Q2 2025 Modiv Industrial Inc Earnings Call
1.
Good day and welcome to motive. Industrial Inc, second quarter 2025 conference call. All participants will be in a listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
On today's call management will provide prepared remarks and then we will open up the call for your questions.
To ask a question, analysts may press star and then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star. Please note this event is being recorded. I would now like to turn the conference over to John Rainey, Chief Operating Officer and General Counsel. Please go ahead, sir.
Thank you, operator. And thank you everyone. For joining us for motive industrial. Second quarter, 2025 earnings call. We issued our earnings release before Market open this morning and it's available on our website at
uh, motive.com.
I'm here today with Aaron haker, chief executive officer and Ray, Puccini Chief Financial Officer.
At the operator noted we issued our earning uh we'll start today's call with prepared remarks and we'll open up the call for your questions.
Before you before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal Securities laws. Forward-looking statements are identified by words, such as will be intended, expect anticipate or other comparable words and phrases.
Statements that are not historical facts, such as statements about our expected Acquisitions or dispositions.
Thank you. But that I'd like to turn the call over to Aaron a half acre.
Aaron.
Thanks John. Uh, welcome everyone to the second quarter 2025 earnings release. Um, I think in, you know, past practice, I'll just hand it over to Ray first and then then I'll add some comments and then we'll just kind of get into questions and I assume we'll have some of this quarter, right?
Thank you, Aaron. I'll begin with an overview of our second quarter, operating results.
Revenue for the second quarter was 11.8 million compared with 11.4 million in the prior year period.
This 4% increase primarily reflects the impact of 2 industrial manufacturing property Acquisitions, since June 30th 2024,
Second quarter, adjusted funds from operations or affo was 4.8 million up 22% when compared to the 3.9 million in the year ago quarter.
The 9000000 increase in afo reflects a 576,000 increase in cash rents.
A 217,000 decrease in GNA and 126,000 decrease in preferred stock dividends.
the airflow for Shear increased 12% from 34 cents per share in the prior year period, the 38 cents per share for the second quarter of 2025
The increase in AFL propo per share was less than the 22% increase in afo, due to 1.2 million increase in diluted shares outstanding.
Which reflects 895,043 class X, operating partnership, units issued during the first quarter of 2025 and 344,119 Class C. Operating partnership, units issued in connection with a property acquisition in March 2025.
Cash interest expense for the quarter was 255,000 less than the comparable period of 2024. Reflecting a decrease in the weighted average fixed rate as set by the respective swap agreements from 4.53% at June 30th 202024 to 4 and a quarter percent in June 30th 2025
along with a decrease in unused commitment fees that resulted from our decision to reduce the size of our revolver.
Now, turning to our portfolio, our 43 property portfolio has an attractive weighted average lease term of 14.4 years.
Though, the majority of our tenant credits are private approximately 29% of our tenants or their parent companies have an investment grade credit rating from a formally recognized credit, rating agency of triple V, minus or better.
Analyze based rent for our 43 properties. Those 39 million, as of June 30th 2025 with 39, industrial properties representing. Any 1% of AVR in 4, Non core properties representing 19% of AVR.
With respect to our balance sheet and liquidity as of June 30, 2025, total cash and cash equivalents were $5.8 million, and we had $30 million available to draw in a revolver.
Our 280 million of debt outstanding consists of 31 million of mortgages on 2 properties, and 250 million of outstanding borrowings on our 280 million credit facility.
And we do not have any debt maturities until January 2027.
Based on interest rate, swap agreements, we entered into during January 2025, 100% of our indebtedness, as of June 30th 2025 of the fixed interest rate. With a weighted average interest rate of 4.27%, based on our leverage ratio of 48% at quarter end,
As previously announced our board of directors, declared a cash dividend for common shares of 9.7 9.75 cents. For the months of July, August, and September 2025 representing an annualized dividend rate of 1.17 per share of common stock.
this represents the yield of 8.1% based on the 1444 closing, price of our common stock is the longest 6 2025
Out now, turn the call back over to Eric.
Thanks Ray. Um,
I kind of said in the press release this this quarter was um a little boring um
I would say, for me personally, it was probably a little frustrating.
Uh, but, you know, I think hard work and patience can be frustrating at times.
Um,
And as well as to our passport, right? So we we didn't choose to be, um, very active this quarter. We obviously got the lease extension of Northrup. Um, we've been working on some things, we certainly did, we're pursuing a particular property right now, but the process isn't, you know, doesn't fit neatly within a quarter.
And you know, obviously you you've seen our share price, I think
Almost to the day 60 days before the Russell inclusion. Uh, when, when it's pretty much known and calculable that you're going to get in, we, we fell off a cliff. So we were in the 16th and we've been in the 14s, uh, now for about 90 days,
So, you know, our exponential moving averages are now sort of set to those levels. And, you know, we're not going to, we're going to be disciplined. We're not going to issue. We didn't issue any uh, at those prices and and we won't. Um, and so it was a, it was a quarter where there was a lot of volatility. Um, there was a lot of opportunities to buy. I think I probably purchased
Or 4 or 5 thousand shares myself.
Um, it's ridiculously cheap. I mean, I don't think some more of the analysts probably have the implied cap rate, but it's like in the mid 8s. Um, and there's no way you can buy these properties.
Um, with any handled, the low sevens or mid 7s. Some of them are high sixes. So it just it it's comfort in that regard, but it's also frustrating. That's the, the, the the Troubles of being a small cap name and again, you know, patients gets patients, right? And so, we're playing a long game here, not much to report, and I'm sure we'll talk a little bit about Claire and the questions. I'm sure. You'll talk about some of my comments that I've made in in the release and but, you know, it was a solid quarter. I think the decisions we've made repeatedly and consistently is why we had a large beet and so the decisions even the absence of activity this quarter, my belief is that that that'll pay dividends. And when we're talking this time next year, right? And, and I think that's the process is just to be really patient to understand our strengths understand. Our weaknesses, be able to maneuver nimbly and quickly as needed. Um, I think there's a real
The need for what we're offering out there and I think we're starting to consistently build a tribe. It's a retail drive, it's increasingly an Institutional tribe but it's largely a retail tribe where people? They they they like what we're doing. They like the no bulshit they like uh the consistency. They like the effort. And you know we're we're seeing traction there and we like that.
So even though I'm a little frustrated with the quarter, I would love to be a bigger read. Uh, I would love to be able to do more things. I mean that's you know, but I don't want to do stupid things and you guys don't pay us to do stupid things. And so we're going to do smart things and we're going to keep doing them every day of the week.
So with that, let's uh operator open it up to questions.
Thank you, ladies and gentlemen, we will now begin the question and answer session. Remember should you have a question, please press the star key followed by the number 1 on your touchtone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the pulling process? Please press the star key followed by the number, to 1 moment, please for your first question.
Your first question comes from gov meta of Alliance Global partner. Your line is now open
No, thank you. Good morning.
Good morning. Hey, uh,
I I wanted to ask you on some of the remarks that you made made in the earning release about the asset recycling. It seems like uh, environment is getting better for you guys and we're getting closer to sell some of those assets uh continually provide some more color on on. I guess on what you're seeing as far as Recycling. And then the 150 million dollar assets that you mentioned. You know, what kind of assets is it going to be a 20% non-core that you would sell?
Yeah, so a good question uh questions. Um so the assets that we sell would be um largely Legacy assets. So these are uh they could be core and non-core
Has an option to to to purchase the property. They are in the throws of their Ray, lengthy appraisal process um and so we don't think that would even sell liquidity at the earliest until next year anyway just give them the process and this has always been known to us and always communicated so th those I'm not talking about those those candidly are not going to be um a Creed of spread. I mean, I can we can liquidate them, they'll produce cash, but, you know, you're probably treading water after you sell them and replace them. Some of the other ones, we're talking about these are, I'm not going to call them out specifically because, you know, we, we have to be strategic about when we take them to to Market. But there, there are some assets that don't quite fit, our box. Most of them are industrial, um, their legacy assets. Um, they are, you know, they are
Uh, would be very creative. So they would be selling and, you know, High 5 flow 6's and we would redo redeploying these, you know, in the, in the sevens and so, um, and they're they're fairly liquid. And they're also properties that we've also received unsolicited offers in the past and we've kind of gauged, uh, the unsolicited offers because 1, if someone goes out of their way to make you an offer, then they they clearly find the property attractive and they're not, every not every problem. No 1's doing that for Clara. So, so we understand the difference. Um and we've been able to note over periods of time. How those those those cap rates that have been unsolicited have have have
um, and so we think that, you know, kind of the broader picture of this pivot point that I talked about that we're starting to see
A little bit more fluidity and and people's desires to do things. And so now maybe or or the approaching the time to start doing that. And so that's probably, I think, In fairness to talk about that at a big level, the that called 150 million dollars of proceeds, which I think, you know, could generate close to 100 basis points if not more than 100 basis points of of accretion has given us a calm, right? Because if if we didn't have some of that and we're trading in the 14s, I mean we're not issuing and, you know, we would be like like really in a box, right? I don't feel the pressure to be in a box because I know I have these things like we're shaving we're still shaving off expenses, we're getting tighter, we're growing afo. We're doing all the things that we need to do. We just may not be acquiring a ton right now which is like you know the cocaine of the re world.
And we're not doing that but we feel comfortable that we have additional leverage to pull. So I don't feel any despair, I don't feel the frustration I talked about earlier, it's just because I just like to grind, I like to do s***, right? And that's the frustration. It's not like oh we don't have any oxides. We have options, we're being patient, we're being disciplined. I think that's why we don't worry about the share price right now or not. You know, for clumped uh I you know, I believe that we will see that recover and I think the recycling of those assets will help to do that.
Me mentioning, it means that we're poised. We're, we're thinking a lot about it. We've been thinking about it, but we're thinking the timing is right. It does just to be clear. It does not mean I'm I've already launched something, right? And if I do a recycling, you will know it. I will tell you when it's done, but I we're getting to that next stage, which I think is probably over the course of the next year or so that that makes them the right time to do that.
Okay, thanks for that perspective. Um, maybe you follow up. I think you also made from comments about the landing Market. It seems like you, you are exploring. Even the term loan is not expired until 27. You you have been exploring a different options just wondering you know. Uh, I know you said there's Landing available but just wondering, you know, what kind of terms and rates. Are you seeing in, in the, in the market?
Yeah, so um, you know, I like to work. I'm just a very blue collar. I just like to work. I never really developed any other habits other than maybe running and working out a little bit, but I don't call, I don't, I just like to work and so in a quarter where you have to be patient and there's not a lot of grinding stuff to do necessarily, I'm going to spend that time thinking
You know, 12 and 18, and 24, and 36 months down and just iterating. Iterating. What could go here? What could be there? Like some a big as you guys all know. I'm a big
Uh, fan of re Capital Market history. I know what reads have done in the past but
Uh a new Term Loan credit facility. Would be the same or better than what we had. Um and you know that I think that helps the fact that we've shown tremendous afo growth over the last 3 years, you know, the about the the balance sheet has become very solid. We've you know, remember when we put that first to terminal on we were it was pre-listing and we still had a s*** ton of office.
So, we've really transformed. So I think the lenders feel good. Um, and I think we're exploring the full gamut of of how to finance, right? Because to me, I like data, I like optionality. I like to understand what are all the choices? What if I do this now, what does that mean later? So we feel encouraged uh we're going to be taking uh more steps towards that. I think, you know the Wild Card clearly for anyone here is is you know, what are the broader? You know, what's the what's the FED going to do, right? Are we going to see, treasuries come down. We're going to see so far. Come down, we're going to see that that's going to drive the needle. They're like, you know, and like, you see it, you see the, you know, where, you know, you know, robustly levered, small cap name, and then, you know, you know, there's a there's a Fed fart in the news and you know, we we whip saw right? And so that's if we do find rates coming down which I think, you know everyone's going to make their own bets over the course of the next 12 to 18 months and that's going to be a positive, right? But as in as it relates to the terms and the structure, we do not see anything.
Negative in our conversations.
And if something comes up that changes that well, well then you're going to hear it from me. But right now we feel encouraged by it and we are, we are early, I think, I don't feel any pressure about, you know, I I know some people get uh, really sort of um, contemplative about maturities that are 18 months out, but I feel really good about this. We're in a, you know, we got 14 plus Walt and that includes things like, you know,
The 2 months on on solar and the and and that included, right. You know, the shortening of of uh Costco you remove those things, our Walts more like an 18 or 19 year old. So the real core portfolios solid with bumps and growing and so it's very attractive to the lenders.
Okay, thank you. That's all I had.
Thanks.
Our next question comes from Craig Kuser from Lucid Capital markets. Your line is now open.
Uh yeah good morning guys. Um you had a pretty sizable pickup uh in income recognized from your joint venture um or your ticket Ventures. I should say can you give us some color there and what to expect going forward?
Right.
I don't. Hello. Yeah. That that reflects the impact of extending the lease um the way straight line rent works is uh, you know, you're in the early years of a lease you're picking up um rent. That's going to be received down the road. So, um, you know, that was a 10-year increase in the lease term uh, with 3%, annual bumps. So that's what's driving it.
Okay. I, I would say, I'd say what, you know, we're at. We've noted in Prior quarters, you know where we are, inactive, uh, dialogue and and discussion with arctic partner.
Um, you know, it's important for us that we...
In a timely manner, and the tick. There's a variety of ways to end that tick, but, you know, ticks are ticks, are a throwback of probably the
You know, 3gf construct. And you don't see a lot of ticks anymore, even though they're, they're somewhere around and they're just not as fluid for a V. And so our goal long-term and I don't again, longer term is longer than, you know, this month is, uh, to get rid of that tick and we will get that done, uh, 1 way or another and so that will change a little bit of the dynamic, but there shouldn't be any more pickup after now that we signed the lease,
I got it, that's helpful. Um, and changing gears. Uh, you know, you took the impairment charge, looks like that was taken on the Calera equipment, um, I I guess, are you moving closer to maybe a sale there versus trying to lease it or, or is that just to? Yeah. How are you thinking that's it? Yeah. So we've we've had, you know, it's it's on the market and we've had, you know, um, a variety of things people going through. And so, what, I think, what we've learned at increasingly, I 1 is, I don't, I just don't know that. I want to lease it. I just kind of, I think we want to sell it and free up our capital and get redeploy it. Um, I think that what we've learned over time is that there's as many different types of growing Technologies,
as there are Growers as there are leafy greens and so um the growing technology that was within this equipment is now
Older and refined last type of market for it, uh, unless you find that particular growing style. So so we decided to take the impairment
Uh, against that um, doesn't mean that, you know, we might not find, uh, a buyer that values. It has some residual value, but we just figured that was a cleaner way to go. And yeah, our goal is to my ideal context is that property's gone. Uh, if if all if you know, if I have
Any powers within me to get rid of that property by the end of the year.
Got it.
um, you know when the tariffs first started being announced, you know, you had mentioned that your discussions with them indicated that they really thought the impact would be limited but you
I'm curious kind of, as they've been shifting around in the marketplace and you're looking at their financials. Are you seeing that case that you have the discussions with the, with your tenants?
Yeah, so um we're just now Gathering. There's always a little bit of lag so we're just now Gathering second quarter financials from them and doing analysis. But what so the ones that we have seen and you know it's a good chunk of them. Yeah. It's well 1, I'd say 2 is we really haven't, I mean, the Tariff dance is just kind of been.
You know, kicked down the, the street this summer. And so we really not seen a ton of definitive terrorists, until like, you know, a lot less earlier this week or last week, um, but the impact has been as we underwrote right? That the, you know, I think there's not been any costs we
There's not been any like that. I think what we have the commentary we've noticed and it's not. It's a forward-looking so you don't see it. In the numbers is some of them are saying that
Some of the bigger Capital decisions that their clients are make, uh, opinion or deciding on are a little bit delayed because everyone's, like, everyone is waiting to see. Well, what is the world look like, right? And so that that seems um,
Normal to me. And so the conversations are, it's not that they're their clients aren't pulling the trigger, they're just not ready to pull the trigger yet, right? So we haven't seen it. Um, I think there's, you know,
Again, we still don't know exactly where Canada shakes out right on this. Um, but
You know, I I the countries that have announced. I we don't really have exposures to, I think the China deal, if it gets solidified the way,
We think it's going to get certified. I think that's probably a win. Um, and so I I just don't see an issue on tariffs, uh, for for our particular Set. Uh, doesn't mean that they're not going to be impacted, but they're not going to be disproportionately impacted from what we can see.
Got it. Um, I want to circle back to Costco. You know, that lease was scheduled to expire at the end of July. Can you give us a sense of the annual rent they were paying, and did you receive the first extension fee from KB Home?
Uh, TV has until August 15th. So, we've been in conversations with him. They've told us, they saw this, they, they will be doing at least 1 extension. They may be doing 2 and so they're targeting some possibly closing, uh, in, in, in December. Um, and it's the, the reason is, is purely Logistics with the city. It is not sort of a, a contemplative thing, from what we've gathered, it's just, um, the city is got a process, um, that Personnel have been taking vacations and doing this, and that, and that process is taking longer than. And you can't push a push a string. So, um, they, they have another 8 days before they need to, you know, officially do the extension. We expect them to do that. The rent. Ready. Do you have the rent on hand, but Costco's paying
Yeah, it was running about 2.4 million.
Got it. Uh, finally for me, um, you know, late last year, you were looking at a number of transformational transactions. You didn't close, but you know, they were still potentially out there. Um, and they come back. Are you looking at anything out there that's similar or any other large portfolio transactions?
uh, I would say that, um,
uh,
transformative transactions are still definitely on the table.
Um,
I think for for all parties, it just needs to be the right environment.
and, you know,
It feels like we could be getting closer to environments that are conducive to those.
There are still conversations.
But they're, they're more as well. The last
You know.
First half of the year they've been sort of more checking in conversations, right? Uh because a lot of moving parts and it's just really, you know, really hard for for
Make decisions with without you know, maybe a few data points a little bit more solidified so I'd say they're still still on the table. I think they have to be too, right? Because
uh, we can't just, you know,
you know, scroll down the lane and, and, and, and do this, you know, little bitty stuff forever, right? We're too small of a re. So we have to do something transformational at some point. I don't think it has to be today. But if you know if we're, if we were a hundred million dollar market cap rate in 5 years then you should shoot us.
Right. This is not how this is, not how the capital markets work, right, and they never do work that way, right? Unless it's someone who's not interested in shareholders, unless someone who's just, you know, that's not us, right? Uh, we care about our shareholders. I that's all I am at the shareholder. Even though I, you know, I'm the CEO. All my conversation is shares, right? So it's and so, we're completely aligned in that regard. And so transformative and transactions, probably will never be done. Just not gonna, uh, bring them up unless they are baked this time.
Got it. I appreciate your kandare. That's it for me. Thanks. Yeah.
Your next question comes.
From John masoka from B Riley. Your line is now open.
Good morning.
Um, it's always kind of a difficult question to ask in this context. I think, given, you know, the answers. You gave to the last question and some of the commentary on the earnings call. I mean, do you think there's, you know, maybe an opportunity given some of the loosening of capital, broadly out there in the markets to maybe Market motive in its entirety, is kind of a portfolio in platform or either or
so,
I've talked about this before. Um, look, you know, we we
And I think I did it in the context when we released our appraisal. So every year we get our portfolio, appraised. It's a tradition. We had when we were pre-public as a non-trade week, right? And where we were, I'm not like, I'm like a Blackstone, I'm read or Starwood read where they have liquidity Windows. That's what we used to. We used to have sort of liquidity windows, and we would have set arms length and a price on. We've continued that tradition on even though there's a little bit of cost to it, I think it's been useful. And I think the last 2 years, it's been roughly $24 a share, right? 2375, 24, something like that.
And look that's done by Christian Wakefield, very respectable. But if you look at sort of, um, so Nate creates sort of indices and work of relative to Nate, we know there's lags. So look, I'm not here to suggest to you that.
I know for a fact that we're worth $44 a share, but I sure as fuk know, we're worth more than 14 and we're going to work diligently to close that loop with the actions that we can take. And I've said, and I think I stated this in February, if someone comes over the top and can close that value Gap definitively, then we have to listen, that's our duty, that's our job. Are we going to go solicit that? I don't think that would make the most sense right now, because candidly if I was going to solicit and go sort of, and again, bloody this is the board decision and I'm just 1 member of that board.
Is that, you know?
Soliciting that would mean that we're waving a flag that we think we could pitch late, and I don't want to see predatory.
uh, sort of
characters coming into play, right? I can remember back when we were at 9 dollars, 53 cents and we're getting like, f****** 3,000 shares trading. It was a mess, right? We were just, this was an early like late 2022. We had a lot of people sniffing in, but they wanted to go pay, you know, ten dollars a share. It was like flight Heights, right because in 4 years of dividends that's like half the value you're saying. And so we understand that this is a tough time in the broader Market smallcap weeks in particular you know we're holding up relatively. Well if you look at us compared to some of the other small cap breeds and look for for various reasons, I look at like I look at plenty of time, I look at good and I look at Pine and I look at the front view.
I look at these guys and you know, we're we're a whole other than when we fell off a cliff right before the Russell announcement.
We we've been holding up pretty well and I think that resonates the tribe and so our view is we're going to keep climbing that mountain. We're going to keep delivering dividends and we're going to try to close that value Gap and smart money will know that if they want to close that value Gap sooner we're going to listen, right? Um and so I think that's the approach we're going to take um because I think it we, our investors deserve us to fight.
But we're not also going to be, you know, um,
Uh, begging.
Okay. Um and then how do you kind of think about understanding that kind of in the volatile kind of capital markets and you know cost of capital moving around, you have to be mindful of that and the impact that Acquisitions and the like have on, on bottom line results. But how are you thinking about maybe weighing that against right?
The the positive impacts of increased scale either on your valuation of the public company or maybe even based on what kind of talked before about, maybe being more attractive as something, um, you know, for private Capital to come in. Come and look at
Should repeat that question a little bit again. A little bit more simpler. I didn't, I couldn't follow your question. What is the question? Well, I guess so. You know, right? Obviously, you know, you've passed a lot of Acquisitions. You're trying to make smart transactions given kind of where your cost of capital is but there's also an argument to be made that, right. Part of the reason why your cost of capital is where it is is because you're kind of subscale. And so how are you kind of weighing those 2 against each other? And I guess is that also, maybe impact your attractiveness based on kind of what we were previously talking about.
Got it. Yeah, so uh I think our attractiveness if we continue to do our job which is to increase value. We will only continue to be attractive, right? If we only do, if we do what's right?
For the shareholders, which is don't make stupid decisions.
Grow the money.
Protect the money, protect the house, and get it to be more valuable than those will. Always mean that will be attracted; we could triple in size tomorrow and we’re still bites us. Right? So I think in the public or private spectrum, we are going to be in that box of always someone’s, you know, appetizer.
For a quarter or the, you know, the the meal for the year to be on the size of the the other. But we're always going to be on that thing until such time that we are not and to me in this market I think that unless you are a billion dollar market cap or larger you're you're on the food chain.
Right. So, so I'm cognizant that our existence is going to be 1 where we are always going to be.
You know, a lab and people are always going to check on us. Unless you know, you know, the weak gods line up and we kind of suddenly are, you know, huge.
But I don't have any ego to do that. I have the my sole purpose is to increase the value. And so what we do during the day to day is we make sure we take decisions that increase the value because if we you know recycle Legacy assets and you know we have I think 1 or 2 Double net, leases that we didn't acquire if we if we recycle uh shorter Walt stuff and we end up being a very you know, Ironclad Battleship of, you know, a Walt of 18 years and a clean balance sheet and we're operating well and we're smooth. That's just going to make us even more attractive and more valuable. And in the meantime, while we're doing that, our investors are getting paid a dividend. So give you an example. Let's just say, you know you know wild blue re came tomorrow and said we want to buy you for $15 a share. We were like well that's not much of a premium and you know and they wanted to they wanted to pay cash. I imagine our investors would say know they'd say, no because chances are all
Are in 2 or 3 years. We we could vary at least be worth 15 if not more. And we'd also have made over 3 and a half bucks worth of dividends. So that economic value becomes 18, or 19 or 20. And so I think for us, you know we're going to stay our course if we keep doing the right thing we're going to continue to do more valuable and it's just you know we either we'll get there and you know, I don't think it's a matter of, you know, we're not and I bring this up on the office thing and even the office people are getting bids but we're not office, right?
We have actually a very attractive portfolio. We're cognizant of that, but our mission is solely to do right by our shareholders. If we do that, everything else will take care of itself.
Okay. And and then on a much more kind of micro basis.
Um you know the the the property in Washington with KB Homes, is there any risk?
That the city doesn't.
Zone that for KB Homes or some kind of regulatory reason that falls out. I'm just thinking is the delay purely kind of bureaucratic
Is there inactivity, or is there some kind of debate going on in the municipality as to whether they should greenlight that project or not?
So it is purely the bureaucracy of the city. I mean, they have entitlement writes that the city can't. Um,
Can't disregard those.
It is zoned to allow additional housing.
There this is this is sort of a plan approval um I I I believe it's bureaucracy and Logistics. Um that said, you know
I think until the end, you know, what I do know for sure is there's $1.7 million that they can't get back.
Um do I have concerns that they're not going to close? I don't but probably there's some small probability weighting that that that is an outcome until it's done, right? I think about all probabilistic weightings, I don't think it's, I think it's, you know, it's a on a tail. It's, you know, it's there's a lot of kurtosis in that in that assumption but I don't, I don't think it's happening.
Okay. Um that's it for me. Thank you very much.
Great, thanks.
No further questions at this time. I will now turn the call back over to Erin Halfacre chief executive officer, please continue,
Danny. It looks like we do have a a question from Steve chick. Do you want to go ahead and get that?
Yep. 1 more question. From Steve. Check of CIS Garden Capital LLC, please. Your line is open.
Hey, thanks. Um
Just to to clarify on the 150 million of uh you know, recyclable assets that you've kind of soft circled.
The the Costco property, the 25 million are expecting from, Costco isn't in that and can you kind of highlight, how many properties that kind of refers to?
No, I cannot, um, or will not let's put that I surely can but I won't because. Um, and the reason is
If you're taking these properties to market, you want to preserve a little bit of the...
Um, because we are a public company, right? And anyone can go read up on us. And so, we like to preserve a little bit of that optionality suffice to say, their legacy properties. Um, and they are properties that don't quite fit our box.
Um, but they're very attractive properties.
That's what I will say. Um and um it does not include the KB or the Costco, excuse me but but Costco 1. Yeah, the Costco 1 is like, you know,
It's great that they're buying it and you know, if you recall there was other other home builders that did on that process, they were the top bid. So it this the destiny of that property is to be, you know, a housing for people in a housing constrained market. So we feel good about that. Um, you know, I don't think the pro
Proceeds from that, it, you know, they don't move the needle, can't do it after we pay back the, the loan, there's just not, it's not a ton of precedes, it should be good to be free of it and move on because that would, that would be an office. But these other ones we're talking about are these are things that we. Again, we received unsolicited offers for in the past, they would be considered very liquid. Um, and so that sensitivity on, on a recycling. And so, which know 1 to ask really is and because these are Legacy properties. They all have very low tax bases. And so you have to think about them in terms of 1031 exchanges and to do a 1031 exchange. So you don't incur a tax liability, which is a no, no, for me is you have to be very thoughtful and very aligned things up. And so, you know, part of that is, you know, what is the, what do you replace them with? It's just as important. I think that that the decision to sell them is, is an easy 1 to do. It is not 1. That will take long. Um, and I do not think that, you know, we'll be wringing our hands worried about, you know, the resulting
Cap rates that we get for them. I think the more thought comes in is, okay, how do we sequence and place them into something that's really going to make the portfolio more valuable. And so that the other part of this equation that, you know, we're starting to see coming into play is that, you know, you go back to the fourth quarter of last year and the first quarter of this year; there was just not much inventory being available to acquire. Certainly not like we like. I mean, some deals are going down, but some of the deals look like crap.
And it's like, I don't want to buy a crap deal just for a crap deal. So I think what we're seeing is a little bit of the Fall. It's also starting to see people say, hey we're willing to go put our properties out again. And so now it's giving us the other side of the equation because we could have sold these, this 150 million dollars of properties. A year ago, probably wouldn't have suffered that much on the cap rate side, but we would have had trouble deploying and I think so it's a balancing act there.
Um, but suffice to say Legacy properties, valuable properties, um, things that should move fast.
Closely? But I mean, does that mean the market around you? Or is it, have you gotten overtures?
That are Beyond just sheer properties.
You read it pretty accurately.
Okay great. Thank you. Yeah. What what there was no there was no uh double and Tandra there so doesn't mean there. It's increased right? Um sniffing that's how I would describe it.
Right.
Obviously if there, if there yeah, there's something that was, you know, very, very specific and very formal. Then that would be a different type of disclosure.
Right. Okay, thanks. Thanks. S.
All right, Danny, I think we're there. I will run with it now. Everyone, thank you so much. You know, it's so much more enjoyable to just answer questions. You know, I've been reading so many.
Times releases the transcripts may I can't suffer going on people's calls anymore because all they do is read things and it just they they just regurgitate what was in the, the queue. And I know that's protocol and I know that's probably the best way to go, but it just does not work with my personality. And so I prefer these questions because there's more insight
And you know, the job for me to have a dialogue with an analyst or or, or an investor is to help create understanding. Again, our balance sheet is pretty straightforward but it's only 43 properties. Most of you guys have the numbers down. What you're trying to do is get into my head.
Right into the head of Friday and the head of John, and everyone here to see how do these people because, you know, what are my motivations? What are, what are our, what are our proclivities? What are our, what's our past history? How all these things that everyone has, it makes up who they are make the impact of decisions, right? And so as a reminder, I think I'm like an 8.9% shareholder of the company. I have put all my eggs in this basket. I watched this basket 24/7. I love thinking about it all the time. I want to do. I treat every dollar that's in there as if it was my like, my grandmother's God. God bless her soul. She's not here anymore. My grandmother's money, right. And damned if I'm not going to screw that up.
And so, that's how we think about it. And, and, you know, um, I think it's refreshing. It's refreshing to me. And I know, increasingly, we get comments from people that, you know, um, Wall Street people are looking for to seeing what Aaron's, going to say because look, I'm, I'm a bit a bit, uh, uncharacteristic in, in my writing style and maybe my speaking style, but I hope it resonates. I'm preaching to uh, to deaf ears on 1 side, and the tribe and the other. But let's just skip this done. Great grind back to the grindstone and
We'll see what uh we'll see. What comes with the next quarter. Thanks everyone.
Ladies and gentlemen, that concludes today's conference call.