Plymouth Industrial REIT, Inc.

Hello, and welcome to the Plymouth Industrial REIT second quarter 2022 conference call. All participants will be in the Sonali 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 your touchtone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. Now, I'd like to turn the conference over to your host today, Tripp Sullivan of STR Partners. Mr. Sullivan, please go ahead.

Thank you. Good morning. Welcome to the Plymouth Industrial REIT Conference call to review the company's results for the second quarter of 2022. On the call today will be Jeff Witherell, Chairman and Chief Executive Officer, Penn White, President and Chief Investment Officer, Anthony Saladino, Executive Vice President and Chief Financial Officer, Jim Conley, Executive Vice President of Asset Management, and Anne Hayward, General Counsel. Our results were released this morning in our earnings press release, which can be found on the best relations section of our website, along with our Form 10-Q and supplemental file with SEC. A replay of this call will be available shortly after the conclusion of the call through August 10, 2022. The numbers to access the replay are provided in the earnings press release. For those who listened to the replay of this call, we remind you that the remarks made herein are as of today, August 3rd, 2022, and will not be updated subsequent to this call. During this call, certain comments and statements we make may be deemed forward-looking statements within the meaning prescribed by the securities laws, including statements related to the future performance of our portfolio, our pipeline of potential acquisitions and other investments, future dividends, and financing activities. All forward-looking statements represent Plymouth's judgment as of the date of this conference call and are subject to risk and uncertainties that can cause actual results to differ materially from our current expectations. Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the SEC. We also will discuss certain non-GAAP measures, including but not limited to core FFO, AFFO, and adjusted EBITDA. Definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in our filings with the SEC. I'll now turn the call over to Jeff Witherell. Please go ahead.

Thanks, Tripp. Good morning, everyone, and thank you for joining us today. What you'll hear from us this morning is very consistent with what you've heard from other industrial landlords so far this quarter. Industrial fundamentals are as strong as ever, tenants are showing zero sign of economic distress, rent growth is robust, supply chains are shrinking, and borrowing costs are ratcheting up significantly, while seller and buyer expectations appear to be mismatched. We will keep our commentary short on these well-trodden topics, but we can certainly devote more time to them in Q&A if necessary. Where Penn and I would like to focus most of our time this morning is on correcting some false premises and reaffirm our belief in our markets. When we look across our portfolio, you can see that our operating metrics reinforce our thesis that our markets have strong fundamentals, lower cost of living, higher labor force availability, lack of new supply competing with our property type, and tight availability for space that is in high demand for the majority of our tenants. In addition, recent large corporate and manufacturing relocations to these regions and the ongoing shift in supply chains certainly reinforce our long-held belief that a Tier 1 only investment strategy is not only short-sighted and subject to higher volatility, but also inconsistent with a disciplined, diversified investment approach. There are a lot of facts about the non-coastal markets that are being overlooked. There are two major developments that I would like to highlight. First is the decision of the Ford Motor Company to locate the development of their Blue Oval City just outside Memphis. This is their future electrification program and will consist of over 10 million square feet and over 10,000 new jobs. The second is the Columbus, Ohio market, where Intel is building two semiconductor fabrication plants on 926 acres. This is a $20 billion capital investment that will create 3,000 high-tech jobs There is a reason these global companies have chosen these markets to create the future of their companies. Based on numerous requests we've received of late to better educate the investment community on what's being missed about our markets, we have a few new slides in our investor presentation that supports this commentary. We will also have third-party research posted on our website as well that provides a lot more empirical data. Now let's turn to the key operating stats of the quarter. They look a lot like what we've reported the last several quarters, but we are starting to see the cumulative impact of double-digit rent increases and record leasing volumes show up in accelerating same-store NOI growth. Occupancy was 97.3%. Cash releasing spreads were 22.2%. Same-store NOI on a cash basis was up 15.8%. Rent collections were well over 99%. Core FFO per share was up 15%, and AFFO per share was up 28%. Consistent with our announcements in June ahead of NAREAD and our quarterly activity update in early July, we have elected to pull back from acquisition activity. Penn will get into the drivers for this decision later. Until we see some stability in the capital markets, we expect our primary source of growth for the near term will be organic growth complemented by our development program that can produce yields in the 7 to 9% range. We have provided some new disclosures related to our development program in the quarterly supplemental on pages 5 and 12 that I want to highlight, such as more definitive completion dates, funding percentage, and percentage leased. As this program progresses, we will be able to give you a better idea of the status of each project. In Portland, Maine, we have completed construction at our $9.3 million 70,000 square foot building, and we are now 50% leased with proposals out for the balance of the space. In Atlanta, we're under construction with a new 237,000 square foot industrial building that should deliver in the third quarter and a 180,000 square foot building adjacent to it that should deliver in the fourth quarter. The total investment for these two is approximately $24 million. We currently have a lease out for signature on the second building for the entire 180,000 square feet. In Cincinnati, at our Fisher Industrial Park, we have a new 155,000 square foot building under construction for a total investment of $12.2 million. That should also deliver in the fourth quarter. We have five other buildings that are in various stages of development but have not yet begun construction. In Cincinnati, we have another 200,000 square feet that we are considering in Fisher Park. we are preparing to begin construction on 176,000 square feet over four buildings that are in our existing parks. Out of the 176,000 square feet, we have a lease signed on 20,000 square feet and a lease out for signature on 41,000 square feet. As it relates to our balance sheet, we know where we need to be in terms of leverage. While our plan to gradually de-lever is extended a bit due to the current state of capital markets, We know 2023 will be a big opportunity for us. We have the Series A preferred that can be repaid beginning on January 1st. Absent the ability to repeatedly access equity capital in the markets, we expect to de-lever through EBITDA growth. We also have several options we are actively considering in terms of upgrades, additional asset dispositions on a limited basis, or JV, such as the one we completed with Madison in Memphis. Our dividend payout ratio is among the lowest across our peer group and provides a solid return to our shareholders. Penn, why don't you take it from here on what's occurring in our markets and with our acquisition activity?