UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarter Ended
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:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (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 |
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.
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).
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
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 ☐
As of November 1, 2022, the Registrant had outstanding shares of common stock.
Plymouth Industrial REIT, Inc.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
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 | $ | $ | ||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Real estate properties, net | ||||||||
| Cash | ||||||||
| Cash held in escrow | ||||||||
| Restricted cash | ||||||||
| Deferred lease intangibles, net | ||||||||
| Investment in unconsolidated joint venture | ||||||||
| Interest rate swaps | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Preferred Stock and Equity | ||||||||
| Liabilities: | ||||||||
| Secured debt, net | $ | $ | ||||||
| Unsecured debt, net | ||||||||
| Borrowings under line of credit | ||||||||
| Accounts payable, accrued expenses and other liabilities | ||||||||
| Deferred lease intangibles, net | ||||||||
| Financing lease liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Preferred stock, par value $ per share, shares authorized, | ||||||||
| Series A: and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively (aggregate liquidation preference of $ | ||||||||
| Series B: and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively (aggregate liquidation preference of $ | — | |||||||
| Equity: | ||||||||
| Common stock, $ par value: shares authorized; and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders' equity | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| Total liabilities, preferred stock and equity | $ | $ | ||||||
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 | $ | $ | $ | $ | ||||||||||||
| Management fee revenue and other income | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Property | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Earnings (loss) in investment of unconsolidated joint venture | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on extinguishment of debt | ( | ) | ||||||||||||||
| Gain on sale of real estate | ||||||||||||||||
| Unrealized (appreciation) depreciation of warrants | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to Plymouth Industrial REIT, Inc. | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Preferred Stock dividends | ||||||||||||||||
| Less: Series B Preferred Stock accretion to redemption value | ||||||||||||||||
| Less: Loss on extinguishment of Series A Preferred Stock | ||||||||||||||||
| Less: Amount allocated to participating securities | ||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss basic and diluted per share attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted-average common shares outstanding basic and diluted | ||||||||||||||||
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 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income: | ||||||||||||||||
| Unrealized gain (loss) on interest rate swaps | ||||||||||||||||
| Other comprehensive income | 16,476 | — | 32,404 | — | ||||||||||||
| Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Less: Net loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Other comprehensive income (loss) attributable to non-controlling interest | ||||||||||||||||
| Comprehensive income (loss) attributable to Plymouth Industrial REIT, Inc. | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
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 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
| Series B Preferred Stock accretion to redemption value | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
| Net proceeds from common stock | — | — | ||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | |||||||||||||||||||||||||||||||
| Restricted shares issued | — | — | ||||||||||||||||||||||||||||||||
| Dividends and distributions | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Reallocation of non-controlling interest | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | |||||||||||||||||||||||||||||||
| Conversion of common stock warrants | — | — | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
| Repurchase and extinguishment of Series A Preferred Stock | ( |
) | ( |
) | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Conversion of Series B Preferred Stock | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Series B Preferred Stock accretion to redemption value | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
| Net proceeds from common stock | — | — | ||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | |||||||||||||||||||||||||||||||
| Restricted shares issued | — | — | ||||||||||||||||||||||||||||||||
| Dividends and distributions | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Reallocation of non-controlling interest | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
| Repurchase and extinguishment of Series A Preferred Stock | ( |
) | ( |
) | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Series B Preferred Stock accretion to redemption value | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
| Conversion of Series B Preferred Stock | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Net proceeds from common stock | — | — | ||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | |||||||||||||||||||||||||||||||
| Restricted shares issued (forfeited) | — | — | ( |
) | ||||||||||||||||||||||||||||||
| Dividends and distributions | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Reallocation of non-controlling interest | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
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 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
| Repurchase and extinguishment of Series A Preferred Stock | ( |
) | ( |
) | — | — | ||||||||||||||||||||||||||||
| Series B Preferred Stock accretion to redemption value | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
| Net proceeds from common stock | — | — | ||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | |||||||||||||||||||||||||||||||
| Restricted shares issued | — | — | ||||||||||||||||||||||||||||||||
| Dividends and distributions | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
| Series B Preferred Stock accretion to redemption value | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
| Net proceeds from common stock | — | — | ||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | |||||||||||||||||||||||||||||||
| Restricted shares issued | — | — | ||||||||||||||||||||||||||||||||
| Redemption of partnership units | — | — | — | — | 1 | 1,684 | — | — | 1,685 | (1,685 | ) | — | ||||||||||||||||||||||
| Reallocation of non-controlling interest | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Dividends and distributions | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
| Series B Preferred Stock accretion to redemption value | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
| Net proceeds from common stock | — | — | ||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | |||||||||||||||||||||||||||||||
| Restricted shares issued | — | — | ||||||||||||||||||||||||||||||||
| Reallocation of non-controlling interest | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Dividends and distributions | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||
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 | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Straight line rent adjustment | ( | ) | ( | ) | ||||
| Intangible amortization in rental revenue, net | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ||||||||
| Amortization of debt related costs | ||||||||
| Unrealized appreciation (depreciation) of warrants | ( | ) | ||||||
| Stock based compensation | ||||||||
| (Earnings) loss in investment of unconsolidated joint venture | ||||||||
| Gain on sale of real estate | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other assets | ( | ) | ||||||
| Deferred leasing costs | ( | ) | ( | ) | ||||
| Accounts payable, accrued expenses and other liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| Investing activities | ||||||||
| Acquisition of real estate properties | ( | ) | ( | ) | ||||
| Real estate improvements | ( | ) | ( | ) | ||||
| Proceeds from sale of real estate, net | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Proceeds from issuance of common stock, net | ||||||||
| Repayment of secured debt | ( | ) | ( | ) | ||||
| Proceeds from issuance of unsecured debt | ||||||||
| Proceeds from line of credit facility | ||||||||
| Repayment of line of credit facility | ( | ) | ( | ) | ||||
| Repurchase of Series A Preferred Stock | ( | ) | ( | ) | ||||
| Redemption of Series B Preferred Stock | ( | ) | ||||||
| Debt issuance costs | ( | ) | ( | ) | ||||
| Dividends and distributions paid | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash, cash held in escrow, and restricted cash | ( | ) | ||||||
| Cash, cash held in escrow, and restricted cash at beginning of period | ||||||||
| Cash, cash held in escrow, and restricted cash at end of period | $ | $ | ||||||
| Supplemental Cash Flow Disclosures: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Assumption of cash, cash held in escrow, and restricted cash upon consolidation of investment in joint venture | $ | $ | ||||||
| Supplemental Non-cash Financing and Investing Activities: | ||||||||
| Dividends declared included in dividends payable | $ | $ | ||||||
| Distribution payable to non-controlling interest holder | $ | $ | ||||||
| Series B accretion to redemption value | $ | $ | ||||||
| Real estate improvements included in accounts payable, accrued expenses and other liabilities | $ | $ | ||||||
| Deferred leasing costs included in accounts payable, accrued expenses and other liabilities | $ | $ | ||||||
| Assumption of secured debt | $ | $ | ||||||
| Conversion of common stock warrants | $ | $ | ||||||
| Conversion of Series B Preferred Stock | $ | $ | ||||||
| Consolidation of net book value of investment in joint venture | $ | $ | ||||||
| Assumption of other assets upon consolidation of investment in joint venture | $ | $ | ||||||
| Assumption of accounts payable, accrued expenses and other liabilities upon consolidation of investment in joint venture | $ | $ | ||||||
| Assumption of secured debt upon consolidation of investment in joint venture | $ | $ | ||||||
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
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
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 $
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 | $ | $ | ||||||
| Cash held in escrow | ||||||||
| Restricted cash | ||||||||
| Cash, cash held in escrow, and restricted cash | $ | $ | ||||||
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
$
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.
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 | $ | $ | ||||||
| Buildings and improvements | ||||||||
| Site improvements | ||||||||
| Construction in progress | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Real estate properties, net | $ | $ | ||||||
Depreciation expense was $
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 | $ | |||||||||||
| Jacksonville, FL | ||||||||||||
| Cincinnati, OH; Columbus, OH; Indianapolis, IN | ||||||||||||
| Memphis, TN | (2) | |||||||||||
| Memphis, TN | ||||||||||||
| Atlanta, GA | ||||||||||||
| St. Louis, MO | ||||||||||||
| Chicago, IL | ||||||||||||
| Cincinnati, OH; Cleveland, OH | ||||||||||||
| Charlotte, NC | ||||||||||||
| Cleveland, OH | ||||||||||||
| Total | $ | |||||||||||
_______________
| (1) | |
| (2) |
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 | $ | N/A | ||||
| Acquisition costs | N/A | |||||
| Total | $ | |||||
| Allocation of Purchase Price | ||||||
| Land | $ | N/A | ||||
| Building | N/A | |||||
| Site improvements | N/A | |||||
| Total real estate properties | ||||||
| Deferred Lease Intangibles | ||||||
| Tenant relationships | ||||||
| Leasing commissions | ||||||
| Above market lease value | ||||||
| Below market lease value | ( | ) | ||||
| Lease in place value | ||||||
| Net deferred lease intangibles | ||||||
| Assumed debt – market value (Above)/below assumed market debt value | ||||||
| Totals | $ | |||||
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 $
On March 11, 2022, the Company acquired
the remaining
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 | $ | $ | $ | $ | ||||||||||||
| Straight-line rent adjustments | ||||||||||||||||
| Tenant recoveries | ||||||||||||||||
| Amortization of above market leases | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of below market leases | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
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
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 | $ | $ | $ | $ | ||||||||||||
| Operating lease expense included in property expense attributable to ground sublease | ||||||||||||||||
| Non-cash adjustment due to straight-line rent adjustments | ||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities (operating cash flows) | $ | $ | $ | $ | ||||||||||||
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 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total minimum operating lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Total operating lease liability | $ | |||
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
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 | $ | $ | $ | $ | ||||||||||||
| Interest expense for financing lease liability | ||||||||||||||||
| Total financing lease cost | $ | $ | $ | $ | ||||||||||||
The following table summarizes the maturity analysis of our financing lease (in thousands):
| October 1, 2022 – December 31, 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total minimum financing lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Total financing lease liability | $ |
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 | $ | $ | ||||||||||
| Transamerica Loan | ||||||||||||
| Allianz Loan | ||||||||||||
| Minnesota Life Loan | ||||||||||||
| Minnesota Life Memphis Industrial Loan(1) | ||||||||||||
| JPMorgan Chase Loan(2) | ||||||||||||
| Ohio National Life Mortgage | ||||||||||||
| Nationwide Loan | ||||||||||||
| Lincoln Life Gateway Mortgage | ||||||||||||
| Midland National Life Insurance Mortgage | ||||||||||||
| Total secured debt | $ | $ | ||||||||||
| Unamortized debt issuance costs, net | ( | ) | ( | ) | ||||||||
| Unamortized premium/(discount), net | ||||||||||||
| Total secured debt, net | $ | $ | ||||||||||
| Unsecured debt: | ||||||||||||
| $100m KeyBank Term Loan(3) | | |||||||||||
| $200m KeyBank Term Loan(3) | | |||||||||||
| $150m KeyBank Term Loan(3) | | |||||||||||
| Total unsecured debt | $ | $ | ||||||||||
| Unamortized debt issuance costs, net | ( | ) | ( | ) | ||||||||
| Total unsecured debt, net | $ | $ | ||||||||||
| Borrowings under line of credit: | ||||||||||||
| KeyBank unsecured line of credit(3) | | |||||||||||
| Total borrowings under line of credit | $ | $ | ||||||||||
_______________
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) |
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 | $ | $ | $ | $ | ||||||||||||
| Unsecured debt | ||||||||||||||||
| Borrowings under line of credit, net | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
| Unamortized debt issuance cost, net | ( | ) | ( | ) | ||||||||||||
| Unamortized premium/(discount), net | ||||||||||||||||
| Total carrying value | $ | $ | ||||||||||||||
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.
16
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 |
|||||||||||||||||||