Mach Natural Resources LP

Good morning and welcome to the Monmouth Real Estate Investment Corporation's fourth quarter and fiscal year-end 2020 earnings conference call. All participants will be in 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 star 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 10-K that we filed with the SEC yesterday, we have filed an unaudited annual and fourth quarter supplemental information presentation. This supplemental information presentation, along with our 10-K, 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 annual 2020 earnings release and filing with the Securities and Exchange Commission. The company disclaims any obligation to update its forward-looking statements. I would now 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.

Thanks, Becky. Good morning, everyone, and thank you for joining us. We are pleased to report our results for the fiscal year ended September 30th. Fiscal 2020 was a successful year for Monmouth. During the year, we acquired five brand-new, highly automated Class A built-to-suit industrial properties containing 1.2 million square feet for a total cost of $175.1 million. In keeping with our business model, all five properties are leased long-term to investment-grade tenants. These acquisitions will generate annualized rental revenue of $10.9 million and have a weighted average lease term of 13.9 years. During the fourth quarter, we acquired one property for $15.2 million, consisting of a newly constructed 121,000 square foot distribution center. This distribution center is situated on 22 acres in Oklahoma City, Oklahoma, and is leased to Amazon for 10 years. This 22-acre site has ample expansion capacity and is ideally located immediately north of the Will Rogers World Airport. With regards to our current acquisition pipeline, our pipeline grew over the quarter, and we've now entered into agreements to purchase six properties for $338.4 million, comprising 2.4 million square feet of new Class A build-to-suit industrial buildings situated on 416 acres. Upon closing these transactions, our large pipeline will represent a 10% increase in our gross leaseable area. Four of these properties are leased to FedEx. Our largest deal is leased to Home Depot for 20 years, and one is leased to Mercedes-Benz. These future acquisitions will have a weighted average lease term of 15.3 years. Subject to our due diligence, we anticipate closing each of these transactions upon completion and occupancy. Five of these transactions are scheduled to close during fiscal 2021, and one is scheduled to close in early fiscal 2022. In connection with three of these six properties, we have entered into commitments to obtain three fully amortizing mortgage loans totaling $139.5 million with a weighted average term of 15.8 years and with a weighted average interest rate of 2.99%. We continue to experience strong demand for our properties as evidenced by our nearly full 99.4% occupancy rate at fiscal year end. With 81% of our rental revenue generated from investment grade tenants and the remaining 19% generated from strong unrated companies, our overall occupancy and tenant rent collections throughout the COVID-19 pandemic have been excellent. Our rent collections have averaged 99.7% and we expect November and future months to be consistent with this trend. Since the start of the pandemic, we've agreed to a cumulative total of only $438,000 in deferred rent, which represents just 31 basis points of our total annual base rent. We have since collected $312,000 or 71% of this amount. During fiscal 2020, we raised approximately $26.4 million in equity capital, having issued 2 million shares through our dividend reinvestment plan. Of this amount, a total of $7.6 million in dividends were reinvested this year, representing an 11 percent participation rate among our shareholders. Throughout the year, we also raised $122.4 million in net proceeds from our preferred stock ATM program, with a sale of 5 million shares of a 6.8% Series C preferred stock at an average price of $25.04 per share. As has been widely reported, the COVID-19 pandemic has greatly accelerated the strong e-commerce growth trajectory. E-commerce sales as a percentage of total retail sales nearly doubled from approximately 15% to 27% during the last two quarters. The COVID-19 pandemic has also created a need for supply chain reconfiguration. Increased inventory stocking is currently taking place across many industries as they seek to better prepare for future surges in demand. Additionally, U.S. manufacturing, which had already been increasing in recent years, has accelerated further and this trend will likely continue as supply chains now favor shorter travel distances and reduced reliance on foreign sources. These trends are expected to continue to drive demand for U.S. industrial real estate for the foreseeable future. With regards to the overall U.S. industrial market, our property sector continues to perform exceptionally well. As per CBRE's third quarter report, net absorption for the third quarter was 56.8 million square feet, marking the 42nd consecutive quarter of positive net absorption. This brings year to date net absorption to 128 million square feet and represents the 10th consecutive year of over 100 million square feet of positive net absorption. U.S. industrial vacancy rate remained unchanged during the quarter at a record low of 4.7%. Weighted average asking rents increased by 2% over the prior year period to $6.63 per square foot. Currently there is approximately 341 million square feet of industrial product under construction representing a 1% increase over the prior year period. The U.S. economy is improving with third quarter real GDP growing at 33% after falling by 31% in the prior quarter due to the broad pandemic related economic shutdown. North American freight rail traffic has come back from record low numbers in April to record high results in October. U.S. railroads originated an average of just under 300,000 containers and trailers per week in October, representing the best month ever and an increase of 34% over April. The COVID-19 pandemic has resulted in companies like FedEx, Amazon, and UPS all experiencing peak season-like demand all year round. Demand for this holiday season is expected to eclipse total shipping capacity. Current total shipping capacity in the U.S. allows for approximately 80 million packages per day. Anticipated demand is expected to exceed capacity by approximately 10%. This is despite operations now running 24-7. We are working closely with our tenants to increase their throughput and are planning several parking expansion projects for the new year. And now let me turn it over to Rich Mulkey so he can provide you with more property level detail, as well as our progress on the leasing front.