Q1 2025 Modiv Industrial Inc Earnings Call
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Robert Stevenson, Stephen Chick, Barry Oxford, Bryan Maher, Gaurav Mehta
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Speaker Change: Ladies and gentlemen, greetings and welcome to Modine Industrial Inc. First quarter 2025 earnings conference call.
At this time, all participants are in listen only mode.
Speaker Change: A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please signal the operator by pressing star and zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host John Rainey, Chief operating Officer, and General Counsel of Motiva Industrial. Please go ahead.
Speaker Change: Thank you Ryan and thank you everyone for joining us for motive Industrial's first quarter 2005 earnings call. We issued our earnings release before market opened this morning, and it's available on our website at motive Dot Com I'm.
Speaker Change: I'm here today with air and half Baker, Chief Executive Officer, and Ray Picheny, Chief Financial Officer.
Speaker Change: On today's call management will provide prepared prepared remarks, and then we will open up the call for your questions.
Speaker Change: Before we begin I would like to remind you that today's comments will include forward looking statements under the federal Securities laws.
Speaker Change: Forward looking statements are identified by words, such as will be intend believe expect anticipate or other comparable words and phrases state.
Speaker Change: 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 Barry may vary materially from those kinds of public played it by such forward looking statements.
Speaker Change: 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.
Aaron: I'd like to turn the call over to Aaron.
Speaker Change: Erin Please go ahead.
Aaron: Thanks, John Hey, everyone, I hope you're doing well.
Speaker Change: Uh huh.
Speaker Change: I guess I'll start off by saying it looks like we're at 32261 shares trade. This morning, we're off 25, let's see what it does it's all traffic while we're on this call to see what it does.
Speaker Change: <unk> be interesting to see if it goes up or down probably nothing though because we're right in front of Pal and we are in a weird time, a time of great uncertainty a lot of all the histrionics a lot of.
Speaker Change: Raw emotion.
Speaker Change: The fear and agreed in the Mr. Market is pretty pronounced has been really for quite a while and I think there's probably a lot of fatigue setting in the marketplace.
Speaker Change: As all of you who probably on this call know your long rates or you are certainly in the REIT space research.
Speaker Change: They're a bit of a roller coaster, taking it on the Chin one day doing well the next not a lot of consistency and certainly a lot a lot a lot of consistency relative to the stability of the asset classes that are underneath those I think that's true for us.
Speaker Change: As normal I tried to lay out a lot of detail in our earnings release for those people, who don't ever dialing into the call or who can't.
Speaker Change: Hence it tells them.
Speaker Change: The AI auto enabled transcripts, they don't get it quite right I tried to put it out there. So if someone picks it up today someone's picks it up next week somebody picks it up next year, they have a little bit of a historical record of how we see things and how we see things are are good they are stable.
Speaker Change: They're strong.
Speaker Change: We've got.
Speaker Change: On a weighted average lease term of roughly 14 years and if you actually look at the manufacturing portfolio that's over 20 years.
Speaker Change: And we've got 20 years of tenants, who their rent is a very small percentage of their overall cost input.
Speaker Change: And they're all doing really solidly if not better than solid.
Speaker Change: During this really hard time and so.
Speaker Change: For me there isn't there's a lotta piece a lot of sleep well at night survives.
Speaker Change: It's amusing, sometimes it's frustrating sometimes to see the whip solved in the marketplace.
Speaker Change: But most importantly, I suppose it's interesting right.
Speaker Change: Like for instance, we saw yesterday, a large seller powdered and 4300 44000 shares all about someone made a very.
Speaker Change: Brass balls decision to sell in front of our earnings release.
Speaker Change: I'm curious, but that makes me interested what are they what are they seeing that I don't see that I have so much insight on what do they see is it just fear are they worried about what Paul was going to say do they have a different thesis did they bias at 13 62 on April 7th in there they're collecting gains it's hard to know, but it is it is interesting it is amusing sometimes.
Speaker Change: Frustrating right I would tell you there would be better days it would be far easier to be a private company given the stability of our asset class.
Speaker Change: We believe in the public markets and we believe that there's an opportunity here.
Speaker Change: Yesterday was like the eight largest trading volume days, we've had since inception.
Speaker Change: So not the largest they're not the largest by a long shot.
Speaker Change: And not even the largest down day. So you know we've seen this before.
Speaker Change: I don't I don't predict that it will recover overnight, but I feel very comfortable at these price levels and you know.
Speaker Change: Others will too.
Ray Picheny: That said, let's go to Ray let's go over the financials, a little bit and then I'll come back at a little more commentary and then let's see if we can dive into some Q&A.
Speaker Change: Right.
Speaker Change: Thank you Erinn I'll begin with an overview of our first quarter operating results.
Speaker Change: Rental income for the first quarter was $11 $7 million.
Paired with $11 $9 million in the prior year period.
Speaker Change: It's 2% decrease reflects the disposition of two properties with expiring leases during the first two months of 2024, partially offset by acquisitions of industrial manufacturing property in July 2024, and March 2025.
Speaker Change: First quarter adjusted funds from operations or <unk> was $3 $9 million up 18%.
Speaker Change: With $3 $3 million in the year ago quarter.
Speaker Change: The increase.
Speaker Change: Primarily reflects a $195000 increase in cash rental income.
Speaker Change: 200000 decrease in cash interest expense.
Speaker Change: Wondered 40000 decrease in property expenses.
Speaker Change: On a per share basis.
Speaker Change: It was <unk> <unk> per diluted share for this quarter.
Speaker Change: Which reflects an increase of 483000 shares and the weighted average number of fully diluted common shares outstanding.
Speaker Change: <unk> 29 per diluted share in the year ago quarter.
Speaker Change: The increase in fully diluted shares is attributable well.
Speaker Change: Common shares issued in our a T M.
Speaker Change: Classic class.
Speaker Change: That's O P units issued to employees during the first quarter of 2025.
Speaker Change: Shares issued during March 2025 in connection with the property acquisition through an up REIT transaction.
Speaker Change: The decrease in cash interest expense reflects the new swaps, we put in place in January which were 28 basis points lower than the swaps that were canceled at the end of December 2024.
Speaker Change: The decrease in property expenses.
Speaker Change: Primarily reflects the disposition of an office property in February 24.
Speaker Change: General and administrative expenses remained constant at $2 million for each of the three months ended March 31, 2025, and 'twenty 'twenty four which includes approximately 200000 in the current quarter of nonrecurring separation.
Speaker Change: General and administrative expenses are expected to be lower in future quarters.
Speaker Change: First quarter each year includes higher costs for legal audit and tax professional fees.
Speaker Change: Along with higher social security taxes for employees, who reached the social security Maxwell.
Speaker Change: During the first quarter upon payment of bonuses from the prior year.
Speaker Change: We also reduced our headcount from 12 employees. The nine employees in April 25, and Aaron keeps drawing a salary effective April one 2025 in connection with his grant.
Speaker Change: Six O P units, which will vest over the next five years.
Speaker Change: Now turning to our portfolio. Our 43 property portfolio has an attractive weighted average lease term of 14 two years after including the lease amendments executed in April for our ticket and Santa Clara, California.
Speaker Change: Annualized based rents for 43 properties totaled $94 million as of March 31, 2025.
Speaker Change: 39, industrial properties, representing 80% of ABR and four non core properties record representing 20% of ABR.
Speaker Change: Ultimately, 30% of our tenants or the parent companies have an investment grade credit rating.
Speaker Change: Recognize credit agency triple B minus or better.
Speaker Change: With respect to our balance sheet and liquidity as of March 31, 2025, total cash and cash equivalents were $6 $2 million and we had $280 million of debt outstanding.
That consists of $31 million of mortgages on two properties and $250 million of outstanding borrowings on our $280 million credit facility.
Speaker Change: Do not have any debt maturities until January 2027.
Speaker Change: Based on interest rate swap agreements, we entered into during January 2025, 100% of our indebtedness as of March 31, 2025, all the fixed interest rate with a weighted average interest rate.
Speaker Change: For two 7% based on our leverage ratio of 47, 6% at quarter end.
Speaker Change: As previously announced our board of directors declared a cash dividend for common shares of 975.
Speaker Change: Each of the months of April May and June 2025.
Speaker Change: Representing an annualized dividend rate of $1 17 per share common stock. This.
Speaker Change: This represents a yield of 8% based on the $14 58.
Speaker Change: The price of our common stock yesterday.
Aaron: Now I'll turn the call back over to Aaron.
Aaron: Thanks, Alright.
Aaron:
Aaron: You know.
Speaker Change: As you just heard from Ryan as I said in the press release solid quarter right.
Aaron: <unk> just delivered as we expected nothing.
Speaker Change: Nothing Earth, shattering, but really solid and I think that's that's noteworthy.
Speaker Change: Also consistent in the sense that you know it's been several quarters now where we haven't really necessarily been anxious to to acquire if I.
Speaker Change: Look at OS first quarter results I mean, I think they acquired.
Speaker Change: 200 million or something like that which is a which is really small for them and I think I take the same approach that you know, there's not a lot of value and I've seen other Reits.
Speaker Change: <unk> acquisitions or announce a continued intensive acquisitions and I think some of them had been punished for it yeah, just because of where cost of capital is I think so it helps that we are in a market environment that it's super volatile and it doesn't really make sense unless it's really compelling.
Speaker Change: To pull the trigger.
Speaker Change: I I'm not I'm not immune to the fact that even if we were in a really robust market. We you know we would have to push the envelope a little bit because I don't like Oh, a bunch of that and if you saw from.
Speaker Change: 275000.
Speaker Change: <unk> as a preferred that we've retired where we're effectively delevering.
Speaker Change: You know and I think that's that's smart money.
Speaker Change: But we bought those are like a dollar less than where it's trading right. Now. So I think you know the bloom may be off the rose there I don't I don't know that we're all that interested in buying at.
Speaker Change: It's near par.
Speaker Change: And I also think that we got a lot more than we thought on that front, almost 14% will look around and you'll never know when it's only one has a large block and they want to come to us and we'll talk to them.
Speaker Change: But you know I think you know unfortunately, our preferred is strong and our our equities is weak, but you know I think.
Speaker Change: That's kind of normal for this environment right. We're in a really sort of I'm still like an <unk>.
Speaker Change: Talking to it too.
Speaker Change: To the wall here, but are we all know that this is a rough market you know it's a tough.
Speaker Change: Rough time to understand what capital decisions you need to make and so I think what we're doing is pretty pretty impressive right just delivering results tightening expense controls, allowing the portfolio to breathe and get its natural two and a half plus percent annual growth rate and they're looking for.
Speaker Change: Different spots to take on and we've you know in our pipeline, we actually had.
Speaker Change: Had a handful.
Speaker Change: More than more than one conversation with <unk>.
Speaker Change: Folks that are might be equity deals in terms of properties are being contributed so I think there's something there I don't know if I wanted to do with them at today's pricing. So you know who knows we'll see how that shakes out, but we are seeing things.
Speaker Change: We're getting good looks we are passing on a lot of things right.
Speaker Change: Because I I, just sometimes it's hard to do the calculus, particularly as you've seen both in this writing in prior ratings, we have a very narrow box for what we like in manufacturing. So we're really focused on risk management and to do that you have to be highly disciplined you have to be very specific and theres a lot of deals out there that.
Speaker Change: Just don't get that box there they may be more appropriate for a much larger balance sheet with a lot number a lot larger number of properties that may be more appropriate for someone who doesn't have the same.
Speaker Change: Worldview as we do so I'm not knocking the other assets that just don't fit our box.
Speaker Change: As much as we'd like a unless there's a real compelling real estate or financial opportunity.
Speaker Change: As I noted in the press release, we did talk to tenants.
Speaker Change: You know the didn't talk to L. Three you didn't talk to Northrop they wouldn't tell us anything any way, they're public companies and you know we have one asset or you know.
Speaker Change: A legion of assets and other things. So it's hard you couldn't get them, even if you could get them to talk they're not going to tell you what that division is doing so but we see the financials. So we know where those are at all the other ones are the ones that probably scoop people. The most of the middle market credits, we didnt speak to it and we have great report with them and we spoke to.
Speaker Change: Lakes and this is on top of already getting their financials on a quarterly basis and getting updates are we we talked about real world thinks about you know how supply chains are being impacted how they're thinking about how they're projecting a around the corner.
Speaker Change: The what if scenario if if Trump does this or Trump does that or China does this and you know the conversations were very productive I think we all walked away agreeing let's talk again in another quarter.
Speaker Change: They were.
Speaker Change: You know, it's an isolated kind of environment.
Speaker Change: In terms of if you're manufacturing X widget and we you don't get to hear what the person who manufactures whitewood, it's doing and we had a unique perspective, we also talk to some of the private equity sponsors of these companies and so I think it was a real collaborative effort a lot a lot of sharing a lot of insight, but again just much ado about nothing.
Speaker Change: I think.
Speaker Change: No. Some I've told some investors, who you know panic I think you know the panicking took us.
Speaker Change: So does that 13 62 on April 7th and I know I've had some conversations and I said a couple of things to them is one but.
Speaker Change: The capital markets react emotionally and at a faster pace than the physical markets can ever move.
Speaker Change: Physical markets can't speed at emotional.
Speaker Change: Part in part because you can't move you can't make decisions that quickly and so I'm sorry, I said look you know things transact slower so that we don't know what we don't know.
Speaker Change:
Speaker Change: Malaria is a lot of uncertainty you know theres a lot of headlines, but there's not a lot of detail and so I think that's really important.
Speaker Change: And then the last thing is is that you know the.
Speaker Change: The supply chain that the global supply chain is very nuanced, it's very detailed it's very specific and broad brush strokes just don't apply.
Speaker Change: And you have to think about how how specialized the distribution networks have become over the last three and a half decades, and you know where you source things and how you're sourcing and you also have to think about how yes.
Speaker Change: A lot of those decisions have been made in response to prior legislation right. So if you think about Nast NAFTA and then and its predecessor I mean, it's it's yeah follow ons successor U S. MCA, where are we had a lot of you know effectively free trade between Canada and Mexico.
Speaker Change: You saw a lot of infrastructure built right. We've purposely avoided over the last four years, we've shown and seen a lot of deals about buying factories in Canada, Mexico, and candidly, sometimes theyre very attractive pricing I think the real answer why we never did that is one we wanted to stick to our knitting keep focus laser focus to we're too small to have sort of.
Speaker Change: All of those tax simplifications and I think it's more suited for a much larger Reits, but I bring this up because the whole supply chain infrastructure is really nuanced, it's really nuanced and I think I think it was ackman, who posted on X. The other day. He was suggesting that you know again, he's always talked in his book, but he was suggesting that Trump.
Speaker Change: Back on tariffs and then sort of have this incremental clipping coupons sort of effect where it grows at.
Speaker Change: 50 basis points every month or something or whatever period. It was until it gets to some sort of a Q level and I think it's pointless to allow people time to change.
Speaker Change: And because it does take time I heard comments and say that look even if we had you know permanent tariffs implementation.
Speaker Change: There's there's a wait and see because even if you had permanent tariffs.
Speaker Change: There's a view out there that okay. If if you know the Republicans arent in are in control of a white house in four years and that's a big if but if they're not then maybe all of this stuff is undone and sometimes you want to rip off and destroy a supply chain for three and a half years right.
Speaker Change: So I think there's that sort of a long term perspective that people have had but theres also a near term, saying Oh, yeah. There may be there is 145 right now but is it really going to be that way and that was before we've heard then you know sort of soften their tome and that's before yesterday's announcement that she and ambassador a representative for she investments are our talk.
Speaker Change: Right I, you know I think.
Speaker Change: Again.
Speaker Change: I don't I'm not at that level.
Speaker Change: It will influence I you know we have two generally take it and wait and see what happens with.
Speaker Change: The tariff conversations and this was this a is this a bold move to negotiate or was this a fumble we don't know and everyone's going to have their opinions and no one's going to be convinced otherwise of their opinion, but we have to wait and see how they shake out right because if they shake out and then they work well then great and if they don't well then.
Speaker Change: That's bad right, but we don't know and I understand the uncertainty in our stock I understand the uncertainty in the market, but for US you know we're long we're committed to and we feel comfortable that I mean I have so much of my network tightening. This thing if I were stressed about this you would here, but I'm not it's solid portfolio doing well.
Speaker Change: I got to think this is a pro or asset class strategy over the next four years at the minimum but.
Speaker Change: But we need it.
Speaker Change: Need other things to clear we need less uncertainty number or are we just had India and Pakistan last night I mean, what's how many things can we have pop up.
Speaker Change: No the whack a mole of geopolitical risk, it's been incessant for three and a half years.
Speaker Change: And we also need inside of the rates I think you know we're rolling into this year and we had people pricing a bunch of rate cuts and you know most of those people are not pricing in rate cuts now we don't know what to expect I'm glad I'm not an pals job that's not an easy one to do.
Speaker Change: But I have to respond to what he's doing so it's not all so easy, but we feel good about it we feel good about our our tenants I mean I heard stories about yeah, I think the biggest price import right now it's been steel cans.
Speaker Change: Candidly, our steel and aluminum pricing because you know they are indexed even if you buy from you asked me if we buy from China, you buy from Brazil, you buy for Germany, you still got the index pricing and so you know.
Speaker Change: And a lot of infrastructure based you know critical types of things Rick.
Speaker Change: Lie on types of these types of metals, so there's been that pricing pressure, but it's not again not out of the ordinary that they haven't seen before.
Speaker Change: Typically I think some of the remedies they have.
Speaker Change: With one client we talked about they had a 10% surcharge placed on you know the the metal components of their products and their clients regularly accepted it yet they had eight months of inventory such that they didn't have to pay the higher prices. So there in the near terms our contribution margins are improving.
Speaker Change: And our view is that you know they'll have to buy steel when that date inventory runs out, but who knows where steel prices will be at that time.
Speaker Change: We had and I mentioned in there that the the manufacturer who decided to leave China. They started thinking about this in August they formally started the implant in November when the elections in the past and they said they should be up and running and they're Malaysia production and about another 45 days.
Speaker Change: And they so they just wanted to cut out the risk of the volatility because they had it with Covid, which was really frustrating and then they had they had it again this time and so volatility in supply chain is justice. It just as stressful as costs in the supply chain and I think this is an important element that we.
Speaker Change: Think about this and that it takes time to sort this out but I feel good I feel really good about where we're at we don't have that many properties. We watch. These you know we've got four what are the four four.
Speaker Change: For three and a half dozen eggs in our basket and were watching every one of these eggs. All the time, you know and so I feel good about it I don't see any real reason to be concerned, but again like you I don't know what I don't know I don't know, what's going to be said tomorrow or happen. The next day, but I can tell you that we have.
Speaker Change: Good margins the rent coverage is strong.
Speaker Change: We have a dividend coverage is strong we're super tight and our expenses were super patients. There's no ego involved I don't need to spend money. If we don't need to it makes for it can make for boring soup.
Speaker Change: You know look we could very well be Bubba gump's shrimp boat here and in a year and a half.
Speaker Change: There's we could find ourselves just as the asset play and whoever bought now is going to wind up.
Speaker Change: But hey, if you're a day trader and reach it's a it's a good time because you can make for a 5% swings on hard assets that havent changed the value over the last 60 days and you can pick up a lot more alpha than you could buy just a buyer at home so kudos to the hedge funds in the day traders out there who are doing that and our name and others you know.
Speaker Change: Oh I may I may 12.
Speaker Change: 12% on prolonged just in about a week. So we're all you know there's there's money to be had out there and so it's an interesting space enough of rambling, though let's get to Q&A in and see what we get that's interesting.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question. Please press star and one.
Speaker Change: A confirmation tone will indicate your line is in the question queue you.
Speaker Change: You May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: The first question comes from the line of Rob Stevenson from Janney Montgomery Scott. Please go ahead.
Rob Stevenson: Hey, Good morning, guys. Aaron can you talk about the cap rates that you're seeing on deals or are you not finding the quality industrial manufacturing assets with good tenants still selling at the eight caps to be able to pull the trigger there or is it now the cost of equity at 14 versus 15, 16, almost 17 and change before that's keeping you on the sideline.
Speaker Change: At this point.
Speaker Change: So cap rates I'd say that right now we're seeing there, they're a little bit tighter than they were in third and fourth quarter, but so I think the sweet spot seven and a half to eight in a quarter.
Speaker Change: Whereas before there were probably there while they were probably 25 plus basis.
Speaker Change: Points higher, but we have seen some clear sub seven and a half we've certainly seen brokers still pushing sort of the low sevens.
Speaker Change: We got someone yesterday at seven nine a we've seen some that are wider so.
Speaker Change: Look those work.
Speaker Change: You know, maybe not a $14, but they do certainly work at you know in the 15th.
Speaker Change:
Speaker Change: But I, it's not so much the cap rate right because you remember I look the cap rate is not is not necessarily your ongoing yield because most of these have 3% bumps I think where it is is just saying I think a lot of it is what we're seeing right now is just not that compelling they're not bad <expletive>.
Speaker Change: But they're not Italian assets and you know what what's the point of buying something thats marginal in terms of.
Speaker Change: Your motivation behind it and it's also marginal and yield in a time, where you could either look like a genius or it looked like an idiot, but in that you know.
Speaker Change: And hindsight, so if if if we've got a strong if forgot either really strong real estate or a really strong tenancy or there in terms of their making it a very unique product or they're very strong financially strong or it's a yes, just a compelling financial opportunity.
Speaker Change: Kind of just like what.
Speaker Change: You know I just I've said this before so many reach just feel like they have to have to grow they have to grow they have to buy they have to buy but we're not really growth stocks.
Speaker Change: We're where we want to grow and there's enough of price depreciation in the REIT industry overall from from the depressed levels of.
Speaker Change: Sure pricing right now to get people, a pretty good appreciation with yield and so I'm just not seeing compelling reasons. The other thing I think about that as you always have to think about the motivation and we some of the deals. We've seen have been T. Led so why are they why are you why are you P firms selling this now.
Speaker Change: And the most volatile time in cap rates or higher why because you apparently really need the money and this and you don't understand that this is a cheaper form of leverage.
Speaker Change: Those motivations are not always in line with us as a long term holder. So I think all of that comes into play when we're looking at this I think the laughing thing as you know I got a I got I got I got finite dollars and I'm going to use those dollars.
If I, if I don't spend them I'm, yeah. It may not be growing today, but I'm not I'm not shrinking.
Speaker Change: And if I, so if I do spend them I'm going to spend them. So I get the maximum amount of growth.
Speaker Change: Okay. That's helpful. And then I guess as a follow up to that I mean, I don't know whether or not you were blacked out or not but I mean would you guys thinking about doing stuff under the ATM you know a few weeks ago. When you guys were in.
Speaker Change: In the Sixteens, you know given the fact that you said that a lot of these deals would work for you in the fifteens to be able to do hit the ATM in the sixteens I mean was that attractive to you at that point or at that point.
Speaker Change: Volatility in the marketplace still had you.
Speaker Change: Just waited from doing that.
Speaker Change: Like I think even though I think the average was I forget what the average was 15 86, there was some of that but.
Speaker Change: It was weak.
Speaker Change: For the quarter that was actually at the very beginning of the year that rolled over that we had tried to do in 12 31, but it settled in.
Speaker Change: So that was a little bit lower number because we were closing out that year, but we did buy quite a bit in ourselves quite a bit in the sixteens for the quarter, but to your point wherever like you know it was like 13, 62, and I was like Oh, I want to buy that myself and then like within a week. He was like $17 you know like that'd be sweet, but we are already we were already a blackout.
Speaker Change: Unfortunately, it seems to be the case, so listen so kudos.
Speaker Change: Kudos to those hedge funds, who seem to play. This game. We we we tend to like write out Weird last week Friday or 16, 42, I was like okay, I like that I'll do that and then of course today, where you know fucking whenever 14 30 so.
Speaker Change: We tend to Miss a lot of big swaths of the window I think the last period of time, where we had robust volume at a good price. While we were open was like in December and so you know just another it's like Joe just constant patients here, but yeah. We we look at it we look at it constantly.
Speaker Change: You know.
Speaker Change: And the strategy for the ATM is twofold, you know like I do.
Speaker Change: Don't like issuing at a even at 16 necessarily because I think that's a steep discount but it is a balancing act of incremental growth. We're not doing large volume are not a big REIT. So we're not doing large ATM, but it's also increasing float right because we understand that right.
Speaker Change: What happened in on in any given day when you could have 10000 shares which is what you know that's that's nothing in terms of dollar buy 10000 shares could could cause us to move for a 5% and so we understand that we need to over time gradually consistently increase float.
Speaker Change: And then you know taking volumes are up substantially we're probably averaging 40 right now on them whatever Lucky. This 40 to 50, depending on what data you use and you contrast that to like it was 9002 years ago. So we're incrementally doing that so there's a couple of strategies there, but I think the short answer is like if we were if we were doing well we would issue more we would never.
Speaker Change: Destroy the price to issue.
Speaker Change: Because we have a long game, but I would love to I'd love to get more equity out there to do more deals.
Speaker Change: But I got a I got to have things lined up.
Speaker Change: Okay. That's helpful. And then a couple of questions on some of the individual assets any clarity on a time frame for oes to exercise a purchase option I saw the comments in the footnotes, but just curious as to whether or not you guys think that that's any closer to a resolution in the near term.
Speaker Change: Well they have.
Speaker Change: Bye bye the lease agreement they have.
Speaker Change: They have a four year window to purchase that there there are already a year and a half I guess into that.
Speaker Change: I will say that.
Speaker Change: They have engaged I think I've said this before but they have engaged there are appraisal process. So that's the first step they have to do is they have to engage a third party vendor to they actually go out there RFP for appraisers, they get those rfps. They select an appraiser appraisals starts a process that has already.
Speaker Change: That's already underway, even if they if they don't move fast they just don't move fast and they they forward us I mean, we like there's one department does real estate. There's another part of the evaluation. There's another part of it as you know acquisitions and so it's it's a government entity.
Speaker Change: And I am not saying, they're inefficient theyre just built this way and so they export warned us that it takes a long time, that's why they ask for the four year window. They are taking all the signs to suggest that they are.
Speaker Change: Certainly exploring getting the valuation I think you know as it's laid out in and the lease how that works and so they'll get evaluation. If it's within the parameters that they can they can proceed as is and they can put it towards to the budget for approval and then have a catch up for the next year. So even if they are actually approved it today, which they won't.
Speaker Change: Then it won't even be available the monies wouldnt be available until next year. So this is a long tail, but for them all the tea leaves we see it's it's progressing heavily utilizing the property they put improvements in it as I remind everyone. It's literally next door to that our own headquarters, which is the office of emergency services, which has got I mean.
Speaker Change: This is where all the natural disasters or happened, which is probably the biggest business in southern California, or excuse me in California.
Speaker Change: And so we're positive on it but we have to unfortunately be patient right. Because if I were to go and say man I don't Wanna be wait and I'm going to go try to flip. It I mean, good luck I mean look at look at all the office streets right.
Speaker Change: So that's where that stands.
Speaker Change: And then latest thoughts on the vacant Minneapolis, Minnesota assets is that looking like a sale or a release at this point.
Speaker Change: Yeah. So I think Theres a question someone had asked is why why is it showing up held for sale the held for sale Testacy. Thank you will.
Speaker Change: <unk>.
Speaker Change: You have a reasonable to believe that it will sell within 12 months and that's the test for GAAP. It's on the market. We have had numerous tours I think they picked up now that winter is passing really rough to go to her.
Speaker Change: You know an empty industrial building in the Delaware.
Speaker Change: St Paul.
Speaker Change: Tours are picking up where we are having conversations.
Speaker Change: For both lease and sale.
Speaker Change: I just you know I think when we underwrote and engaged the broker. The broker said this is gonna be a 10 plus months marketing process and then at closing.
Speaker Change: So that's why it doesn't trigger that help yourselves standard 12 months.
Speaker Change: We're going to keep monitoring it.
Speaker Change: You know I don't look I.
Speaker Change: I'm receptive to selling them receptive to leasing it I'd, probably more receptive to selling it.
Speaker Change: Candidly.
Speaker Change: And look I think my hope is that we will have have resolution on that or at least progressive resolution on that this calendar year.
Speaker Change: Okay. That's helpful. And then last one for me Ray the stock. The G&A commentary was helpful. The stock compensation expense was only 484000 this quarter versus $1 4 million last year, what does that trend look like over the course of 'twenty 'twenty for the remainder of 2025 is it isn't that sort of.
Speaker Change: Four to 500, a quarter range does it spike at some point, how should we be thinking about that line item as we run through our models for 'twenty five.
Speaker Change: The run rate will be about 750000 for the Oh P units and then the other directors of the mother.
Speaker Change: Roughly 60000, so round number is about 800000 a quarter. The reason it was lower in the first quarter as the units were granted until February and March so you've only got that.
Speaker Change: Roughly.
Speaker Change:
Speaker Change: Two thirds or so little less in the.
Speaker Change: Okay, that's really helpful.
Speaker Change: I would add to that so that noncash stock comp will be that'll be.
Speaker Change: You can model that for the next.
Speaker Change: There are numerous years theres not going to be any volatility in that 750 component because that's how we designed it it's bridged out over that like for instance, my comp is five years.
Speaker Change: Et cetera, et cetera, so that's going to be very stable, whereas if you go back and look historically when we had the other types of the other units that had the earn out provision the variability we saw it spiked materially so year over year comparisons are not valid. So just think about the 750 plus the stock I mean, the director accomplished sort of a steady state.
Speaker Change: Okay. Thanks, guys I appreciate the time today.
Sure. Thanks.
Speaker Change: Thank you. The next question comes from the line of Craig Cusano.
Speaker Change: From lucid capital market. Please go ahead.
Speaker Change: Okay.
Speaker Change: Okay.
Craig: Craig if you can please on mute from your rent.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, Craig has left our question queue. We move on to our next question, which is from the line of Gaurav Mehta from Alliance Global Partners. Please go ahead.
Gaurav Mehta: Thank you good morning.
Gaurav Mehta: I wanted to ask you on some of the noncore properties is there any update on the sale of cost per property and and then any expectations for solar turbines.
Gaurav Mehta: So costco, we have calls with them. So the buyer kb homes. They have calls with them approximately every four to six weeks. We had won about two weeks ago.
Speaker Change: Hey, Everything's moving forward there they have another meeting with the city right.
Gaurav Mehta: Right now we think you know.
Gaurav Mehta: We see well you know, they're hard quite a bit of money and so that's that's moving on track.
Gaurav Mehta: And so that we see nothing to suggest that doesn't go on the timeline that we've already suggested I would point out that they do have the right for extensions.
Gaurav Mehta: And if they do those extension that's really just a matter of their logistics of.
Gaurav Mehta: You know finalizing approvals scraping the property when they want to get that teed up things like that and there is economic benefit to those extension. So in some ways that they extended we'd be fine with that because we had actually pick up.
Speaker Change: I think the first extension half of it goes towards a purchase price matter happens in our pocket right and then the subsequent extensions are just in our pocket. So.
Speaker Change: We're kind of comfortable with them, we're working with them, they're great Theyre very savvy people theyre very sophisticated so that those are moving along as it writes a solar.
Speaker Change: We are actually in conversations with solar they they probably need to extend a few more months.
Speaker Change: We're working out the punch list they are definitely leaving but they they just need a little bit more time.
Speaker Change: To restore the property back to sort of original flex space.
Speaker Change: And so we're working through that we'll probably know more by the next earnings but they wouldn't need much more than call. It two months, if they need any at all.
Speaker Change: And then concurrent with that as we stated before the solar and Ws P property are actually on one parcel and we've been this is Ben.
Speaker Change: Literally since 2021, keeping working to split this parcel.
Speaker Change: And this shows the challenges of working with municipalities.
Speaker Change: And in particular, southern California municipalities, but we are almost there. My gut is these will lineup fairly close where we will have the formal parts of slit towards the end of the year the tenant will be out towards the end of the year and then our intent is as we stated before for the solar property itself is.
Speaker Change: To market it to an owner user ideally for cell, we're receptive to tenancy, but I.
Speaker Change: Ideally for itself.
Speaker Change: And we think the owner user market in that and that San Diego Submarket is pretty robust.
Speaker Change: We've seen Prince you know greater than $300 a foot.
Speaker Change: And so that was just gonna take time, Unfortunately, but if we get if we get a couple more months out of them that's great. They get it cleaned up for us that's great.
Speaker Change: It's the it's moving moving according to plan.
Speaker Change: Okay.
Speaker Change: Okay, and then second question I wanted to ask you was on the profit share.
Speaker Change: I really appreciate this.
Speaker Change: That's something that we should expect more of going forward or was this like one time sort of opportunistic repurchases.
Speaker Change: Yeah.
Speaker Change: Well, it's sort of I alluded in his opening comments.
Speaker Change: I'm pleased that we acquired them, we acquired what 13, 8% of the shares outstanding at a very favorable price that price on the blended prices like a dollar less than where it is trading at right now when the share price is.
Speaker Change: The preferred is closer to par I don't see a lot of I don't I'm not as compelling.
Speaker Change: Right.
Speaker Change: Hmm.
Speaker Change: I would say so and when I mentioned, the balloon is a little bit off the roads. So look if if someone reaches out to us and they have all but I think the thing is it's very illiquid right you know it it's trading up at whatever it is 24024 60.
Speaker Change: But if it trades like 900 shares right and so if you think about if we were to buy.
Speaker Change: 900 shares in the market every day and even traded every day that would take a long time to get 275000, So I don't Wanna Banging My head against the Wall will see you know people.
Speaker Change: I think also there's a little bit of play here on interest rates right now where people think things are going and Ah. So lucky Opportunistically sure you know I think reducing leverage on the margin you know we bought those that wasn't a move a property acquisition and that's a very that's a yield like I have no underwriting.
Speaker Change: Cost I don't have any dead deal cost.
Speaker Change: I know I can guarantee my downside and I know my upside by acquiring that and in total I think that was six and a half million dollars. It really really hard to find a fix and a half million dollar manufacturing property that did the exact same thing. So it made sense. So it's a way for us to take you know to take action when theres not much action.
Speaker Change: To be taken and it reduces our effective leverage from some people's perspective increases F O. Because now we're saving over $400000 a year in preferred dividends yeah. So he buys more sure, but I mean, I think the signals should be to the market. You know we're not going to go we're not trying to take this down right. We have the right to call. It I don't know that we would even call. It next year for you.
Speaker Change: Wanted to we've already taken off some of the steam.
Speaker Change: So you know I think it's like we look at all things at all times and we're trying to how do we place money how do we be smart about this money regardless of what you know Mr market thinks on any given day, we're trying to do the right thing for our shareholders, who are long term, who care about the dividend and care about the long term price share price.
Speaker Change: Okay. Thank you that's all I had.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of John Masako from B Riley Securities. Please go ahead.
John Masako: Good morning.
John Masako: Maybe kind of thinking big picture and you talked about having conversations with multiple kind of your mid market tenants.
John Masako: What's kind of their view on transaction activity given the macro uncertainty and it may just be thinking that that potentially drive some potential deal flow for you is there any tightening up because of all the uncertainty or they may be viewing it as an opportunity given they are in the business of manufacturing in the United States.
John Masako: Yeah. Good question. So yeah, I think what you're asking is are they seeing opportunities to consolidate or expand or how are they looking at their respective transaction markets is that the question.
John Masako: Yeah pretty much yeah yeah.
John Masako: Yeah. So I have asked that question and.
John Masako: I think that.
John Masako: For good operators just like for good capital Allocators that are just in the investment management space. It's a really hard time to try to place capital.
John Masako: Because you just don't.
John Masako: Too much volatility.
John Masako: So I think you know collectively like us they're they've got they've got a beat on what other people are doing and seeing opportunities and you know theyre looking around for things, but they're not rushing to do that I think the thesis could forms to be very attractive.
John Masako: To some of the sponsors of this in the same mind. It's like you know look there could be some unique opportunities I think a lot of the strategies in these spaces, our roll ups, where you're taking you know very specific like this particular CNC skill with this particular stamping skill in this you know and then you're rolling them up and you're good.
John Masako: <unk> order our order books are synergies.
John Masako: And so I think that's on the horizon, I think though that everyone needs capital and you know what was a very volatile that market, if you're not super motivated and the flip side is as you say a super super compelling opportunity other than if it's a liquidity concern like if someone just you know they're exiting because it's an end of life type of.
John Masako: <unk> or whatever and so they are willing to take market because they want cashing my cash now normally great buying opportunities are wrapped in distress and so that distress could be really amplified in this environment. So I think theres, a patient's quotient going on right now, but look I think it's I think he couldn't see it.
John Masako: Hum.
John Masako: I think you'll see that.
John Masako: Candidly, though there's probably a balancing act between the extension of existing so almost all of our properties have space and the way. These are designed as they could.
John Masako: Could be easier to pilfer, another company's production lines once they've hit if they if they were to fall on hard times.
John Masako: Like one of our cameras camera tools bot.
John Masako: Yes, it was like a $2 million press that took six trucks to be shipped and they got it from kind of remember that shifted down and they built a building around it and added it in and it added I mean, it paid for itself within like six months right and so that was an example, where it far easier just to expand your existing lines because your workforce is already there and things like that so it'll be interesting to see.
Speaker Change: Look I think it's fair to say that depending on how everything shakes out with sort.
Speaker Change: Sort of supply chain that you should see you should see transaction opportunities.
Speaker Change: Okay, and then was that in mind I mean, how are you thinking about.
Speaker Change: Utilizing more leverage versus maybe.
Speaker Change: Giving some capital recycling out of things that are I guess in the core bucket today I know theres still some more noncore wood to chop, but just just.
Speaker Change: Just longer term, how do you kind of view.
Speaker Change: Running capital recycling versus leverage versus saying obviously.
Speaker Change: You're going to see capital markets, yes, but yes.
Speaker Change: We have several properties that.
Speaker Change: Our industrial and our core bucket that are.
Speaker Change: Distribution properties and not manufacturing or you said.
Speaker Change: Would fetch lower cap rates and so it can be recycled accretively and we are.
Speaker Change: But I think that I would rather I will do that all day long before I want to sort of seek more leverage.
Speaker Change: I don't I don't I don't you know if.
Speaker Change: Yes.
Speaker Change: Right now I like where my leverage profile is in.
Speaker Change: I mean are likely to be lower but I like where it is I just don't see much benefit until we have a clear line of sight on rates two to play with that box, but we have definitely recycling opportunities and I think that that's why we're common we have enough.
Speaker Change: The opportunities are.
Speaker Change: Place at the right time that will sustain us.
Speaker Change: Don't need capital.
Speaker Change: To continue to grow in our models.
Speaker Change: That's it for me I appreciate the Forrest Gump referenced earlier in the call.
Speaker Change: Terrific.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Craig Disanto from Lucid capital market. Please go ahead.
Speaker Change: Hey, guys, sorry, the call dropped on me.
Speaker Change: Hum.
Speaker Change: I apologize if I missed any of these questions I'm asking.
Speaker Change: But you made up on talking to your pizza shops, and you know you source a lot of deals from them in the past and I'd be curious are they.
Speaker Change: Able to raise more money right now and maybe looking at accelerating investment in domestic manufacturing or is it still too early to tell.
Speaker Change:
Speaker Change: Yeah, I kind of it's still muddy waters, some have some our city on capital that they raised.
Speaker Change: Previously.
Speaker Change:
Speaker Change: I sort of either lay back go back stepped back a little bit.
Speaker Change: 'twenty two we saw rates go we saw volatility, but there was still a lot of there was an optimism in the general market that we might have sort of a you know a hard V. And then you know are that rates would kind of revert back pretty quickly that didn't happen and then we got into a bit of a malaise in late 'twenty two early 'twenty three where.
Speaker Change: And what's going on but then there was a bit of resurgence see certainly twenty-three heading into elections heading into August rate cut.
Speaker Change: And there was a lot of capital I think that was raised around that time frame.
Speaker Change: I think that's slowed down because you know.
Speaker Change: Theses haven't played out quite that anyone that's exactly right.
Speaker Change: And so I think there is capital on the sidelines certainly some of the piedmont's, who we've talked to have capital.
Speaker Change: They have a window to deploy.
Deploy that capital.
Speaker Change: And so they're comfortable within comfortably in that window deploy it. So it's not like there's a immediate ticking time bomb.
Speaker Change: And I think theyre looking but they haven't.
Speaker Change: Necessarily deployed it for the same reasons, we havent right. It's just that it's it's still pretty murky and somebody and look there's there's a general view that there may be better pricing.
Speaker Change: And at the same time.
Speaker Change: You know just you know just being thoughtful about what other operators maybe it's the same pricing, maybe it's not better pricing, but it is a better asset.
Speaker Change: So that's interesting to note I think also too.
Speaker Change: Tell them that you know the battleship conversations we still havent.
Speaker Change: Have you been speaking to two of those battleships and what they're doing what we're doing there. They're just taking a pause there has not made any sort of finite decisions about their their existence.
Speaker Change: Because it's just it's really choppy time and you know I think you know the near term focus a lot for a lot of people as you know the balance sheet in terms of refinancing.
Speaker Change: And less about it sort of more of a defensive posture than a regressive policy.
Speaker Change: Got it I appreciate that changing gears you know you've mentioned that you you do have large land footprints on a number of assets that you have and you know I'd be curious are you getting any increasing number of inbound calls for developing some of those sites, where maybe there could be some shared efficiencies between tenants.
Speaker Change: Oh, we have.
Speaker Change: So a lot of other properties have landed there that you wouldn't necessarily carve out because they would they have ideas to expand footprints, we have other properties and I'd say.
Speaker Change: 123, probably four five.
Speaker Change:
Speaker Change: Five specific assets that.
Speaker Change: But we think theres, a good redevelopment opportunities or development opportunities I should say not to read about the development. So there's additional land that they don't need that we think could be developed we are looking at.
Speaker Change: At one right now we're speaking to sort of a build to suit operator.
Speaker Change: About doing that I think the process for these is you have to you'd have to if you're really sort of on a monetize something you'd have to sort of first go through a partial split.
Speaker Change: Then you got it.
Speaker Change: Once you've just unless you've just gone through the feasibility study you Gotta go to a parcel split and then you can build them. So we are actively looking at that I think that's a value add I don't put a whole lot of attention to it because I think alright, I don't put a lot of mention too it put a lot of attention to it but the other ball I mentioned it just because it's early days, but I think there is some there on inbound nuts.
Speaker Change: Not a ton and the reason is that you got to think about most of the industrial building has was was warehouse space speculatively built supply chain supply got too high. It's it's you know that's come up there there has been absorption issues and a lot of those operators.
Speaker Change: Our dealing with much higher cost of capital with the construction loan. So I think a lot of the spec builders, who would be the kind that would call you and say hey look I want to build the building you parcel that they've kind of gone in there either sitting on their hands or are they.
Speaker Change: They're looking at there.
Speaker Change: There are some we did get we did get an inquiry probably about a month ago about one or are they wanted to buy a parcel, but you know I think it just was a reinforcement to us that you know those parcels. We can do that if we want to partner with someone to do that over the long term that that will generate even more return for our investors.
Speaker Change: Got it.
Speaker Change: And given that you extended the lease with Fuji film does that become a potential disposition candidate now just to clean up the JV interest or do you still view that as a as a core asset.
Speaker Change: Yes, I do think it has the potential.
Speaker Change: Okay.
Speaker Change: One more for me I'm. Just curious you know housing has been pretty slow this spring, particularly among the the new homebuilders has come from Kt home changed at all or are you still confident that that they want to move forward with the purchase.
Speaker Change: Zero zero change in tone.
Speaker Change: I think look our broad strokes are homebuilders have been slow, but where were.
Speaker Change: Massively under supplied in housing in the United States and in certain markets, we're acutely under supplied.
Speaker Change: So.
Speaker Change: The economics in the right Submarkets the economics work all day long.
Speaker Change: Okay, great. Thanks for the time.
Speaker Change: Sure.
Speaker Change: Yeah.
Thank you. The next question comes from the line of Steve check from Sebastian Gordon Capital. Please go ahead.
Speaker Change: Hi, Thanks.
Speaker Change: The the state you guys cite the 30% of your portfolio ABR, that's leased by investment grade tenants.
Speaker Change: I'm, assuming that like many of your tenants arent, even rated and so I'm wondering if you kind of have I mean that might seem like 100% of the ones that.
Speaker Change: All right I mean, if you have something that is the only other dynamic.
Speaker Change: So that is just those are rated a lot of having been in the net lease space for a long time, there's a lot of.
Speaker Change: It's been a long history of people doing implied or look through ratings, which I know, they're trying to bolster that we don't do that it's got a rating is.
Speaker Change: And and if investment grade that's what we're showing.
Speaker Change: Because otherwise I think it's kind of bullshit.
Speaker Change: Yes.
Speaker Change: One of the companies that we look at financially would probably be.
Speaker Change: But look I'm not a rating agency and they don't have a rating. So I don't want to blow any smoke up your your your rear and so that's 30%. It's just hard coated there they've got a real rate.
Speaker Change: The rest you know.
Speaker Change: And what we do that with with the view that hey, it on the margin people like Oh, well you don't have.
Speaker Change: You don't have a.
Speaker Change: You don't have Oh.
Speaker Change: Investment grade so why don't you do a look through and so that process up your numbers I just I just look let's just be honest and would it be where it is that just because they're not right at all that means is they didn't they don't they're not asking the public debt markets and so they don't need a rating right and I think there's a view that if youre not made it then you must be subpar, there's a lot of people.
Speaker Change: There's a lot of private companies, who don't go public equity and because there's a lot of brain damage Theres a lot of cost like the reason why we bought our preferred back is because it's it's not rated we rated it when we listed it because that was a requirement, but the rating agency wanted to like you know 80 Grand just you know cause.
Speaker Change: Sure you know retrenched, the thing you're right I'm not going to 80 granted ear for something Thats already issue and so we had some insurance companies who they bought it with the rating. They want you know and so they get a different reserve treatment. So that's why we got the shows that rating agencies are a wonderful industry. If you need that that type of paper, but they've done.
Speaker Change: Everything so that's a long way to way of saying the 30% is just simply the real rated ones. The other ones are good companies, but they're not rated.
Speaker Change: Yeah, Yeah, no. That's that's kind of what I figured out I mean with your due diligence and don't know when their financials and you'd probably say that percentage of your portfolio was a lot higher so it's almost like the metrics almost irrelevant for you guys. It seems like but.
Speaker Change: And then the second thing I wanted to ask on the the Santa Clara Tennant common property.
Speaker Change: The distribution yields you guys have been really realizing on that was had been very attractive I mean the cash.
Speaker Change: It's been higher than your proportion of income.
Speaker Change: And I'm, just wondering maybe why and does that continue.
Speaker Change: Its opinion pay any dividends at like $1 billion, a year or to 200 and $200 million or sorry, 1000, plus a quarter.
Speaker Change: Yeah.
Speaker Change: Does that continue I guess my question.
Speaker Change: Uh huh.
Speaker Change: Not quite following your question Ray do you do with all of those questions.
Speaker Change: Yes, it does.
Speaker Change: Referring to the distributions were getting off of the tick.
Speaker Change: Generally it will continue but there'll be a slowdown for the next few months because.
Speaker Change: We're gonna have to pay at least commission it won't we won't be distributing through the next the.
Speaker Change: Four months.
Speaker Change:
Speaker Change: Basically generate cash paid weeks commission, but after that it will kick back in.
Speaker Change: Yep Gotcha. Okay notes currently are pretty good atrophy, you got so okay I appreciate it thanks.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, if you wish to ask a question Please press star and one.
Speaker Change: Ladies and gentlemen, if you wish to ask a question Please press star and one.
Speaker Change: Okay.
Speaker Change: And there are no further west gun.
Speaker Change: Yes.
Speaker Change: Hey, everyone.
Speaker Change: Yeah, Thanks, Ryan so.
Speaker Change: <unk> done the call Here's a verdict. It's 46413 shares. So it was a 10000 shares traded over the class hour and we're down so clearly I I pissed off more investors today.
Speaker Change: But I just think that's a compelling in a buying opportunity. So that's 40 theres. Some investors out there bought $46000 a 46000 shares excuse me at a very attractive price.
Speaker Change: And.
Speaker Change: I'm I'm in support of that and I think that's favorable so.
Speaker Change: Until we have more news b well hold on tight a kiss your children and your wives and talk next time.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: The conference Automotive Industrial Inc. Has now concluded. Thank you for your participation you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].