Good day, and welcome to Modiv Industrial, Inc. Fourth Quarter 2025 Conference Call. [Operator Instructions] On today's call, management will provide remarks and then we will open up the call for your questions. [Operator Instructions] Please note this event is being recorded. And I would now like to turn the conference over to Sara Grisham, Chief Accounting Officer. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us for Modiv Industrial's Fourth Quarter and Full Year 2025 Earnings Call. We issued our earnings release after market close today, and it's available on our website at modiv.com. I'm here today with Aaron Halfacre, Chief Executive Officer; Ray Pacini, Chief Financial Officer; and John Raney, Chief Operating Officer and General Counsel. 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, intend, believe, expect, anticipate or other comparable words or phrases. Statements that are not historical facts, such as statements about our expected acquisitions and dispositions and business plans are also forward-looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-K and 10-Q. With that, I would like to turn the call over to Aaron. Aaron, please go ahead.

Thanks, Sara. Hello, everyone. I hope you're doing well. Crazy times. So I know I'm looking forward to this call. I'm sure you are, too. Let me start off by saying that Sara just read the standard preamble that everyone has that talks about forward-looking statements. And I spend the vast majority of my time thinking about forward things. But the historical things and the things that are measured, the accounting are really important. And I just -- this is a point in time because this is going to be Ray's last earnings call, even though Ray is going to be with us for the remainder of the year, it's his last official earnings call, and John is going to be taking over the helm. And I just really want to speak and thank our team. So Sara, John, Winnie, Lamont, Jason, all the accounting team, in particular, which is candidly more than half of our company, does such a good job and they make my job easier so I can spend all this time talking about the forward thinking things and dealing with these things that don't always have measurable outcomes. And that messy part of it that I do is that much easier because of how good they are. So I appreciate that they're all here and just wanted to welcome Sara to the call, even though she's always been there in the background, she's going to be part of the call now along with John going forward. And of course, Ray. So with that, let me sort of -- shifting gears. I'm sure we're going to have a whole host of interesting questions. I have no idea if I can answer your interesting questions, but I will do my best. But first, let's let Ray have the stage and do his thing. Ray?

Thank you, Aaron. I'll begin with an overview of our fourth quarter operating results. Rental income for the fourth quarter was $11 million compared with $11.7 million in the prior year period. The decrease in rental income reflects expiration of our lease with Costco on our office property in Issaquah, Washington, which was sold to KB Home on December 15, 2025, and expiration of our lease with Solar Turbines on an office property in San Diego, California, which we plan to market for sale upon receiving approval from the City of San Diego for a lot split. Fourth quarter adjusted funds from operations, or AFFO, was $4 million compared to $4.1 million in the year ago quarter. The $30,000 decrease in AFFO reflects a $554,000 decrease in cash rents, which was partially offset by a $299,000 decrease in cash interest expense, $138,000 decrease in preferred stock dividends, a $40,000 decrease in property expenses and a $15,000 decrease in G&A. AFFO per share decreased from $0.37 per share in the prior year period to $0.32 per share for the fourth quarter of 2025. The decrease in AFFO per share was primarily due to a 1.7 million share increase in diluted shares outstanding, which reflects previously disclosed issuance of operating partnership units during the first quarter of 2025, along with the issuance of common shares in our ATM and distribution reinvestment plan. Interest expense for the quarter was $1.1 million higher than the comparable period of 2024, primarily due to amortization of off-market interest rate swaps. With respect to our balance sheet and liquidity, as of December 31, 2025, total cash and cash equivalents were $14.4 million, and we had $30 million available to draw on our revolver. Our $262.1 million of consolidated debt outstanding consists of a $12.1 million mortgage on one property, excluding a $12.1 million mortgage on the Santa Clara property that was owned by tenants in common and therefore, not consolidated as of December 31, 2025, and $250 million of outstanding borrowings on our $280 million credit facility. Following the January 2026 extension of our credit facility, we do not have any outstanding debt maturities until July 2028. Based on interest rate swap agreements we entered into in January 2026, 100% of our indebtedness as of December 31, 2025, held a fixed interest rate with a weighted average interest rate of 4.15% based on our leverage ratio of 45.1% at quarter end and the January amendment to our credit facility. I'll now turn the call back over to Aaron.

Thanks, Ray. Let's just -- operator, let's just go to questions, it'd just be easier.

[Operator Instructions] And your first question comes from the line of Gaurav Mehta from Alliance Global Partners.

I wanted to ask you, I think in your -- in the press release, you talked about receiving multiple offers and spending some time on one of those and not pursuing it. So I just want to get some more color on what those reasons were for not pursuing the offer.

I figured you'd ask that. And I don't really have an answer that I can give you other than to say that we, at that moment, didn't see a secure path forward. So we stepped back from discussions. And I think that -- I think fundamentally, there was -- the vast majority of the stuff there was good. It's just that we -- our job is to protect our investors and to make sure that we have put forward the requests that we need to make sure that our investors are going to get what they're going to get. And it was just a process. I think that it was a generally positive exchange. And sometimes these things happen where it's just like it's not quite flowing. So that's about all I could say. It doesn't give you much. But as it relates to that, we just -- in that particular moment, we didn't see a secure path forward. And so we stepped back from discussions.

All right. Maybe on 2026, I was wondering as far as asset recycling, should we expect any -- are you guys expecting to sell any assets this year? And then maybe some comments on the acquisition environment that you guys are seeing?

So yes, on a go-forward basis, the recycling will -- as I mentioned in January, we will start to pick up in earnest. I'd say the stuff that's happened in the last 2 or 3 weeks might -- is going to cause -- it's hard, right? It's hard for pipelines. It's hard for dispositions because you've got rates just gyrating all over, and that just really stings confidence for buyers and sellers in general. And I think appetite is always there, but it's hard. It's just hard. If you're a buyer, you're pricing in a huge margin of safety because you could be wrong. And if you're a seller, you don't want to sell and do a deal that you would regret literally 30 days later, right? And so the landscape has changed a lot. So I think -- the near term, it's a little bit harder, a little bit cloudier, but it's not -- candidly, it's not any different than before. But let's assume that the trend long term, barring $200 barrels of oil is that we will eventually find REITs returning to favor. I think all of us here on the call probably presume this at some point. It's certainly been long in the tooth, and we would have liked to see it sooner, but this is the narrative we have. So we will continue to honor our recycling. I think the way we're thinking about the recycling and this is a couple of different phases. The first phase is really looking at like we have some noncore assets, particularly office. Those are going to get -- we're going to get rid of those, right? There's only 2 office properties we have. One is Solar, which, as you know, went -- or not Solar. It's the property in…

I appreciate it. That's all I had.

And your next question comes from the line of Jay Kornreich from Cantor Fitzgerald.

In line with a lot of your comments there, obviously, a lot of questions on the macro perspective at the moment. And I guess if we could just wrap up all those comments you just made about the transaction front and how you're thinking about that going forward. Do you still feel on track to get the portfolio to the 100% pure-play manufacturing industrial over the next 24 months? Or does maybe the time line shift just with everything that's going on at the moment?

Yes, I do because I always like to underpromise and overdeliver whatever the phrase is. So that 24 months, I think if things are rosy and the market starts hitting its stride, that's a 12-month process, right? So it can be a lot tighter. Again, the bottleneck is having the right assets to acquire and the right assets to acquire will become much more evident when the market gets a little bit more stable. So -- and theoretically, just putting out our portfolio, I could -- if I identify the right portfolio of assets as an example, and I had the right timing to buy them, that I could almost in effect, do it in one fell swoop, right? So just mathematically, if you think about it, it's not going to happen likely because it's hard to find these things, but it doesn't mean it can't happen. It doesn't mean we are not looking. But if you found a $100 million portfolio of assets that you like that you could line up to purchase that met your box, and then you sold your -- you could take your assets out to market, they would all be reversed 1031 or forward 1031 designated exchange and you're done in one fell. It's the pipeline that matters. So yes, I do think 24 months is very realistic and doable.

Okay. I appreciate that. And then just one follow-up. And I recognize that there's a little commentary you can provide on the potential acquisition offers that you received. But can you maybe just from a different angle, talk about what's perhaps brought you more on the radar of others more recently as an acquisition target, maybe relative to a year ago? Is it the state of interest rates? Is it the progress you've done on the asset recycling efforts? Is it something else? Just what do you think has brought you more into the light of others looking for a portfolio like yours? And how do you expect additional potential inbounds moving forward?

That's a good question. So I think, look, we've seen REIT M&A -- the discount for public REITs to private real estate has been persistent. We started to see REITs get picked off. In some ways, you could argue why hasn't there been more M&A volume, but there's still been a decent amount of M&A activity, right? So in our space, you obviously had the real germane thing you had sort of Fundamental, which was not public, but they got taken out by Starwood. You had Plymouth taken out. You had Peakstone taken out. Broader than that, you got Alexander & Baldwin, you just had the NSA deal. We've had a lot of different names get consumed. I think a lot of them were smaller cap names, which means that there's a greater buyer pool of people who can afford to take those out. So I think there's been a trend where for a while now, I mean, if you had raised a value-added opportunistic fund in '23, you've got a 3-year investment window maybe or you raised it in '24, you've got a 3-year deployment window that you had to get it deployed. At some point, people are starting to deploy and they were waiting and they're waiting. And I think we saw early signs -- we started seeing signs as early as the third quarter of last year where activity started to pick up, and we've seen a fair number of those things. And so once that starts happening, people start looking, right? If you're -- once you decide you're a seller, then you're potentially a seller, so that attracts buyers. But if you're starting a buyer, you start to look for things to buy, right? And so I think that's been the first thing. I think the…

[Operator Instructions] Your next question comes from the line of John Massocca from B. Riley Securities.

So I know you kind of talked a lot about the inbound interest after the January '20 update. But I guess, given that you've seen that, does that maybe spark an interest in running a kind of strategic alternatives process earlier than that, I guess, maybe that kind of post 24-month time line that was kind of talked about in that update. Just kind of curious how that changes your mindset, if at all.

I think that -- I think the interest suggests to me that people know there's value here and that they know that we can clean up the portfolio. And look, again, the portfolio is not dirty, but if it's more polished, it's going to be more valuable. And so they see a window of opportunity if they can take it out cheaper than what it will be in the future, that's their job. Their job is to try and take it -- keep the upside for themselves and give you a few shekels. I think what this suggests to me is that barring someone closing that value gap -- and again, closing that value gap does not mean $22. Let's just all be clear. No one is going to do that. No investor in the right mind or buyer in the right mind is going to do that. But there's no upside, right? They don't -- they want it bad. They just buy a bond, right? So they need upside, but our investors need upside. And so there's -- it's a dance of where that is. But what it suggests to us is that if we didn't have -- like if you look at -- if I'm going to go buy a used car, and that car has got a little bit of rim rash in the back wheel or there's a little bit of scratch. I'm going to use that to get lower price. But what we have the ability to do is clean that -- polish that portfolio up. And so that it's even more valuable. So if you flash forward in this environment, let's think about where we're at right now. We're in a super crazy rate environment, right, where people are dealing with inflation and bonds…

Okay. That makes sense. Maybe on a more detailed level, and apologies if I missed this in the prepared material. What were the terms of -- or the potential terms of the Melbourne, Florida office sale? Or is that kind of TBD?

The terms are well known, but I'm not to us. And I -- as a respect to that buying party and respect to us, I like to keep those silent until after the fact. Suffice it to say is we have slightly over $400,000 of earned money that's gone hard. And this has been a process. We've given them a long -- this was not a fast deal. It was an organized methodical one. And so once it closes, I'll inform you of what it was. And I'll tell you right now, just to be clear, what we don't have right now, and we're working on that, we don't have a replacement property identified yet. We don't need to worry about this one. So that's okay in terms of the tax sensitivity. Why is that? Well, because we're selling Kalera, and let's just all be honest, we took a loss on Kalera. And so that creates a tax loss that shelters the gain on this one. So we have a little bit of time to be thoughtful about the redeployment of that. But it's scheduled to close in the second quarter. And once it closes, which my guess is we will -- well, we will absolutely tell you what happens on it once it closes.

Okay. And maybe with Kalera, the former Kalera property in mind, can you remind us what the kind of, I guess, cost of carry was for that in 4Q or kind of the OpEx costs associated with that asset in 4Q that's going to go away now that you sold it in January? Like roughly.

Ray, do you know roughly on top of -- it's not -- it wasn't terrible...

Yes. I mean I think it was running about $20,000, $30,000 a month.

Okay, that's it for me. And Ray, appreciate all the help over the years that you've shown on these calls.

There are no further questions at this time. Please proceed.

Everyone, thank you so much. I know we came out a little bit later. That was because of the aforementioned offers. I don't like to come out as late, but it didn't seem -- we are a pebble in -- causing a ripple in the ocean that is raging right now. So I appreciate all that did join. Wishing you the best of luck for your families and your portfolios and talk to you again for next quarter. Thanks so much.

This concludes today's call. Thank you for participating. You may all disconnect.