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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 quarterly period ended September 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 November 5, 2024, the Registrant had outstanding 45,389,186 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 September 30, 2024 and December 31, 2023 1
     
  Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 2
     
  Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 3
     
  Condensed Consolidated Statements of Changes in Preferred Stock, Redeemable Non-controlling Interest and Equity for the Three and Nine Months Ended September 30, 2024 and 2023 4
     
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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 27
     
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 38
     
ITEM 4. Controls and Procedures 38
     
PART II. OTHER INFORMATION 39
     
SIGNATURES 42

 

 

 

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,
2024
   December 31,
2023
 
Assets          
Real estate properties   $1,393,892   $1,567,866 
Less: accumulated depreciation    (246,652)   (268,046)
Real estate properties, net    1,147,240    1,299,820 
           
Real estate assets held for sale, net   199,548     
Cash    21,383    14,493 
Cash held in escrow    4,780    4,716 
Restricted cash    7,393    6,995 
Deferred lease intangibles, net    44,458    51,474 
Other assets    49,256    42,734 
Interest rate swaps    13,237    21,667 
Forward contract asset   9,116     
Total assets   $1,496,411   $1,441,899 
           
Liabilities, Redeemable Non-controlling Interest and Equity          
Liabilities:          
Secured debt, net   $176,717   $266,887 
Unsecured debt, net    448,465    447,990 
Borrowings under line of credit    196,400    155,400 
Accounts payable, accrued expenses and other liabilities    83,397    73,904 
Real estate liabilities held for sale, net    67,982     
Warrant liability    73,335     
Deferred lease intangibles, net    5,095    6,044 
Financing lease liability    2,290    2,271 
Interest rate swaps   1,085    1,161 
Total liabilities    1,054,766    953,657 
Commitments and contingencies (Note 12)          
           
Redeemable non-controlling interest - Series C Preferred Units, 500,000 units authorized, (aggregate liquidation preference of $82,229 and $0 at September 30, 2024 and December 31, 2023, respectively)   426     
           
Equity:          
Common stock, $0.01 par value: 900,000,000 shares authorized; 45,390,436 and 45,250,184 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively    454    452 
Additional paid in capital    614,716    644,938 
Accumulated deficit    (190,675)   (182,606)
Accumulated other comprehensive income    11,969    20,233 
Total stockholders' equity    436,464    483,017 
Non-controlling interest    4,755    5,225 
Total equity    441,219    488,242 
Total liabilities, redeemable non-controlling interest and equity   $1,496,411   $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 September 30,
   For the Nine Months
Ended September 30,
 
   2024   2023   2024   2023 
                 
Rental revenue   $51,432   $49,736   $150,271   $149,006 
Management fee revenue and other income    439    29    514    58 
Total revenues    51,871    49,765    150,785    149,064 
                     
Operating expenses:                    
Property    17,374    15,754    47,585    47,398 
Depreciation and amortization    21,010    22,881    64,725    70,098 
General and administrative    3,582    3,297    10,826    10,586 
Total operating expenses    41,966    41,932    123,136    128,082 
                     
Other income (expense):                    
Interest expense    (10,359)   (9,473)   (29,368)   (28,592)
Loss on extinguishment of debt       (72)       (72)
Gain (loss) on sale of real estate    (234)   12,112    8,645    12,112 
Loss on financing transaction   (14,657)       (14,657)    
Total other income (expense)    (25,250)   2,567    (35,380)   (16,552)
                     
Net income (loss)    (15,345)   10,400    (7,731)   4,430 
Less: Net income (loss) attributable to non-controlling interest    (170)   114    (88)   46 
Less: Net income (loss) attributable to redeemable non-controlling interest - Series C Preferred Units   426        426     
Net income (loss) attributable to Plymouth Industrial REIT, Inc.    (15,601)   10,286    (8,069)   4,384 
Less: Preferred Stock dividends        677        2,509 
Less: Loss on extinguishment/redemption of Series A Preferred Stock        2,021        2,023 
Less: Amount allocated to participating securities    89    83    277    253 
Net income (loss) attributable to common stockholders   $(15,690)  $7,505   $(8,346)  $(401)
Net income (loss) per share attributable to common stockholders — basic   $(0.35)  $0.17   $(0.19)  $(0.01)
Net income (loss) per share attributable to common stockholders — diluted   $(0.35)  $0.17   $(0.19)  $(0.01)
                     
Weighted-average common shares outstanding — basic    45,009,273    44,056,855    44,979,140    43,108,039 
Weighted-average common shares outstanding — diluted    45,009,273    44,139,603    44,979,140    43,108,039 

 

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,
 
   2024   2023   2024   2023 
                 
Net income (loss)  $(15,345)  $10,400   $(7,731)  $4,430 
                     
Other comprehensive income (loss):                    
Unrealized gain (loss) on interest rate swaps   (13,171)   2,935    (8,354)   4,000 
Other comprehensive income (loss)   (13,171)   2,935    (8,354)   4,000 
Comprehensive income (loss)   (28,516)   13,335    (16,085)   8,430 
Less: Net income (loss) attributable to non-controlling interest   (170)   114    (88)   46 
Less: Net income (loss) attributable to redeemable non-controlling interest - Series C Preferred Units   426        426     
Less: Other comprehensive income (loss) attributable to non-controlling interest   (142)   32    (90)   44 
Comprehensive income (loss) attributable to Plymouth Industrial REIT, Inc.  $(28,630)  $13,189   $(16,333)  $8,340 

 

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,
REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY
UNAUDITED
(In thousands, except share and per share amounts)

 

                                                                   
    Preferred Stock   Redeemable
Non-controlling Interest
    Common Stock,
$0.01 Par Value
  Additional
Paid in
  Accumulated   Accumulated
Other
Comprehensive
  Stockholders’   Non-
controlling
  Total  
    Shares   Amount   Amount     Shares   Amount   Capital   Deficit   Income   Equity   Interest   Equity  
Balance, January 1, 2024     $   $     42,250,184   $ 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 (loss)                               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 (loss)                               (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  
Net proceeds from common stock                       (207 )           (207 )       (207 )
Stock based compensation                       1,093             1,093         1,093  
Restricted shares issued (forfeited)               (5,850 )                            
Dividends and distributions                       (10,927 )           (10,927 )   (118 )   (11,045 )
Other comprehensive income (loss)                               (13,029 )   (13,029 )   (142 )   (13,171 )
Reallocation of non-controlling interest                       (53 )           (53 )   53      
Net income (loss)           426  -               (15,601 )       (15,601 )   (170 )   (15,771 )
Balance, September 30, 2024     $   $ 426     45,390,436   $ 454   $ 614,716   $ (190,675 ) $ 11,969   $ 436,464   $ 4,755   $ 441,219  

 

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,
REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY
UNAUDITED
(In thousands, except share and per share amounts)

 

    Preferred Stock   Redeemable
Non-controlling Interest
    Common Stock,
$0.01 Par Value
  Additional
Paid in
  Accumulated   Accumulated
Other
Comprehensive
  Stockholders’   Non-
controlling
  Total  
    Shares   Amount   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 (loss)                               (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 (loss)                               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  
Redemption of Series A Preferred Stock   (1,953,783 )   (46,803 )               (19 )   (2,021 )       (2,040 )       (2,040 )
Net proceeds from common stock               2,130,600     21     48,249             48,270         48,270  
Stock based compensation                       827             827         827  
Restricted shares issued (forfeited)               18,720                              
Dividends and distributions                       (10,870 )           (10,870 )   (110 )   (10,980 )
Other comprehensive income (loss)                               2,903     2,903     32     2,935  
Reallocation of non-controlling interest                       (255 )           (255 )   255      
Net income (loss)        -                   10,286         10,286     114     10,400  
Balance, September 30, 2023     $   $     45,250,184   $ 452   $ 654,346   $ (191,882 ) $ 33,695   $ 496,611   $ 5,381   $ 501,992  

 

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,
 
   2024   2023 
Operating activities          
Net income (loss)   $(7,731)  $4,430 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization    64,725    70,098 
Straight line rent adjustment    1,012    (1,833)
Intangible amortization in rental revenue, net    (910)   (1,820)
Loss on extinguishment of debt       72 
Amortization of debt related costs    1,346    1,708 
Stock based compensation    3,118    2,128 
Loss on financing transaction   14,657     
(Gain) loss on sale of real estate   (8,645)   (12,112)
Changes in operating assets and liabilities:          
Other assets    (9,392)   588 
Deferred leasing costs    (3,915)   (4,400)
Accounts payable, accrued expenses and other liabilities    (220)   4,400 
Net cash provided by operating activities   54,045    63,259 
           
Investing activities          
Acquisition of real estate properties    (101,387)    
Real estate improvements    (16,497)   (26,542)
Proceeds from sale of real estate   8,439    18,231 
Net investment in sales-type lease    21,244     
Net cash used in investing activities    (88,201)   (8,311)
           
Financing activities          
(Payment) proceeds from issuance of common stock, net    (517)   49,499 
Repayment of secured debt    (23,366)   (12,352)
Proceeds from line of credit facility    132,991    27,500 
Repayment of line of credit facility   (91,991)   (40,000)
Repurchase of Series A Preferred Stock        (43)
Redemption of Series A Preferred Stock       (48,824)
Proceeds from financing transaction, net   58,670     
Financing transaction issuance costs   (1,937)    
Debt issuance costs    (28)   (27)
Dividends and distributions paid    (32,314)   (31,642)
Net cash provided by (used in) financing activities    41,508    (55,889)
           
Net increase (decrease) in cash, cash held in escrow, and restricted cash    7,352    (941)
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   $33,556   $30,272 
           
Supplemental Cash Flow Disclosures:          
Cash paid for interest   $28,672   $27,450 
           
Supplemental Non-cash Financing and Investing Activities:          
Dividends declared included in accounts payable, accrued expenses and other liabilities   $11,006   $10,205 
Distribution payable to non-controlling interest holder   $118   $110 
Financing transaction costs included in accounts payable, accrued expenses and other liabilities   $7,171   $ 
Real estate improvements included in accounts payable, accrued expenses and other liabilities  $3,608   $3,981 
Deferred leasing costs included in accounts payable, accrued expenses and other liabilities   $646   $1,605 

 

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 subsidiary, 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, 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 September 30, 2024, the Company, through its subsidiaries, owned 158 industrial properties comprising 223 buildings with an aggregate of approximately 34.9 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 condensed consolidated 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 adversely 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, stock-based compensation, preferred unit forward contract asset and its warrant 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 then-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 materially 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 September 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:

   September 30,   December 31, 
   2024   2023 
Cash   $21,383   $14,493 
Cash held in escrow    4,780    4,716 
Restricted cash    7,393    6,995 
Cash, cash held in escrow, and restricted cash   $33,556   $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 $6,815 and $6,787 at September 30, 2024 and December 31, 2023, respectively, and related accumulated amortization amounted to $4,363 and $3,603 at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024 and December 31, 2023, the Company classified net unamortized debt issuance costs of $773 and $1,469, respectively, related to borrowings under the revolving line of credit facility 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, in determining the fair value of the forward contract for preferred units discussed in Note 9, and in determining the fair value of warrants to purchase partnership units in Note 11.

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.

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

Balance Sheet Line Item  Fair Value as of
September 30, 2024
   Level 1   Level 2   Level 3 
Forward contract asset  $9,116   $   $   $9,116 
Interest rate swaps - Asset   $13,237   $   $13,237   $ 
Interest rate swaps - Liability   $(1,085)  $   $(1,085)  $ 
Warrant liability  $(73,335)  $   $   $(73,335)

 

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

 

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.

9 

 

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

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

Redeemable Non-Controlling Interest – Preferred Units

The Company applies the guidance enumerated in ASC 480, when determining the classification and measurement of preferred units. Preferred units subject to mandatory redemption, if any, is classified as a liability and is measured at fair value. The Company classifies conditionally redeemable preferred units, which includes preferred units that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as mezzanine equity. The Company subsequently measures mezzanine equity based on whether the instrument is currently redeemable or whether or not it is probable the instrument will become redeemable. Upon determination that the instrument is probable of redemption, the Company will adjust the carrying value to the redemption value. If redemption is not probable, the Company will not adjust the carrying value of the instrument recorded as mezzanine equity other than to reflect dividends accrued and not yet paid, but which will be payable under the redemption feature.

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 applicable vesting period. Forfeitures of unvested shares are recognized in the period in which the forfeiture occurs.

Warrants

The Company accounts for warrants as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement.  Warrants that are not considered indexed to the Company’s own stock are required to be accounted for as a liability. Liability-classified financial instruments are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the financial instrument after the issuance date is recorded in the condensed consolidated financial statements through earnings.  

Recent Accounting Announcements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within the segment measure of profit or loss. ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. We are currently evaluating ASU 2023-07 to determine its impact on our disclosures.

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, Net

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

   September 30,   December 31, 
   2024   2023 
Land   $177,155   $226,020 
Buildings and improvements    1,087,628    1,203,355 
Site improvements    114,993    130,638 
Construction in progress    14,116    7,853 
Real estate properties at cost    1,393,892    1,567,866 
Less: accumulated depreciation    (246,652)   (268,046)
Real estate properties, net   $1,147,240   $1,299,820 

 

Depreciation expense was $16,258 and $16,943 for the three months ended September 30, 2024 and 2023, respectively, and $50,502 and $50,705 for the nine months ended September 30, 2024 and 2023, respectively.

Acquisition of Properties

The Company made the following acquisitions of properties during the nine months ended September 30, 2024:

Location   Date Acquired   Square Feet   Properties   Purchase Price (1)  
Memphis, TN   July 18, 2024     1,625,241     4   $ 100,500  
Total         1,625,241     4   $ 100,500  

________________

(1) Purchase price does not include capitalized acquisition costs.

 

The allocation of the aggregate purchase price in accordance with 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, 2024
 
Purchase price allocation   Purchase
Price
    Weighted Average
Amortization
Period (years) of
Intangibles at
Acquisition
 
Total Purchase Price                
Purchase price   $ 100,500       N/A  
Acquisition costs     887       N/A  
Total   $ 101,387          
                 
Allocation of Purchase Price                
Land   $ 14,465       N/A  
Building     73,213       N/A  
Site improvements     3,494       N/A  
Total real estate properties     91,172          
                 
Deferred Lease Intangibles                
Tenant relationships     1,711       5.4  
Leasing commissions     1,026       5.3  
Above market lease value     710       6.7  
Below market lease value     (1,443 )     6.1  
Lease in place value     8,211       4.4  
Net deferred lease intangibles     10,215          
                 
Totals   $ 101,387          

 

All acquisitions completed during the nine months ended September 30, 2024 were considered asset acquisitions under ASC 805.

11 

 

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

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

Sale of Real Estate

During the nine months ended September 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. During the nine months ended September 30, 2023, the Company sold a single, 306,000 square foot property located in Chicago, IL for approximately $19,926, recognizing a net gain of $12,112.

Real Estate Properties Held for Sale

On August 26, 2024, the Operating Partnership, Isosceles JV Investments, LLC, an affiliate of Sixth Street Partners, LLC (the “Investor”), and Isosceles JV, LLC, an affiliate of Sixth Street Partners, LLC (the “Joint Venture”), entered into a Limited Liability Company Interest Contribution Agreement (the “Contribution Agreement”), pursuant to which the Operating Partnership will contribute (the “Contribution”) 100% of its equity interests in directly and indirectly wholly-owned subsidiaries owning 34 properties located in and around the Chicago metropolitan statistical area (each, a “Chicago Property” and, collectively the “Chicago Properties”) to the Joint Venture, which will be owned 35% by Plymouth Chicago Portfolio, LLC, a wholly-owned subsidiary of the Operating Partnership, and 65% by the Investor. The aggregate purchase price for the Chicago Properties is $356,000, which includes the assumption by the Joint Venture of $56,898 of debt held by the Company that is currently outstanding with Transamerica Life Insurance Company (“Transamerica”) and secured by certain Chicago Properties. An additional $10,506 of debt held by the Company that is currently outstanding with Midland National Life Insurance Mortgage and secured by a single Chicago Property is also expected to be paid in full by the Company upon the close of the Contribution (refer to “Note 5 – Indebtedness”). The closing of the Contribution is scheduled to take place on the day that is 12 business days following the satisfaction or waiver of all of the condition’s precedent to the closing, including, without limitation, obtaining new financing and refinancing existing indebtedness secured by the Chicago Properties. The Contribution closing is anticipated to occur in the fourth quarter of 2024, however it is contingent on the satisfaction of the closing conditions, which cannot be assured.

As of September 30, 2024, due to the pending contribution of the Chicago Properties, the carrying amount of the Chicago Properties were classified as "Real estate assets held for sale, net" and "Real estate liabilities held for sale, net" on the condensed consolidated balance sheets. Upon classifying the Chicago Properties as "Real estate assets held for sale, net" and "Real estate liabilities held for sale, net", the Chicago Properties were recorded at the lower of the carrying value or fair value less costs to sell and the Company ceased recognizing depreciation on the Chicago Properties. The Company determined that the disposition is not considered discontinued operations as it does not represent a strategic shift that has or will have a material impact on the Company's operations and financial results.

Real estate assets and liabilities held for sale, net consisted of the following at September 30, 2024. The Company did not classify any properties as held for sale as of December 31, 2023.

   September 30, 
Assets  2024 
Land   $60,359 
Buildings and improvements    173,355 
Site improvements    16,965 
Construction in progress    3,789 
    254,468 
Less: accumulated depreciation    (61,994)
Real estate properties held for sale, net  $192,474 
Deferred lease intangibles, net   7,074 
Real estate assets held for sale, net   199,548 

 

Liabilities  September 30,
2024
 
Secured debt, net  $66,951 
Deferred lease intangibles, net   1,031 
Real estate liabilities held for sale, net  $67,982 

 

12 

 

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

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

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 applicable lease term. Many of our leases have triple-net provisions or modified gross lease expense reimbursement provisions, which entitle us 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 rent increases based on increases 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, 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
September 30,
   Nine Months Ended
September 30,
 
   2024   2023   2024   2023 
Income from leases   $37,808   $36,783   $112,020   $109,163 
Straight-line rent adjustments    17    216    (1,012)   1,833 
Tenant recoveries    13,104    12,320    37,722    36,190 
Amortization of above market leases    (151)   (158)   (420)   (494)
Amortization of below market leases    450    575    1,330    2,314 
Total   $51,228   $49,736   $149,640   $149,006 

 

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

Sales Type Leases

During the quarter ended March 31, 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. As a result, we reclassified the respective real estate property to net investment in sales-type lease totaling $21,480 in 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 related to this transaction. On August 30, 2024, we completed the sale of the property and recognized selling costs of $234.

Earnings from our Net investment in sales-type leases are included in Rental revenue in the condensed consolidated statements of operations and totaled $204 and $0 for the three months ended September 30, 2024 and 2023, respectively, and $631 and $0 for the nine months ended September 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 leases are assessed for credit loss allowances. No such allowances were recorded as of September 30, 2024 or December 31, 2023.

As a Lessee

Operating Leases

As of September 30, 2024, we are the lessee under four 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 0.3 to 31.3 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 $4,420 and $5,216, respectively, as of September 30, 2024 and $4,829 and $5,789, respectively, as of December 31, 2023. The operating lease liability as of September 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.

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

                     
   Three Months Ended September 30,   Nine Months Ended September 30, 
   2024   2023   2024   2023 
Operating lease expense included in general and administrative expense attributable to office leases   $177   $195   $599   $577 
Operating lease expense included in property expense attributable to ground sublease    21    9    39    27 
Non-cash adjustment due to straight-line rent adjustments    44    36    131    105 
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)   $242   $240   $769   $709 

 

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:

         
October 1, 2024 – December 31, 2024   $ 325  
2025     965  
2026     876  
2027     894  
2028     865  
Thereafter     2,658  
Total minimum operating lease payments   $ 6,583  
Less imputed interest     (1,367 )
Total operating lease liability   $ 5,216  

 

Financing Leases

As of September 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 $825 and $845 as of September 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 31.3 years, which includes the exercise of a single twenty-year renewal option. The financing lease liability in the amount of $2,290 and $2,271 as of September 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 September 30, 2024, was 31.3 years. The incremental borrowing rate is our estimated borrowing rate on a fully-collateralized basis for the term of the respective lease.

The following table summarizes the financing lease expense recognized during the three and nine months ended September 30, 2024 and 2023 included in the Company’s condensed consolidated statements of operations.

                     
   Three Months Ended September 30,   Nine Months Ended September 30, 
   2024   2023   2024   2023 
Depreciation/amortization of financing lease right-of-use assets   $7   $7   $21   $20 
Interest expense for financing lease liability    45    45    135    134 
Total financing lease cost   $52   $52   $156   $154 

 

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 summarizes the maturity analysis of our financing lease:

         
October 1, 2024 – December 31, 2024   $ 39  
2025     170  
2026     170  
2027     170  
2028     170  
Thereafter     6,195  
Total minimum financing lease payments   $ 6,914  
Less imputed interest     (4,624 )
Total financing lease liability   $ 2,290  

 

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 September 30, 2024 and December 31, 2023.

    Outstanding Balance at     Interest rate at    
Debt   September 30,
2024
    December 31,
2023
    September 30,
2024
  Final
Maturity Date
Secured debt:                        
Ohio National Life Mortgage(4)           18,409     4.14%   August 1, 2024
Allianz Loan     60,383       61,260     4.07%   April 10, 2026
Nationwide Loan     14,712       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     54,079       54,956     3.15%   January 1, 2028
Midland National Life Insurance Mortgage(5)     10,506       10,665     3.50%   March 10, 2028
Minnesota Life Loan     19,220       19,569     3.78%   May 1, 2028
Transamerica Loan(5)     56,898       59,357     4.35%   August 1, 2028
Total secured debt   $ 244,598     $ 267,964          
Unamortized debt issuance costs, net     (916 )     (1,174 )        
Unamortized premium/(discount), net     (14     97          
Total secured debt, net   $ 243,668     $ 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     (1,535 )     (2,010 )        
Total unsecured debt, net   $ 448,465     $ 447,990          
                         
Borrowings under line of credit:                        
KeyBank unsecured line of credit     196,400       155,400     6.41%(1)(3)   August 11, 2025
Total borrowings under line of credit   $ 196,400     $ 155,400          

_______________

(1) For the month of September 2024, the one-month term SOFR for our unsecured debt was 5.195% and the one-month term SOFR for our borrowings under line of credit was at a weighted average of 4.980%. 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%.
(4) On August 1, 2024, the Company repaid in full, the outstanding principal and interest balance of approximately $18.1 million on the Ohio National Life Mortgage using proceeds from the KeyBank unsecured line of credit.
(5) As of September 30, 2024, the Midland National Life Insurance Mortgage and the Transamerica Loan were reclassified to Real estate liabilities held for sale, net on our condensed consolidated balance sheets.
 

 

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 its secured and unsecured debt and unsecured revolving line of credit as of September 30, 2024.

Fair Value of Debt

The fair value of our debt and borrowings under our revolving 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, 2024 and December 31, 2023:

   September 30, 2024   December 31, 2023 
Indebtedness  Principal Outstanding   Fair Value   Principal Outstanding   Fair Value 
Secured debt   $244,598   $233,530   $267,964   $254,114 
Unsecured debt    450,000    450,000    450,000    455,229 
Borrowings under revolving line of credit, net    196,400    196,400    155,400    155,599 
Total   890,998   $879,930    873,364   $864,942 
Unamortized debt issuance cost, net   (2,451)        (3,184)     
Unamortized premium/(discount), net   (14)        97      
Total carrying value   $888,533        $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 the nine months ended September 30, 2024 and the year ended December 31, 2023, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

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, 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
  September 30,
2024
  December 31,
2023
  September 30,
2024
  December 31,
2023
 
Capital One, N.A.   July 13, 2022   July 1, 2022   Feb. 11, 2027   1.527%   $ 200,000   $ 200,000   $ 8,253   $ 12,539  
JPMorgan Chase Bank, N.A.   July 13, 2022   July 1, 2022   Aug. 8, 2026   1.504%   $ 100,000   $ 100,000   $ 3,477   $ 5,692  
JPMorgan Chase Bank, N.A.   Aug. 19, 2022   Sept. 1, 2022   May 2, 2027   2.904%   $ 75,000   $ 75,000   $ 754   $ 1,723  
Wells Fargo Bank, N.A.   Aug. 19, 2022   Sept. 1, 2022   May 2, 2027   2.904%   $ 37,500   $ 37,500   $ 377   $ 861  
Capital One, N.A.   Aug. 19, 2022   Sept. 1, 2022   May 2, 2027   2.904%   $ 37,500   $ 37,500   $ 376   $ 852  
Wells Fargo Bank, N.A.   Nov. 10, 2023   Nov. 10, 2023   Nov. 1, 2025   4.750%   $ 50,000   $ 50,000   $ (540 $ (577 )
JPMorgan Chase Bank, N.A.   Nov. 10, 2023   Nov. 10, 2023   Nov. 1, 2025   4.758%   $ 25,000   $ 25,000   $ (272 $ (292 )
Capital One, N.A.   Nov. 10, 2023   Nov. 10, 2023   Nov. 1, 2025   4.758%   $ 25,000   $ 25,000   $ (273 $ (292 )

_______________

(1) Represents the notional value of interest rate swaps effective as of September 30, 2024.
(2) As of September 30, 2024, the fair value of five of the interest rate swaps were in an asset position of approximately $13.2 million and the remaining three interest rate swaps were in a liability position of approximately $1.1 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 $10,653 will be reclassified as a decrease to interest expense.

The following table sets forth the impact of our interest rate swaps on our condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023.

                     
   For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
 
Interest Rate Swaps in Cash Flow Hedging Relationships:  2024