Our broker buys its probably a six to nine months sales process.

Speaker Change: Hard right now in the winter, obviously, there so it's sort of been a little bit of thought marketing but.

Speaker Change: But I I don't know what the outcome will be on that what I can tell you is that is whatever dollar value. We get out of that that is dollars that are already right now and so we look forward to getting out redeployed in putting that money to work and we have not made any assumptions in our numbers.

Speaker Change: That happening just now.

Ray Pacini: No, that's, that's good. It's there. Because I think the book value is somewhere in the area nine to 10 million. So it sounds like you'd be expecting the worth of that sometime over the next six to nine months, assuming the process goes as yet. I don't have any expectations right now until I, you know, the market's weird. And we're going to see what we get and then we'll go from there. But my only desire is to get the most we can get. But I don't know. I don't have the. Okay.

Speaker Change: No. That's that's good fair because.

Speaker Change: Because I think the book value was somewhere in the area of nine to 10 million. So it sounds like you'd be expecting north of that.

Speaker Change: Time over the next six to nine months with some of the process goes as you know.

Speaker Change: I don't have any expectations right now until you know the market's weird and we're going to see what we get and then we'll go from there but.

Speaker Change: Look I my only desires to get the most we can get but I don't know I don't have an expectation of.

Speaker Change: Yes.

Ray Pacini: A couple more, if I could. I'm wondering if it makes sense, you know, with the preferred coming up in a callable in 2026, you don't want to advertise in advance, I guess, but does it make sense at some point, if it's below par value, to pick off some of that in the open market? I saw in the credit agreement, you know, in the K, it looks like you released you know, some commentary on that. You could do that if it was funded by the common stock, but I'm just curious if you could speak to that and, you know, any future refinancings as you look out into 26 and 27.

Speaker Change: Okay.

Speaker Change: A couple more if I could.

Speaker Change: On I'm wondering if it makes sense.

With the preferred coming up and are callable in 2026, and you don't want to advertise in advance I guess, but does it make sense at some point, if it's below par value to.

Speaker Change: Pick off some of that in the open market.

Speaker Change: I saw them and we give credit agreement.

Speaker Change: Okay. It looks like you released.

Speaker Change: Some commentary on that you could do that if it was found by the common stock, but I'm. Just curious if you could speak to that and any future refinancings as you look out into 'twenty six 'twenty seven.

Ray Pacini: So I think in the third quarter commentaries in either on the call or commentary, I alluded to, you know, a lot of our thinking is going towards that preferred that becomes callable in September of 26 and our debt maturing in January 27. And so we're very much thinking about decisions today that impact those. And, you know, I think in an ideal context, you know, should we have the means, which candidly is going to probably be equity. But if we had the means to retire the preferred, I would. It was good for us. It served its purpose.

So I think in the third quarter commentaries and neither on the color commentary I alluded to a lot of our thinking is going towards that preferred debt becomes callable in September 26, and our debt maturing in January of 27, and so we're very much thinking about decisions today that impact.

Speaker Change: Those.

Speaker Change: And you know.

Speaker Change: I think an ideal context should we have the means which candidly is going to probably be equity, but if we had the means to retire the preferred I would.

Speaker Change: I E. It was it was good for US it served its purpose, but you know.

Ray Pacini: But, you know, you know, I think it could be priced better if you ever wanted to do one. Like in my ideal context in a world that doesn't currently exist, I would be like public storage used to be and I would have preferred as my sort of first lien position and I had common and I would not have any other debt. And then that would de-risk the nature of this asset class considerably and it would make it very much a perpetual income vehicle, but I'm not there. So, you know, to even get there though, if we were ever to be there, we would have to retire this preferred.

Speaker Change: I think you could it could be price better if you ever wanted to do one like in my ideal ideal contacts in a world that doesn't currently exist I would be like public storage used to be and I would have I would have preferred as my sort of.

Speaker Change: The first lien position in <unk> comment and I would not have any other debt and then that would de risk. The nature of this asset class considerably and it would make it very much a perpetual income vehicle, but I'm not there so can.

Speaker Change: Can you even get there, though if we were ever to be there we'd have to retire this preferred.

Operator: I think you're right. We wouldn't want to advertise in advance if we're gonna be taking things out. We have the flexibility to do so and we'll see. All right, great. Thanks guys. I appreciate it. Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. There were no further questions at this time.

Speaker Change: You're right, we wouldn't want to.

Speaker Change: Advertise in advance if we're going to be taking things out we have the flexibility to do so and we'll see.

Speaker Change: Yes.

Speaker Change: Alright, great. Thanks, guys I appreciate it.

Speaker Change: Thank you.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad one moment. Please while we poll for question.

Speaker Change: There are no further questions at this time I'd like to turn the call back over to management for closing comments.

Operator: I'd like to turn the call back over to management for closing comments. All right, everyone. Thanks so much. Talk again soon and we'll keep our nose to the grindstone and keep working things out. Appreciate your support. Take care. This concludes today's conference. You may disconnect your lines at this time and we thank you for your

Speaker Change: All right everyone. Thanks, so much.

Speaker Change: Just talk again soon and we'll keep our nose to the grindstone and keep working things out I appreciate your support take care.

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.