Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Plymouth Industrial REIT Inc (PLYM, Financial) reported better-than-expected Q2 results, driven by favorable real estate tax appeals within their Chicago portfolio.
- The company successfully completed an accretive acquisition in Memphis, expanding their presence in this core market to almost 7 million square feet.
- Leverage was reduced to 6.4 times, and the company expects to maintain operations within the six times range for 2024.
- The development program is nearing 100% lease-up, with full stabilization expected in 2025.
- Tenant retention for the Memphis acquisition is estimated to be around 70%, with significant yield improvements anticipated over the next three years.
Negative Points
- The company faced challenges in leasing up certain portfolio properties, which muted growth for the quarter.
- A tenant vacated a property in Cleveland, causing a temporary dip in occupancy and requiring backfill efforts.
- The top end of the full-year guidance range was tightened due to these leasing challenges.
- There is some uncertainty regarding the tax environment in Chicago, despite recent favorable outcomes.
- The company noted that the market for industrial properties remains fractured, with varying levels of investment opportunities.
Q & A Highlights
Highlights of Plymouth Industrial REIT Inc (PLYM) Q2 2024 Earnings Call
Q: Can you provide details on the Memphis investment and tenant retention expectations?
A: Tenant retention for the Memphis acquisition is estimated at around 70%. The full mark-to-market is expected to be realized over the next three years, potentially lifting yields above 9.5%. - Jeffrey Witherell, CEO
Q: Are there more investment opportunities similar to Memphis?
A: Yes, we have a robust pipeline of potential acquisitions, ranging from small portfolios to one-off deals. If they are accretive, we are interested. - Jeffrey Witherell, CEO
Q: Can you discuss the timeline and mark-to-market opportunities for the Cleveland property?
A: The timeline for backfilling the space is September-October for half the building, with a backup prospect for the full space. The mark-to-market opportunity is substantial. - Anthony Saladino, CFO
Q: What is your view on the property tax environment in Chicago?
A: The tax environment has improved slightly, with assessments valid for two more years and expected increases at an inflation rate of 3-4%. - Anthony Saladino, CFO
Q: What impact do fixed renewals have on cash releasing spreads?
A: Fixed renewals will continue to impact cash releasing spreads into 2025, but the effect will diminish over time. Without fixed renewals, spreads would be about 2% higher. - Anthony Saladino, CFO
Q: Can you provide an update on Phase Two of your development program?
A: We are not starting speculative development at this time. Future projects will be build-to-suit, with ongoing discussions for potential opportunities, especially in Cincinnati and Jacksonville. - Jeffrey Witherell, CEO
Q: What is your perspective on the onshoring movement?
A: Onshoring is real and driven by infrastructure needs, availability of power, water, and skilled labor. We have seen tenants expanding manufacturing in the U.S., and this trend is expected to continue. - Jeffrey Witherell, CEO
Q: Can you comment on the leasing front and the slowdown in Q2 volume?
A: Q2 volume was the third highest in the Company's history. Leasing is currently stronger than ever, with a significant increase in calls for renewals. - Anthony Saladino, CFO
Q: Are there any other potential vacates that could be material?
A: The only potential vacate of concern is in March, but we are still awaiting definitive word. - Anthony Saladino, CFO
Q: How do you view the long-term rent increase trends in the industrial market?
A: We expect market rate increases to continue, driven by onshoring and a lack of new supply for our types of buildings. This should provide a sizable advantage for many years. - Anthony Saladino, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
