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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From _______to ________

Commission File Number: 001-38106

PLYMOUTH INDUSTRIAL REIT, INC.

(Exact name of registrant as specified in its charter)

 

Maryland   27-5466153
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
20 Custom House Street, 11th Floor, Boston, MA 02110   (617) 340-3814
(Address of principal executive offices)   (Registrant’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class Trading Symbol Name of Each Exchange
on Which Registered
Common Stock, par value $0.01 per share PLYM New York Stock Exchange
7.50% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share PLYM-PrA NYSE American

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑   No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☑   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐      Accelerated filer       Non-accelerated Filer ☐      Smaller reporting company       Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐   No ☑

As of November 1, 2022, the Registrant had outstanding 42,849,489 shares of common stock.

 

 

Plymouth Industrial REIT, Inc.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

 

PART I. FINANCIAL INFORMATION PAGE
     
ITEM 1. Financial Statements  
     
  Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021 1
     
  Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 2
     
  Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021 3
     
  Condensed Consolidated Statements of Changes in Preferred Stock and Equity for the Three and Nine Months Ended September 30, 2022 and 2021 4
     
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 6
     
  Notes to Condensed Consolidated Financial Statements 7
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
     
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 36
     
ITEM 4. Controls and Procedures 36
     
PART II. OTHER INFORMATION 37
     
SIGNATURES 38

 

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

PLYMOUTH INDUSTRIAL REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(In thousands, except share and per share amounts)

 

           
   September 30,   December 31, 
   2022   2021 
Assets          
Real estate properties   $1,538,416   $1,254,007 
Less accumulated depreciation    (189,170)   (142,192)
Real estate properties, net    1,349,246    1,111,815 
           
Cash    16,341    26,232 
Cash held in escrow    13,156    11,893 
Restricted cash    6,756    5,249 
Deferred lease intangibles, net    76,674    75,864 
Investment in unconsolidated joint venture        5,833 
Interest rate swaps    32,404     
Other assets    36,566    33,919 
Total assets   $1,531,143   $1,270,805 
           
Liabilities, Preferred Stock and Equity          
Liabilities:          
Secured debt, net   $390,944   $352,075 
Unsecured debt, net    447,182    297,840 
Borrowings under line of credit    67,500    38,000 
Accounts payable, accrued expenses and other liabilities    74,701    66,880 
Deferred lease intangibles, net    9,612    10,273 
Financing lease liability    2,243    2,227 
Total liabilities    992,182    767,295 
Commitments and contingencies (Note 13)          
           
Preferred stock, par value $0.01 per share, 100,000,000 shares authorized,          
Series A: 1,972,427 and 2,023,551 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively (aggregate liquidation preference of $49,311 and $50,589 at September 30, 2022 and December 31, 2021, respectively)    47,249    48,473 
Series B: 0 and 4,411,764 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively (aggregate liquidation preference of $0 and $97,277 at September 30, 2022 and December 31, 2021, respectively)        94,437 
           
Equity:          
Common stock, $0.01 par value: 900,000,000 shares authorized; 42,849,489 and 36,110,659 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively    428    361 
Additional paid in capital    644,447    532,666 
Accumulated deficit    (190,728)   (177,258)
Accumulated other comprehensive income    32,002     
Total stockholders' equity    486,149    355,769 
Non-controlling interest    5,563    4,831 
Total equity    491,712    360,600 
Total liabilities, preferred stock and equity   $1,531,143   $1,270,805 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

1 

 

PLYMOUTH INDUSTRIAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In thousands, except share and per share amounts)

 

                 
   For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
 
   2022   2021   2022   2021 
                 
Rental revenue   $47,788   $35,877   $136,120   $100,468 
Management fee revenue and other income    2    85    90    265 
Total revenues    47,790    35,962    136,210    100,733 
                     
Operating expenses:                    
Property    14,495    12,032    42,369    34,398 
Depreciation and amortization    24,860    18,305    71,759    50,984 
General and administrative    4,078    3,264    11,776    9,582 
Total operating expenses    43,433    33,601    125,904    94,964 
                     
Other income (expense):                    
Interest expense    (8,983)   (4,906)   (23,303)   (14,489)
Earnings (loss) in investment of unconsolidated joint venture        (178)   (147)   (675)
Loss on extinguishment of debt            (2,176)    
Gain on sale of real estate                590 
Unrealized (appreciation) depreciation of warrants        (926)   1,760    (1,809)
Total other income (expense)    (8,983)   (6,010)   (23,866)   (16,383)
                     
Net loss    (4,626)   (3,649)   (13,560)   (10,614)
Less: Net loss attributable to non-controlling interest    (55)   (57)   (170)   (193)
Net loss attributable to Plymouth Industrial REIT, Inc.    (4,571)   (3,592)   (13,390)   (10,421)
Less: Preferred Stock dividends    930    1,652    3,949    4,956 
Less: Series B Preferred Stock accretion to redemption value   2,371    1,807    4,621    5,421 
Less: Loss on extinguishment of Series A Preferred Stock    56        80     
Less: Amount allocated to participating securities    62    48    194    153 
Net loss attributable to common stockholders   $(7,990)  $(7,099)  $(22,234)  $(20,951)
Net loss basic and diluted per share attributable to common stockholders   $(0.19)  $(0.22)  $(0.57)  $(0.71)
                     
Weighted-average common shares outstanding basic and diluted    41,128,421    32,301,693    38,838,811    29,636,996 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

2 

 

PLYMOUTH INDUSTRIAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
UNAUDITED
(In thousands, except share and per share amounts)

 

                 
   For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
 
   2022   2021   2022   2021 
                 
Net loss   $(4,626)  $(3,649)  $(13,560)  $(10,614)
                     
Other comprehensive income:                    
Unrealized gain (loss) on interest rate swaps    16,476        32,404     
Other comprehensive income    16,476        32,404     
Comprehensive income (loss)    11,850    (3,649)   18,844    (10,614)
Less: Net loss attributable to non-controlling interest    (55)   (57)   (170)   (193)
Less: Other comprehensive income (loss) attributable to non-controlling interest    194        402     
Comprehensive income (loss) attributable to Plymouth Industrial REIT, Inc.   $11,711   $(3,592)  $18,612   $(10,421)

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3 

 

PLYMOUTH INDUSTRIAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PREFERRED STOCK AND EQUITY
UNAUDITED
(In thousands, except share and per share amounts)

                                                                     
  Preferred Stock
Series A
$0.01 Par Value
  Preferred Stock
Series B
$0.01 Par Value
    Common Stock,
$0.01 Par Value
  Additional
Paid in
  Accumulated   Accumulated
Other
Comprehensive
  Stockholders’   Non-
controlling
  Total  
  Shares   Amount   Shares   Amount     Shares   Amount   Capital   Deficit   Income   Equity   Interest   Equity  
Balance, January 1, 2022 2,023,551   $ 48,473   4,411,764   $ 94,437     36,110,659   $ 361   $ 532,666   $ (177,258 ) $   $ 355,769   $ 4,831   $ 360,600  
Series B Preferred Stock accretion to redemption value           1,500             (1,500 )           (1,500 )       (1,500 )
Net proceeds from common stock               614,800     7     17,116             17,123         17,123  
Stock based compensation                       442             442         442  
Restricted shares issued               120,160                              
Dividends and distributions                       (9,835 )           (9,835 )   (108 )   (9,943 )
Reallocation of non-controlling interest                       (122 )           (122 )   122      
Other comprehensive income                               9,933     9,933     135     10,068  
Conversion of common stock warrants               139,940     2     3,756             3,758         3,758  
Net loss                           (4,410 )       (4,410 )   (60 )   (4,470 )
Balance, March 31, 2022 2,023,551   $ 48,473   4,411,764   $ 95,937     36,985,559   $ 370   $ 542,523   $ (181,668 ) $ 9,933   $ 371,158   $ 4,920   $ 376,078  
Repurchase and extinguishment of Series A Preferred Stock (16,381 )   (392 )                     (24 )       (24 )       (24 )
Conversion of Series B Preferred Stock       (2,205,882 )   (47,970 )   2,205,882     22     47,948             47,970         47,970  
Series B Preferred Stock accretion to redemption value           750             (750 )           (750 )       (750 )
Net proceeds from common stock               927,900     9     24,375             24,384         24,384  
Stock based compensation                       538             538         538  
Restricted shares issued               13,970                              
Dividends and distributions                       (10,149 )           (10,149 )   (108 )   (10,257 )
Reallocation of non-controlling interest                       (472 )           (472 )   472      
Other comprehensive income                                 5,787     5,787     73     5,860  
Net loss                           (4,409 )       (4,409 )   (55 )   (4,464 )
Balance, June 30, 2022 2,007,170   $ 48,081   2,205,882   $ 48,717     40,133,311   $ 401   $ 604,013   $ (186,101 ) $ 15,720   $ 434,033   $ 5,302   $ 439,335  
Repurchase and extinguishment of Series A Preferred Stock (34,743 )   (832 )                     (56 )       (56 )       (56 )
Series B Preferred Stock accretion to redemption value           2,371             (2,371 )           (2,371 )       (2,371 )
Conversion of Series B Preferred Stock       (2,205,882 )   (51,088 )   1,915,511     19     36,069             36,088         36,088  
Net proceeds from common stock               802,547     8     16,804             16,812         16,812  
Stock based compensation                       518             518         518  
Restricted shares issued (forfeited)               (1,880 )                            
Dividends and distributions                       (10,356 )           (10,356 )   (108 )   (10,464 )
Reallocation of non-controlling interest                       (230 )           (230 )   230      
Other comprehensive income                                 16,282     16,282     194     16,476  
Net loss                           (4,571 )       (4,571 )   (55 )   (4,626 )
Balance, September 30, 2022 1,972,427   $ 47,249     $     42,849,489   $ 428   $ 644,447   $ (190,728 ) $ 32,002   $ 486,149   $ 5,563   $ 491,712  

 

4 

 

PLYMOUTH INDUSTRIAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PREFERRED STOCK AND EQUITY
UNAUDITED
(In thousands, except share and per share amounts)

  Preferred Stock
Series A
$0.01 Par Value
  Preferred Stock
Series B
$0.01 Par Value
    Common Stock,
$0.01 Par Value
  Additional
Paid in
  Accumulated   Accumulated
Other
Comprehensive
  Stockholders’   Non-
controlling
  Total  
  Shares   Amount   Shares   Amount     Shares   Amount   Capital   Deficit   Income   Equity   Interest   Equity  
Balance January 1, 2021 2,023,999   $ 48,485   4,411,764   $ 87,209     25,344,161   $ 253   $ 360,752   $ (162,250 ) $   $ 198,755   $ 4,767   $ 203,522  
Repurchase and extinguishment of Series A Preferred Stock (448 )   (12 )                                      
Series B Preferred Stock accretion to redemption value           1,807             (1,807 )           (1,807 )       (1,807 )
Net proceeds from common stock               2,883,794     30     42,480             42,510         42,510  
Stock based compensation                       418             418         418  
Restricted shares issued               110,000                              
Dividends and distributions                       (7,320 )           (7,320 )   (121 )   (7,441 )
Net loss                           (2,919 )       (2,919 )   (65 )   (2,984 )
Balance, March 31, 2021 2,023,551   $ 48,473   4,411,764   $ 89,016     28,337,955   $ 283   $ 394,523   $ (165,169 ) $   $ 229,637   $ 4,581   $ 234,218  
Series B Preferred Stock accretion to redemption value           1,807             (1,807 )           (1,807 )       (1,807 )
Net proceeds from common stock               2,646,854     26     48,558             48,584         48,584  
Stock based compensation                       461             461         461  
Restricted shares issued               5,000                              
Redemption of partnership units               99,118     1     1,684             1,685     (1,685    
Reallocation of non-controlling interest                       (1,078           (1,078   1,078      
Dividends and distributions                       (8,180 )           (8,180 )   (106 )   (8,286 )
Net loss                           (3,910 )       (3,910 )   (71 )   (3,981 )
Balance, June 30, 2021 2,023,551   $ 48,473   4,411,764   $ 90,823     31,088,927   $ 310   $ 434,161   $ (169,079 ) $   $ 265,392   $ 3,797   $ 269,189  
Series B Preferred Stock accretion to redemption value           1,807             (1,807 )           (1,807 )       (1,807 )
Net proceeds from common stock               3,173,883     32     69,258             69,290         69,290  
Stock based compensation                       340             340         340  
Restricted shares issued               10,434     1                 1         1  
Reallocation of non-controlling interest                       (1,100           (1,100   1,100      
Dividends and distributions                       (8,849 )           (8,849 )   (106 )   (8,955 )
Net loss                           (3,592 )       (3,592 )   (57 )   (3,649 )
Balance, September 30, 2021 2,023,551   $ 48,473   4,411,764   $ 92,630     34,273,244   $ 343   $ 492,003   $ (172,671 ) $   $ 319,675   $ 4,734   $ 324,409  

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

5 

 

PLYMOUTH INDUSTRIAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)

 

         
   For the Nine Months Ended
September 30,
 
   2022   2021 
Operating activities          
Net loss   $(13,560)  $(10,614)
Adjustments to reconcile net loss to net cash provided by operating activities:          
Depreciation and amortization    71,759    50,984 
Straight line rent adjustment    (3,045)   (2,726)
Intangible amortization in rental revenue, net    (2,632)   (1,589)
Loss on extinguishment of debt    2,176     
Amortization of debt related costs    1,597    1,163 
Unrealized appreciation (depreciation) of warrants    (1,760)   1,809 
Stock based compensation    1,498    1,219 
(Earnings) loss in investment of unconsolidated joint venture    147    675 
Gain on sale of real estate        (590)
Changes in operating assets and liabilities:          
Other assets    1,160    (6,720)
Deferred leasing costs    (4,316)   (3,363)
Accounts payable, accrued expenses and other liabilities    5,828    4,299 
Net cash provided by operating activities    58,852    34,547 
           
Investing activities          
Acquisition of real estate properties    (197,085)   (166,374)
Real estate improvements    (39,687)   (15,630)
Proceeds from sale of real estate, net    222    2,204 
Net cash used in investing activities    (236,550)   (179,800)
           
Financing activities          
Proceeds from issuance of common stock, net    58,319    160,386 
Repayment of secured debt    (19,621)   (4,019)
Proceeds from issuance of unsecured debt    150,000    150,000 
Proceeds from line of credit facility    203,000    51,000 
Repayment of line of credit facility    (173,500)   (141,000)
Repurchase of Series A Preferred Stock    (1,304)   (12)
Redemption of Series B Preferred Stock    (15,000)    
Debt issuance costs    (1,798)   (1,691)
Dividends and distributions paid    (29,519)   (22,522)
Net cash provided by financing activities    170,577    192,142 
           
Net (decrease) increase in cash, cash held in escrow, and restricted cash    (7,121)   46,889 
Cash, cash held in escrow, and restricted cash at beginning of period    43,374    32,054 
Cash, cash held in escrow, and restricted cash at end of period   $36,253   $78,943 
           
Supplemental Cash Flow Disclosures:          
Cash paid for interest   $20,645   $13,357 
Assumption of cash, cash held in escrow, and restricted cash upon consolidation of investment in joint venture   $2,895   $ 
           
Supplemental Non-cash Financing and Investing Activities:          
Dividends declared included in dividends payable   $9,427   $7,900 
Distribution payable to non-controlling interest holder   $108   $106 
Series B accretion to redemption value   $4,621   $5,421 
Real estate improvements included in accounts payable, accrued expenses and other liabilities   $5,261   $3,497 
Deferred leasing costs included in accounts payable, accrued expenses and other liabilities   $634   $1,373 
Assumption of secured debt   $   $10,820 
Conversion of common stock warrants   $3,758   $ 
Conversion of Series B Preferred Stock   $84,058   $ 
Consolidation of net book value of investment in joint venture   $5,686   $ 
Assumption of other assets upon consolidation of investment in joint venture   $638   $ 
Assumption of accounts payable, accrued expenses and other liabilities upon consolidation of investment in joint venture   $1,955   $ 
Assumption of secured debt upon consolidation of investment in joint venture   $56,000   $ 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

6 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

1. Nature of the Business and Basis of Presentation

Business

Plymouth Industrial REIT, Inc., (the “Company”, “we” or the “REIT”) is a Maryland corporation formed on March 7, 2011. The Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its assets and conducts substantially all of its business through its operating partnership, Plymouth Industrial Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). The Company, as general partner of the Operating Partnership, controls the Operating Partnership and consolidates the assets, liabilities, and results of operations of the Operating Partnership. As of September 30, 2022 and December 31, 2021, the Company owned a 98.9% and 98.7%, respectively, equity interest in the Operating Partnership.

The Company is a real estate investment trust focused on the acquisition, ownership and management of single and multi-tenant industrial properties, including distribution centers, warehouses, light industrial and small bay industrial properties, located in primary and secondary markets within the main industrial, distribution and logistics corridors of the United States. As of September 30, 2022, the Company, through its subsidiaries, owned 157 industrial properties comprising 207 buildings with an aggregate of approximately 33.8 million square feet, and our regional property management office building located in Columbus, Ohio totaling approximately 17,260 square feet.

2. Summary of Significant Accounting Policies

The accounting policies underlying the accompanying unaudited condensed consolidated financial statements are those set forth in the Company's audited financial statements for the years ended December 31, 2021 and 2020. Additional information regarding the Company’s significant accounting policies related to the accompanying interim financial statements is as follows:

Basis of Presentation

The Company’s interim condensed consolidated financial statements include the accounts of the Company, the Operating Partnership and their subsidiaries. The interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). All significant intercompany transactions have been eliminated in consolidation. These interim condensed consolidated financial statements include adjustments of a normal and recurring nature considered necessary by management to fairly present the Company's financial position and results of operations. These interim condensed consolidated financial statements may not be indicative of financial results for the full year. These interim condensed consolidated financial statements and notes thereto should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for the years ended December 31, 2021 and 2020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the United States Securities and Exchange Commission on February 23, 2022.

Consolidation

We consolidate all entities that are wholly owned and those in which we own less than 100% but control, as well as any variable interest entities (“VIEs”) in which we are the primary beneficiary. We evaluate our ability to control an entity and whether the entity is a variable interest entity and we are the primary beneficiary through consideration of the substantive terms of the arrangement to identify which enterprise has the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Investments in entities in which we do not control but over which we have the ability to exercise significant influence over operating and financial policies are presented under the equity method. Investments in entities that we do not control and over which we do not exercise significant influence are carried at the lower of cost or fair value, as appropriate. Our ability to correctly assess our influence and/or control over an entity affects the presentation of these investments in our condensed consolidated financial statements.

Consolidated VIEs are those for which the Company is considered to be the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and (2) the obligation to absorb losses or the right to receive the returns from the VIE that could potentially be significant to the VIE. The Company has determined that the Operating Partnership is a VIE and the Company is the primary beneficiary. The Company's only significant asset is its investment in the Operating Partnership, therefore, substantially all of the Company’s assets and liabilities are the assets and liabilities of the Operating Partnership.

7 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

Risks and Uncertainties

The state of the overall economy can significantly impact the Company’s operational performance and thus impact its financial position. Should the Company experience a significant decline in operational performance, it may affect the Company’s ability to make distributions to its stockholders, service debt, or meet other financial obligations.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes significant estimates regarding the allocation of tangible and intangible assets of real estate acquisitions, impairments of long-lived assets, stock-based compensation and its common stock warrants liability. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management adjusts such estimates when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from those estimates and assumptions.

Segments

The Company has one reportable segment, industrial properties. These properties have similar economic characteristics and meet the other criteria that permit the properties to be aggregated into one reportable segment.

Revenue Recognition

Minimum rental revenue from real estate operations is recognized on a straight-line basis. The straight-line rent calculation on leases includes the effects of rent concessions and scheduled rent increases, and the calculated straight-line rent income is recognized over the lives of the individual leases. In accordance to ASC 842, we assess the collectability of lease receivables (including future minimum rental payments) both at commencement and throughout the lease term. If our assessment of collectability changes during the lease term, any difference between the revenue that would have been received under the straight-line method and the lease payments that have been collected will be recognized as a current period adjustment to rental revenue. Rental revenue associated with leases where collectability has been deemed less than probable is recognized on a cash basis in accordance with ASC 842. Management fee revenue represents management fees earned from the unconsolidated joint venture. For the nine months ended September 30, 2022, we recognized fees of $82 related to asset management services we provided to the unconsolidated joint venture.

Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at September 30, 2022 and December 31, 2021. The Company maintains cash and restricted cash, which includes tenant security deposits and cash collateral for its borrowings discussed in Note 6, and cash held in escrow for real estate tax, insurance, tenant capital improvements and leasing commissions, in bank deposit accounts, which at times may exceed federally insured limits. As of September 30, 2022, the Company has not realized any losses in such cash accounts and believes it mitigates its risk of loss by depositing its cash and restricted cash in highly rated financial institutions.

The following table presents a reconciliation of cash, cash held in escrow and restricted cash reported within our condensed consolidated balance sheets to amounts reported within our condensed consolidated statements of cash flows:

   September 30,   December 31, 
   2022   2021 
Cash   $16,341   $26,232 
Cash held in escrow    13,156    11,893 
Restricted cash    6,756    5,249 
Cash, cash held in escrow, and restricted cash   $36,253   $43,374 

 

8 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

Fair Value of Financial Instruments

The Company applies various valuation approaches in determining the fair value of its financial assets and liabilities within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 — Significant inputs to the valuation model are unobservable.

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement. Level 3 inputs are applied in determining the fair value of our debt, interest rate swaps and warrants to purchase common stock, discussed in Notes 6, 7 and 8, respectively.

Financial instruments, including cash, restricted cash, cash held in escrow, accounts receivable, accounts payable, accrued expenses and other current liabilities, are considered Level 1 in fair value hierarchy. The amounts reported on the condensed consolidated balance sheets for these financial instruments approximate their fair value due to their relatively short maturities and prevailing interest rates. Derivative financial instruments are considered Level 2 in the fair value hierarchy as discussed in Note 7.

Derivative Instruments and Hedging Activities

We record all derivatives on the accompanying consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply, or we elect not to apply hedge accounting.

In accordance with fair value measurement guidance, we made an accounting policy election to measure the credit risk of our derivative financial instruments that are subject to master netting arrangements on a net basis by the counterparty portfolio. Credit risk is the risk of failure of the counterparty to perform under the terms of the contract. We minimize the credit risk in our derivative financial instruments by entering into transactions with various high-quality counterparties. Our exposure to credit risk at any point is generally limited to amounts recorded as assets on the accompanying condensed consolidated balance sheets.

Debt Issuance Costs

Debt issuance costs other than those associated with the revolving line of credit facility are reflected as a reduction to the respective loan amounts in the form of a debt discount. Amortization of this expense is included in interest expense in the condensed consolidated statements of operations.

9 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

Debt issuance costs amounted to $10,786 and $9,710 at September 30, 2022 and December 31, 2021, respectively, and related accumulated amortization amounted to $5,784 and $4,689 at September 30, 2022 and December 31, 2021, respectively. At September 30, 2022 and December 31, 2021, the Company has classified net unamortized debt issuance costs of $2,529 and $2,405, respectively, related to borrowings under the line of credit to other assets in the condensed consolidated balance sheets.

Stock Based Compensation

The Company grants stock-based compensation awards to our employees and directors typically in the form of restricted shares of common stock. The Company measures stock-based compensation expense based on the fair value of the awards on the grant date and recognizes the expense ratably over the vesting period. Forfeitures of unvested shares are recognized in the period the forfeiture occurs.

Earnings (Loss) per Share

The Company follows the two-class method when computing net earnings (loss) per common share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net earnings (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Diluted net loss per share is the same as basic net loss per share since the Company does not have any common stock equivalents such as stock options. The common stock warrants are not included in the computation of diluted net loss per share as they are anti-dilutive for the periods presented.

Investment in Unconsolidated Joint Venture

Investment in unconsolidated joint venture represents a non-controlling equity interest in a joint venture we entered into during October 2020. The Company determined that the venture is not a VIE in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the investment in unconsolidated joint venture. We have concluded that we have the ability to exercise significant influence; however, we do not have control or kick out rights and therefore the investment in the unconsolidated joint venture is accounted for under the equity method of accounting. Accordingly, we initially recorded our investment at cost, and subsequently adjust for equity in earnings or losses and cash contributions and distributions. Any difference between the carrying amount of these investments on the condensed consolidated balance sheets and the underlying equity in net assets will be amortized as an adjustment to equity in earnings (loss) in investment of unconsolidated joint venture over the life of the related asset. Our net equity investment in the joint venture is reflected within the condensed consolidated balance sheets, and our share of net income or loss from the joint venture is included within the condensed consolidated statements of operations.

On March 11, 2022, the Company acquired full ownership of the unconsolidated joint venture as discussed in Note 4.

Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04 Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform-related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 was effective upon issuance on a prospective basis beginning January 1, 2020, and may be elected over time as reference rate activities occur. During the second quarter of 2022, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Inter-bank Offered Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding instrument. To date, the adoption of ASU 2020-04 has not had a material impact on our condensed consolidated financial statements.

10 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

3. Real Estate Properties

Real estate properties consisted of the following at September 30, 2022 and December 31, 2021:

   September 30,   December 31, 
   2022   2021 
Land   $231,829   $201,164 
Buildings and improvements    1,127,172    930,678 
Site improvements    132,295    108,756 
Construction in progress    47,120    13,409 
    1,538,416    1,254,007 
Less: accumulated depreciation    (189,170)   (142,192)
Real estate properties, net   $1,349,246   $1,111,815 

 

Depreciation expense was $16,565 and $11,466 for the three months ended September 30, 2022 and 2021, respectively, and $47,051 and $32,368 for the nine months ended September 30, 2022 and 2021, respectively.

Acquisition of Properties

The Company made the following acquisitions of properties during the nine months ended September 30, 2022:

Location  Date
Acquired
  Square
Feet
   Properties   Purchase Price
(in thousands) (1)
 
Atlanta, GA   January 20, 2022  150,000   1   $9,750 
Jacksonville, FL   February 7, 2022  85,920   1    12,300 
Cincinnati, OH; Columbus, OH; Indianapolis, IN   February 24, 2022  678,745   3    43,250 
Memphis, TN   March 11, 2022  2,320,773   16    106,508(2)
Memphis, TN   March 11, 2022  67,557   1    8,150 
Atlanta, GA   March 15, 2022  200,000   1    12,500 
St. Louis, MO   April 6, 2022  76,485   1    8,450 
Chicago, IL   April 14, 2022  78,743   1    7,300 
Cincinnati, OH; Cleveland, OH  May 18, 2022  153,903   2    12,700 
Charlotte, NC   May 19, 2022  155,220   1    20,400 
Cleveland, OH   July 7, 2022  197,518   1    16,500 
Total      4,164,864   29   $257,808 

_______________

(1) Purchase price does not include capitalized acquisition costs.
(2) The purchase price of $106,508 included the assumption of $56,000 of existing debt secured by the properties and the consolidation of the net book value of investment in joint venture of $5,686. In addition, we consolidated financial assets of approximately $3,533, comprised of cash, cash held in escrow and other assets, and liabilities of approximately $1,955 comprised of accounts payable, accrued expenses and other current liabilities.

 

11 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

The allocation of the aggregate purchase price in accordance with Financial Accounting Standards Board, (FASB), ASU 2017-01 (Topic 805) “Business Combinations,” of the assets and liabilities acquired at their relative fair values as of their acquisition date, is as follows:

   Nine Months Ended
September 30, 2022
  
Purchase price allocation  Purchase
Price
   Weighted Average
Amortization
Period (years) of
Intangibles at
Acquisition
Total Purchase Price       
Purchase price   $257,808   N/A
Acquisition costs    2,280   N/A
Total   $260,088    
         
Allocation of Purchase Price        
Land   $30,887   N/A
Building    186,710   N/A
Site improvements    23,538   N/A
Total real estate properties    241,135    
         
Deferred Lease Intangibles        
Tenant relationships    3,429   3.8
Leasing commissions    2,678   4.0
Above market lease value    732   4.3
Below market lease value    (2,520)  7.4
Lease in place value    14,367   3.7
Net deferred lease intangibles    18,686    
Assumed debt – market value
(Above)/below assumed market debt value
   267   5.8
Totals   $260,088    

 

All acquisitions completed during the nine months ended September 30, 2022 were considered asset acquisitions under ASC 805.

4. Investment in Unconsolidated Joint Venture

On October 23, 2020, a wholly owned subsidiary of the Operating Partnership entered into a $150,000 equity joint venture agreement (the “MIR JV”) with an unrelated third-party partner (the “MIR JV Partner”). The purpose of the MIR JV agreement is to acquire value-add/opportunistic industrial properties that meet certain criteria as outlined within the MIR JV agreement. The Operating Partnership owns a 20% interest in the MIR JV. The Operating Partnership is responsible for the day-to-day oversight of the MIR JV, its subsidiaries and properties and is entitled to an annual asset management fee equal to 1% of total equity contributed to the MIR JV by the partners paid quarterly as well as a promote based on return thresholds as set forth in the MIR JV agreement. The MIR JV completed its initial investment of a 28-building portfolio of industrial buildings totaling approximately 2.3 million square feet in metropolitan Memphis, Tennessee on December 17, 2020 for $86,000. The initial investment was funded by the MIR JV via $30,000 cash equity contributions to the MIR JV on a 20%/80% pro-rata basis and a 7-year secured mortgage for $56,000.

On March 11, 2022, the Company acquired the remaining 80% interest in the MIR JV from the MIR JV Partner for $46,401, as well as the assumption of the $56,000 secured mortgage. Upon the completion of the acquisition of the MIR JV Partner’s interest, the Company fully consolidated the former MIR JV assets and liabilities into its condensed consolidated financial statements. Assets consolidated included the 28-building portfolio of industrial buildings and financial assets of approximately $3,533, comprised of cash, cash held in escrow, other assets and the net book value of our 20% investment in the former MIR JV of $5,686. Liabilities consolidated included the 7-year secured mortgage of $56,000 and approximately $1,955 accounts payable, accrued expenses and other current liabilities.

12 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

5. Leases

As a Lessor

We lease our properties to tenants under agreements that are classified as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Many of our leases include the recovery of certain operating expenses such as common area maintenance, insurance, real estate taxes and utilities from our tenants. The recovery of such operating expenses is recognized in rental revenue in the condensed consolidated statements of operations. Some of our tenants’ leases are subject to changes in the Consumer Price Index (“CPI”).

The Company includes accounts receivable and straight-line rent receivables within other assets in the condensed consolidated balance sheets. For the nine months ended September 30, 2022 and 2021, rental revenue was derived from various tenants. As such, future receipts are dependent upon the financial strength of the lessees and their ability to perform under the lease agreements.

Rental revenue is comprised of the following:

                                 
   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2022   2021   2022   2021 
Income from leases   $34,886   $26,008   $98,832   $73,320 
Straight-line rent adjustments    1,319    966    3,045    2,726 
Tenant recoveries    11,042    8,423    31,611    22,833 
Amortization of above market leases    (184)   (237)   (548)   (824)
Amortization of below market leases    725    717    3,180    2,413 
Total   $47,788   $35,877   $136,120   $100,468 

 

Tenant recoveries included within rental revenue for the nine months ended September 30, 2022 and 2021 are variable in nature.

As a Lessee

Operating Leases

As of September 30, 2022, we have five office space operating leases and a single ground operating sublease. The office lease agreements do not contain residual value guarantees or an option to renew. The ground sublease agreement does not contain residual value guarantees and includes multiple options to extend the sublease between nineteen and twenty years for each respective option. The operating leases have remaining lease terms ranging from 1.7 years to 33.3 years, which includes the exercise of a single twenty-year renewal option pertaining to the ground sublease. As of September 30, 2022, total operating right of use assets and lease liabilities were approximately $5,918 and $7,097, respectively. The operating lease liability as of September 30, 2022 represents a weighted-average incremental borrowing rate of 4.0% over the weighted-average remaining lease term of 8.8 years. The incremental borrowing rate is our estimated borrowing rate on a fully-collateralized basis for the term of the respective leases.

The following table summarizes the operating lease expense recognized during the three and nine months ended September 30, 2022 and 2021 included in the Company’s condensed consolidated statements of operations.

                                 
   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2022   2021   2022   2021 
Operating lease expense included in general and administrative expense attributable to office leases   $210   $216   $632   $586 
Operating lease expense included in property expense attributable to ground sublease    9    9    27    38 
Non-cash adjustment due to straight-line rent adjustments    28    18    78    122 
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)   $247   $243   $737   $746 

 

 

13 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

The following table summarizes the maturity analysis of our operating leases, which is discounted by our incremental borrowing rate to calculate the lease liability as included in accounts payable, accrued expenses and other liabilities in the Company’s condensed consolidated balance sheets for the operating leases in which we are the lessee (in thousands):

     
October 1, 2022 – December 31, 2022   $324 
2023   1,311 
2024   1,280 
2025   894 
2026   803 
Thereafter    4,309 
Total minimum operating lease payments   $8,921 
Less imputed interest    (1,824)
Total operating lease liability   $7,097 

 

Financing Leases

As of September 30, 2022, we have a single finance lease in which we are the sublessee for a ground lease. The Company includes the financing lease right of use asset within real estate properties and the corresponding liability within financing lease liability in the condensed consolidated balance sheets. The ground sublease agreement does not contain a residual value guarantee and includes multiple options to extend the sublease between nineteen and twenty years for each respective option. The lease has a remaining lease term of approximately 33.3 years, which includes the exercise of a single twenty-year renewal option. The financing lease liability as of September 30, 2022 represents a weighted-average incremental borrowing rate of 7.8% over the weighted-average remaining lease term of 33.3 years. The incremental borrowing rate is our estimated borrowing rate on a fully-collateralized basis for the term of the respective lease.

The following table summarizes the financing lease expense recognized during the three and nine months ended September 30, 2022 and 2021 included in the Company’s condensed consolidated statements of operations.

                                 
   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2022   2021   2022   2021 
Depreciation/amortization of financing lease right-of-use assets   $7   $6   $21   $19 
Interest expense for financing lease liability    44    43    132    130 
Total financing lease cost   $51   $49   $153   $149 

 

The following table summarizes the maturity analysis of our financing lease (in thousands):

         
October 1, 2022 – December 31, 2022   $39 
2023   155 
2024   155 
2025   170 
2026   170 
Thereafter    6,537 
Total minimum financing lease payments   $7,226 
Less imputed interest    (4,983)
Total financing lease liability   $2,243 

 

14 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

6. Indebtedness

The following table sets forth a summary of the Company’s borrowings outstanding under its respective secured debt, unsecured line of credit and unsecured debt as of September 30, 2022 and December 31, 2021.

   Outstanding Balance at       
Debt  September 30,
2022
   December 31,
2021
   Interest rate at
September 30, 2022
  Final
Maturity Date
Secured debt:                
AIG Loan   $112,449   $114,477   4.08%  November 1, 2023
Transamerica Loan    67,731    68,709   4.35%  August 1, 2028
Allianz Loan    62,663    63,115   4.07%  April 10, 2026
Minnesota Life Loan    20,129    20,453   3.78%  May 1, 2028
Minnesota Life Memphis Industrial Loan(1)    56,000       3.15%  January 1, 2028
JPMorgan Chase Loan(2)        13,205   5.23%  January 1, 2027
Ohio National Life Mortgage    19,201    19,660   4.14%  August 1, 2024
Nationwide Loan    15,000    15,000   2.97%  October 1, 2027
Lincoln Life Gateway Mortgage    28,800    28,800   3.43%  January 1, 2028
Midland National Life Insurance Mortgage    10,820    10,820   3.50%  March 10, 2028
Total secured debt  $392,793   $354,239       
Unamortized debt issuance costs, net    (2,185)   (2,861)      
Unamortized premium/(discount), net    336    697       
Total secured debt, net   $390,944   $352,075       
                 
Unsecured debt:                
$100m KeyBank Term Loan(3)    100,000    100,000        3.10%(4)(5)  August 11, 2026
$200m KeyBank Term Loan(3)    200,000    200,000        3.08%(4)(5)  February 11, 2027
$150m KeyBank Term Loan(3)    150,000            4.50%(4)(5)  May 2, 2027
Total unsecured debt  $450,000   $300,000       
Unamortized debt issuance costs, net    (2,818)   (2,160)      
Total unsecured debt, net   $447,182   $297,840       
                 
Borrowings under line of credit:                
KeyBank unsecured line of credit(3)    67,500    38,000     4.16%(4)  August 11, 2025
Total borrowings under line of credit   $67,500   $38,000       

_______________

(1) On March 11, 2022, a wholly-owned subsidiary of the Operating Partnership assumed a mortgage (the “Minnesota Life Memphis Industrial Loan”) with a balance of $56,000 in conjunction with our acquisition of all outstanding interests in the entity owning the portfolio in Memphis, Tennessee. The Minnesota Life Memphis Industrial Loan, held by Minnesota Life Insurance Company, matures on January 1, 2028, bears interest at 3.15% and is secured by the property. The Minnesota Life Memphis Industrial Loan requires monthly installments of interest only through January 1, 2023, and afterwards, monthly installments of principal plus accrued interest through January 1, 2028, at which time a balloon payment is required. The Company has the right to prepay the borrowings outstanding, subject to a prepayment penalty in effect until the loan approaches maturity.
(2) On February 1, 2022, the Company repaid in full, the outstanding principal and interest balance of approximately $13,245 on the JPMorgan Chase Loan. The Company recognized a $2,176 loss on extinguishment of debt resulting from prepayment penalty and fees incurred as a result of the repayment.
(3) On May 2, 2022, the Company entered into an amendment to the KeyBank unsecured facility. The credit facility agreement, as amended, expanded the availability on the KeyBank unsecured line of credit up to $350 million and entered into a new $150 million unsecured term loan (the “$150m KeyBank Term Loan”), with an accordion feature that allows the total borrowing capacity under the credit facility to be increased to $1 billion, subject to certain conditions. The $150m KeyBank Term Loan matures in May 2027. The maturity date for the KeyBank unsecured line of credit remains unchanged. The amendment also provided for the transition of the reference rate for the KeyBank unsecured line of credit and the $100m, $200m, and $150m KeyBank Term Loans from 1-month LIBOR to the Secured Overnight Financing Rate (“SOFR”). Borrowings under the credit agreement, as amended, bear interest at either (1) the base rate (determined as the highest of (a) KeyBank’s prime rate, (b) the Federal Funds rate plus 0.50% and (c) the Adjusted Term SOFR for a one month tenor plus 1.0% or (2) SOFR, plus, in either case, a spread (A) between 35 and 90 basis points for revolver base rate loans or between 135 and 190 basis points for revolver SOFR rate loans and (B) between 30 and 85 basis points for term base rate loans or between 130 and 185 basis points for term SOFR rate loans, with the amount of the spread depending on the Borrower’s total leverage ratio.
(4) For the month of September 2022, the one-month term SOFR for our unsecured debt and borrowings under line of credit was 2.512%. The spread over the applicable rate for the $100m, $150m, and $200m KeyBank Term Loans and KeyBank unsecured line of credit is based on the Company’s total leverage ratio plus the 0.1% SOFR index adjustment.
(5) As of September 30, 2022, the one-month term SOFR for the $100m, $150m and $200m KeyBank Term Loans was swapped to a fixed rate of 1.504%, 2.904%, and 1.5273%, respectively.

 

15 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

Financial Covenant Considerations

The Company is in compliance with all respective financial covenants for our secured and unsecured debt and unsecured line of credit as of September 30, 2022.

Fair Value of Debt

The fair value of our debt and borrowings under line of credit was estimated using Level 3 inputs by calculating the present value of principal and interest payments, using discount rates that best reflect current market interest rates for financings with similar characteristics and credit quality, and assuming each loan is outstanding through its maturity.

The following table summarizes the aggregate principal outstanding under the Company’s indebtedness and the corresponding estimate of fair value as of September 30, 2022 and December 31, 2021:

 

                                 
   September 30, 2022   December 31, 2021 
Indebtedness (in thousands)  Principal Outstanding   Fair Value   Principal Outstanding   Fair Value 
Secured debt   $392,793   $370,473   $354,239   $369,459 
Unsecured debt    450,000    450,000    300,000    300,000 
Borrowings under line of credit, net    67,500    67,500    38,000    38,000 
Total    910,293   $887,973    692,239   $707,459 
Unamortized debt issuance cost, net    (5,003)        (5,021)     
Unamortized premium/(discount), net    336         697      
Total carrying value   $905,626        $687,915      

 

7. Derivative Financial Instruments

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  During 2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. There were no such derivatives during 2021.

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Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
(all dollar amounts in thousands, except share and per share data)

The following table sets forth a summary of our interest rate swaps as of September 30, 2022 and December 31, 2021.

                    Notional Value(1)   Fair Value(2)
Interest Rate Swap
Counterparty
  Trade
Date