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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 June 30, 2024

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

 

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 July 29, 2024, the Registrant had outstanding 45,396,286 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 (Unaudited)  
     
  Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 1
     
  Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 2
     
  Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023 3
     
  Condensed Consolidated Statements of Changes in Preferred Stock and Equity for the Three and Six Months Ended June 30, 2024 and 2023 4
     
  Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2024 and 2023 6
     
  Notes to Condensed Consolidated Financial Statements 7
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 29
     
ITEM 4. Controls and Procedures 29
     
PART II. OTHER INFORMATION 30
     
SIGNATURES 31

 

 

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)

 

           
   June 30,
2024
   December 31,
2023
 
Assets          
Real estate properties   $1,548,517   $1,567,866 
Net investment in sales-type lease    21,396     
Less accumulated depreciation    (292,454)   (268,046)
Real estate properties, net    1,277,459    1,299,820 
           
Cash    23,548    14,493 
Cash held in escrow    5,598    4,716 
Restricted cash    6,983    6,995 
Deferred lease intangibles, net    42,434    51,474 
Other assets    40,445    42,734 
Interest rate swaps    25,328    21,667 
Total assets   $1,421,795   $1,441,899 
           
Liabilities and Equity          
Liabilities:          
Secured debt, net   $262,834   $266,887 
Unsecured debt, net    448,326    447,990 
Borrowings under line of credit    155,400    155,400 
Accounts payable, accrued expenses and other liabilities    67,492    73,904 
Deferred lease intangibles, net    5,134    6,044 
Financing lease liability    2,284    2,271 
Interest rate swaps   5    1,161 
Total liabilities    941,475    953,657 
Commitments and contingencies (Note 11)          
           
Equity:          
Common stock, $0.01 par value: 900,000,000 shares authorized; 45,396,286 and 45,250,184 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively    454    452 
Additional paid in capital    624,810    644,938 
Accumulated deficit    (175,074)   (182,606)
Accumulated other comprehensive income    24,998    20,233 
Total stockholders' equity    475,188    483,017 
Non-controlling interest    5,132    5,225 
Total equity    480,320    488,242 
Total liabilities and equity   $1,421,795   $1,441,899 

 

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 June 30,
   For the Six Months
Ended June 30,
 
   2024   2023   2024   2023 
                 
Rental revenue  $48,649   $49,899   $98,839   $99,270 
Management fee revenue and other income   37        75    29 
Total revenues   48,686    49,899    98,914    99,299 
                     
Operating expenses:                    
Property   13,569    15,690    30,211    31,644 
Depreciation and amortization   21,347    23,417    43,715    47,217 
General and administrative   3,880    3,842    7,244    7,289 
Total operating expenses   38,796    42,949    81,170    86,150 
                     
Other income (expense):                    
Interest expense   (9,411)   (9,584)   (19,009)   (19,119)
Gain on sale of real estate   849        8,879     
Total other income (expense)   (8,562)   (9,584)   (10,130)   (19,119)
                     
Net income (loss)   1,328    (2,634)   7,614    (5,970)
Less: Net income (loss) attributable to non-controlling interest   14    (30)   82    (68)
Net income (loss) attributable to Plymouth Industrial REIT, Inc.   1,314    (2,604)   7,532    (5,902)
Less: Preferred Stock dividends       916        1,832 
Less: Loss on extinguishment of Series A Preferred Stock               2 
Less: Amount allocated to participating securities   94    82    188    170 
Net income (loss) attributable to common stockholders  $1,220   $(3,602)  $7,344   $(7,906)
Net income (loss) per share attributable to common stockholders — basic  $0.03   $(0.08)  $0.16   $(0.19)
Net income (loss) per share attributable to common stockholders — diluted  $0.03   $(0.08)  $0.16   $(0.19)
                     
Weighted-average common shares outstanding — basic   44,991,220    42,646,535    44,963,908    42,625,768 
Weighted-average common shares outstanding — diluted   45,027,503    42,646,535    44,994,060    42,625,768 

 

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 June 30,
   For the Six Months
Ended June 30,
 
   2024   2023   2024   2023 
                 
Net income (loss)  $1,328   $(2,634)  $7,614   $(5,970)
                     
Other comprehensive income (loss):                    
Unrealized (loss) gain on interest rate swaps   (870)   8,135    4,817    1,065 
Other comprehensive (loss) income   (870)   8,135    4,817    1,065 
Comprehensive income (loss)   458    5,501    12,431    (4,905)
Less: Net income (loss) attributable to non-controlling interest   14    (30)   82    (68)
Less: Other comprehensive (loss) income attributable to non-controlling interest   (9)   93    52    12 
Comprehensive income (loss) attributable to Plymouth Industrial REIT, Inc.  $453   $5,438   $12,297   $(4,849)

 

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)

 

                                         
   Common Stock,
$0.01 Par Value
   Additional
Paid in
   Accumulated   Accumulated
Other
Comprehensive
   Stockholders’   Non-
controlling
   Total 
   Shares   Amount   Capital   Deficit   Income   Equity   Interest   Equity 
Balance, January 1, 2024    -45,250,184   $452   $644,938   $(182,606)  $20,233   $483,017   $5,225   $488,242 
Net proceeds from common stock            (245)           (245)       (245)
Stock based compensation            914            914        914 
Restricted shares issued (forfeited)    131,892    1    (1)                    
Dividends and distributions            (10,904)           (10,904)   (118)   (11,022)
Other comprehensive income                    5,626    5,626    61    5,687 
Reallocation of non-controlling interest            (51)           (51)   51     
Net income (loss)    -            6,218        6,218    68    6,286 
Balance, March 31, 2024    -45,382,076   $453   $634,651   $(176,388)  $25,859   $484,575   $5,287   $489,862 
Net proceeds from common stock            (65)           (65)       (65)
Stock based compensation            1,111            1,111        1,111 
Restricted shares issued (forfeited)    14,210    1    (1)                    
Dividends and distributions            (10,928)           (10,928)   (118)   (11,046)
Other comprehensive income                    (861)   (861)   (9)   (870)
Reallocation of non-controlling interest            42            42    ( 42)    
Net income (loss)    -            1,314        1,314    14    1,328 
Balance, June 30, 2024    -45,396,286   $454   $624,810   $(175,074)  $24,998   $475,188   $5,132   $480,320 

 

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

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
    Common Stock,
$0.01 Par Value
  Additional
Paid in
  Accumulated   Accumulated
Other
Comprehensive
  Stockholders’   Non-
controlling
  Total  
  Shares   Amount     Shares   Amount   Capital   Deficit   Income   Equity   Interest   Equity  
Balance, January 1, 2023 1,955,513   $ 46,844     42,849,489   $ 428   $ 635,068   $ (194,243 ) $ 29,739   $ 470,992   $ 5,389   $ 476,381  
Repurchase and extinguishment of Series A Preferred Stock (1,730   (41 )               (2 )       (2 )       (2 )
Net proceeds from common stock                 (137           (137       (137
Stock based compensation                 585             585         585  
Restricted shares issued (forfeited)         181,375     2     (2 )                    
Dividends and distributions                 (10,598 )           (10,598 )   (110 )   (10,708 )
Other comprehensive income                         (6,989   (6,989   (81   (7,070
Reallocation of non-controlling interest                 26             26     (26 )    
Net income (loss)                     (3,298 )       (3,298 )   (38 )   (3,336 )
Balance, March 31, 2023 1,953,783   $ 46,803  -   43,030,864   $ 430   $ 624,942   $ (197,543 ) $ 22,750   $ 450,579   $ 5,134   $ 455,713  
Net proceeds from common stock         70,000     1     1,384             1,385         1,385  
Stock based compensation                 716             716         716  
Dividends and distributions                 (10,625 )           (10,625 )   (110 )   (10,735 )
Other comprehensive income                         8,042     8,042     93     8,135  
Reallocation of non-controlling interest                 (3 )           (3 )   3      
Net income (loss)      -               (2,604 )       (2,604 )   (30 )   (2,634 )
Balance, June 30, 2023 1,953,783   $ 46,803     43,100,864   $ 431   $ 616,414   $ (200,147 ) $ 30,792   $ 447,490   $ 5,090   $ 452,580  

 

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 Six Months Ended
June 30,
 
   2024   2023 
Operating activities          
Net income (loss)   $7,614   $(5,970)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization    43,715    47,217 
Straight line rent adjustment    1,029    (1,617)
Intangible amortization in rental revenue, net    (611)   (1,403)
Amortization of debt related costs    876    1,138 
Stock based compensation    2,025    1,301 
Gain on sale of real estate   (8,879)    
Changes in operating assets and liabilities:          
Other assets    (365)   1,595 
Deferred leasing costs    (1,802)   (2,812)
Accounts payable, accrued expenses and other liabilities    (7,125)   50 
Net cash provided by operating activities   36,477    39,499 
           
Investing activities          
Real estate improvements    (9,335)   (18,520)
Proceeds from sale of real estate   8,439     
Net investment in sales-type lease    85     
Net cash used in investing activities    (811)   (18,520)
           
Financing activities          
(Payment) Proceeds from issuance of common stock, net    (310)   1,248 
Repayment of secured debt    (4,130)   (3,695)
Proceeds from line of credit facility        10,000 
Repurchase of Series A Preferred Stock        (43)
Debt issuance costs        (27)
Dividends and distributions paid    (21,301)   (21,158)
Net cash used in financing activities    (25,741)   (13,675)
           
Net increase (decrease) in cash, cash held in escrow, and restricted cash    9,925    7,304 
Cash, cash held in escrow, and restricted cash at beginning of period    26,204    31,213 
Cash, cash held in escrow, and restricted cash at end of period   $36,129   $38,517 
           
Supplemental Cash Flow Disclosures:          
Cash paid for interest   $18,732   $18,215 
           
Supplemental Non-cash Financing and Investing Activities:          
Dividends declared included in accounts payable, accrued expenses and other liabilities   $10,975   $9,709 
Distribution payable to non-controlling interest holder   $118   $110 
Real estate improvements included in accounts payable, accrued expenses and other liabilities  $2,037   $4,050 
Deferred leasing costs included in accounts payable, accrued expenses and other liabilities   $414   $1,048 

 

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 June 30, 2024 and December 31, 2023, the Company owned a 98.9% 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 June 30, 2024, the Company, through its subsidiaries, owned 155 industrial properties comprising 210 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, 2023 and 2022. 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 state 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, 2023 and 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the United States Securities and Exchange Commission on February 22, 2024.

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 VIE 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 VIE 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, and therefore, substantially all of the Company’s assets and liabilities are the assets and liabilities of the Operating Partnership.

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.

7 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited

(all dollar amounts in thousands, except share and per share data)

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 and liabilities for real estate acquisitions, impairments of long-lived assets and its stock-based compensation. 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.

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. The Company maintains cash and restricted cash, which includes tenant security deposits and cash collateral for its borrowings discussed in Note 5, 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 June 30, 2024, 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 or within accounts that are below the federally insured limits.

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:

   June 30,   December 31, 
   2024   2023 
Cash   $23,548   $14,493 
Cash held in escrow    5,598    4,716 
Restricted cash    6,983    6,995 
Cash, cash held in escrow, and restricted cash   $36,129   $26,204 

 

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.

Debt issuance costs amounted to $6,787 at June 30, 2024 and December 31, 2023, and related accumulated amortization amounted to $4,109 and $3,603 at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024 and December 31, 2023, the Company has classified net unamortized debt issuance costs of $1,005 and $1,469, respectively, related to borrowings under the line of credit to other assets in the condensed consolidated balance sheets.

Derivative Instruments and Hedging Activities

We record all derivatives on the accompanying condensed 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.

8 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited

(all dollar amounts in thousands, except share and per share data)

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. See Note 10 for details.

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 performance stock units discussed in Notes 5, 6 and 9 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 6.

Leases

For leases in which we are the lessee, a right of use asset and lease liability is recorded on the condensed consolidated balance sheets equal to the present value of the fixed lease payments of the corresponding lease. To determine our operating right of use asset and lease liability, we estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases by utilizing a market-based approach. Since the terms under our ground leases are significantly longer than the terms of borrowings available to us on a fully collateralized basis, the estimate of this rate requires significant judgment, and considers factors such as market-based pricing on longer duration financing instruments.

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 term of the individual leases. In accordance with 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.

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.

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, and performance stock units for certain executive officers and key employees. 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.

9 

 

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, Net

Real estate properties, net consisted of the following at June 30, 2024 and December 31, 2023:

   June 30,   December 31, 
   2024   2023 
Land   $223,049   $226,020 
Buildings and improvements    1,185,488    1,203,355 
Site improvements    128,463    130,638 
Construction in progress    11,517    7,853 
Real estate properties at cost    1,548,517    1,567,866 
Net investment in sales-type lease    21,396     
Less: accumulated depreciation    (292,454)   (268,046)
Real estate properties, net   $1,277,459   $1,299,820 

 

Depreciation expense was $16,813 and $16,891 for the three months ended June 30, 2024 and 2023, respectively, and $34,244 and $33,762 for the six months ended June 30, 2024 and 2022, respectively.

Acquisition of Properties

There were no acquisitions of properties during the six months ended June 30, 2024.

Sale of Real Estate

During the six months ended June 30, 2024, the Company sold a single, 221,911 square foot property located in Kansas City, MO for approximately $9,150, recognizing a net gain of $849. There were no sales of real estate for the six months ended June 30, 2023.

4. Leases

As a Lessor

Operating Leases

We lease our properties to tenants under agreements that are typically 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 have triple net provisions or modified gross lease expense reimbursement provisions in order to recover 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 six months ended June 30, 2024 and 2023, 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

June 30,

  

Six Months Ended

June 30,

 
   2024   2023   2024   2023 
Income from leases  $37,321   $36,440   $74,212   $72,380 
Straight-line rent adjustments   (1,044)   705    (1,029)   1,617 
Tenant recoveries   11,759    12,085    24,618    23,870 
Amortization of above market leases   (133)   (166)   (269)   (336)
Amortization of below market leases   426    835    880    1,739 
Total  $48,329   $49,899   $98,412   $99,270 

 

Tenant recoveries included within rental revenue for the six months ended June 30, 2024 and 2023 are variable in nature.

10 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited

(all dollar amounts in thousands, except share and per share data)

Sales Type Leases

During the six months ended June 30, 2024, the tenant occupying a single tenant industrial property located in Columbus, Ohio, provided notice of its intention to exercise its option to purchase the property at a fixed price of $21,480. We believe the exercise of the purchase option is reasonably probable and therefore, in accordance with ASC 842, Leases, there is a lease modification. As a result, we reclassified the respective real estate property to net investment in sales-type lease totaling $21,480 on our condensed consolidated balance sheets, effective as of the date of tenant notice, in the following amounts: (i) $19,605 from Real estate properties, (ii) $8,094 from Accumulated depreciation, (iii) $877 from net Deferred lease intangible assets, and (iv) $1,062 from Other assets. Further, we recognized a Gain on sale of real estate of $8,030 during the six months ended June 30, 2024 related to this transaction.

Earnings from our Net investment in sales-type lease are included in Rental revenue in the condensed consolidated statements of operations and totaled $320 and $0 for the three months ended June 30, 2024 and 2023, respectively, and $427 and $0 for the six months ended June 30, 2024 and 2023, respectively. Prior to this reclassification to Net investment in sales-type lease, earnings from this lease were recognized in Rental revenue in the condensed consolidated statements of operations.

Net investment in sales-type lease is summarized as follows:

   June 30,   December 31, 
   2024   2023 
Lease payments receivable(1)   $21,608   $ 
Less: unearned rental revenue    (212)    
Total   $21,396   $ 

______________

(1) Includes estimated purchase price and total contractual rents through the anticipated close date.

 

Net investment in sales-type leases are assessed for credit loss allowances. No such allowances were recorded as of June 30, 2024 or December 31, 2023.

Scheduled future lease payments to be received (exclusive of expenses paid by) under sales-type leases at June 30, 2024 are as follows:

      
July 1, 2024 – December 31, 2024   $21,608 
2025    
2026    
2027    
2028    
Thereafter     
Total   $21,608 

 

As a Lessee

Operating Leases

As of June 30, 2024, 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 0.2 to 31.5 years, which includes the exercise of a single twenty-year renewal option pertaining to the ground sublease. The Company's condensed consolidated balance sheets include the total operating right of use assets within other assets, and lease liabilities within accounts payable, accrued expenses and other liabilities. Total operating right of use assets and lease liabilities were approximately $4,639 and $5,491, respectively, as of June 30, 2024 and $4,829 and $5,789, respectively, as of December 31, 2023. The operating lease liability as of June 30, 2024 represents a weighted-average incremental borrowing rate of 4.1% over the weighted-average remaining lease term of 8.0 years. The incremental borrowing rate is our estimated borrowing rate on a fully-collateralized basis for the term of the respective leases.

11 

 

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 operating lease expense recognized during the three and six months ended June 30, 2024 and 2023 included in the Company’s condensed consolidated statements of operations.

                 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2024   2023   2024   2023 
Operating lease expense included in general and administrative expense attributable to office leases  $222   $190   $422   $382 
Operating lease expense included in property expense attributable to ground sublease   9    9    18    18 
Non-cash adjustment due to straight-line rent adjustments   44    35    87    69 
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)  $275   $234   $527   $469 

 

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:

         
July 1, 2024 – December 31, 2024   $ 654  
2025     965  
2026     876  
2027     894  
2028     865  
Thereafter     2,658  
Total minimum operating lease payments   $ 6,912  
Less imputed interest     (1,421 )
Total operating lease liability   $ 5,491  

 

Financing Leases

As of June 30, 2024, 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 in the amount of $832 and $845 as of June 30, 2024 and December 31, 2023, respectively, 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 31.5 years, which includes the exercise of a single twenty-year renewal option. The financing lease liability in the amount of $2,284 and $2,271 as of June 30, 2024 and December 31, 2023, respectively, represents a weighted-average incremental borrowing rate of 7.8% over the weighted-average remaining lease term, which as of June 30 2024 was 31.5 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 six months ended June 30, 2024 and 2023 included in the Company’s condensed consolidated statements of operations.

                 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2024   2023   2024   2023 
Depreciation/amortization of financing lease right-of-use assets  $7   $6   $14   $13 
Interest expense for financing lease liability   45    45    90    89 
Total financing lease cost  $52   $51   $104   $102 

 

12 

 

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 financing lease:

         
July 1, 2024 – December 31, 2024   $ 77  
2025     170  
2026     170  
2027     170  
2028     170  
Thereafter     6,195  
Total minimum financing lease payments   $ 6,952  
Less imputed interest     (4,668 )
Total financing lease liability   $ 2,284  

 

5. 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 June 30, 2024 and December 31, 2023.

    Outstanding Balance at     Interest rate at    
Debt   June 30,
2024
    December 31,
2023
    June 30,
2024
  Final
Maturity Date
Secured debt:                        
Ohio National Life Mortgage     18,078       18,409     4.14%   August 1, 2024
Allianz Loan     60,679       61,260     4.07%   April 10, 2026
Nationwide Loan     14,791       14,948     2.97%   October 1, 2027
Lincoln Life Gateway Mortgage     28,800       28,800     3.43%   January 1, 2028
Minnesota Life Memphis Industrial Loan     54,374       54,956     3.15%   January 1, 2028
Midland National Life Insurance Mortgage     10,559       10,665     3.50%   March 10, 2028
Minnesota Life Loan     19,337       19,569     3.78%   May 1, 2028
Transamerica Loan     57,217       59,357     4.35%   August 1, 2028
Total secured debt   $ 263,835     $ 267,964          
Unamortized debt issuance costs, net     (1,003 )     (1,174 )        
Unamortized premium/(discount), net     2       97          
Total secured debt, net   $ 262,834     $ 266,887          
                         
Unsecured debt:                        
$100m KeyBank Term Loan     100,000       100,000     3.00%(1)(2)   August 11, 2026
$200m KeyBank Term Loan     200,000       200,000     3.03%(1)(2)   February 11, 2027
$150m KeyBank Term Loan     150,000       150,000     4.40%(1)(2)   May 2, 2027
Total unsecured debt   $ 450,000     $ 450,000          
Unamortized debt issuance costs, net     (1,674 )     (2,010 )        
Total unsecured debt, net   $ 448,326     $ 447,990          
                         
Borrowings under line of credit:                        
KeyBank unsecured line of credit     155,400       155,400     6.51%(1)(3)   August 11, 2025
Total borrowings under line of credit   $ 155,400     $ 155,400          

_______________

(1) For the month of June 2024, the one-month term SOFR for our unsecured debt was 5.328% and the one-month term SOFR for our borrowings under line of credit was at a weighted average of 5.328%. 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.
(2) 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 1.527%, respectively.
(3) $100 million of the outstanding borrowings under the KeyBank unsecured line of credit was swapped to a fixed USD-SOFR rate at a weighted average of 4.754%.

 

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 June 30, 2024.

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.

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 aggregate principal outstanding under the Company’s indebtedness and the corresponding estimate of fair value as of June 30, 2024 and December 31, 2023:

   June 30, 2024   December 31, 2023 
Indebtedness  Principal Outstanding   Fair Value   Principal Outstanding   Fair Value 
Secured debt   $263,835   $248,521   $267,964   $254,114 
Unsecured debt    450,000    450,000    450,000    455,229 
Borrowings under line of credit, net    155,400    155,400    155,400    155,599 
Total    869,235   $853,921    873,364   $864,942 
Unamortized debt issuance cost, net    (2,677)        (3,184)     
Unamortized premium/(discount), net    2         97      
Total carrying value   $866,560        $870,277      

 

6. 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 2024 and 2023, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

The following table sets forth a summary of our interest rate swaps as of June 30, 2024 and December 31, 2023.

                      Notional Value(1)     Fair Value(2)  
Interest Rate Swap
Counterparty
  Trade
Date
  Effective
Date
  Maturity
Date
  SOFR Interest
Strike Rate
    June 30,
2024
    December 31,
2023
    June 30,
2024
    December 31,
2023
 
Capital One, N.A.   July 13, 2022   July 1, 2022   Feb. 11, 2027   1.527%     $ 200,000     $ 200,000     $ 13,852     $ 12,539  
JPMorgan Chase Bank, N.A.   July 13, 2022   July 1, 2022   Aug. 8, 2026   1.504%     $ 100,000     $ 100,000     $ 5,976     $ 5,692  
JPMorgan Chase Bank, N.A.   Aug. 19, 2022   Sept. 1, 2022   May 2, 2027   2.904%     $ 75,000     $ 75,000     $ 2,751     $ 1,723  
Wells Fargo Bank, N.A.   Aug. 19, 2022   Sept. 1, 2022   May 2, 2027   2.904%     $ 37,500     $ 37,500     $ 1,375     $ 861  
Capital One, N.A.   Aug. 19, 2022   Sept. 1, 2022   May 2, 2027   2.904%     $ 37,500     $ 37,500     $ 1,373     $ 852  
Wells Fargo Bank, N.A.   Nov. 10, 2023   Nov. 10, 2023   Nov. 1, 2025   4.750%     $ 50,000     $ 50,000     $ 1     $ (577 )
JPMorgan Chase Bank, N.A.   Nov. 10, 2023   Nov. 10, 2023   Nov. 1, 2025   4.758%     $ 25,000     $ 25,000     $ (3)     $ (292 )
Capital One, N.A.   Nov. 10, 2023   Nov. 10, 2023   Nov. 1, 2025   4.758%     $ 25,000     $ 25,000     $ (2)     $ (292 )

_______________

(1) Represents the notional value of interest rate swaps effective as of June 30, 2024.
(2) As of June 30, 2024, the fair value of six of the interest rate swaps were in an asset position of approximately $25.3 million and the remaining two interest rate swaps were in a liability position of approximately $0.005 million.

 

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (“AOCI”) and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $16,740 will be reclassified as a decrease to interest expense.

14 

 

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 the impact of our interest rate swaps on our condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023.

                     
   For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
 
Interest Rate Swaps in Cash Flow Hedging Relationships:  2024   2023   2024   2023 
Amount of unrealized gain (loss) recognized in AOCI on derivatives   $(870)  $8,135   $4,817   $1,065 
Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded  $3,944   $3,414   $7,902   $6,266 

 

Fair Value of Interest Rate Swaps

The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2024 and December 31, 2023, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The following tables summarize the Company’s interest rate swaps that are accounted for at fair value on a recurring basis as of June 30, 2024 and December 31, 2023.

       Fair Value Measurements as of June 30, 2024 
Balance Sheet Line Item  Fair Value as of
June 30,
2024
   Level 1   Level 2   Level 3 
Interest rate swaps - Asset   $25,328   $   $25,328   $ 
Interest rate swaps - Liability   $(5)  $   $(5  $ 

 

       Fair Value Measurements as of December 31, 2023 
Balance Sheet Line Item  Fair Value as of
December 31, 2023
   Level 1   Level 2   Level 3 
Interest rate swaps - Asset   $21,667   $   $21,667   $ 
Interest rate swaps - Liability   $(1,161)  $   $(1,161)  $ 

 

Non-designated Hedges

The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. Changes in the fair value of derivatives not designated in hedging relationships would be recorded directly in earnings.

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. Specifically, the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.

As of June 30, 2024, the fair value of two of the eight interest rate swaps were in a net liability position. As of June 30, 2024, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions at June 30, 2024, it could have been required to settle its obligations under the agreements at their termination value.

15 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited

(all dollar amounts in thousands, except share and per share data)

7. Common Stock

ATM Program

On February 27, 2024, the Company entered into a distribution agreement with certain sales agents pursuant to which the Company may issue and sell, from time to time, shares of its common stock, with aggregate gross proceeds of $200,000 through an “at-the-market” equity offering program (the “2024 $200 Million ATM Program”). The 2024 $200 Million ATM Program replaced the previous $200 million ATM program, which was entered on February 28, 2023 (“2023 $200 Million ATM Program”).

For the six months ended June 30, 2024, the Company did not issue shares of its common stock under the 2024 $200 Million ATM Program and 2023 $200 Million ATM Program. The Company has approximately $200,000 available for issuance under the 2024 $200 Million ATM Program.

Common Stock Dividends

The following table sets forth the common stock dividends that were declared during the six months ended June 30, 2024 and the year ended December 31, 2023.

   Cash Dividends
Declared
per Share
   Aggregate
Amount
 
2024          
First quarter   $0.2400   $10,904 
Second quarter    0.2400    10,928 
Total   $0.4800   $21,832 
           
2023          
First quarter   $0.2250   $9,682 
Second quarter    0.2250    9,709 
Third quarter    0.2250    10,193 
Fourth quarter    0.2250    10,193 
Total   $0.9000   $39,777 

 

8. Non-Controlling Interests

Operating Partnership Units

In connection with prior acquisitions of real estate property, the Company, through its Operating Partnership, had issued Operating Partnership Units (“OP Units”) to the former owners as part of the acquisition price. The holders of the OP Units are entitled to receive distributions concurrent with the dividends paid on our common stock. The holders of the OP Units can also convert their respective OP Units for the Company’s common stock on a 1-to-1 basis. Upon conversion, the Company adjusts the carrying value of non-controlling interest to reflect its modified share of the book value of the Operating Partnership. Such adjustments are recorded to additional paid-in capital as a reallocation of non-controlling interest on the accompanying condensed consolidated statements of changes in preferred stock and equity.

OP Units outstanding as of June 30, 2024 and December 31, 2023 was 490,299.

The following table sets forth the OP Unit distributions that were declared during the six months ended June 30, 2024 and the year ended December 31, 2023.

    Cash Distributions
Declared per
OP Unit
    Aggregate
Amount
 
2024                
First quarter   $ 0.2400     $ 118  
Second quarter     0.2400       118  
Total   $ 0.4800     $ 236  
                 
2023                
First quarter   $ 0.2250     $ 110  
Second quarter     0.2250       110  
Third quarter     0.2250       110  
Fourth quarter     0.2250       110  
Total   $ 0.9000     $ 440  

 

16 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited

(all dollar amounts in thousands, except share and per share data)

The proportionate share of the income (loss) attributed to the OP Units was $14 and ($30) for the three months ended June 30, 2024 and 2023, respectively, and $82 and ($68) for the six months ended June 30, 2024 and 2023, respectively.

9. Incentive Award Plan

Restricted Stock

The following table is a summary of the total restricted shares granted, forfeited and vested for the six months ended June 30, 2024:

    Shares  
Unvested restricted stock at January 1, 2024     370,843  
    Granted     146,102  
    Forfeited      
    Vested     (126,578 )
Unvested restricted stock at June 30, 2024     390,367  

 

The Company recorded equity-based compensation expense related to restricted stock in the amount of $822 and $691 for the three months ended June 30, 2024 and 2023, respectively, and $1,584 and $1,276 for the six months ended June 30, 2024 and 2023, respectively which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. Equity-based compensation expense for shares issued to employees and directors is based on the grant-date fair value of the award and recognized on a straight-line basis over the requisite period of the award. The unrecognized compensation expense associated with the Company’s restricted shares of common stock at June 30, 2024 was approximately $7,051 and is expected to be recognized over a weighted average period of approximately 2.9 years. The fair value of the 146,102 restricted shares granted during the six months ended June 30, 2024 was approximately $3,192 with a weighted average fair value of $21.85 per share.

Performance Stock Units

On April 15, 2024, the compensation committee of the board of directors approved, and the Company granted, 85,983 Performance Stock Units (“PSUs”) under the 2014 Incentive Award Plan to certain executive officers and key employees of the Company. The PSUs are subject to performance-based criteria including the Company’s total shareholder return (35%) and total shareholder return compared to the MSCI US REIT Index (65%) over a three-year performance period. Upon conclusion of the performance period, the final number of PSUs vested will range between zero to a maximum of 171,966 PSUs. All vested performance stock units will convert into shares of common stock on a 1-to-1 basis. Equity-based compensation expense is charged to earnings ratably from the grant date through to the end of the performance period.

The fair value of the PSUs of $1,757 was determined using a lattice-binomial option-pricing model based on a Monte Carlo simulation applying Level 3 inputs as described in Note 2. The significant inputs into the model were: grant date of April 15, 2024, volatility of 29.0%, an expected annual dividend of 4.2%, and an annual risk-free interest rate of 4.87%.

The following table summarizes activity related to the Company’s unvested PSUs during the six months ended June 30, 2024 and year ended December 31, 2023.

Unvested Performance Stock Units  Performance
Stock Units
   Weighted Average
Grant Date
Fair Value per Unit
 
Balance at December 31, 2022       $ 
    Granted    51,410    30.15 
    Vested         
    Forfeited         
Balance at December 31, 2023    51,410   $30.15 
    Granted    85,983    20.44 
    Vested         
    Forfeited         
Balance at June 30, 2024    137,393   $24.07 

 

The Company recorded equity-based compensation expense related to the PSUs in the amount of $289 and $25 for the three months ended June 30, 2024 and 2023, respectively and $441 and $25 for the six months ended June 30, 2024 and 2023, respectively, which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. The unrecognized compensation expense associated with the Company’s PSUs at June 30, 2024 was approximately $2,537 and is expected to be recognized over a weighted average period of approximately 2.2 years.

17 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited

(all dollar amounts in thousands, except share and per share data)

10. Earnings per Share

Net Income (Loss) per Common Share

Basic and diluted earnings per share attributable to common stockholders was calculated as follows:

                 
   Three Months Ended
June 30,
   Six Months Ended
June 30,
 
   2024   2023   2024   2023 
Numerator                
Net income (loss)  $1,328   $(2,634)  $7,614   $(5,970)
Less: Net income (loss) attributable to non-controlling interest   14    (30)   82    (68)
Net income (loss) attributable to Plymouth Industrial REIT, Inc.   1,314    (2,604)   7,532    (5,902)
Less: Preferred Stock dividends       916        1,832 
Less: Loss on extinguishment/redemption of Series A Preferred Stock               2 
Less: Amount allocated to participating securities   94    82    188    170 
Net income (loss) attributable to common stockholders  $1,220   $(3,602)  $7,344   $(7,906)
Denominator                    
Weighted-average common shares outstanding — basic   44,991,220    42,646,535    44,963,908    42,625,768 
Effect of dilutive securities                    
Add: Stock-based compensation(1)   36,283        30,152     
Weighted-average common shares outstanding — diluted    45,027,503    42,646,535    44,994,060    42,625,768 
Net income (loss) per share – basic and diluted                    
Net income (loss) per share attributable to common stockholders — basic  $0.03   $(0.08)  $0.16   $(0.19)
Net income (loss) per share attributable to common stockholders — diluted  $0.03   $(0.08)  $0.16   $(0.19)

_______________

(1) During the three and six months ended June 30, 2024, there were approximately 156 and 32,144, respectively, unvested restricted shares of common stock on a weighted average basis that were not included in the computation of diluted earnings per share as including these shares would be anti-dilutive. During the three and six months ended June 30, 2023, all unvested restricted shares of common stock were deemed to be anti-dilutive due to the net loss attributable to common stockholders.

 

The Company uses the two-class method of computing earnings per common share in which participating securities are included within the basic earnings per share (“EPS”) calculation. The amount allocated to participating securities is according to dividends declared (whether paid or unpaid). The restricted stock does not have any participatory rights in undistributed earnings. The unvested shares of restricted stock are accounted for as participating securities as they contain nonforfeitable rights to dividends. PSUs, which are subject to vesting based on the Company achieving certain total shareholder return thresholds over a three-year performance period, are included as contingently issuable shares in the calculation of diluted EPS when the total shareholder return thresholds are achieved at or above the threshold levels specific in the award agreements, assuming the reporting period is the end of the performance period, and the effect is dilutive.

In periods where there is a net loss attributable to common stockholders, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company’s potential dilutive securities for the three and six months ended June 30, 2024 include the 390,367 shares of restricted common stock and 60,973 PSUs. The restricted common shares and PSUs have been excluded from the computation of diluted net loss per share attributable to common stockholders for the three and six months ended June 30, 2023 as the effect of including them would reduce the net loss per share.

18 

 

Plymouth Industrial REIT, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited

(all dollar amounts in thousands, except share and per share data)

11. Commitments and Contingencies

Employment Agreements

The Company has entered into employment agreements with the Company’s Chief Executive Officer, Managing Director, Chief Financial Officer, and Executive Vice President Asset Management. As approved by the compensation committee of the Board of Directors the agreements provide for base salaries ranging from $350 to $650 annually with discretionary cash and stock performance awards. The agreements contain provisions for equity awards, general benefits, and termination and severance provisions, consistent with similar positions and companies.

Legal Proceedings

The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses, as incurred, the costs related to such legal proceedings.

Contingent Liability

Under the terms of the Plymouth MIR JV II LLC agreement executed July 6, 2023, the majority partner has the right to require us to purchase its 98% interest in the 297,583 square foot property located in Atlanta, GA at the greater of the property’s then-current fair market value, or, 150% of aggregate capital contributions made by the majority partner. Such right can be executed by the majority partner no sooner than June 1, 2025, and no later than August 29, 2025. As of June 30, 2024, the projected fair market value of the property at the date the put option is exercisable is expected to exceed the 150% of the aggregate capital contributions made by the majority partner, and as such, there is no contingent liability to recognize.

12. Subsequent Events

On July 18, 2024, the Company acquired a multi-building, multi-tenant industrial property, consisting of approximately 1,621,000 square feet, located in Memphis, TN for an aggregate purchase price of $100,500.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

We make statements in this Quarterly Report on Form 10-Q that are forward-looking statements, which are usually identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions. Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward-looking statements. Additionally, unforeseen factors emerge from time to time, and we cannot predict which factors will arise or their ultimate impact on our business or the extent to which any such factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Furthermore, actual results may differ materially from those described in the forward-looking statements and may be affected by a variety of risks and factors including, without limitation:

  the general level of interest rates;
  financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;
  the uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the outbreak of COVID-19, including, without limitation, its impact on the Company’s ability to pay common stock dividends and/or the amount and frequency of the dividends;
  the competitive environment in which we operate;
  real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;
  decreased rental rates or increasing vacancy rates;
  potential defaults on or non-renewal of leases by tenants;
  potential bankruptcy or insolvency of tenants;
  acquisition risks, including failure of such acquisitions to perform in accordance with projections;
  the timing of acquisitions and dispositions;
  potential natural disasters such as earthquakes, wildfires or floods;
  national, international, regional and local economic conditions;
  potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or REIT tax laws, and potential increases in real property tax rates;
  lack of or insufficient amounts of insurance;
  our ability to maintain our qualification as a REIT;
  litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and
  possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.

Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion and analysis is based on, and should be read in conjunction with our unaudited financial statements and notes thereto for the periods ended June 30, 2024 and 2023 included elsewhere in this Quarterly Report, as well as information contained in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on February 22, 2024, including the audited historical financial statements and related notes thereto as of and for the years ended December 31, 2023 and 2022 contained therein, which is accessible on the SEC’s website at www.sec.gov.

Overview

We are a full service, vertically integrated real estate investment company 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. Our mission is to provide tenants with cost effective space that is functional, flexible and safe.

As of June 30, 2024, the Company, through its subsidiaries, owned 155 industrial properties comprising 210 buildings with an aggregate of approximately 33.8 million square feet, and our property management office building located in Columbus, Ohio, totaling approximately 17,260 square feet.

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We are also evaluating diversifying our portfolio of real estate assets to include the origination or acquisition of mortgage, bridge or mezzanine loans, all of which would be collateralized by properties that meet investment criteria that are substantially the same as our real estate portfolio or that are complementary to our existing assets.  The Company believes expanding its investment strategy to include these types of real estate-related assets will enable it to deploy its capital efficiently to continue to grow at times when acquisitions of industrial properties are limited due either to availability or cost.

We seek to generate attractive risk-adjusted returns for our stockholders through a combination of dividends and capital appreciation.

Factors That May Influence Future Results of Operations

Business and Strategy

Our core investment strategy is to acquire industrial properties located in primary and secondary markets across the U.S, as well as select sub-markets across the U.S. We expect to acquire these properties through third-party purchases and structured sale-leasebacks where we believe we can achieve attractive initial yields and strong ongoing cash-on-cash returns.

Our target markets are located in primary and secondary markets, as well as select sub-markets, because we believe these markets tend to have less occupancy and rental rate volatility and less buyer competition relative to gateway markets. We also believe that the systematic aggregation of such properties will result in a diversified portfolio that will produce sustainable risk-adjusted returns. Future results of operations may be affected, either positively or negatively, by our ability to effectively execute this strategy.

We also intend to continue pursuing joint venture arrangements with institutional partners which could provide management fee income, a residual profit-sharing income and the ability to purchase properties out of the joint venture over time. Such joint ventures may involve investing in industrial assets that would be characterized as opportunistic or value-add investments. These may involve development or redevelopment strategies that may require significant up-front capital expenditures, lengthy lease-up periods and result in inconsistent cash flows. As such, these properties’ risk profiles and return metrics would likely differ from the non-joint venture properties that we target for acquisition.

Rental Revenue and Tenant Recoveries

We receive income primarily from rental revenue from our properties. The amount of rental revenue generated by the Company’s portfolio depends principally on the occupancy levels and lease rates at our properties, our ability to lease currently available space and space that becomes available as a result of lease expirations and on the rental rates at our properties. As of June 30, 2024, the Company’s portfolio was approximately 97.0% occupied. Our occupancy rate is impacted by general market conditions in the geographic areas which our properties are located and the financial condition of tenants in our target markets.

Scheduled Lease Expirations & Leasing Activity

Our ability to re-lease space subject to expiring leases will impact our results of operations and will be affected by economic and competitive conditions in the markets in which we operate and by the desirability of our individual properties. During the period from July 1, 2024 through to December 31, 2026, an aggregate of 44.1% of the annualized base rent leases in the Company’s portfolio are scheduled to expire, which we believe will provide us an opportunity to adjust below market leases to reflect current market conditions.

The table below reflects certain data about our new and renewed leases with terms of greater than six months executed and commenced during the six months ended June 30, 2024. 

Six Months Ended
June 30, 2024
  Square
Footage
  % of Total Square Footage   Expiring
Rent
  New 
Rent
  % Change   Tenant Improvements $/SF/YR   Lease
Commissions
$/SF/YR
Renewals   2,539,003   79.3%   $ 4.32   $ 4.91   13.7%   $ 0.11   $ 0.11
New Leases   660,913   20.7%   $ 4.19   $ 5.69   35.8%   $ 0.34   $ 0.33
Total/weighted average   3,199,916   100.0%   $ 4.29   $ 5.07   18.2%   $ 0.16   $ 0.16

Conditions in Our Markets

The Company’s portfolio is located in various primary and secondary markets within the main industrial distribution and logistics corridors of the United States. Positive or negative changes in economic or other conditions, adverse weather conditions and natural disasters in these markets are likely to affect our overall performance.

Property Expenses

Our rental expenses generally consist of utilities, real estate taxes, insurance and repair and maintenance costs. For the majority of the Company’s portfolio, property expenses are controlled, in part, by either the triple net provisions or modified gross lease expense reimbursement provisions in tenant leases. However, the terms of our tenant leases vary and in some instances the leases may provide that we are responsible for certain property expenses. Accordingly, our overall financial results will be impacted by the extent to which we are able to pass-through property expenses to our tenants.

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Critical Accounting Policies

Our financial statements are prepared in accordance with GAAP. 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 or business acquisitions, impairments of long-lived assets and stock-based compensation. 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.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K filed with the SEC on February 22, 2024, and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Accordingly, we believe the policies set forth in our 2023 10-K are critical to fully understand and evaluate our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. During the six months ended June 30, 2024, there were no material changes to our critical accounting policies.

Results of Operations (dollars in thousands)

Our condensed consolidated results of operations are often not comparable from period to period due to the effect of property acquisitions and dispositions completed during the comparative reporting periods. Our Total Portfolio represents all of the properties owned during the reported periods. To eliminate the effect of changes in our Total Portfolio due to acquisitions, dispositions and other, and to highlight the operating results of our on-going business, we have separately presented the results of our Same Store Portfolio and Acquisitions, Dispositions and Other.

For the three and six months ended June 30, 2024 and 2023, we define the Same Store Portfolio as a subset of our Total Portfolio and includes properties that were wholly owned by us for the entire period presented. We define Acquisitions, Dispositions and Other as any properties that were acquired, sold, placed into service or held for development or repositioning during the period from January 1, 2023 through June 30, 2024.

Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023

The following table summarizes the results of operations for our Same Store Portfolio, our Acquisitions, Dispositions and Other and total portfolio for the three months ended June 30, 2024 and 2023:

  Same Store Portfolio   Acquisitions, Dispositions and Other   Total Portfolio  
  Three Months Ended
June 30,
  Change   Three Months Ended
June 30,
  Change   Three Months Ended
June 30,
  Change  
  2024   2023   $   %   2024   2023   $   %   2024   2023   $   %  
Revenue:                                                
Rental revenue $ 45,657   $ 45,715   $ (58 )   (0.1% ) $ 2,992   $ 4,184   $ (1,192 )   (28.5% ) $ 48,649   $ 49,899   $ (1,250 )   (2.5% )
Management fee revenue and other income                   37         37     0.0%     37         37      
Total revenues   45,657     45,715     (58 )   (0.1% )   3,029     4,184     (1,155 )   (27.6% )_   48,686     49,899     (1,213 )   (2.4% )
                                                                         
Property expenses   13,294     14,392     (1,098 )   (7.6% )   275     1,298     (1,023 )   (78.8% )   13,569     15,690     (2,121 )   (13.5% )
Depreciation and amortization                                                   21,347     23,417     (2,070 )   (8.8% )
General and administrative                                                   3,880     3,842     38     1.0%  
Total operating expenses                                                   38,796     42,949     (4,153 )   (9.7% )
                                                                         
Other income (expense):                                                                        
Interest expense                                                   (9,411 )   (9,584 )   173     (1.8% )
Gain on sale of real estate                                                   849         849      
Total other income (expense)                                                (8,562   (9,584 )   1,022     (10.7% )
                                                                         
Net income (loss)                                                 $ 1,328   $ (2,634 ) $ 3,962     150.4%  

Rental revenue: Rental revenue decreased by $1,250 to $48,649 for the three months ended June 30, 2024 as compared to $49,899 for the three months ended June 30, 2023. This was primarily related to a net decrease of $58 within the Same Store Portfolio primarily due to an increase in rent income of $1,504 due to scheduled rent steps and leasing activities, an increase of $339 in tenant recoveries, partially offset by a decrease in non-cash rent adjustments of $1,901 and a net decrease of $1,192 within Acquisitions, Dispositions and Other primarily driven by a decrease in average occupancy during Q2 2024 compared to Q2 2023 and a decrease rental revenue and reimbursements from disposition activity which occurred between Q3 2023 and Q2 2024.

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Property expenses: Property expenses decreased $2,121 for the three months ended June 30, 2024 to $13,569 as compared to $15,690 for the three months ended June 30, 2023. This was primarily due to property expenses for the Same Store Portfolio decreasing approximately $1,098 driven primarily by a decrease in real estate taxes and utilities of $2,701, partially offset by an increase of $1,603 in operating expenses, and a net decrease of $1,023 within Acquisitions, Dispositions and Other primarily due to a decrease in real estate taxes.

Depreciation and amortization: Depreciation and amortization expense decreased by $2,070 to $21,347 for the three months ended June 30, 2024 as compared to $23,417 for the three months ended June 30 2023, primarily due to a net decrease of $1,681 for the Same Store Portfolio and $389 within Acquisitions, Dispositions and Other due to full depreciation and amortization of certain assets during the three months ended June 30, 2024.

General and administrative: General and administrative expenses increased approximately $38 to $3,880 for the three months ended June 30, 2024 as compared to $3,842 for the three months ended June 30, 2023. The increase is attributable primarily to an increase in professional fees of $20.

Interest expense: Interest expense decreased by approximately $173 to $9,411 for the three months ended June 30, 2024, as compared to $9,584 for the three months ended June 30, 2023. The schedule below is a comparative analysis of the components of interest expense for the three months ended June 30, 2024 and 2023.

   Three Months Ended
June 30,
 
   2024   2023 
Changes in accrued interest   $(316)  $158 
Amortization of debt related costs    438    570 
Total change in accrued interest and amortization of debt related costs    122    728