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Good day, and welcome to Modiv Industrial Inc. 3Q '24 Conference Call. All participants will be listen-only mode. [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 vrecorded. I would now like to turn the conference over to John Raney, Chief Operating Officer and General Counsel. Please go ahead, sir.

Thank you, operator, and thank you, everyone, for joining us for Modiv Industrial's third-quarter 2024 earnings call. We issued our earnings release before market opened this morning, and it's available on our website at modiv.com. I'm here today with Aaron Halfacre, Chief Executive Officer; and Ray Pacini, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we'll open up the call for your questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases. Statements that are not historical facts such as statements about our expected acquisitions or dispositions and business plans are also forward-looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-K and 10-Q. With that I would like to turn the call over to Aaron. Aaron, the floor is yours.

Thanks, John. Hello, everyone. Thanks for joining us. Like some of you, I probably stayed up fairly late watching the results. No matter what someone's opinion is, I was hoping that it was decisive either way. One more uncertainty removed from the marketplace, so we have that. Of course, 10 years are up to where they were in June. So it makes for an interesting time for REITs. Most REITs are selling off today. We are up a little bit, but I guess a broken clock is right twice a day. With that, why don't we get started? I'm just going to go right into Ray, have him give some prepared remarks, then I'll have a few comments and then we'll open up to questions. Ray?

Thank you, Aaron. Rental income for the third quarter was $11.6 million compared with $12.5 million in the prior year period. The decrease in rental income primarily reflects the disposition of two properties during the first quarter of 2024 and the sale of 14 properties in August 2023, partially offset by rental income from one industrial manufacturing property acquired on July 15, 2024. Third quarter adjusted funds from operations or AFFO was $3.7 million, which is comparable to the $3.7 million in the year-ago quarter. The decrease in rental income was partially offset by decreases in the adjustment for straight-line rents, primarily associated with the May 2024 increase in rent paid by the State of California's Office of Emergency Services to our Rancho Cordova property, along with decreases in property expenses and G&A. AFFO per share of $0.34 reflects a $0.01 increase over the prior year quarter AFFO of $0.33 per share, due to a decrease in fully-diluted weighted average shares outstanding. Our repurchase of 780,000 operating partnership units and shares on August 1st, 2024, was partially offset by 157,000 shares sold in our ATM offering during September 2024. If our repurchase of the 780,000 shares from First City Investment Group on August 1 that occurred at the beginning of the quarter, pro forma AFFO would have been $0.35 per fully diluted share. Interest expense for the quarter was $3.2 million greater than the comparable period of 2023 due to $2.4 million of unrealized non-cash net losses on swap valuations, which increased interest expense in the current period, while the prior year period had included $795,000 of unrealized gains on swap valuations, which decreased interest expense. Now turning to our portfolio. Following our eight-year lease extension with WSP USA for our San Diego property and a five-year lease extension with LabCorp for our San Carlos, California property, our 43 property portfolio has an attractive weighted average lease term of 13.8 years. Though the majority of our tenant credits are private, approximately 33% of our tenants or their parent companies have an investment grade rating from a formally recognized credit rating agency of BBB- or better. Annualized base rent for our 43 properties totals $40.2 million as of September 30th, 2024. With respect to our balance sheet and liquidity, as of September 30, 2024, total cash and cash equivalents were $6.8 million and we had $280 million of debt outstanding. Our debt consists of $31 million of mortgages on two properties and $250 million of outstanding borrowings on our $400 million credit facility. We do not have any outstanding debt maturities until January 2027. Based on interest rate swap agreements we entered into during 2022, 100% of our indebtedness as of September 30th, 2024 held a fixed interest rate with a weighted average interest rate of 4.52%, based on our leverage ratio of 48% at quarter end. We're actively evaluating the changing interest rate environment and intend to enter the new swap agreements on or before December 31st, 2024 to continue our full cash position, since we expect at least one, if not both, of the current swaps to be canceled on December 31st, 2024. As we reported in our earnings release, our Board of Directors declared a cash dividend per common share of $0.0975 for the months of January, February, and March 2025, representing an annualized dividend rate of $1.17 per share, which is an increase of $0.02 per share or 1.7% compared with our current annual dividend rate of $1.15 per share of common stock. I'll now turn the call back over to Aaron.

Thanks, Ray. So this was a quarter where we spent a lot of time on that prior potential JV deal. Yet despite spending a lot of time on that and digging in that, doing the work of that, which ultimately, as you saw in October, didn't come to fruition, at least certainly not in its current form. We were still mining the store and still getting things done, and I think that speaks really highly of our team. With a company of this size and with a finite number of assets, you are undoubtedly making an investment choice that is largely predicated on the quality of your team. And to know to be patient in what has been a crazy market ever since we listed, to make the tough choices that sometimes are not the sexy ones, and to do that consistently, I think, speaks to the caliber of the team that we have and I'm very grateful for them. And I think, I just want to highlight that, doing all these things with basically no fresh capital and in an adverse rate and volatility market with limited traded float. In some ways, we shouldn't even be here. I remember, I mean, if you think about it when we listed this company, Power REIT, ticker PW, was a $200 million marketing company. I think they're like $3 million now. SquareFoot was a bigger Presidio that is, was a bigger company than we are. OPI was a bigger company. There are so many companies that have made the wrong choices over the last two-and-a-half years and here we are still standing, I think the quality of the portfolio is better than it was. We were more than 50% office three years ago and now we are the really the only pure-play industrial manufacturing REIT out there. I know Gladstone has picked up some in the end, and they trade -- we trade Demir and Parity some days. But it really speaks to us just trying to be patient, trying to be disciplined, not trying to be sensational. Yes, I have a very candid approach. Yes, you're seeing that in the press releases but, I think it really boils down to the fact that we're just getting stuff done. We're getting stuff done. We're being smart about it. We're being patient. And as we think about the balance of this year, there's primarily two things that I'm focused on, and we don't have much of the year left. But one is that UPRE transaction that we ordered our thirds on that, and we're doing a site visit and this has been negotiated for months. So I think barring there being an environmental toxic dump there that we didn't know about, I think this is an all sign that we're going to get this closed. So that's one thing. And the other one, which many of you have caught on to and some of you have maybe brushed over, is the swaps. And just to spell it out in real simple terms, when we put on our two different hedges for two different term loans, one was $150 million term loan, one was $100 million term loan. They were done in '22 and '23, respectively. We entered into to save on interest expense, we made a calculated decision to go into a type of swap contract that has a put feature at the end of the year and if the rates are materially so, we're massively in the money on these sloughs and so they've hedged us comfortably. And so we think it's highly, highly likely like I would, you know, zero percent probability in my mind that the first swap that's on 150 million will get put back to us and where the 10 year is, which is, I mean, I don't know who hates the tenure like this more, REITs or Powell because Powell doesn't have that in his chamber anymore because rates are higher than they were before we cut. So it's a confusing environment, I think. But right now I betting that the second swap will also have to be canceled or put back to us and we've been anticipating this for months. So it's not, there's no alarm, there's no concern. We have a game plan. We use Chatham Financial, which is sort of the premier derivative accounting pricing shop out there and they price for us daily a series of different swap contracts that we can look at that would allow us to address this. And like anything with the volatility and the rates, we've been monitoring it, right and so we've got, it's. I know it's out there. I know, for instance, Steve Chick, one of our investors might ask about it. I think we've got it covered. I think, you know, our approach to this is that the rates will be the same or lower, right and that's how we've engineered this going forward. That's the next thing on the focus, obviously. I think the third thing, if I was to add a third thing that isn't necessarily economic but I do think it's important is we're going to increase the communication with investors. We're going to continue to do some things differently. We are a very retail-oriented REIT. I think we're probably the lowest institutional ownership of any REIT of this size, bar none. I mean, I think we have less than 9% institutional ownership and I'm okay with that. I'm okay with the fact that our stock trades damn near by appointment. We trade a fraction of the shares that are outstanding because a lot of our investors just like to hold it. They like their dividend, they like to know what they're owning and they don't pay attention to the daily fluctuations of the market price. That makes it hard obviously to get big large institutional investors into your ecosystem. No large institutional investor is really interested in making those types of bets in this current market anyway. And so we like the retail investor, we like the individual investor, we think that's a force to be reckoned with. And so we're going to try to work on that communication as well for the balance of this quarter and thereafter. So let's keep it interactive. Hopefully, we have some good questions. I'm going to allow you guys to ask your questions and if you need to come back, we can. But I'd like to have a dialogue and make this a little bit more constructive for folks. So with that operator, let's open it up.

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. [Operator Instructions] The first question is from Rob Stevenson from Janney Montgomery Scott. Please go ahead.

Good morning. Aaron, beyond the Jacksonville asset, now that you've moved beyond these two larger deals that you were looking at, how active is the pipeline today? And how are you guys feeling about that given your comments about rates and asset pricing, et cetera?

I like the pipeline right now. It was in the last month, I think you saw comments from Buzz and Gladstone that they were seeing some opportunities. We are as well. I think over the summer, it was pretty dry. I'm seeing a few more that I like. Pricing, it's price talk on some of these -- these are manufacturing assets, these are durable manufacturing assets, these are not flex spaces, these are not warehouses, these are true manufacturing. But I think price talk on a lot of these has been high-7s, low-8s for the majority of them. And nothing that -- I get a sense from the brokers that there's not a lot of buyers out there right now, which makes sense, right? It's really hard to make some decisions in this environment. I think that part of that logjam might have gotten cleared last night. We have tomorrow to see what that looks like and more importantly, the response to tomorrow. So, I'm generally encouraged by the pipeline. That being said, we're being disciplined because I don't want to take on any more debt and so that does limit our choices if you look at just raw capital. So we're being very mindful. That said, we have and we sort of alluded to it in October on that JV deal that one particular JV deal that has been tabled for now contemplated as recycling some assets and that's very, very viable. There are some assets on there that are not sort of true manufacturing. They are either industrial assets that are basically warehouses or they are non-industrial assets. But there's a handful of them that are easily low six cap assets that we could recycle into eight cap assets and on a standstill basis generate a fair amount of AFFO growth. But I'd say, as it relates to the pipeline, we're we like what we're seeing early signs of it, seems encouraging. I don't know how the inventory will change. It's a weird phenomenon. What we're seeing now is, what we're going to see for the balance of the year typically because it's too hard to get anything else closed. We typically then see a new surge sort of mid-January, and but we see things we like, I'll put it that way.

Okay. And then the Jacksonville OP unit asset, is that -- is the $6 million of OP is the entire purchase price or is there also a cash element there too that pushes the price over that up over $6 million from a modeling perspective?

Yes. No, it's all in. That's it. There's no cash.

Okay. And then I guess the other one for you is that you alluded to it a minute ago in terms of asset sales. How are you thinking about the Kia asset and sort of when the right time is for you to sell that asset given that it's probably one of if not your largest asset and going to wind up having significant capital coming in and to be redeployed? Is sometime in '25 the right time to sell that asset? Is there certain benchmarks along the way that you're looking for to figure out when the right time is to recycle that asset?

Good question. I think, you know. First things first, we still -- we've got Costco looking solid to close next July-ish or August. We have heard from our tenant in -- OES that they're going through their valuation process in hopes to exercising their purchase options. So those are two assets that are also large, that also need to that are definitely office, and so we want to address those. And interesting in solar turbines, which is a tenant that's in San Diego that is leading in July, and we've known this and we'll look to put that on the market to, as an owner occupant, just up until about three weeks ago, that parcel, the solar turbines parcel was conjoined with the WSP parcel and we've been spending the last two years trying to get that split in the City of San Diego, which we did. So those parcels have been formally split, and so that -- it's good for us because obviously, we have an eight-year lease on Woods that positions that asset well. We'll explore options with that one, but then we can now pair off the solar turbines. I bring this up because there's some housecleaning still to do. We're not done with those. In the meantime, Kia continues to be a very high-quality asset, very long lease term, attractive rent bumps. And my view is that, as we get into a much more stable rate environment because it is a large asset to purchase, you're going to find that the cost of capital for those who want to buy it is going to be better. And so could it happen in '25? I don't have any designs on that. I think it does have a very low tax basis, so we have to be very mindful of the 10/31 exchange. But I think there'll be plenty of opportunities. I do say that at some point, we're going to want to have all industrial, and that's going to be sooner than later. There -- as I look on the horizon, I'm spending a good amount of my time. Obviously, we're looking to grow and gain more market cap. But absent that, absent there being a real demand, I have to be mindful of our existing investors, and there's over 10 million shares outstanding and those people care about what we're doing. And so, a big part of my focus is thinking about the preferred that is callable in, I think, in September of ‘26, and I think I'm also thinking a lot about our January 2027 maturities and making decisions today, that will put us in a really, really good position for those events. And so, Kia could come into play on that time horizon, certainly. But I'd say that, it's an attractive asset. It's massively cash-flowing. That was a really smart trade for us. 405 Furnish, it's not going to go away. I don't -- I'm not itching to sell that.

Okay. That's helpful. And then Ray, from a numbers perspective, you bought back some OP units and possibly some stock during the quarter. What was the average price on the stuff that you bought back in the third quarter?

$14.80.

Okay. So that's what that $14.80 number was. Okay. I didn't know whether or not that was the number.

Yes. That was the owner of Kia, right? So that was their units. We bought them back. Those are the same units we issued to him in January 2022 at $25. So the 780,000 units, which was OP units hence talk, issued at $25, retired at $14.80, and then we turned around and prospectively with the OP unit transaction for the Jacksonville, Florida, we'll have reissued $600,000 of those $780 at a $2 per share premium.

Okay. That's helpful. And then last numbers one for me. The dividend increase is effective January, not for the already declared fourth quarter dividends, right?

That is correct. Yes.

Thank you. The next question comes from Bryan Maher with B. Riley Securities. Please go ahead.

Just a couple for me this morning. Aaron, you've been pretty quiet, I think, on your current tenant performance, except for the ones that we know about Costco, KIA just talked about. Is there anything else going on in the portfolio that we should know about? Any known vacates other than I think you just talked about Solar Turbine -- can you just give us a little bit more color on kind of the day-to-day with your tenants?

Yes. So there's Kalera still out there, right? So we've resolved that. That's an empty box. It's been empty basically since summer since the bankruptcy proceedings ended. We are -- we've had numerous conversations with different strategic parties, both vertical growers as well as even -- we even had some reach out to us who like it for dry cleaning business because of its water source. So we are getting ready to take that property formally to market. We kind of were waiting -- I think we're going to do it soon, but sometime fourth quarter or probably January. That's the only one that's not carrying its weight and we will look to recycle that. Anything that comes out of that will be accretive by given the fact that the capital is not earning anything right now. Solar has been -- Solar was one that had been there for a long time, say, 4 years ago they did a 2-year extension and then 2 years ago, they did one more 2-year extension, or they had an option they exercised it and we knew they were leading here. And we hope -- we're actually very glad they are because the pricing on that from an owner-occupant standpoint is much higher than it would have been from a tenant standpoint. So, I think you actually toured it back 3 years ago. So we're looking forward to that one. Other than that, I mean, this portfolio was and I think this is a framework that I think an individual investor will appreciate, right? Like all my net worth is in this company and I take the belief that a lot of people's net worth or a meaningful portion of it is in here and they don't want to, pardon my language, and I'm already foul-mouthed sailor as it is, but they don't want us to [expletive] it up. And so we're spending a lot of time building what I believe is a fortress portfolio. I mean we have a 14-year Walt, a 13.8-point year average Walt, but that includes solar that is going to be leaving in 6 months, right? The Labcorp, which we just got a 5-year extension a year early, they'll probably get -- continuously do fivers. We don't have really -- most all of our things are absolute triple net. There's a handful of some double net leases in there that are legacy that eventually like to take care of. But the vast, vast majority of our portfolio is absolutely triple net with 20-plus year leases and they're solid late, like salt of the earth manufacturers that just keep making the same stuff they've been making for 30 or 40 years and so it's a really solid portfolio, and there's not a lot of pulling your hair, gnashing at your teeth in this, I think. That helps -- I mean, so there's inherently, when you look at the top 10 roster, you look there's concentration risk. There is. I would love to be 5x the size. But when you have 43 properties, you watch them like crazy, right? I mean you're sitting on your eggs. And so this portfolio is really solid. So, Solar, there's nothing in the portfolio at all that causes me to be worried or I got to do this before that. Obviously, if the unknown, unknown happens, that's always a [expletive] situation, that's what we had with Kalera but we're working through that. And I think other than that, this is a really solid portfolio, in my opinion.

And just one more for me. Thanks for those comments. Given the election outcome, regardless of what you think of each candidate, is that changing your view on your acquisitions? I mean, I guess we should expect increased onshoring of manufacturing. But how does that tweak how you're thinking about acquisitions of industrial manufacturing going forward? And that's all for me.

Yes. And I think I mentioned this in -- I'd have to go back and pull it. But I talked about why industrial manufacturing. I think there's some great national wind in our sail. I think they were there under both campaigns, but I think there's still going to be there for the next while, right? I think if we look at Trump and if he introduces tariffs -- look, the things that we're manufacturing are already being built here. They're already being sold here. They're already valuable. So I don't expect them to, will they get a surge in new orders? Maybe they will. But even if they got a surge of new orders, maybe -- even if our tenants got like triple the orders tomorrow, we're still getting our rent, right? We're in that lease company. So we're not participating in them. Just like if they have a slightly low manufacturing output number, we're not looking for them to go dark. It's really sort of bedrock. I'm grateful that we're supporting sort of American workers. I really believe in them. I think that with a Trump administration, it's probably more likely that you'll see onshoring, possibly even nearshoring. I think you're going to have -- but even if that did happen, it takes time, right? And I think there was actually a podcast, or Elon Musk with someone, he just noted that manufacturing takes time to start up. That's why we're very focused on manufacturing that has already been, it's durable and not necessarily something that moves like a stock, right? And so I like manufacturing because it makes something. It's not based on consumerism. It's not based on separating your discretionary dollar from your wallet so to make someone else -- it's stuff that's very durable products. I mean things that you're just not going to see on Amazon or eBay or even in a dollar store or a mall, you're just not going to see these products, and they're really -- and they're boring. And I like that. I like the way they're boring and they're consistent. And so I think this environment is conducive for that. I think people would -- this is -- the unique thing about us, because we have no institutional followship is that we trade very different to the broader market, we're almost an automatic diversifier and you could own -- if you wanted to own a handful of REIT sectors, we're really the best option if you want to own American manufacturing. There's not a really another way to cleanly do that unless you own industrial names themselves, but then they may take on so many other different noises with commodity pricing, things like that. We basically have -- is management going to screw up your balance sheet or not? So far, we haven't. And if we do, shoot me. And then what does the rate environment going to do? What are the broader trends for REITs? And if you think those are going to be in your favor and you like real estate and you're like, wait, this is kind of an easy thing to add into your portfolio because it's not correlated to your B&Q trade, and it's buying something that's got lots of durability. And yes, it has upside. I mean if you go back and look at our last appraisal for the NAD in January, which we'll probably do another one next year, it was like $23 a share. And someone might say, oh, you guys just hit a new 52-week high in the last 2 weeks. And we hit a new 52-week high after we told the market we weren't going to do the JV, which shows you that people want you to make smart decisions with your money. And just to be honest. And I read so many press releases from so many CEOs, and it's not written by them. It's written by their attorneys. It's written by their IR folks. And there's nothing wrong with that, and if you're a large institutional REIT, you've got to do that. But you think back for 20, 30 years, NNN and O as examples, they just raised retail money, and they did a great job doing that. But you have to be very transparent, you have to be very solid. So this is a good investment at a good time. And so I'm encouraged by manufacturing. I need more money to buy more assets. But I only get more money as people want -- because I'm not going to borrow it. So we're only going to get more money if people like the share price and they want -- they own more of this and the good news and the bad news about having no float is that, on any single day, some dude in his underwear can sell 1,000 shares and our stock can fall 2%, but also can go up 2%. I don't even know what it's doing right now. But it trades very differently than the rest of the market. And if it's trading well, we're going to focus on raising capital to retail investors, so that they get rewarded because eventually, we'll have to, down the road, and it could be $500 million, it could be a $600 million, could be a $1 billion mark gap before you're really going to have institutional investors care about too in any meaningful way. Until such time, we're going to focus on people who have been in the fund and like it, and I think they like manufacturing.

Thanks, Aaron. Up 4%.

Oh, nice.

The next question is from Gaurav Mehta with Alliance Global Partners. Please go ahead.

I wanted to go back to your comments about your expiring swaps. Do you expect the new hedges that you're looking at to have similar terms and similar rates as your expiring swaps?

So, yes, so I'd say the way we're engineering it is it's going to be at the same all-in rate or better. So that's how we've been looking at it. That's how we've been getting our daily quotes. I'd say the one thing -- I won't do any more cancellation features. We got -- so I remember being business school 2 years ago at Rice, and this is back when Enron was around and all those crazy things and there was a case study about airlines. And should they hedge their fuel costs or jet fuel costs or not? And some airlines took a 50% hedge, some went unhedged, and some went fully hedged. And the decision to hedge comes with consequences. In REIT environment, you absolutely need to hedge. Is it safe to assume that between this point now and -- our maturity rates will go down? I think it's generally leaning towards that versus going up. So you could argue, well, rates should come down but I don't like the uncertainty. I don't think an individual investor does -- would like the uncertainty. I don't like debt. I understand how debt is a necessary evil in the REIT space. I like the days when -- remember Public Storage had all the have preferred and common? That was a wonderful time. I don't personally care for debt, but I know, understand its role, but we will hedge it. So we'll hedge it at the same rate or lower. What we will do differently than we did last time was we will not put any put features in, and we will hedge exactly to the maturity date of our debt. And what that -- why that is significant is our FFO gets swung around because of this hedge is not deemed a perfect hedge. So you have this non-cash interest expense that hits us, one time it's up, one time it's down. That's just noise. And I don't like noise either. So I think you'll look to us to buy hedges that are perfectly tied to a maturity. And all things being equal, those should lead to perfectly hedges. And so then we'll strip out some of that FFO volatility that I wish I didn't have.

Thank you. The next question is from the line of Barry Oxford with Colliers. Please go ahead.

Thanks for the explanation on the hedge, Aaron. Looking at kind of your cost of capital and the arrows in your quiver, where does the stock price sort of come in? You're up 15% year-to-date. Again, you're up nearly 4% right now, 17.40 17.5. At what point do you say, hey, I'd be willing to do a decent-sized chunk, whatever number that is, in order to sort of kind of grow my asset base versus sales, which is just kind of disposition, which is just kind of running in place?

So it's a good question. It's one that I've been obsessing over for 2 years. And I'd say I've gone through sort of a bit of a cathartic process over the last 2 years. It's not been an easy environment. We are -- even though there are some people who don't like any G&A, I think we've done pretty -- and we have 11 people. We've squeezed the juice out of every lemon we had. We've worked really diligently to get things done with not having anything. There's a song by Oliver Anthony that says, I don't have a dollar, but I don't need a dime. And that kind of feels how it's been. We've done very -- we've done a tremendous amount of work with very little capital. I mean if you think about the $3.9 million that we raised, I mean I think we've raised if you -- since we've been public, in common shares, actual issuance, it's like $6 million total. Maybe, if that. I mean over 3 years. Yet we're now -- we just hit a new 52-week high not too long ago. We're apparently up today. Look, I don't want any more debt. I do want equity. We did have a conversation with a bank about the JV, about when we were looking at the JV, one of the last things we looked at was, let's see, maybe we could raise some money and I didn't want to raise money much. I wanted to raise $10 million, $15 million. I think that would be good. I could have probably tapered over some of the differences in the JV, maybe. But when we started talking, the model typically is -- and this is -- you guys know this well, but to any retail investor who's listening to this or reading this on Seeking Alpha in a week from now, the process is, as you go do an overnight or a wall cross or you do a raise, and everyone wants the institution to anchor the investment. They don't want to really take the risk and so they want the institutions to anchor their investments. As I already mentioned, we don't have institutional followship. We've done everything that we're supposed to do like a big REIT, but the system is designed for big REITs. The system is designed for easy money. Right? Easy money for banks to get paid, easy money to issue, easy money to the cost of capital to go buy more shares. Bigger, bigger, bigger, bigger. There are huge REITs. We are miniscule in the scheme of things. The whole ecosystem is designed for big-money REITs. And what I mean by this, hey, you got to go to the institutional investors and they're going to anchor you and they're going to go up to you and they'll say, okay, well, your float sucks. I want to -- if I'm going to do this by the shares, I want to be derisked so that I can flip these shares within a short -- very short period of time. And if you thought about a $10 million or $15 million raise, that's damn near 10% of our market cap but it would take much, much longer to unwind that position, right? There are days like, really, there are days where we have like almost no volume for the first 2 hours of the day, right? How would someone try to unwind it? How they do that is they say we'll take your shares but we want a 15% discount. And then if you think about the banking cost, that's probably with your underwriting costs and your fees, that's probably another 10%. All that cost of all the legal costs and everything like that. So suddenly you're looking at issuing shares at a 25% discount just to go buy a property -- and that doesn't transform you and I know there's been conversations about re-IPOs and things like that. There are good and bad things about what we've done in the past. If I jump back in history, we listed the shares when we did, and we didn't do a big raise because I felt it was really important that investors had choice. I'm a big guy about individual freedom. I don't like to be told what to do. I don't like -- have to tell anyone what to do. It's important to have individual freedom. And our legacy investors were crowd-funded investors. And look what happened to BREIT or Starwood REIT or all these other ones, where they had to gate and they had to gate. I know what that feels like to gate. We were -- we had individual investors in a non-traded REIT, and they wanted out. And I knew that we couldn't sustain just doing that because that would be a self-liquidation. So we listed the shares. We did not provide any lockup. Had we done it differently, we could have probably done a big re-IPO. But that big re-IPO would have been selling half the company. If we raised $150 million, we didn't sell a half the company to institutions at a huge discount. And so they would have won and the individual investors would have lost. And my view is that we can be patient. We can continue to grow. If I grow -- when we raised $4 million last ATM, if we did that every quarter, that's a 10% raise in the market cap, without having to give away shares, without having to destroy the intrinsic value of the company. And remember, we -- those appraisals suggested -- we had CBRE and Cushman do those appraisals last year, and they said we are -- if you were to go sell these assets, it'd be roughly $22. You can say, oh, that's BS, it's not that much. Okay, let's take $20. There's a liquidation value out there. And so raising a bunch of capital or selling the company at an artificially low price, all it does is it probably lines of my pockets, and it probably lines bankers' pockets. But it doesn't grow the dividend. It doesn't grow the strength of the portfolio for the investors. So it's a long way -- winded to say that, look, we are going to lean into the retail investor forum, we think there's -- if they respond and they are interested, then we will raise in that manner. And if we can raise a lot and it can go to them, we'll do that. If we can raise a little, but it goes to them, we'll do that. Eventually, what will happen -- it's pretty clear, if you study history, it's pretty clear. One of 2 things will happen here. Well, there's 3 things. One is you guys can end up hating me and I'm out. And good luck whoever is going to take this job on the backend because there's still got work to be done. But I think right now, I'm the guy in charge. I'm going to work my ass off every day to make sure we do it. So there's that option. It's always there. It's always that we've got a proxy going on right now. Anyone can always say, get this dude out here, right? But barring that, there's 2 paths. One is we'll incrementally start growing million $15 million, $20 million, $30 million, and we'll certainly be -- next thing you know, we'll be a $200-some million market cap. And the indices, the passive indices will have to buy our shares because now we'll have -- we'll hit their thresholds. And then you've ever seen this before, when they have to go buy, they have to buy. And they don't get to play the games, they go out and buy. And so that would be a huge uplift. And I'd rather do that with retail dollars than institutional dollars because eventually institutional dollars will come in. If I just did like knocked it out of the park, and if I could, I would, if I go out tomorrow and double our size by raising exactly 50 -- the same amount of shares, so basically selling half the company. We'd still be $300 million. We'd still be tiny. We've got a long time to do. There's a lot of upside. And so there's that path that we'll continue to chip away and get bigger and then eventually will be sort of mainstream and this will die down. The alternative is, is at some point in those years it takes to get there, some will, you know what, Aaron, we like your portfolio, and we're going to go buy it. And so either way, the investor wins. It's just a slower game. It's not fast. It's not sexy. If we can raise large sums of money and we can do it accretively, and I'd like to do it for retail investors or those institutional investors who believe in the retail investor, then we'll do it. Absent that, we're going to be hunkered down, dragging our knuckles, working hard through this, and see what we get.

That all sounds reasonable, Aaron. Appreciate the color. Thanks.

Looks like we have one more question.

The next question comes from Steve Chick with Sebis Garden Capital LLP. Please go ahead.

Thanks for the color on the swaps, by the way. I think that's really helpful. Looking back at the JV transaction that's been tabled, the Miami battleship, with these deals and the way you want to structure it, the sellers would be kind of post money shareholders in the company. And from the terms that you kind of roughly outlined when you made the announcement last month, it looked like the deal would be very accretive and bullish for the stock. So I guess I'm curious as to the balancing act that they're doing and why -- what's kind of the obstacle for them to do a deal that -- where both sides benefit potentially so materially?

So what was known was the first half of the deal, and you're right, that would have been accretive. The shares would have been issued at an attractive price. We would have used a modicum of cash. We would have not incurred any debt in this. That would have been an accretive transaction. Assuming that we could take down the second half of that portfolio at that same cap rate, it would have -- all the way through, it would have been accretive, right? And be mindful, it was a balancing act. It wasn't like we were -- no party was ripping either's face off, right? It was balanced. It was accretive. They would be making money. They would -- have been in the money on that trade. We would have been in the money. I think a couple of things came into play. And look, I alluded to this and I own this, is that, for accounting reasons, the JV couldn't have still spelled out exactly the second half. And so I misunderstood or I wanted to be optimistic, and I thought that the agreement we had allowed us to take down the remainder of the same cap rate. And that wasn't that perspective. And I think that -- and that's fine. And I don't think they misled us at all. I think I just -- we just had a miscommunication, and sometimes that happens because you're focused on so many things. You got term sheets going back and forth with attorneys. It wasn't evident until some of the attorney language came out, was like, wait a minute, this isn't about -- the mechanics that they were suggesting wasn't the one we thought of. And so could I close over it? I mean, God, there's been so many probably CEOs out there who have been in that same -- I have to think about Jeff Witherell at Plymouth, right? He got done with the Madison stuff, cleaned up his balance sheet and then he comes and does another deal with Sixth Street. And probably when he started that process, he probably thought, this looks good, this is going to be a good deal, this is going to help us grow and he did everything with good intent and probably what happened is it got down to the 11th hour and you get sort of you get so far down the road, some people -- there's just some cost balancing, right? And they're like, oh, well, I got to close over it. And he did. And he was doing it at 23, and I think he's at 20 now and generally, the people didn't like it. And I'm not criticizing him or what he did, he had to do what he had to do and he's making his own decisions, I don't know. But there's been -- undoubtedly, there are spots where CEOs are in this thing where they like, they've got legal dollar spend, everything is good, there's ego, there's pride, there's reputation, there's all these things. I did not know with certainty that I could take down the second portion of that portfolio at the same cap rate that I negotiated. I knew we were in a changing environment. And I knew that, hey, it was reasonable for this other party to go out, and then if they could go sell these materially tighter then, yes, maybe I would have been unwound, right, because we could have sold the asset and I would have sold my portion at a tighter cap rate then. But I wasn't doing this as a trade. I was doing this to add true industrial manufacturing portfolio into ours, combine the natural strengths to diversification, and to get us size, because size does matter down the road. But I wasn't going to do that -- I wasn't going to tilt into a hope certificate or windmill and just hope for the best because that's not a strategy with people's dollars. And so I didn't have that certainty. That's why we had looked at the market to see could we go do a little bit of raise to buy certainty. But then that raise, when I -- in that particular situation, was going to be not accretive. And so, okay, why am I doing this? Because I want to be bigger? Because everyone tells us we need to be bigger? No, we need to be smarter. And so that's still a solid portfolio. And they very well may read or listen to these things, and they're great guys, there's no problem about it. They would probably -- well, here's an interesting thing. Depending on what rates do, they will probably sell that higher than what they sold it to -- or what was willing to sell it to us. They had a fund. It was in an institutional fund that was closing. So they had -- they didn't want to wait, for us to sell a couple of assets and roll them over. They wanted us to do it fast. And I just didn't want to take that risk because if I go out and say, okay, I'm going to go sell KIA tomorrow, it might be a really crappy time to sell KIA. And I don't really want to sell KIA right now. But if I had to go put it down to my head and sell KIA just to go and closing another thing to maybe get that thing, that's forcing a decision, that's not smart. And so that's what really came out, is that we had to make a tough decision. We could have closed over it. The first part would have looked accretive. We probably would have rallied in the near term. But I would have taken on sort of existential risk on the backend, and I have to think 2 years ahead. I can't think a quarter. I think 2 or 3 years ahead because I have to do this -- I have to preserve the value of the portfolio while growing it intelligently. And so will that deal come back? I don't know. There were 2 other JVs that we -- very similar size that we've had conversations with. But here is a fundamental problem right now. All these private equity portfolios, which I like, and they're neither better or worse quality than ours. I mean when you're getting manufacturing, there's always a little bit of dirt and rust on your facade, right? There's a patina. But they're good durable assets. But they're all levered portfolios. And all of these portfolios are 20-to-1 vintage portfolios. So if you leverage your portfolio in a PE fashion, let's say, I don't know, maybe it's 60%, maybe it's 70%, if you levered it in 2021 and maybe you took 4 or 5-year paper, you've got to solve for this. You've got to solve for this probably by the end of next year, a lot of these. Some of them may be a little bit longer. If you look in August, you, okay, winds have shifted, rates are going to come down. We're going to start to see clarity. January, February, March, maybe we're going to have a lot of flowing capital again. But we've got a 10-year that's higher than it was before the Fed ever did anything and we don't have a clear path to what that rate is going to be in a year. And there are looming debt maturities coming. And we haven't really seen the CRE doomsday articles recently, and I'm not saying that they're going to happen, and I think some of them were way overblown and they're mischaracterized. But the reality is there is a lot of leverage in the system that does need lower rates, or they just need to sort of a Come to Jesus moment because they're going to have to pony up more equity. And so with these portfolios, they all have highly-levered capital effects. I'm not flush with capital. If we could go -- if the market said, Hey, we'll give you $100 million of capital that's accretive, then I'll go do those deals. But I don't want to bet on some future things and say, hey, I was wrong. The market does not give a [expletive] about us. They do not want to give us this money. And now we're stuck with that portfolio that we can't close in the backend because remember, when at Compass Crest I stepped into that. And it was nasty. It was a nasty thing to see, where you had a half-completed UPREIT transaction and a JV will own 60% of your portfolio, and you had -- you couldn't -- you were in a rock and a hard spot and that's because the decisions made years prior. And so I didn't want to do that. It's a tough decision we made. Will these come back? They could. We don't want to burn bridges. We are the premier manufacturing REIT. The reason why they are having conversations with us, and from the other ones that have been having conversations with us, is we are a form of liquidity. We are a way for their investors to get shares but then make the individual decisions. Because if you're a fund, you're making a singular decision. We are liquidating this fund, and you're all getting your money back, and I do that they like to roll their money into the next fund, or not. As a public company, everyone gets to make an individual decision. So you, Steve, tomorrow, need money to go to Disneyland, you can sell your shares and the guy next to you doesn't have to. And so that's still valuable, that currency is still valuable, and we believe that those opportunities still exist, but we just weren't going to force it now. All right. We talked everyone to death.

Thank you.

All right, everyone. Thanks so much until next time. I encourage those who are reading this later on Seeking Alpha or wherever, or who are listening in, do send us your questions, do send us your critiques. I don't mind the tough questions. I will try to be as transparent as we can without breaking any rules. And I hope you guys have a good holiday and get some rest. Be well.