Modiv Industrial
Get paid monthly while the company works toward a sale
Modiv Industrial (NYSE:MDV) is a real estate investment trust1 (REIT) focused on critical industrial manufacturing properties, with tenants in sectors such as aerospace & defense and broader infrastructure.
Management’s focus over the past few years has been on improving the underlying earnings power of the business. The company has recycled capital out of non core office properties and into industrial assets, while using 1031 exchanges to defer taxes.
Numerous steps have also been taken to improve adjusted funds from operations (AFFO), including extending maturities, retiring preferred equity, and even turning off the dividend reinvestment program to add an incremental $0.01 per share to AFFO.
This has been paired with an increasingly focus from CEO Aaron Halfacre on closing the value gap between the company’s share price and the underlying value of its assets:
“So, you have my word that we will do everything in our power to close this value gap within 24 months or less”
“I will go to our Board of Directors and recommend that we explore the sale of the company, either in whole or parts, to realize the maximum value to investors.”
We might be a wee tugboat traversing the high seas right now, but we are armor clad and your captain is hellbent on arriving to the port of maximum value”
While shareholders wait for the company to be sold, a $0.10 monthly dividend is paid, representing an 8.4% yield at today’s price.
From a tax perspective, Modiv’s 2025 distributions have been classified as a return of capital (ROC) or a non dividend distribution2. These distributions are not taxed when received, but instead reduce the investor’s cost basis3. In 2024, the distribution mix was 84% return of capital and 16% ordinary income4.
The company’s net asset value (NAV) is $22.19 per share. Applying a 15% discount and $1 of value creation implies an exit value of $19.96 within 24 months. This equates to a 25% compounded annual return or 27% IRR over a two year horizon.
CAGR Calculation
IRR Calculation
Appendix
REIT’S by law have to pay out 90% of taxable income to their investors
https://modiv.com/modiv-industrial-announces-tax-treatment-of-2025-dividends/
Not tax advice
https://s3.amazonaws.com/sec.irpass.cc/2863/0001645873-26-000040.pdf (10-k)
Photo Source: https://www.flickr.com/photos/projectapolloarchive/21037481544/in/photostream/
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This document is provided for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. The author owns shares in the companies discussed. All views expressed are solely those of the author and do not reflect the views of any current or former employer. Special thanks to Charlie and “Tao” for their editorial assistance.