Mach Natural Resources LP

Good morning and welcome to Monmouth Real Estate Investment Corporation's second quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press store then two. Please note this event is being recorded. It is now my pleasure to introduce your host, Ms. Becky Coleridge, Vice President of Investor Relations. Thank you, Ms. Coleridge. You may begin.

Thank you very much, operator. In addition to the 10Q that we filed with the SEC yesterday, we have filed an unaudited second quarter supplemental information presentation. This supplemental information presentation, along with the 10Q, are available on the company's website at mreic.reit. I would like to remind everyone that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the company's second quarter 2020 earnings release and filings with the Securities and Exchange Commission. The company disclaims any obligation to update its forward-looking statements. Having said that, I'd like to introduce management with us today. Eugene Landy, Chairman. Michael Landy, President and Chief Executive Officer. Kevin Miller, Chief Financial Officer. And Richard Mulkey, Vice President of Asset Management. It is now my pleasure to turn the call over to MAMA's President and Chief Executive Officer, Michael Landy.

Thank you, Becky. Good morning, everyone, and thank you for joining us. We hope you are all in good health and handling these difficult circumstances well. First and foremost, much gratitude and respect goes out to all of the medical practitioners, the doctors, the nurses, the technicians, the support teams, and everyone else out there working hard on the front line. Your efforts and sacrifices do not go unnoticed and they are greatly appreciated. I am pleased to report that our team is healthy and everyone has been doing an exceptional job keeping things on track while working remotely. I cannot be more proud of how well everyone has stepped up during this challenging environment. For decades, our business model has been and continues to be to provide consistent, high-quality income streams by investing in industrial buildings on long-term leases to investment-grade tenants. At various points in the business cycle, this type of conservative business model is more highly favored than at others. For example, during the global financial crisis, our strong results allowed for our investors to receive uninterrupted cash dividend payments. This is something that very few REITs were able to achieve. Monmouth represented one of the only safe harbors during the Great Recession, and we are uniquely positioned to outperform once again. You should recall that prior to the COVID-19 Black Swan event, much more aggressive strategies were favored by the investment community. Companies in our sector were deliberately sacrificing occupancy rates for more aggressive leasing spreads. Same-store NOI growth was the biggest factor many looked to in ranking industrial REITs, while focusing less on tenant quality, lease duration, and other important factors. Today, tenant quality, lease term, safety, and stability are once again the predominant focus of the investment community at large. This is just the most recent of many examples illustrating why it is important to stick to strategies that have worked well over the long term as opposed to succumbing to short-term trends that may appear to work in any given moment until sooner or later the proverbial tide goes out and business models truly get tested. Monmouth's assets are mission critical to some of the strongest companies in the world. Many of our properties are currently seeing record throughput and are working extra shifts due to the stay-at-home environment we are dealing with today. Our consistently high occupancy rate has been over 98% for more than five years, and it is currently 99.4%. Our weighted average lease maturity has exceeded seven years for more than six consecutive years, and it is currently averaging 7.4 years. At the intersection of quality versus growth, we have always favored quality, and our strong results through this difficult period will bear this out. Rent collections have been the most prominent investor concern of late, so let's drill down on that. In March, 100% of our tenants' rent payments were received, and for the month of April, 99% of rents have been received. While it is still early, thus far from May, 93% of rent payments have been received, which is normal given we are still in the first week of the month. To date, Monmouth has received very limited requests for rent deferment, representing only 200 basis points of our annual base rent. Of this amount, we've agreed to defer $320,000, which represents just 23 basis points of our annual base rent. This deferred amount is due to be paid by the end of the calendar year. From a portfolio standpoint, during the first two quarters of fiscal 2020, we grew our GLA by 769,000 square feet through the acquisition of two brand new built-to-suit properties at a total cost of $99.4 million. The first acquisition consummated in the first quarter was a 616,000 square foot distribution center leased to Amazon for 15 years. This property acquired for $81.5 million is situated on 79 acres in the Indianapolis MSA. On March 30th, we acquired another property for $17.9 million consisting of a newly constructed 153,000 square foot distribution center leased for 10 years to Magna Seating of America, a division of Magna International. This property is situated on over 24 acres in the Columbus, Ohio MSA. This acquisition did not contribute to our results this quarter, but will do so going forward. Our gross leasable area has now increased to approximately 23 million square feet, representing a 6% increase over the prior year period. As of the quarter end, our portfolio consisted of 116 properties, geographically diversified across 30 states. Our acquisition pipeline grew during the quarter to $229.6 million. We now have four built-to-suit development projects representing 1.5 million square feet currently under construction. Three of these projects have 15-year leases and one has a 20-year lease, resulting in a weighted average lease term of 17.2 years. In keeping with our business model, all of these projects are subject to long-term net leases to investment grade tenants. Of these four properties, three properties comprising 844,000 square feet or 56% of our pipeline are leased to FedEx for 15 years. The remaining property consisting of 658,000 square feet is leased to Home Depot for 20 years. From a timing standpoint, we expect to close on two of these acquisitions for approximately $60.5 million, representing 356,000 total square feet, or approximately 24% of our current pipeline during this fiscal year. The remaining two built-to-suit projects, representing $169.1 million, containing approximately 1.1 million square feet, are expected to close in fiscal 21. To take advantage of today's attractive interest rate environment, we have already locked in very favorable financing for three of these acquisitions. The combined financing terms for these three acquisitions consist of $85.7 million of proceeds, representing over 64% of the total cost. These financings have a weighted average interest rate of 3%. All three mortgages are 15-year self-amortizing loans. These built-to-suit acquisitions are all well-located, state-of-the-art industrial assets that will represent excellent additions to our high-quality portfolio. As always, these future acquisitions are subject to satisfactory due diligence, and we anticipate closing these transactions upon completion and occupancy. We expect that the combination of our recent acquisitions along with our increased acquisition pipeline will contribute positively to earnings in ensuing quarters. During the quarter, we raised approximately $8.6 million in equity capital through our dividend reinvestment plan. Of this amount, a total of $1.4 million in dividends were reinvested, representing an 8.6% participation rate. We also raised $37.1 million in net proceeds through our preferred stock ATM program with a sale of 1.5 million shares of our six and one-eighth Series C preferred stock at a weighted average price of $25.12 per share. As we announced during our last earnings call, this past February, we established a common stock ATM program that provides for the issuance of up to $150 million of our common stock at prevailing market prices. To date, we have not raised any equity through our common stock equity program, and based on current prevailing prices, we do not expect to utilize the common stock ATM program at this time. In March, as a result of the rapid and massive sell-off in the broad market, we repurchased 300,000 shares of our common stock for $3.2 million at an average price of $10.70 per share. Subsequent to the quarter end, we purchased an additional 100,000 shares of our common stock for $1.1 million at an average price of $10.66 per share. We ended the quarter with a strong balance sheet, a completely unused bank line, and ample liquidity, which will allow us to continue to allocate capital opportunistically. With regards to the U.S. industrial market, heading into this downturn, the vital signs with regards to occupancy and rental rates were very strong consistently registering at or near record levels. New industrial construction has historically been very responsive to shifts in the broad economy and that has been the case thus far as new construction decreased by over 50% from 320 million square feet in the prior quarter to approximately 140 million square feet currently under construction. Initial reports for U.S. GDP in the first quarter came in at an annual rate of negative 4.8%, ending the longest expansion on record, dating back to mid-2009. As the result of much of the economy being shut down, unemployment claims have eclipsed 30 million people in just one and a half months. ISM manufacturing readings are deep in contraction mode at 41.5 for the month of April, due to the demand destruction that comes with a broad economic shutdown. It is too early to say to what extent the new normal will resemble the old. The global health crisis came on fast, and whether it plays out quickly or lingers longer will be the key determinant as to the depth of the destruction. And now let me turn it over to Rich so he can provide you with more detail on the property level, as well as her progress on the leasing front.