MDV - NYSE

Good day, and welcome to Modiv Industrial, Inc. Second Quarter 2025 Conference Call. [Operator Instructions] Please note this event is being recorded. 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 Second Quarter 2025 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. As the operator noted, we issued -- we'll start today's call with 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 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'd like to turn the call over to Aaron Halfacre. Aaron?

Thanks, John. Welcome, everyone, to the second quarter 2025 earnings release. I think in past practice, I'll just hand it over to Ray first and then I'll add some comments and then we'll just kind of get into questions and I assume we'll have some this quarter. Ray?

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 30, 2024. Second quarter adjusted funds from operations, or AFFO, was $4.8 million, up 22% when compared with the $3.9 million in the year ago quarter. The $900,000 increase in AFFO reflects a $576,000 increase in cash rents, a $217,000 decrease in G&A and $126,000 decrease in preferred stock dividends. AFFO per share increased 12% from $0.34 per share in the prior year period to $0.38 per share for the second quarter of 2025. The increase in AFFO per share was less than the 22% increase in AFFO due to a $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 the 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 30, 2024, to 4.25% at June 30, 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 formerly recognized credit rating agency of BBB- or better. Annualized base rent for our 43 properties totals $39 million as of June 30, 2025, with 39 industrial properties representing 81% of ABR and 4 noncore properties representing 19% of ABR. With respect to our balance sheet and liquidity, as of June 30, 2025, total cash and cash equivalents were $5.8 million and we have $30 million available to draw on our 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 30, 2025, held a 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 $0.0975 for the months of July, August and September 2025, representing an annualized dividend rate of $1.17 per share of common stock. This represents a yield of 8.1% based on the $14.44 closing price of our common stock as of August 6, 2025. I'll now turn the call back over to Aaron.

Thanks, Ray. I kind of said in the press release, this quarter was a little boring. I would say, for me personally, it was probably a little frustrating. But I think hard work and patience can be frustrating at times. And it was boring in the context probably on a relative basis to others as well as to our past quarter, right? So we didn't choose to be very active this quarter. We obviously got the lease extension at Northrop. We've been working on some things. We certainly did -- we're pursuing a particular property right now, but the process, it doesn't fit neatly within a quarter. And obviously, you've seen our share price. I think almost to the day, 60 days before the [ Russell inclusion ] when it's pretty much known and calculable that you're going to get in, we fell off a cliff. So we were in the 16s and we've been in the 14s now for about 90 days. So our exponential moving averages are now sort of set to those levels. And we're not going to -- we're going to be disciplined. We're not going to issue. We didn't issue any at those prices and we won't. And so it was a quarter where there was a lot of volatility. There was a lot of opportunities to buy. I think I probably purchased, I don't know, 4,000 or 5,000 shares myself. It's ridiculously cheap. I mean I think one of the analysts probably have the implied cap rate, but it's like in the mid-8s. And there's no way you can buy these properties within any handle, low 7s, the mid-7s, some of them are high 6s. So it's just -- it's comforting in that regard, but it's also frustrating. That's the troubles of being a small cap name. And again, patience begets patience, right? And so we're playing a long game here, not much to report. I'm sure we'll talk a little bit about [ Clara ] in the questions. I'm sure you'll talk about some of my comments that I've made in the release. But it was a solid quarter. I think the decisions we've made repeatedly and consistently is why we had a large beat. And so the decisions, even the absence of activity this quarter, my belief is that that will pay dividends when we're talking this time next year, right? And I think that's -- the process is just to be brutally patient to understand our strengths, understand our weaknesses, be able to maneuver nimbly and quickly as needed. I think there's a real need for what we're offering out there. And I think we're starting to consistently build a tribe. It's a retail tribe. It's increasingly an institutional tribe, but it's largely a retail tribe where people, they like what we're doing. They like the no-bullshit, they like the consistency, they like the effort. And 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 REIT. I would love to be able to do more things. I mean that's -- 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, operator, open it up to questions.

[Operator Instructions] Your first question comes from Gaurav Mehta of Alliance Global Partners.

I wanted to ask you on some of the remarks that you made in the earnings release about asset recycling. It seems like the environment is getting better for you guys, maybe getting closer to sell some of those assets. Can you maybe provide some more color on, I guess, what you're seeing as far as recycling? And then the $150 million asset that you mentioned, what kind of -- is it going to be a 20% noncore that you would sell?

Yes, it's a good question. So the assets that we would sell would be largely legacy assets. So these are -- they could be core and noncore. So bucket of the noncore is in process, right? So as you know, KB Homes is under contract to buy Costco. We expect them to extend at least one extension. That one is itself is in process. It's just a matter of timing. And the reason why they extend is that they're just finalizing the paperwork with the city. And as a reminder, I think they're $1.7 million hard money already. And so that one is one of the noncore that's in the process of liquidating. We've mentioned in the past, OES has an option to purchase the property. They are in the throes of their very lengthy appraisal process. And so we don't think that would even self-liquidate at the earliest until next year anyway, just given the process, and this has always been known to us and always communicated. So those -- I'm not talking about -- those candidly are not going to be accretive spread. I mean, I can -- we can liquidate them, don't produce cash, but 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 we have to be strategic about when we take them to market. But there are some assets that don't quite fit our box. Most of them are industrial. They are legacy assets. They are -- would be very accretive. So they would be selling in high 5s, low 6s and we were redeploying these in the 7s. And so -- and they're fairly liquid. And there are also properties that we've also received unsolicited offers in the past. And we've kind of gauged the unsolicited offers because, one, if someone goes the other way to make an offer, then they clearly find the property attractive. And not every property -- no one is doing that for Clara. So we understand the difference. And we've been able to note over periods of time how those cap rates that have been unsolicited have tightened. And so we think that kind of in the broader picture of this pivot point that I talked about that we're starting to see a little bit more fluidity and people's desires to do things. And so now maybe be approaching the time to start doing that. And so that's probably -- I think in fairness, we talked about that at a big level, that, call it, $150 million of proceeds, which I think could generate close to 100 basis points, if not more than 100 basis points of accretion has given us calm, right? Because if we didn't have some of that and we're trading in the 14s and we're not issuing and we would be 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 still shaving off expenses, we're getting tighter, we're growing AFFO. We're doing all the things that we need to do. We just may not be acquiring a ton right now, which is like the cocaine of the [ world ]. And we're not doing that, but we feel comfortable that we have additional levers to pull. So I don't feel any despair. I don't feel -- the frustration I talked about earlier is just because I just like to grind, I like to do shit, right? And that's the frustration. It's not like, oh, we don't have any options. 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, we're not [indiscernible]. I believe that we will see that recover. And I think the recycling of those assets will help do that. Me mentioning it means that we're poised, 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've already launched something, right? And if I do a recycling, you will know it. I will tell you when it's done. But we're getting to that next stage, which I think is probably over the course of the next year or so that that makes the right time to do that.

Okay. Maybe a follow-up. I think you also made some comments about the lending market. It seems like you are exploring -- even the term loan is not expiring until '27, you have been exploring different options. Just wondering, I know you said there's lending available, but just wondering what kind of terms and rates are you seeing in the market?

Yes. So I like to work. I'm just very blue collar. I just like to work. I've never really developed any other habits other than maybe running and working out a little bit, but 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 grindy stuff to do necessarily, I'm going to spend that time thinking 12 and 18 and 24 and 36 months down and just iterating what could go here, what could do there, because I'm a big -- as you guys all know, I'm a big fan of REIT capital market history. I know what REITs have done in the past, but I love this industry. I've been in it for a long time. So I spent a lot of time. And look, there are certain things, we're not reinventing the wheel here. And so during this quarter, I spent a lot of time. One of the natural things to do is to say, okay, we've got -- on our event horizon, we have a term loan maturity, a credit facility maturity. And so let's get started talking earlier. We've talked to, obviously, our bank syndicate, we talked to others. And look, we are seeing that the environment for a new term loan/credit facility would be the same or better than what we had. And I think that helps the fact that we've shown tremendous AFFO growth over the last 3 years. The balance sheet has become very solid. We -- remember, when we put that first term loan on, we were -- it was pre-listing and we still had a shit ton of office. So we've really transformed. So I think the lenders feel good. And I think we're exploring the full gamut 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. We're going to be taking more steps towards that. I think the wildcard clearly for anyone here is what are the broader -- what's the Fed going to do, right? Are we going to see treasuries come down? We're going to see SOFR come down, we're going to see that that's going to drive the needle like -- and look, you see it. You see -- we're like robustly levered small cap name and then there's a Fed fart in the news and we whipsaw, right? And so that's -- if we do find rates coming down, which I think everyone is 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 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, we'll then -- you're going to hear it from me. But right now, we feel encouraged by it. And we are early, I think. I don't feel any pressure about -- I know some people get really sort of contemplated about maturities that are 18 months out, but I feel really good about this. We're -- we've got 14-plus WALT. And that includes things like 2 months on solar and that included the shortening of Costco. You remove those things, our WALT is more like an 18 or 19-year WALT. So the real core portfolio is solid with bumps and growing. And so it's very attractive to the lenders.

Your next question comes from Craig Kucera from Lucid Capital Markets.

You had a pretty sizable pickup in income recognized from your joint venture or your TIC interest, I should say. Can you give us some color there on what to expect going forward?

Ray?

Yes, that reflects the impact of extending the lease. The way straight-line rent works is in the early years of a lease, you're picking up rent that's going to be received down the road. So that was a 10-year increase in the lease term with 3% annual bumps. So that's what's driving it.

I'd say we're -- as we've noted in prior quarters, we are in active dialogue and discussion with our TIC partner. It's important for us that we, in a timely manner, end the TIC. There's a variety of ways to end that TIC, but TICs are a throwback of probably the pre-GFC construct. You don't see a lot of TICs anymore, even though there are some around and they're just not as fluid for a REIT. And so our goal longer term -- and I don't -- again, longer term is longer than this month, is to get rid of that TIC and we will get that done one 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. And changing gears, you took the impairment charge. It looks like that was taken on the [ Kaleyra ] equipment. I guess, are you moving closer to maybe a sale there versus trying to lease it? Or is that just -- how are you thinking about that asset?

Yes. So we've had -- it's on the market and we've had a variety of things, people going through. And so what -- I think what we've learned increasingly -- one 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. 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 the growing technology that was in this equipment is now progressively several years older and we're finding less of a market for it unless you find that particularly growing style. So we decided to take the impairment against that. It doesn't mean that we might not find a buyer that values it and has some residual value, but we just figured that was a cleaner way to go. And yes, our goal is to -- my ideal context is that property is gone if all -- if I have any powers within me to get rid of that property by the end of the year.

Got it. When the tariffs first started being announced, 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 as you have the discussions with your tenants?

Yes. So 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 the analysis. But the ones that we have seen and it's a good chunk of them, yes, it's -- one, I'd say, too, is we really haven't -- I mean, the tariff dance has just kind of been kicked down the street this summer. And so we have really not seen a ton of definitive tariffs until like earlier this week or last week. But the impact has been as we underwrote, right? I think there's not been any cost squeeze. There's not been anything 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 opining on or deciding on are a little bit delayed because everyone is -- like everyone is waiting to see, well, what does the world look like, right? And so that seems normal to me. And so the conversations are not that their clients aren't pulling the trigger, they're just not ready to pull the trigger yet, right? So we haven't seen it. I think there's -- again, I still don't know exactly where Canada shakes out, right, on this. But the countries that have announced, 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 solidified, I think that's probably a win. And so I just don't see an issue on tariffs for our particular set. It 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. I want to circle back to Costco. 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?

KB has until August 15. So we've been in conversations with them. They have told us -- they told us they will be doing at least 1 extension, they may be doing 2. And so they're targeting some possibly closing in December. And the reason is purely logistics with the city. It is not sort of a contemplated thing from what we've got. It's just the city has got a process. They have personnel that have been taking vacations and doing this and that and that process is taking longer than -- and you can't push a string. So they have another 8 days before they need to officially do the extension. We expect them to do that. The rent, Ray, do you have the rent on hand that Costco is paying?

Yes, it was running about $2.4 million.

Got it. Finally for me, late last year, you're looking at a number of transformational transactions you didn't close, but they were still potentially out there and may come back. Are you looking at anything out there that's similar or any other large portfolio transactions?

I would say that transformative transactions are still definitely on the table. I think for all parties, it just needs to be the right environment. And it feels like we could be getting closer to environments that are conducive to those. So there are still conversations, but they're more -- well, the last first half of the year, they've been sort of more checking in conversations, right, because a lot of moving parts. And it's just really, really hard for teams and balance sheets across the spectrum to pull triggers and make decisions without maybe a few data points a little bit more solidified. So I'd say they're still on the table. I think they have to be, too, right? Because we can't just stroll down the lane and do this little bitty stuff forever, right? We're too small of a REIT, so we have to do something transformational at some point. I don't think it has to be today. But if we were a $150 million market cap REIT in 5 years, then you should shoot us, right? 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 -- that's not us, right? We care about our shareholders. That's all I am as a shareholder, even though I'm CEO, all my compensation is shares, right? So it's -- and so we're completely aligned in that regard. And so transformative transactions probably will never be done, just not going to bring them up unless they are baked at this time.

Your next question comes from John Massocca from B. Riley.

It's always kind of a difficult question to ask in this context, I think given the answer you gave to the last question and some of the commentary on the earnings call. I mean, do you think there is maybe an opportunity given some of the loosening of capital broadly out there in the market to maybe market Modiv in its entirety as kind of a portfolio and platform or either/or?

So I've talked about this before. Look, 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 nontraded REIT, right? And where we were -- unlike a Blackstone REIT or a Starwood REIT where they have liquidity windows, that's what we used to have. We used to have sort of liquidity windows and we would have set arm's length in appraisal. And we continue 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, $23, $25, $24, something like that. And look, that's done by Cushman & Wakefield, very respectable. But if you look at sort of [indiscernible] sort of indices relative to NAREIT, 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 $24 a share. But I sure 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, this is the Board decision, and I'm just one member of that Board -- is that soliciting that would mean that we're waving a flag that we think that we capitulate. And I don't want to see predatory sort of characters coming into play, right? I can remember back when we were at $9.53 and 3,000 shares trading, it was a mess, right? We were just -- this was like late 2022. We had a lot of people sniffing in, but they wanted to go pay $10 a share. It was like slight hike, right? Because in 4 years of dividends, that's like half the value you're seeing. And so we understand that this is a tough time in the broader market, small-cap REITs in particular. We're holding up relatively well if you look at us compared to some of the other small-cap REITs. And look, for various reasons, I look at like -- I look at Plymouth and I look at [ Good ] and I look at Pine and I look at FrontView and I look at these guys and we're -- other than when we fell off a cliff right before the Russell announcement, we've been holding up pretty well. And I think that resonates to 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 we'll know that if they want to close that value gap sooner, we're going to listen. And so I think that's the approach we're going to take because I think our investors deserve us to fight for them not to be -- not to have hubris, not to be -- like if I lose my job tomorrow, so be it. That's how I set this up, right? So there's -- it's so hard to do things in REIT land. We're going to be smart about it and we're not going to be obsolete about it, but we're not also going to be begging.

Okay. And then how do you kind of think about -- understanding that kind of in the volatile kind of capital markets and cost of capital moving around, you have to be mindful of that and the impact that acquisitions and the like have on bottom line results. But how are you thinking about maybe weighing that against, right, the positive impacts of increased scale, either on your valuation as a public company or maybe even based on what kind of talked before about maybe being more attractive as something for private capital to come and look at?

Repeat that question again, a little bit simpler. I couldn't follow you clearly. What was the question?

Well, I guess, obviously, you 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 because you're kind of subscale. And so how are you kind of weighing those 2 against each other? And I guess, does that also maybe impact your attractiveness based on kind of what we were previously talking about?

Got it. Yes. So I think 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, get it to be more valuable, then those will always mean that we'll be attractive. We could triple in size tomorrow and we're still rightsized, right? So I think on the -- from public or private spectrum, we are going to be in that box of always someone's appetizer for a quarter or the meal for the year, depending on the size of the other -- 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 $1 billion market cap or larger, you're in the food chain, right? So I'm cognizant that our existence is going to be one where we are always going to be a rabbit and people are always going to check on us until unless the REIT gods line up and we kind of suddenly are huge. But I don't have any ego to do that. I have -- 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 recycle legacy assets -- and we have, I think, 1 or 2 double net leases that we didn't acquire -- if we recycle shorter WALT stuff and we end up being a very ironclad battleship of 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 to give you an example, let's just say WildBlue REIT came tomorrow and said, we want to buy you for $15 a share. We're like, well, that's not much of a premium. And they wanted to pay cash. I imagine our investors would say no. They'd say no because chances are in 2 or 3 years, we could very least be worth $15, if not more, and we'd also have made over $3.5 worth of dividends. So that economic value becomes $18 or $19 or $20. And so I think for us, we're going to stay our course. If we keep doing the right thing, we're going to continue to be more valuable. And it's just -- either we will get there. And I don't think it's a matter of we're not -- and I bring this up on the office thing. Even the office people are getting bids, but we're not office, right? We have actually a very attractive portfolio and we're cognizant of that. But our mission is solely do right by our shareholders. If we do that, everything else would get taken care of.

Okay. And then on a much more kind of micro basis, 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 inactivity? Or is there some kind of debate going on in the municipality as to whether to greenlight that project or not?

So it's purely the bureaucracy of the city. I mean, they have entitlement rights that the city can't disregard those. It's zoned to allow additional housing.

Yes. The zoning is already there. This is sort of a plan approval. I believe it's bureaucracy and logistics. That said, there is always -- I think until the -- what I do know for sure is there's 1.7 that they can't get back. Do I have concerns that they're not going to close? I don't. But probabilistically, there's some small probability waiting 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 on tail. There's a lot of ptosis in that assumption, but I don't think it's happening.

There are no further questions at this time. I will now turn the call back over to Aaron Halfacre, Chief Executive Officer. Please continue.

Danny, it looks like we do have a question from Steve Chick. Do you want to go and take that?

Yes. One more question from Steve Chick of Sebis Garden Capital LLC.

Just to clarify on the $150 million of recyclable assets that you've kind of soft circled, the Costco property, the $25 million you're expecting from Costco isn't in that. And can you kind of highlight how many properties that kind of refers to?

No, I cannot. Or I will not. I surely can, but I won't because -- and the reason is if you're taking these properties to market, you want to preserve a little bit of the -- because we are a public company, right? And anyone can go read up on us. And so we'd like to preserve a little bit of that optionality. Suffice to say, they're legacy properties and they are properties that don't quite fit our box, but they're very attractive properties. That's what I will say. And it does not include the KB -- or the Costco, excuse me. Costco one -- yes, the Costco one is like it's great that they're buying it. And if you recall, there was other homebuilders that bid on that process. They were the top bid. So this -- the destiny of that property is to be housing for people in a housing-constrained market. So we feel good about that. I don't think the proceeds from that, they don't move the needle, candidly. After we pay back the loan, there's just not a ton of proceeds. It would be good to be free of it and move on because that would be an office. But these other ones we're talking about, these are things that we, again, received unsolicited offers for in the past. They would be construed as very liquid. And so that sensitivity on the recycling and so -- which no one's asked really is 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 a REIT, is you have to be very thoughtful and very line things up. And so part of that is what is the -- what do you replace them with? It's just as important. I think that the decision to sell them is an easy one to do. It is not one that will take long. And I do not think that we'll be wringing our hands worried about 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's the other part of this equation that we're starting to see come into play is that if you go back fourth quarter of last year, 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 getting done, 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 a fall, also starting to see people saying, "Hey, we're willing to put our properties out again." And so now it's giving us the other side of the equation because we could have sold this $150 million 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. But suffice to say, legacy properties, valuable properties, things that should move fast.

Okay. That's very helpful. And then the second, if I could, in your comments about kind of the numerous unsolicited overtures you've received for your properties, you kind of also -- you say and beyond, I'm just kind of curious, I don't want to look into that too closely, but I mean, does that mean the market around you? Or is it -- are you -- have you gotten overtures that are beyond just sheer properties?

You read it pretty accurately. There was no double entendre there. So doesn't mean -- it's increase, right? Sniffing, that's how I would describe it, right? Obviously if there is -- yes, if there was something that was very, very specific and very formal, then that would be a different type of disclosure. All right, Danny, I think we're there. I will run with it now. Everyone, thank you so much. It's so much more enjoyable to just answer questions. I've been reading so many earnings releases, the transcripts, I mean, I can't suffer going on people's calls anymore because all they do is read things and they just regurgitate what was in the queue. And I know that's protocol. 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 the job for me to have a dialogue with an analyst or an investor is to help trade understanding. Again, our balance sheet is pretty straightforward. There's only 43 properties. Most of you guys have the numbers down. What you're trying to do is get into my head, right? And to the head of Ray and the head of John and everyone here to see how do these people -- because what are my motivations? What are our proclivities? What's our past history? All these things that everyone has and 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 watch 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 like my grandmother's -- 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 I think it's refreshing. It's refreshing to me. And I know increasingly, we get comments from people that Wall Street people are looking forward to seeing what Aaron is going to say because, look, I'm a bit uncharacteristic in my writing style and maybe my speaking style, but I hope it resonates. I'm preaching to deaf ears on one side and a tribe on the other. But let's just get this done, great grind, back to the grindstone and we'll see what comes in the next quarter. Thanks, everyone.