Communication is the Key....

The following post is not a paid endorsement/buy recommendation but a thought on CEO communication and transparency.

I have been very fortunate to build relationships with unique leaders in the REIT industry for over 25 years and have watched many former colleagues move into C-Suite and other executive roles.

Over the past few years I have been watching Aaron Halfacre, CFA, CAIA , CEO of Modiv Industrial , steer the ship in choppy waters as it rebranded and reinvented itself into a pure-play Net Lease Industrial Manufacturing REIT.

So why should you care?

One of the things that I admire most about Aaron is that every single press release commentary is written by him. I can see him sitting in his office on his laptop with his mind racing as he types away his thoughts.

To put it bluntly, I have never seen a REIT executive that writes commentary like he does. He is about as transparent as it gets and is not afraid to share his thoughts and opinions on the current environment, acquisition/disposition opportunities, his compensation, M&A and other topics.

Let's look at some examples:

February 4th, 2025 Update on Portfolio Appraisal

(https://modiv.com/modiv-industrial-announces-latest-portfolio-appraisal/)

"...it is hard for me to contain my enthusiasm at the chance to own mighty American manufacturing at nearly half off, during a pro-American Trump presidency no less. When you include our fully covered $1.17 per share annual dividend, there is so much shimmer one might begin to feel they are getting both a dessert topping and a floor wax."

"I can already hear it being asked ‘Halfacre (or, if you prefer, any of my past monikers*), why bother with an appraisal in the first place?’ the primary answer is simple – transparency. As we have stated before, we believe that data informs decision-making, and transparency empowers awareness."

"*Monikers: Having the last name Halfacre seems like a no-brainer for the real estate industry but for whatever reason the pronunciation of my surname has been routinely butchered. When I was in high school in Hawaii as a non-military haole, I remember running at a track and field event in Waipahu when my name was pronounced (over the loudspeaker) with a thick Tagalog accent as “Hal FUHker”. I carried that lucky nickname for the remainder of the school semester. Or how about when I was at USAF basic training and my drill sergeant mispronounced my last name as ‘Hal Face’ and I stupidly corrected him with an unaware scowl, which in turn led him to yelling “FROM NOW ON YOUR NAME IS HELLFACE!!”. It wasn’t until I became a residential real estate agent (way before I went to college) and put on my business card “like a ? acre of land” did people finally figure out how to pronounce my last name."

Thoughts on M&A

"Personally, I love M&A and I have been lucky enough to have been involved with four REIT M&A deals in my career (including the merger that initially created Modiv). In fact, I love to think about M&A so much that I have spent weekends creating, for fun, hypothetical pro forma merger models of REITs that I affectionately call ‘REITmanteaus’. For example, imagine the accretion from G&A synergies and cost of capital benefits if a net lease juggernaut were created by combining Realty Income (NYSE: O), W.P. Carey (NYSE: WPC) and NNN REIT (NYSE: NNN). Think about how much more interesting the distressed office play would be if you merged Net Lease Office Properties (NYSE: NLOP), City Office REIT (NYSE: CIO), Office Properties Income Trust (NASDAQ: OPI) and Orion Office REIT (NYSE: ONL). Or perhaps, the combo of equally sized FrontView (NYSE: FVR) and Alpine Income Property Trust (NYSE: PINE). Or what about the no-brainer of combining Farmland Partners (NYSE: FPI) and Gladstone Land Corp (NASDAQ: LAND) into a better sized farmland REIT. I know #REITNerd."

March 4th Earnings Press Release and Outlook for 2025

https://modiv.com/modiv-industrial-announces-fourth-quarter-and-full-year-2024-results/

"We have two primary active ways to grow AFFO – acquiring positive income producing assets and continuously improving expense efficiency. Knowing full well that a near-term patient, disciplined acquisition strategy was in place, we have spent a considerable amount of time over the recent months to identify even more ways to be even more efficient with every dollar of expenditure. The beauty of being a small and disciplined REIT is that we fully understand that every dollar really does matter, and we have the bandwidth to focus on every single dollar. Our internal efficiency efforts have positioned us to be a small, special forces caliber team that tightly communicates on every facet of process and expenditure. This process has resulted in our achieving well over $1.4 million in cash savings for 2025 to include interest expense savings, a material reduction in unused revolver fees, some service contract negotiations and a reduction in employee G&A. For example, we are now saving $300k annually by rightsizing our revolver to a level that is in line with our balance sheet discipline. Also, for the next five years, I personally will not receive any salary or bonus. My interests are now completely aligned with investors – growing the dividend, growing the share price, or, ideally, both."

"Some of you might not have been following us in 2022 and don’t know this, but we provided guidance that year to be like the bigger REITs. We beat that guidance. Guess what? No one really cared. Bigger market forces were at play, and we had too small of a following. Our following has grown, including analyst coverage and institutional ownership, but I am still not a huge fan of guidance for a company like ours given the reason that we could literally be a materially different company overnight by doing one transformational deal (and, as you know, we are focused on trying to do transformational deals). That said, a few years have passed, our balance sheet has evolved, and I have noticed that analyst estimates have all started to drift. For example, based on the three current analyst estimates for Modiv’s 2025 AFFO, their consensus is $1.15 per fully diluted share. I don’t know about you, but that number looks anemic. So, to provide a bit of course adjustment in order that the collective community has a proper base line, I am here to let you know that our internal AFFO modeling estimates us earning $1.37 per fully diluted share (including the shares to be issued in the forthcoming UPREIT transaction) by assuming we do nothing but stare at our navel (e.g. zero net acquisition activity, no transformative deals, no additional efficiencies, etc.). You can take it with a grain of salt if you so choose, but if you want to bet on us doing nothing at all during the year, then you get a 2025 AFFO estimate that is 19% higher than the street consensus."

March 7th Raising AFFO Guidance and Buying Preferred Stock Back

https://modiv.com/modiv-industrial-increases-affo-and-retires-preferred-shares/

"Most days being a small cap REIT CEO in a high interest rate environment feels a lot like being Rodney Dangerfield you might be entertaining to investors on any given day but the majority of time you get no respect. Case in point, just a few days ago we released results that solidly beat consensus estimates, and the market yawned with a blank stare – you’re a tough audience to please. Let’s see if today’s news can at least cause you to begrudgingly break a smile. Though it may not be a four-leaf clover, at the very least it is a vibrant three-leaf clover found in the dead of winter, and I gladly accept this lucky charm as the yield is magically delicious."

"This transaction increases our base case, static, ‘stare-at-navel’ AFFO to $1.39 per fully diluted share for 2025. Yes, it is only a two-cent increase (in as many days) to our “do nothing” scenario but it highlights how a small REIT can move the needle with smart decisions. I will let you make your own bets on whether you think we will do nothing this year; however, not unlike when we retired OP units last year for $14.80 that we had issued at $25.00, acquiring preferred at $23.50 that was originally issued at $25.00 is another example of our ability to make money for our investors. Every penny matters and if you know how to make investors money, then you will be given the opportunity to do so with larger amounts over time. Though the cash to purchase this transaction was on balance sheet and is a bit fungible, let’s for illustrative purposes link this cash to the ATM sales we did in the fourth quarter of 2024. That equity was issued at a dividend yield/cost of capital of 7.24% and we have quickly redeployed that capital at a 7.85% yield with quantifiable upside."

"Today’s news will likely not earn the respect of some of you and that’s ok. My hope is that those investors out there, who worked damn frickin hard for their money, will read this and say to themselves ‘this dude is a good steward of my capital’. To paraphrase Warren Buffett, I personally have put all my eggs in one basket (over 1.11 million eggs to be exact – which is over 8% of the MDV basket), and I am watching (and thinking and strategizing and perfecting) that basket 24/7. Each day we climb the hill, each day we grind it out, and for those of you who that resonates with – then welcome to the tribe."

In Conclusion

Regardless of market cap size or focus, I think its important in how a company shares its message and its transparency for its shareholders.

Aaron does it as well if not better than any other industry leader.

Keep doing your thing Aaron and as you like to say "Grit, grind, get it done!”