Plymouth Industrial REIT, Inc. (PLYM) is a real estate investment trust (REIT) focused on the acquisition, ownership, and management of single and multi-tenant industrial properties located in primary and secondary markets across the United States. The company has a vertically integrated platform that allows it to strategically grow through both direct property acquisitions and joint venture arrangements.
Company History and Portfolio Growth
Plymouth Industrial REIT was formed on March 7, 2011 as a Maryland corporation. 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. Plymouth went public in 2017, raising $135 million in its initial public offering.
Since its inception, the company has rapidly grown its portfolio through a series of strategic acquisitions. In 2018, the REIT expanded its footprint by acquiring 36 industrial properties for $395 million. The following year, Plymouth added another 23 properties to its holdings for $292 million. In 2022, Plymouth Industrial REIT continued to grow its portfolio, acquiring $252.6 million in investment properties. The company also issued $58.2 million in new capital through common stock offerings to fund acquisitions and strengthen its balance sheet.
As of September 30, 2024, the company owns 158 industrial properties comprising 223 buildings with an aggregate of approximately 34.9 million square feet. This represents significant growth from its initial portfolio of just 17 properties when it went public. Plymouth has focused on building a diversified portfolio of assets located in primary and secondary markets, with a concentration in the Midwest, Southeast, and Northeast regions of the United States.
Financial Performance and Liquidity
Financials
Plymouth Industrial REIT has demonstrated solid financial performance in recent years, although it has faced some challenges. For the fiscal year ended December 31, 2023, the company reported total revenue of $199.85 million, a 8.8% increase from the prior year. Net income for the year was $13.66 million, compared to a net loss of $16.89 million in 2022. The REIT's adjusted funds from operations (AFFO), a key metric for REITs, was $54.82 million in 2023, up from $41.74 million in 2022.
It's worth noting that the company faced difficulties in previous years. In 2021, Plymouth Industrial REIT reported a net loss of $17.1 million as it dealt with tenant defaults and delays in leasing activity due to the COVID-19 pandemic. The company navigated this period by closely monitoring its tenants and quickly re-leasing vacant spaces. Similarly, in 2022, despite continued growth, the company reported a net loss of $17.1 million as it recorded one-time charges related to debt extinguishment and transaction costs.
For the most recent quarter ended September 30, 2024, Plymouth reported revenue of $51.87 million, representing a year-over-year growth of 4.2%. However, the company experienced a net loss of $15.69 million for the quarter, compared to net income of $10.40 million in the same period of the previous year. This loss was primarily due to unexpected tenant issues in Cleveland and St. Louis markets.
Core Funds from Operations (Core FFO) for the third quarter of 2024 was $20.13 million, slightly down from $20.56 million in the prior year period. The company's operating cash flow (OCF) and free cash flow (FCF) for the quarter were not reported in the provided financial data.
Liquidity
As of September 30, 2024, Plymouth had $21.38 million in cash and cash equivalents, $4.78 million in cash held in escrow, and $7.39 million in restricted cash on its balance sheet. The company also had $196.40 million in borrowings under its KeyBank unsecured line of credit, which has a total capacity of $500 million. This leaves Plymouth with approximately $303.60 million of available borrowing capacity on its unsecured revolving credit facility.
The company's net debt to gross asset value ratio was 57.0% at the end of the third quarter, indicating a relatively conservative capital structure. Plymouth's weighted average debt maturity was 4.2 years, with no significant debt maturities until 2026. The debt-to-equity ratio stood at 1.80 as of the most recent quarter, while the current ratio was 0.25 and the quick ratio was 0.11.
Diversification and Growth Strategies
Plymouth Industrial REIT's strategy is focused on acquiring well-located industrial properties in primary and secondary markets across the United States. The company targets assets that can provide stable cash flows and opportunities for value-add improvements or repositioning. In addition to direct property acquisitions, Plymouth also pursues joint venture arrangements with institutional partners to access capital and expand its investment opportunities.
One such joint venture was announced in August 2024, when Plymouth formed a strategic partnership with Sixth Street, a leading global investment firm. Through this transaction, Plymouth contributed a portfolio of 34 industrial properties located in the Chicago metropolitan area in exchange for $356 million. The company retained a 35% ownership stake in the joint venture, providing it with the ability to participate in the future upside of the portfolio while also unlocking capital for additional acquisitions.
In the third quarter of 2024, Plymouth's same-store net operating income (SS NOI) decreased 1.2% on a GAAP basis, excluding early termination income, compared to the same period in 2023. This was primarily due to a few tenant challenges in the Cleveland and St. Louis markets, which the company has been actively addressing. Specifically, Plymouth faced unexpected issues with two tenants in Cleveland:
1. A tenant at 2100 International Parkway abruptly laid off employees and could not pay rent, leading to an eviction. 2. A tenant at 1350 Moore Road's business was no longer viable, resulting in the tenant leaving equipment and inventory behind, which cost Plymouth $500,000 to clear out.
Despite these short-term headwinds, management remains confident in the company's long-term growth prospects. Plymouth has a robust acquisition pipeline of over 11 million square feet and $1 billion in potential transactions. The company is actively working on this pipeline, although it is difficult to quantify how much of it they expect to actually close on.
Future Outlook and Guidance
Looking ahead, Plymouth Industrial REIT is well-positioned to continue its growth trajectory. The company expects to see significant growth in 2025, driven by several factors:
1. Leasing up vacant spaces, especially in St. Louis where they have several prospects they are working on. 2. Ramping up the recently acquired Memphis portfolio over the next 2-3 years to achieve a target yield of 10%. 3. Acquiring the $40 million Cincinnati portfolio that is expected to close before year-end 2024.
Plymouth's management anticipates that the fourth quarter of 2024 Funds from Operations (FFO) will be impacted by some one-time items. However, they believe that the underlying Q4 run-rate should provide a good base for growth going into 2025. The company has provided full-year 2024 guidance assumptions in their supplemental materials, although specific details were not mentioned in the conference call transcript.
Risks and Outlook
While Plymouth Industrial REIT has demonstrated its ability to grow through strategic acquisitions, the company faces several risks that investors should consider. The industrial real estate market is highly competitive, and the company may face challenges in identifying and acquiring properties at attractive valuations. Additionally, the company's portfolio is concentrated in the Midwest, Southeast, and Northeast regions, exposing it to economic and market conditions in those areas.
The recent tenant issues in Cleveland and St. Louis highlight the potential risks associated with tenant defaults and unexpected property expenses. However, Plymouth's management has shown the ability to navigate these challenges and remains focused on addressing them promptly.
Overall, Plymouth Industrial REIT's diversified portfolio, conservative financial profile, and strategic growth initiatives make it an interesting investment opportunity in the industrial REIT space. The company has established itself as a significant player in the industrial real estate market over the past decade through strategic acquisitions and a disciplined investment approach. Plymouth has demonstrated its ability to weather challenging economic conditions and continues to actively manage its portfolio to drive value for shareholders. With a strong pipeline of potential acquisitions and a focus on leasing up vacant spaces, the company is well-positioned for growth in the coming years, despite the short-term challenges faced in 2024.