Plymouth Industrial REIT, Inc. (PLYM) Earnings Call Transcript & Summary

Right. So yes, the additional space has been taken -- the space that has been leased up is taken off of the available pool. So just to note, at the end of the year, and this was unusual for us, there was only 71.4 of the 24 expirations were addressed, but that number is already up to 80 over 80. And if you include the transactions that occurred between the end of the year and February 24. So we expect that to be 90s in like a month or 2.

With respect to same-store, Nick, the composition has changed as we said and provided for in the materials. To your point, FedEx is in the same-store pool as is Geodis. ODW is not. And the other kind of key driver in that pool is the reintroduction of the Latty building. It's 142,000 square foot building in St. Louis that was previously in the repositioning pool. So that has come into the same-store portfolio in 2025. And I believe that's contributing approximately 7 bps to the year-over-year growth.

That's helpful. Maybe for Jeff. I mean, I guess, what do you think the disconnect is between your guys' view of the Sixth Street transaction and kind of the market's view? And as the Board, you guys obviously announced the buyback. But I guess how patient are you guys going to be if the stock continues to kind of linger at these levels? Like are you guys -- are you going to pursue alternative strategies? Just kind of your views there.

I mean, yes, I mean, nobody likes complication. I think that's the biggest feedback we have. I think the biggest thing that we look at is our equity in '23 and '24, I mean, the Street is telling us we're not going to give you any more equity because they're not pricing your stock correctly. So we did what we thought was in the best interest of shareholders, and that's a transformative transaction, plenty of capital. It put -- we can get into all the details on Chicago, which we've talked about ad nauseam of why that was a good move to take that entire 6 million square feet and put it into a JV. I mean we've been patient for 7 years, Nick. We continue to do our blocking and tackling. I guess we look at where our stock price is versus where we believe the value -- where our NAV is. And I think your NAV is around in the mid- to high 20s. And we're in the market every day bidding on our type property. So in Columbus, we're bidding right now on a building across the street from our property. So it's identical. And there's 10 bidders on it, and I can tell you, we're not going to be the winning bidder on it. So if somebody is using a cap rate to value Plymouth and it's anything north of 6.75%, they're totally off the mark. We're getting outbid in all of our markets, 10, 11, 12 bids. So what we need to do is we need to find good property, the shorter walls like we did in Cincinnati. And we've got some deals that are teed up that are going to work out really well for Plymouth. So we have a lot of patience. And I think the Sixth Street deal is going to work out fantastic. I think everything is priced correctly for us. So we're going to get this money deployed. We did put a buyback in, as you mentioned, I'm glad you brought that up. We'll see how the stock performs over the next few months. But I think if you look at where our stock price is and what we can buy it back at, it's kind of a no-brainer for us to do that. But that's going to be based on whether we can put the capital to work in properties that we believe in. So right now, the pipeline looks good. So we feel good about that. But it's just another option for us.

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

I'll speak to that. No, it's really just -- I mean, Anthony's expertise, obviously, as CFO, has proven out over the last couple of years. But beyond that, he's got a handle on acquisitions, processes that go into making the company better overall. So I think it's a great move for us, and it's a great move for him.

The next question is from Mitch Germain from Citizens JMP.

Maybe, Jeff, since you were just mentioning the Sixth Street relationship, I'm curious how engaged are they with you to grow their relationship with you guys?

Mitch, yes, so across our platform, different levels are engaged with Sixth Street somewhat on a daily basis. I am engaged with their lead on this, and we talk regularly. So this was -- this is supposed to be transformative. It's going to take time. As you know, we've done several JVs that have worked out really well for Plymouth. And so I think we're pretty smart about that. And we are looking at some JVs with them. And I think that's probably -- the real basis of the relationship is the Sixth Street deal is a JV. They're very focused on us growing the REIT balance sheet because they're going to win on their warrant position, which is why we did the deal. So if the stock moves as they anticipate and we anticipate, they'll make some money, and we'll do well as well. So outside of that, I can't speculate on it. They're a growing platform. They have announced some core money, $17 billion of core money just came into Sixth Street. So we're talking to them about industrial on a daily basis. And I think that's going to prove out really well for Plymouth shareholders long term.

Okay. That's super helpful. I'm curious about some of the pricing trends in the market today. I think you talked about cap rates 6.75% or maybe even lower. Obviously, Memphis was acquired and one of the more recent deals were a little bit higher. So I mean, is it safe to say that we're seeing contraction across the board?

I think that's correct. As we sit here today, we are seeing -- we're still seeing negative leverage in the marketplace, which again baffles us. I've never been a negative leverage person on how that works. But we're seeing a lot of capital into industrial. We're starting to see it in our markets. That being said, and I said this before about the Memphis transaction, there were a lot of moving parts on Memphis. And there was a $100 million portfolio, 80-plus tenants. You have an office building that needed to be sold, a small one. We have a call center that we -- our construction team is in the process of converting back to industrial as we speak. And then there's a vacant parcel of land that we can build 120,000 square feet, let's say, on. So all of those are components that need people that know what they're doing. We can do all that in-house, which is what we're doing. And we think that's going to add a lot of value to the Memphis portfolio. So that's why there weren't as many bidders, and that's why if you have an office in Memphis with people on the ground, you can attack a portfolio like that and get those changes accomplished very accretively. And I think that's why we were the winning bidder on it. So what I don't want people to take away is, a, that Memphis is an 8 cap market because that's not the case. It's a special situation. And Cincinnati is the same thing. We have work to do in Cincinnati. We've got some small tenants. We're going to renew them. We'll move some of them out. We'll expand tenants. Again, we have an 8-person office in Ohio. So for us to do that, it doesn't cost us much time and money to do it. Like we're equipped to do it. Others aren't. So I think that's where you get into it. And as I mentioned, in Columbus, there's a building with -- it's one asset deal, 3 tenants, but there's 10 bidders on it. And the pricing is going to get out of whack on that. So we have to continue to fight for deals, which are good for Plymouth and we'll do it. But it is -- I don't think anybody is going to sit here and think that cap rates are going to continue to rise in the industrial space.

That's helpful...

It's tough. But we've proven that we can buy and we will continue to execute.

One more for me, if I might. Just there's clearly situations that on the leasing front that you guys have discussed. And it just seems based on that commentary that there's a preference to do more of these kind of strategic or call it value-enhancing value-add type of investments. So talk about -- maybe, Jeff, if you can just talk about factoring in weighing the existing situations versus doing more value add. And do you guys have the capabilities to handle all of that all at once?

Yes. I mean, look, the acquisition, I don't -- we didn't put a lot of information out on it yet, but we just closed on a deal in Cincinnati this year, kind of a single asset deal, 260,000 square feet. That doesn't need a lot of value-add component work to it. But the portfolio that we bought for $20 million and then the other balance of that is going to close here in the next couple of weeks. There's a lot of small tenants, and I said we will do the Plymouth work on that. So we're built for it. We should do more value add. I mean we're real estate people. We have been for 30 years, and we understand how to buy real estate correctly at the right basis. We're not afraid of short walls. I don't think we missed too many things when it comes to buying a piece of real estate. So we should be doing more of it. You got to balance that with FFO right? We're in the cash flow growth business as a public REIT. But as a real estate group, we should be buying more value add. So that's the balance that we try to look at on each acquisition. So it's not an easy answer for it. We should be doing more value add. That's how you create value in real estate. We've said 100 times, we're not a net lease REIT, but I think a lot of times, we're looked at as you've just got to smooth out your FFO. So there's a balance there.

And the next question is from Brendan Lynch from Barclays.

Jeff, you mentioned that there's a lot of capital coming into your markets. Is that specifically for acquisitions? Are you also seeing an increase in development spending?

No. We're seeing it mostly, Brendan, just in acquisitions. And it's coming from all sides. Like I said, there'll be 10 bidders, and it's going to run the gamut of who those buyers are. I mean there's still a lot of money out there. I think they would get into development. But I think that, that's been -- we're starting to see a lot of absorption. I mean I think if you look at a market like Cleveland that we continue to focus on, there's -- I think it's about 1.2 million square feet of product under construction and 90% of it is leased. So I think we're at that point where someone is going to start to go into Cleveland and start to build spec because there's only 100,000 square feet available of new product. Now there's places like Dallas and there's some parts of Columbus that are severely overbuilt. I mean if you look at Columbus, Class A is 17% vacancy. And obviously, by definition, a new 32-foot clear building would be designated Class A. But the balance outside of Class A, it's a 5.2% vacancy. So I don't think in Columbus, you could be building any new product anytime soon. There's just a lot of vacancy. So I think it depends on the market. But I think there's a lot of capital. And I think once -- in certain markets, I think you start to see some spec development.

That's helpful. Maybe also just talking high level, any impact that you're seeing from the tariffs or potential for tariffs and reshoring initiatives? Obviously, you have more Heartland exposure than a lot of your peers with more coastal exposure. Maybe anything that you're seeing in terms of your customer base and conversations you're having with them?

Yes. With regard to tariffs, we're seeing a significant increase from various BPO companies for bulk storage requirements, both short and midterm. Some of these -- that we have actively in negotiations, but it seems to be like a rush to get product into the country and in warehouses as soon as possible. So there's definitely piled-up demand.

The next question is from Mike Mueller from JPMorgan.

Apologize if I missed this. But what is the, I guess, Columbus rent on the 2 new prospects compared to the move-out rent? And what's the timing during the year on that?

Well, we're talking -- the move-out is at the end of June. And the timing on the leases would be July or August and then the other one would be between July and probably September. The actual rents -- the rents because we're subdividing the building, they may go to a gross lease versus a triple net lease, but the net effective rent would be slightly higher.

Okay. And then last question. When you're looking at the '26 expirations, are there any similar chunky known move-outs at this point?

No. '26 seems fine. There's no projections for move-outs at this point.

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