Plymouth Industrial REIT, Inc. Price & Performance (PLYM)

They apply to statements made in this call Our press release our prepared commentary and in our supplemental financial information now I'd like to turn the call over to Jeff. Thanks, John. Good morning and thank you for joining us today. I'll hit a few highlights first and then we'll go to Q and A. We've made some big announcements this past few months relating to securing capital that can propel our accretive growth. In late August, we announced the strategic transaction with Sixth Street. I view this as transformative for us in several respects. Most notably we put a valuation marker on our largest portfolio with the Chicago recap JV and sourced capital for up to $500,000,000 in acquisitions. We secured a tremendous partner in Sixth Street who has continued to build out the real estate platform. We also significantly enhanced our borrowing capacity with the refinancing and upsizing of our unsecured credit facilities to $1,500,000,000 With this increase in the revolver, and recasting one of the term loans, we've extended our maturities and enhanced the ability to pursue other unsecured debt. The combination of Sixth Street's investment and expanded borrowing capacity fully addresses our current capital needs. Our focus for 2025 will be on leasing, opportunities and capital deployment.

Both of which will be key themes in the coming quarters. Our earnings release and prepared commentary also discussed leasing and deployment. As well as some tenant challenges we faced in the prior quarter that we didn't anticipate. However, we are confident in our ability to navigate these challenges and lease the remaining spaces. Market conditions remain favorable. Particularly in buildings under 250,000 square feet. Where over 95% of our leases and 67% of our wholly owned portfolio's rentable square footage is concentrated. As we address our remaining lease expirations, we expect a tightening supply in this segment to support our mark to market leasing efforts. Historically, we've maintained high occupancy across our portfolio. And we anticipate strong momentum as we take care of the balance of 2025 expirations. We've also made solid progress on capital Plymouth. The Cincinnati acquisitions totaled approximately 762,000 square feet for $61,300,000 and we continue to unlock value through recycling and value added activity Our pipeline now exceeds 11,000,000 square feet and $1,000,000,000 in potential acquisitions. With nearly all of these opportunities located in our existing markets. Know these markets well. And with the capital now in place, are strategically positioned to expand our scale.

I look forward to providing further updates in the coming months as we execute on our leasing and capital deployment strategies. I would now like to turn it over to the operator for questions. Thank you. We will now begin the question and answer session. And the first question is from Eric Bordon from BMO Capital Markets. Please go ahead. Hey, good morning, everyone. Jeff, just on the last comment around the $1,000,000,000 potential acquisitions, it sounds like based on your guidance up to about half of that could be on balance sheet. Could you talk about the other $500,000,000 or so whether that would be a potential balance sheet acquisition or would that be under the JV? Hey, Eric. Thanks for the question. I mean that's just our total pipeline, right? So we going to be able to execute all $1,000,000,000 probably not. Mean, we're focused on balance sheet I will say that there's $150,000,000 portfolio within that $1,000,000,000 that would most likely be JV material. So So we're working. It's We're in the bid process on it right now. We'll see how that develops. But the majority is on balance sheet. The majority of it is in is in two or three of our top markets.

Okay, that's helpful. And then With the acquisitions in guidance, how are you thinking about the timing of acquisitions and the initial cap rates on those? At the midpoint, Eric, we assume $60,000,000 of acquisitions of which about $70,000,000 is already banked with the remainder to be deployed somewhat evenly over the coming quarters.

In terms of going in yield, I would strike that at about six and three quarters. It could tighten up a bit as we continue to navigate the bid process But I think those are good parameters in terms of how to view deployment and Appreciate that. And then one more, if I may. Just on the guidance bridge on Page 10 of the [indiscernible] all the detailed color there, but I was just hoping that you could talk about the puts and takes to get to the low end of your guidance and to reach the high end of your guidance?

Well, listen, at at the midpoint, we have reset the same store portfolio. It's now 168 buildings encompassing a about 26,000,000 square feet which now represents, I think, 89% of the total in place portfolio as of as of February.

So if we think about the same store driver, we do have to look back to Q4 twenty twenty four occupancy, which I believe stood at about 92% for this particular subset of the portfolio. So at the midpoint, we're assuming about three eighty bps of occupancy improvement which equates to lease up of just over 1,000,000 square feet. And a lot of that is comprised of the three buildings that we've been talking a lot about, the two in Cleveland and the one in St. Louis. And so if you think beyond the midpoint, to the extent that we have accelerated deployment or some surprises to the upside on some of the transitory vacancy. We can realize a result better than midpoint to the extent that We don't deploy as as anticipated. There could be a little drag and then to the extent that some of the leasing is a bit more protracted You'll have a bit of a muting with respect to the outcome.

All right. Well, thank you very much. I'll leave it there.

Thanks.

And the next question is from Todd Thomas from KeyBanc Capital Markets. Please go ahead.

Hi, thanks. Good morning. I just wanted to follow-up on that a little bit. As it pertains to sort of the guidance and some of the the leasing. And I wanted to ask about the timing, specifically of the 740,000 square feet of leases signed which includes 600,000 of the former FedEx Logistics site in St. Louis. So that $0.07 per share impact on the full year FFO. What's the timing like for that? What's commenced versus what is to commence going forward? And can you talk a little bit about the leasing environment as it pertains to the remaining vacancies, whether and whether there is any speculative leasing for vacant space included in the guidance?

Yes. All of that carryover vacant space that has been leased up and it's all commenced already.

So all $700,000 is already commenced.

As far as our projections on leasing, we are focused on the vacancy that came in through the year. You'll see that vacancy has gone up from 92.5 I mean occupancy has gone up from 92.5 up to 94.3 already this year. Which shows the space has been leased. We do have a lot of prospects for Our existing vacancy, there's been a big pickup and leasing activity towards the January and through February So we expect including big lease big bulk leasing Okay. Does is there any additional or any speculative leasing for vacant space included in the guidance at at the high end of the range?

Yes. So of the $1,000,000 that I just spoke of, to Jim's point, call about $700,000 is already addressed. So there's there's the balance of that that is speculative.

Okay. And then Can you provide a little bit more detail on the remaining 25 expirations? Appreciate some of the The notes around that including the the other big box, the 625000 St. Louis, sounds like you expect that tenant to renew, but you provide a little bit more detail there and also discuss the Columbus downsize or vacate that you noted the timeline and and sort of what's embedded around those assumptions within the guidance?

Sure. Little bit of overall [indiscernible] analysis for us. So basically in our markets as shown in our prepared comments, rental growth rate is normalized between 34%.

But we still expect to see mid 20% on Rent spreads on our small to mid sized space, anything under 150,000 square feet And on the larger spaces, we're kind of getting Tenet is looking to take space as is to keep the rents down and so no TI [indiscernible] from a net effective point that that's still pretty high. Now I'm seeing Louis, That lease, it's fairly short term, but the tenant has expressed interest in expanding in the rest of the space and and continuing that lease on afterwards as well as exploring vacancy in our other locations as well. In Columbus, [indiscernible] Yes, ODW is planning on leaving. They have expressed some interest in potentially staying on if they under a contract extension in part of the building. We have two prospects that would fill the the entire building that we're working with at the moment and they would It would be immediately after ODW left, so that we could see little to minimal downtime Okay.

All right. Thank you. Thanks, Todd. And the next question will be from Rich Anderson from Wedbush. Please go ahead. Thanks. Good morning. So on the St. Louis lease, I guess I want to understand why you're optimistic if it's going from 600,000 square feet to four fifty the following year, I'm wondering why there the tenant is sort of got a a funny cadence to it in terms of the space it's taking. Even though you have a feeling that it's going to sort of commit longer term. Can you kind of give the backstory there a little bit On that transaction?

Yes. So that space the current configuration at least is based off of like one contract. This is a large international distributor headquarter in Europe and they they told us as soon as they signed the lease that we usually stay on. Like we usually we plan on finding additional contracts and movement to this building. Feedback so far from the tenant has been really like the building, and looking for more space to come in.

Okay.

Turning to Cleveland, I don't know if you said this, I apologize. But What's the expectation to putting those situations to bed? And if you can give also the backstory because I thought a quarter or two or a quarter ago you kind of thought it would be a faster turnaround than it's turning out to be. Can you sort of give me some color on that as well? [indiscernible] one potential candidate lined up to take take one of the buildings right away, but we that is just slowed down a little bit, but Cleveland is a very tight market. I mean, the vacancy rate is 3% or less and there's really nothing in the market over 100,000 square feet. So feel really good about leasing this up. We've already leased up 120,000 of the vacancy and we expect over the next couple of months to have deals inked on the balance.

Okay.

And then lastly for me, I know the guidance has you at $360,000,000 in terms of acquisitions. Midpoint With that, I'm trying to do the math but would that sort of fully address the redeployment of the entire $500,000,000 from the Sixth Street transaction or would there still be more meat on the bone to address. Rich, it gets us close.

Because remember, we deployed 100 when we acquired the Memphis portfolio in midyear of twenty twenty four.

Okay. Sounds good. Thanks very much.

Thanks, Rich. The next question is from Nick Thielman from Baird. Please go ahead.

Hey, good morning guys. Maybe just points of clarification [indiscernible] of availability in the core portfolio That includes the St. Louis and Cleveland around like over half of that space is kind of spoken for or not spoken for, but in that bucket. And then Anthony, if you could just elaborate on changes to the same store pool It sounds like that St. Louis asset that was the former FedEx space is moving into the pool. Just wondering if ODW or Geotis, if any of those are moved in or out of the pool for 25?

Right. So, yes, the additional space has been taken off the space that has been leased up has taken off of the available pool. So just to note, at the end of the year, this was unusual for us. There was only 71.4 of the 24 expirations were addressed, but that number is already up to 80 over 80 and if you include the transactions that occurred between end of the year and February 24. So we expect that to be 90s in like a month or two. With respect to same store, Nick, The composition has changed as we as we said and provided for in the materials. To your point, FedEx is in the same store pool. As is JEOTIS, ODW is not And the other kind of key driver in that pool is the the reintroduction of the Lattie Building 142,000 square in St. Louis that was previously in the repositioning pool. So that has come into the same store portfolio in 2025 and I believe that's contributing approximately seven bps to the year over year growth.

That's helpful. Maybe for Jeff, I mean, I guess what do you think the disconnect is between your guys' view of the six transaction and kind of the market's view? And as the Board you guys obviously announced the buyback, but I guess how patient are you guys going to be if the stock continues to kind of linger at these levels? Like are you guys are you going to pursue [indiscernible] just kind of your views there?

I mean, I mean, nobody likes complication. I think that's the biggest feedback we have. I think the biggest thing that we look at is in 2023 and 2024, I mean the street telling us we're not going to give you any more equity because they're not pricing your stock correctly. So did what we thought was in the best interest of shareholders and that's a transformative transaction. Plenty of capital, and put we can get into all the details on Chicago, which we talked about ad nauseam of why that was a good move to take that entire 6,000,000 square feet and put it into a JV. So mean, we've been patient for seven years, Nick. We continue to do our blocking and tackling. I guess I guess we look at where our stock price is versus where we believe the value where NAV is. And I think your NAV is around the mid to high 20s, and we're in the market every day bidding on our tight property. So in Columbus, we're bidding right now on a building across the street from our property. So it's identical. And there's 10 bidders on it. I can tell you we're not going to be the winning bidder on it.

So if somebody is using a cap rate to value Plymouth Plymouth, and it's anything north and 6.75 they're totally off the mark. We're getting outbid in all of our markets ten, eleven, 12 bids. [indiscernible] we need to do is we need to find [indiscernible] the shorter waltz, like we did in Cincinnati And we've got some deals that are teed up that are going to work out really well for Plymouth. So we have a lot of patients and I think the Sixth Street deal is going to work out fantastic. I think everything is priced correctly for us. So we're going to get this money deployed We did put a buyback in as you mentioned. I'm glad you brought that up. We'll see how the stock performs over the next few months. But I think if you look at where our stock price is and what we can buy it back at, It's kind of a no brainer. For us to do that. But that's going to be based on whether we can put the capital to work in properties that we believe in.

So right now the pipeline looks the pipeline looks good. So we feel good about that, but it's just another option for us. That's helpful. And just last one, Anthony with the new title and Jeff, you could speak this as well. Is there any additional areas of focus you're kind of looking on as President or areas that are different than your current responsibilities as CFO?

I'll speak to that. No, it's really just I mean, Anthony's expertise, obviously as CFO has proven out over the last couple of years But beyond that, he's got a handle on acquisitions, processes that go into making the company better overall, So I think it's a great move for us. And it's a great move for him.

Helpful.

That's it for me. Thanks guys.

Next question is from Mitch Germain from Citizens JMP. Please go ahead.

Thanks.

Maybe Jeff, since you were just mentioning the Sixth Street relationship I'm curious how engaged are that with you to grow Their relationship with you guys?

Hey, Mitch.

Yes, so across our our platform, different levels are engaged with Sixth Street, somewhat on a daily basis.

I am engaged with their lead on this. [indiscernible] we talk regularly [indiscernible] this was this is supposed to be transformative. It's going to take time. As you know, we've done several JVs that have worked out really well for Plymouth Plymouth. And so I think we're pretty smart about that. And we are looking at some JVs with them. And I think that's probably the real basis of the relationship is is the Sixth Street deal is the JV [indiscernible] On us growing the REIT balance sheet because they're going to win on their warrant position. [indiscernible] So if the stock moves as they anticipate and we anticipate, they'll make some money and we'll do well as as well. So Outside of that, I can't speculate on it. They're a growing platform. They have announced some core money 17,000,000,000 of core money just came into [indiscernible] So we're talking to them about industrial on a daily basis. And I think that's going to prove out really well for Plymouth shareholders long term.

Okay. That's super helpful. I'm curious about some of the pricing trends in the market today I think you talked about how cap rates 6.75% or maybe even lower obviously, Memphis was acquired and one of the more recent deals were a little bit higher. So I mean is it safe to say that we're seeing contraction across the board? I think that's correct. As we sit here today, we are sitting we're still seeing negative leverage the marketplace, which again baffles us. I've never been a negative leverage person on how that works. [indiscernible] we're seeing a lot of capital into industrial starting to see it in our markets. That being said, and I said this before about the Memphis transaction there were a lot of moving parts on Memphis. And there was $100,000,000 portfolio 80 plus tenants, You have an office building that needed to be sold, a small one.

We have call center that we're our construction team is in the process of converting back to industrial as we speak. And then there's a vacant parcel of land that we can build 120,000 square feet, let's say, on. So all of those are components that need people that know what they're doing. We can do all that in house, which what we're doing And we think that's going to add a lot of value to the [indiscernible] if you have an office in Memphis with people on the ground you can attack a portfolio like that and get those changes accomplished And I think that's why we were the winning bidder on it. So what I don't want people to take away is, A, there's Memphis is an eight cap market because that's not the case. There's a special situation. And Cincinnati is the same thing. We have work to do in Cincinnati. We've got some small tenants. We're going to renew them. We'll move some of them out. We'll expand tenants, eight person office in Ohio. So for us to do that, it doesn't cost us much time and money to do it. Like we're equipped to do it.

Others aren't. So I think that's where you get into it. And as I mentioned, in Columbus, there's a building with one asset deal, three tenants, there's 10 bidders on it. And the pricing is going to get out of whack on that.

So we have to continue to fight for deals [indiscernible] which are good for Plymouth And we'll do it. But it is I don't think anybody's going to sit here and think that cap rates are going to continue to rise in the industrial space.

That's helpful.

It's tough.

But we've proven that we can buy and we will continue to [indiscernible] Thank you for that. One more for me if I might. Just there's clearly situations that the leasing front that you guys have discussed And it just seems based on that commentary that there's a preference to do more of these kind of strategic or call value enhancing value add type of investments. So talk about maybe Jeff, if you can just talk about factoring in the weighing the existing situations versus doing more value add and do you guys have the capabilities to handle all of that all at once?

Yes. I mean, the acquisition, we didn't put a lot of information out on it yet, but we just closed on a deal Cincinnati, this year you're kind of a single asset deal, two sixty thousand square feet, that doesn't need a lot of value add component work to it. But the portfolio that we bought for $20,000,000 and then the other balance of that is going to close you in the next couple of weeks. There's a lot of small tenants and I said we will do the Plymouth work on that. So we're built for it. We should do more value add I mean, we're real estate people. We have been for thirty years. We understand how to buy real estate correctly at the right basis We're not afraid of short waltz. I don't think we missed too many things. When it comes to buying a piece of real estate So we should be doing more of it. You're going to balance that with FFO. Right? We're in the cash flow growth business as a public REIT. But as a real estate group, we should be buying more value add. So that's the balance that we try to look at on each acquisition.

So it is not an easy answer for it. We should be doing more value add. That's how you create value in real said 100 times, we're not a net lease REIT. But I think a lot of times we're looked at you've just got to smooth out your FFO So there's a balance there.

Thank you. Thank you, Mitch.

And the next question is from Brendan Lynch from Barclays. Please go ahead. Great. Thanks for taking my questions. Jeff, you mentioned that there's a lot of capital coming into your market Is that specifically for acquisitions? Are you also seeing an increase in development spending?

No, we're seeing it mostly Brendan just in acquisitions. And it's coming from all sides. I said there will be 10 bidders and it's going to run the gamut of who those buyers are. Mean, there's still a lot of money out there. I think they would get into development. But I think that's been we're starting to see a lot of absorption. I mean, I think if you look at a market like Cleveland that we continue to focus on There's a I think it's about 1,200,000 square feet of of product under construction and 90% of it's leased. So I think we're at that point where someone's going to start to go into Cleveland and start to build spec.

Because there's only 100,000 square feet available. Of new product. Now, the places like Dallas and there's some parts of Columbus that are severely overbuilt. I mean, if you look at Columbus, Class A is 17% vacancy. Obviously, by definition, a new 32 foot clear building would be designated Class A. But the balance outside of Class A, it's a 5.2% vacancy. So I don't think in Columbus you could be building any new product anytime soon, there's just a lot of vacancy. I think it depends on the market.

But I think there's a lot of capital and I think once In certain markets, I think you start to see some spec development.

That's helpful. Maybe also just talking high level, any impact that you're seeing from the tariffs or potential for tariffs and resharing initiatives. Obviously, you have more heartland exposure than a lot of peers with more coastal exposure maybe anything that you're seeing in terms of your customer base and conversations you're having with them? [indiscernible] significant increase from various VPL companies for bulk storage requirements. Both short and midterm Some of these we have actively in negotiations But it seems to be like a rush to get product into the country and in warehouses as soon as possible. So is definitely a buildup demand.

Great. Thank you.

Thank you. Next question is from Mike Mueller from JPMorgan. Please go ahead.

Yes, hi. Apologize if I missed this. But what what is the, I guess, Columbus rent on the two new prospects compared to the move out rent? And what's the timing during the year on that?

Well, we're talking the move out is At the June, And the timing on the leases would be July or August and then the other one would be between July and probably September. The actual the rents the rents because we're subdividing the building, they may go to a gross lease versus a triple net lease, but the net effective rent would be Slightly higher.

Okay.

And then last question, when you're looking at the 26x expirations, are there any similar chunky known move outs at this point?

No, 2626 seems fine.

There's no rejections for move outs at this point.

Okay.

Thank you.

Thanks.

Concludes today's call. We thank you very much for attending today's presentation. It is time, you may disconnect your lines.