Plymouth Industrial REIT, Inc.

Good morning and welcome to the Plymouth Industrial REIT conference call to review the company's results for the fourth quarter of 2024. 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 your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to John Wilfong of Investor Relations. Please go ahead.

Thank you. Good morning. Welcome to the Plymouth Industrial REIT conference call to review the company's results for the fourth quarter of 2024. Yesterday afternoon, we issued our earnings release and posted a copy of our prepared commentary and a supplemental deck on the quarterly results section of our Investor Relations page. In addition to these earnings documents, a copy of our 10-K, when filed, can be found on the SEC filings page of the IRR site. Our supplemental deck includes our full year 2025 guidance assumptions, detailed information on our operations, portfolio and balance sheet, and definitions of non-GAAP measures and reconciliations to the most comparable GAAP measures. We will reference this information in our remarks. With me today is Jeff Witherell, Chairman and Chief Executive Officer, Anthony Saladino, President and Chief Financial Officer, Jim Connolly, Executive Vice President of Asset Management, and Anne Hayward, General Counsel. I would like to point out everyone to our forward-looking statements on page one of our supplemental presentation and encourage you to read them carefully. They apply to statements made in this call, our press release, our prepared commentary, and in our supplemental financial information. And 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&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 million in acquisitions. We secured a tremendous partner in Sixth Street who has continued to build out their real estate platform. We also significantly enhanced our borrowing capacity with the refinancing and upsizing of our unsecured credit facilities to $1.5 billion. With this increase in the Revolva 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 deployment. The Cincinnati acquisitions totaled approximately 762,000 square feet for $61.3 million, and we continue to unlock value through recycling and value-added activities in our newly acquired Memphis portfolio. Our pipeline now exceeds 11 million square feet and $1 billion in potential acquisitions, with nearly all of these opportunities located in our existing markets. We know these markets well, and with the capital now in place, we 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. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And the first question is from Eric Borden from BMO Capital Markets. Please go ahead.

Good morning, everyone. Jeff, just on the last comment around the $1 billion potential acquisitions, it sounds like, you know, based on your guidance, up to about half of that could be on balance sheet. You know, could you talk about the other $500 million or so, you know, whether that would be, you know, 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 are we going to be able to execute all billion dollars? Probably not. I mean, we're focused on balance sheet. I will say that there's $150 million portfolio within that billion dollars that would most likely be JV material. So, you know, we're working it. 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 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 360 million of acquisitions of which about $70 million 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 initial yields. Appreciate that.

And then one more, if I may, just on the, you know, guidance bridge on page 10 of the prepared remarks, you know, appreciate all the detailed color there, but I was just hoping that you could talk about the puts and takes to get to, you know, the low end of your guidance and to reach the high end of your guidance.

Well, listen, at the midpoint, you know, we have reset the same store portfolio. It's now 168 buildings encompassing about 26 million square feet, which now represents, I think, 89% of the total in-place portfolio as of February. So if we think about the same store driver, we do have to look back to Q4 2024 occupancy, which I believe stood at about 92% for this particular subset. of the portfolio. So at the midpoint, we're assuming about 380 bps of occupancy improvement, which equates to lease up of just over a million 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. 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 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 KeyBank 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's $0.07 per share impact on the full-year FFO. What's the timing like for that? What's commenced versus what is still to commence going forward? And can you talk a little bit about the leasing environment as it pertains to the remaining vacancies and whether there is any speculative leasing for vacant space included in the guidance.

Yeah. All of that carryover vacant space that has been leased up is 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 end of January and through February. So we expect, including big lease, big bulk leasing space as well.

Okay. Is there any additional or any speculative leasing for vacant space included in the guidance at the high end of the range?

Yeah, so of the one million that I just spoke of, to Jim's point, you know, call about 700,000 is already addressed. So there's, you know, 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 notes around that, you know, including the the other big box, the 625,000 in St. Louis. Sounds like you expect that tenant to renew, but can you provide a little bit more detail there and also discuss the Columbus downsize or vacate that you noted, the timeline and sort of what's embedded around those assumptions within the guidance?

Sure. A little bit of an overall market So, basically, in our markets, as shown in our prepared comments, you know, rental growth rate is normalizing between 3 and 4 percent. But we still expect to see, you know, mid to low 20 percent growth 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 tenants looking to take space as is to keep the rents down and so no TI. But so from a net effective point, they're still pretty high. Now, in St. Louis, that lease, it's fairly short term, but the tenant has expressed interest in expanding in the rest of the space. and continuing that lease on afterwards, as well as exploring vacancy in our other locations as well. In Columbus, the ODW is planning on leaving. They have expressed some interest in potentially staying on under a contract extension and part of the building. We have two prospects that would fill the entire building that we're working with at the moment. 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.

Hi, 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 450,000 the following year. I'm wondering why the tenant is sort of got 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 back story there a little bit on that transaction?

Yes, so that space, the current configuration at Lease is based off of one contract. This is a large international distributor headquartered in Europe, and they told us as soon as they signed the lease that, you know, we usually stay on. Like, we usually plan on finding additional contracts and moving them into this building. The feedback so far from the tenant has been really like the building, and they're 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 back story, because I thought – you know, 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? Thanks.

Yes. We had, you know, one potential candidate lined up to take one of the buildings right away, but that has 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 we feel really good about leasing this up. We've already leased up 120,000 of the vacancy, and we expect over the next couple months to have deals inked on the balance.

Okay. And then lastly for me, I know that guidance has you at $360 million in terms of acquisitions midpoint. I'm trying to do the math, but would that sort of fully address the redeployment of the entire $500 million 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 mid-year of 2024. Right. Okay, sounds good. Thanks very much. Thanks, Rich.

The next question is from Nick Thelman from Baird. Please go ahead.

Hey, good morning, guys. Maybe just points of clarification. The 2.2 million square feet 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 Geodis, if any of those are moved in or out of the pool for 25. Right.

So, yeah, 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, and this was – Unusual for us, you know, there was only 71.4 of the 24 expirations were addressed, but that number's already up to 80, over 80, and if you include the transactions that occurred between the end of the year and February 24th, so we expect that to be, you know, 90s in like a month or two.

With respect to SameStore, Nick, The composition has changed, as we said and provided for in the materials. To your point, FedEx is in the same store pool, as is Geodis. ODW is not. And the other key driver in that pool is the reintroduction of the Laddie building. It's a 142,000 square foot building. 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 BIPs 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 Sixth Street 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 alternative strategies? Um, just kind of your views there.

Um, I mean, yeah, yeah. I mean, nobody likes complication. I think that's the biggest feedback we have. Um, I think the biggest thing that we look at is, you know, our equity In 23 and 24, I mean, the street's telling us we're not going to give you any more equity because they're not pricing your stock correctly. So we did what we thought was in the best interest of shareholders, and that's a transformative transaction, plenty of capital. We can get into all the details on Chicago, which we've talked about ad nauseum of why that was a good move to take that entire 6 million square feet and put it into a JV. I mean, we've been patient for seven years, Nick, We continue to do our blocking and tackling. I guess we look at where our stock price is versus where we believe the value, where our NAV is. And I think your NAV is around in the mid to high 20s. And we're in the market every day bidding on our type property. So property 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, and 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, and it's anything north of 6 and 3 quarters, they're totally off the mark. We're getting outbid in all of our markets, 10, 11, 12 bids. So what we need to do is we need to find good property, 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 patience. And I think the Sixth Street deal is going to work out fantastic. I think everything's 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, is 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 good. So we feel good about that. But it's just another option for us.

That's helpful. Just last one. Anthony, with the new title, and Jesse, you could speak to this as well. Is there any additional areas of focus you're kind of looking on as president or Um, areas that are different than your current responsibilities as CFO.

Oh, um, I'll speak to that. No, I, it's really just, um, I mean, Anthony's expertise, obviously as CFO has proven out over the last couple of years, but beyond that, uh, he's got a handle on, um, you know, acquisitions, um, you know, processes that go into, uh, making the company better overall. So I think it's a great move for us, and it's a great move for him. Well, that's it for me. Thanks, guys. Thank you.

The 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 to How engaged are they with you to grow their relationship with you guys?

Hey, Mitch. Yeah, so across our platform, you know, different levels are engaged with 6th Street somewhat on a daily basis. I am engaged with their lead on this, and we talk regularly. 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. 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 the Sixth Street deal, is the JV. They're very focused on us growing the REIT balance sheet because they're going to win on their warrant position, which is why we did the deal. If the stock moves as they anticipate and we anticipate, they'll make some money and we'll do well as well. Outside of that, I can't speculate on it. They're a growing platform. They have announced some core money, $17 billion of core money just came into Sixth Street. You know, 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 six and three quarters 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're still seeing negative leverage in the marketplace, which, again, baffles us. I've never been a negative leverage person. I don't know how that works. But We're seeing a lot of capital into industrial. We're 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 a $100 million portfolio, 80 plus tenants. You have an office building that needed to be sold, a small one. We have a 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 is what we're doing. And we think that's going to add a lot of value to the Memphis portfolio. So that's why there weren't as many bidders. And that's why if you have an office in Memphis, with people on the ground, you can attack a portfolio like that and get those changes accomplished very accretively. And I think that's why we were the winning bidder on it. So what I don't want people to take away is, hey, 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. Again, we have an eight-person office in Ohio. So for us to do that, it doesn't cost us much time and money to do it. 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, but there's 10 bidders on it, and the pricing's gonna get out of whack on that. So we have to continue to fight for deals which are good for Plymouth, and we'll do it, but it is, I don't think anybody's gonna sit here and think that cap rates are gonna continue to rise in the industrial space. So. It's tough, but we've proven that we can buy, and we will continue to execute.

Thank you for that. One more for me, if I might. There's clearly situations on 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 cold value enhancing, value add type of investments. Talk about, you know, maybe Jeff, if you can just talk about, you know, factoring in, you know, weighing the existing situations versus doing more value add and, you know, do you guys have the capabilities to handle all of that, you know, all at once?

Yeah, I mean, look, the acquisition, we didn't put a lot of information out on it yet, but, you know, we just closed on a deal in Cincinnati, you know, this year. kind of a single asset deal, 260,000 square feet. That doesn't need a lot of value add component work to it. But the portfolio that we bought for 20 million and then the other balance that's going to close here 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 30 years. And we understand how to buy real estate correctly at the right basis. We're not afraid of short walls. I don't think we miss too many things when it comes to buying a piece of real estate. So we should be doing more of it. You've got 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, you know, So it is not an easy answer for it. We should be doing more value add. That's how you create value in real estate. We've said 100 times, we're not a net lease REIT, but I think a lot of times we're looked at as you've just gotta 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 markets. Is that specifically for acquisitions? Are you also seeing an increase in development spending?

No, we're seeing it mostly, Brendan, just in acquisitions. It's coming from all sides. Like I said, there'll be 10 bidders, and it's going to run the gamut of who those buyers are. I mean, there's still a lot of money out there. I think they would get into development, but I think that that's been, you know, 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, I think it's about 1.2 million square feet of product under construction, and 90% of it's leased. So, you know, I think we're at that point where someone's going to start to go into Cleveland and start to build SPACs. because there's only 100,000 square feet available of new product. Now, there's 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. And 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, you know, I don't think in Columbus you can be building any new product anytime soon. There's just a lot of vacancy. So I think it depends on the market. But I think there's a lot of capital. And I think once, you know, 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 reshoring initiatives. Obviously, you have more heartland exposure than a lot of your peers with more coastal exposure. Maybe anything that you're seeing in terms of your customer base and conversations you're having with them.

Yeah, in regard to tariffs, we're seeing a significant increase from various CPL companies with bulk storage requirements, both short and midterm. Some of these, you know, that 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 there's definitely a built-up demand.

Great. Thank you.

Thank you.

Again, if you have a question, please press star, then 1. The next question is from Mike Moeller from JP Morgan. Please go ahead.

Yeah, 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, you know, at the end of 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 rents, because it was subdivided in 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 26 expirations, are there any similar chunky known move outs at this point?

No, 26 seems fine. There's no objections from move-outs at this point.

Okay, thank you.

Thanks. And ladies and gentlemen, this concludes our question and answer session and thus concludes today's call. We thank you very much for attending today's presentation. At this time, you may disconnect your lines. Take care.