Plymouth Industrial REIT - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 core results were stable but slightly below Street FFO/share: Core FFO was $0.44 vs S&P Global consensus FFO/share of $0.461, while AFFO was $0.41; management attributed pressure to the Chicago JV deconsolidation, higher G&A seasonality, and winter Opex. S&P Global consensus figures marked with asterisks; see Estimates Context for details.*
• Operational momentum accelerated: record 2.44M sf of commenced leasing with blended cash spread +9.6% (ex-St. Louis +16.2%); portfolio occupancy rose to 94.3% and same‑store NOI (cash) grew 2.0% YoY despite higher snow removal costs.
• Balance sheet/liquidity intact: 88.1% fixed-rate debt, no 2025 maturities, $415.5M revolver availability, net debt/Adj. EBITDA 5.9x; Board authorized a $90M share repurchase program (no repurchases in Q1).
• Strategy/guidance: $65.1M of Q1 acquisitions at 6.8% initial NOI yields and ~+$205M under agreement; FY25 Core FFO $1.85–$1.89 per share AFFIRMED with SS NOI (cash) +6.0–6.5% and average SS occupancy 95–97%.

What Went Well and What Went Wrong

What Went Well

• Record leasing volume and solid pricing: 2.44M sf commenced; blended cash rent +9.6% (ex‑St. Louis +16.2%); renewals +15.0% cash spread; St. Louis short‑term deal lifted occupancy and provided optionality.
• Accretive external growth and pipeline: closed $65.1M of assets at 6.8% initial NOI yields; ~2M sf (~$205M) under agreement at 6.5–6.75% targeted yields; “well positioned…with ample strategic capital” (CEO).
• Financial flexibility intact: 88.1% fixed debt, no 2025 maturities, $415.5M liquidity; “operate in the 6x range” leverage and affirmed FY25 Core FFO outlook.

Quoted management:

• “We had a good start to 2025, with robust leasing activity... and the successful acquisition of $65 million of functional, infill Class B industrial assets…” — Jeff Witherell, CEO.
• “As of today, we have approximately $205 million of acquisitions under agreement… at a targeted initial NOI yield of 6.5% to 6.75%.” — Management on the call.
• “We continue to have strong liquidity… with $415 million of availability [and] have affirmed our previously issued full year 2025 guidance for core FFO.” — Management.

What Went Wrong

• Slight FFO/share shortfall vs Street and y/y drift: Core FFO/share $0.44 vs $0.45 last year; AFFO/share $0.41 vs $0.45 last year; Street FFO/share consensus $0.461 (company reports Core FFO; basis may differ).*
• New‑lease pricing mixed due to St. Louis: new leases +0.9% cash (would have been +22.1% ex‑St. Louis); blended +9.6% (would have been +16.2% ex‑St. Louis).
• Operating expense headwinds and SS occupancy drag: Q1 SS NOI (cash) growth +2.0% YoY was tempered by a 290 bps occupancy decline and elevated snow removal/utilities; management flagged higher Q2 G&A before normalizing in 2H.

Transcript

Operator (participant)

Please note today's event is also being recorded. I would now like to turn the Conference Call over to John Wilfong, Investor Relations. Sir, please go ahead.

John Wilfong (Investor Relations)

Thank you, and good morning. Welcome to the Plymouth Industrial REIT Conference Call to review the company's results for the first quarter of 2025. Yesterday afternoon, we issued our earnings release and posted a copy of our prepared commentary and a supplemental deck on the quarterly results section of our Investor Relations page. In addition to these earnings documents, a copy of our 10-Q can be found on the SEC filings of our IR site. Our supplemental deck includes our full year 2025 guidance assumptions, detailed information on our operations, portfolio and balance sheet, and definitions of non-GAAP measures and reconciliations to the most comparable GAAP measures. We will reference this information in our remarks. With me today is Jeff Witherell, Chairman and Chief Executive Officer; Anthony Saladino, President and Chief Financial Officer; Jim Connolly, Executive Vice President of Asset Management; and Anne Hayward, General Counsel.

I would like to point everyone to our forward-looking statements on page three of our supplemental presentation and encourage you to read them carefully. They apply to statements made in this call, our press release, our prepared commentary, and in our supplemental financial information. I'll now turn the call over to Jeff.

Jeff Witherell (Chairman and CEO)

Thanks, John. Good morning, and thank you for joining us today. I hope that everyone had a chance to review the commentary and supplemental information we posted last night. First, I will hit a few highlights, and then we'll go to Q&A. The first quarter of 2025 marked a strong start to the year, highlighted by record-leasing activity, positive acquisition momentum, and stable core financial performance. We continue to be well-positioned to scale our platform with ample strategic capital and nearly 30% of annual rents rolling in 2025 and 2026, and markets benefiting from sequential rent growth, limited Class B supply, and favorable reshoring dynamics. We see a path for sustained internal growth and long-term value creation. On a macro level, as global supply chains adjust to the shifting geopolitical and trade landscape, we will continue to actively monitor the impact across our tenant base and target markets.

We have yet to see any material interruptions across our portfolio, but we have observed an increase in short-term space requirements, primarily driven by tenants responding to inventory adjustments and shifting trade flows. Our strategic focus continues to be on acquiring and operating smaller footprint infill industrial properties in dense, supply-constrained submarkets, areas where speculative development has primarily targeted large-scale bulk assets. In contrast to larger warehouses, which often face longer lease-up periods and a narrower tenant base, our properties feature modular layouts and multi-tenant configurations that help mitigate binary vacancy risk and support more resilient cash flows. This flexibility enables us to adapt quickly to evolving tenant demands, including those driven by reshoring, inventory realignment, and supply chain diversification. Our acquisition strategy remains focused on expanding within our existing markets.

Our deal activity in the first quarter and at the end of 2024 was funded largely by the proceeds of the Sixth Street transaction. These acquisitions were located in key distribution hubs within our target markets located across the Golden Triangle. As of today, we have approximately $205 million of acquisitions under agreement, representing roughly 2 million sq ft at a targeted initial NOI yield of 6.5%-6.75%. Since our June 2017 IPO, we have acquired over 32 million sq ft at an average cost under $50 per sq ft, well below replacement cost, which not only provides a meaningful margin of safety but also enhances cash flow returns and highlights our disciplined approach to capital deployment and value creation.

Moving to our balance sheet, we continue to have strong liquidity, with over 88% of our debt being fixed, no debt maturities in 2025, and expect to operate in the six-times range for the balance of the year. With the upsizing of our credit facility in last year's fourth quarter, we have $415 million of availability there, and with the capital secured through the Sixth Street transaction, we are well-positioned and have the critical financial flexibility to scale our platform and support long-term value creation for our shareholders. Finally, we have affirmed our previously issued full year 2025 guidance for core FFO. We anticipated a bit of a muted start to the year, with a stronger second half driven by the stabilization of transitory vacancies in Cleveland and St. Louis, along with the full contribution from acquisitions expected to close in the second and third quarters.

I look forward to providing further updates in the coming months as we execute on our leasing and capital deployment strategies. I would now like to turn it over to the operator for questions.

Operator (participant)

Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press Star and then One using a touch-tone telephone. To withdraw your questions, you may press Star and Two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality. With these instructions in mind, once again, if you would like to ask a question, please press Star and One. Our first question today comes from Todd Thomas from KeyBanc Capital Markets. Please go ahead with your question.

Todd Thomas (Managing Director and Equity Research Analyst)

Hi, thanks. Good morning. First question, in the prepared commentary, you noted the potential three-year renewal at the 624,000 sq ft asset in St. Louis and the backfill prospects you're negotiating with at ODW, the 772,000 sq ft in Columbus. Just in light of the current environment, how confident are you that those deals get done and have conversations changed at all over the last few weeks in light of the current environment here?

Jeff Witherell (Chairman and CEO)

Yes. Regarding St. Louis, we've come to terms on the renewal. It's being signed right now, so any day. Three-year deal. In ODW, they've agreed to take anywhere from 280,000 sq ft to 400,000 sq ft back for a period of time, and that 265,000 of it is out for signature right now.

Todd Thomas (Managing Director and Equity Research Analyst)

Okay. In terms of the acceleration in growth in the back half of the year, really strong second half in terms of increase in total NOI and portfolio occupancy, the larger St. Louis asset, I guess, is a contributor to that. You backfilled and signed the lease there, the 769,000 sq ft facility, but that was removed from the same store. Can you just walk through the key drivers behind the acceleration in the same store growth rate later in the year, what the primary drivers are there?

Anthony Saladino (President and CFO)

Yeah, happily. Todd, as a point of correction, that St. Louis asset is in same store. That is a key contributor to the growth. As Jeff mentioned, we experienced a fairly moderate start to the year in the pool. That said, about 70% of 1.6 million sq ft of speculative space greater than 100,000 sq ft included in our guidance has now been leased. The cadence of occupancy is the best way to illustrate the path to the full year growth. Starting back to Q4 2024 for this pool, occupancy was 92.2%. The lease-up of this larger format space, which we just discussed, adds approximately 640 basis points of occupancy. This is going to be partially offset by a temporary 130 basis point vacancy expected in Q4, which results in a projected year-end same store occupancy of about 97.3%.

Todd Thomas (Managing Director and Equity Research Analyst)

Okay. That's really helpful. Thanks. Sorry about that. I appreciate the clarification on St. Louis. Last question, just in terms of the $205 million of acquisitions under agreement, can you just remind us and run through the funding sources for those investments from here, the timing of the remaining drawdown of the $79 million preferred, what you're anticipating there, and I guess in terms of funding, the balance, how we should think about that?

Anthony Saladino (President and CFO)

Sure. The funding mechanism is the line of credit. To your point, we have another $79 million to draw from the Series C preferred, which we will do so in May. Thinking about the impact of that drawdown, compared to current rates, there is about a 125 basis point premium relative to our line, so there will be an uptick in interest expense post-draw. With respect to cadence of deployment, we identified the $200-plus million. There is probably another $150 million right behind that. There could be some chunky deployment in the middle of the year with tapering as we arrive at year-end.

Todd Thomas (Managing Director and Equity Research Analyst)

Okay. All right. Thank you.

Operator (participant)

Our next question comes from Rich Anderson from Wedbush. Please go ahead with your question.

Rich Anderson (Managing Director)

Thank you. Good morning. Where does the buyback stack up with you on your priorities from a capital deployment standpoint today?

Anthony Saladino (President and CFO)

To be clear, we did not repurchase shares during Q1. Our view is that a balanced approach, deploying capital into both acquisitions and opportunistic repurchases, is the best way to optimize long-term shareholder value. The repurchase math is compelling given the current market dislocation, but expanding the platform remains our priority.

Rich Anderson (Managing Director)

Right. The buyback also can just be disruptive from a balance sheet perspective. I assume if you did go that direction, it would be on a balance sheet neutral way. Again, taking capital from the Sixth Street transaction and just instead of portfolio expansion, buyback, and it would still be a balance sheet neutral transaction in your mind. Is that correct?

Anthony Saladino (President and CFO)

It would be. That is in part the motivation for a balanced approach to the deployment of the remaining capital.

Rich Anderson (Managing Director)

Okay. On ODW, you said 280-400 and some amount is being signed now or sort of what was that? Was that 280 that's being close to being signed? Is that what you said? I missed that. I apologize.

Anthony Saladino (President and CFO)

Yes.

Rich Anderson (Managing Director)

280. You said period of time. Is that like another one of those short-term six-month type situations or longer or shorter? How could you describe that?

Jim Connolly (EVP of Asset Management)

Yeah. It's through the end of the year plus into 2026 with an undefined end date at this point.

Rich Anderson (Managing Director)

The mentality there generally and maybe specifically for that is just we do not know what is going on in front of us with tariffs, etc., and the economy, and so we do not want to make an overcommitment. Is that basically the commentary from your tenants?

Jeff Witherell (Chairman and CEO)

On that particular one, Rich, that's not the case. They occupy the entire building. They have built out a newer campus, and they are going through a flux of new contracts, expiring contracts, and moving to other space. That is not a tariff issue.

Rich Anderson (Managing Director)

As I recall, they have some presence in that area. Generally speaking, is that sort of the mentality that you're hearing?

Jeff Witherell (Chairman and CEO)

Yeah. In our remarks and in the commentary here, we have mentioned that there is some short-term thought process going on from tenants to secure additional space, additional stocking of material. There is some dislocation. Again, we've said in here we haven't really seen it in a significant manner across our portfolio yet.

Rich Anderson (Managing Director)

Yep. Okay. Last for me, you reiterated guidance. You got some acquisitions coming, maybe some more after that. Some of your peers are saying, "We would have raised guidance had it not been for some of these uncertainties ahead." Would you make the same comment, or would you say guidance is good? It sort of captures whatever might happen in the future as it stands, so it's not something that you would have raised if not for some of the questions that are out there right now, broadly speaking.

Anthony Saladino (President and CFO)

Yeah. I mean, I think our view is that that's a good range. To Jeff's point, there hasn't been a lot of static. Just given the momentum around leasing and the success in pursuing and ultimately deploying this capital, I think we're in a good position to achieve within the range that we previously reported and recently affirmed.

Rich Anderson (Managing Director)

Okay. Fair enough. Thanks very much.

Jeff Witherell (Chairman and CEO)

Thank you.

Operator (participant)

Our next question comes from Nick Tillman from Baird. Please go ahead with your question.

Nick Tillman (Senior Reasearch Analyst)

Good morning. Appreciate all the commentary on some of the larger tenants. Anthony, I think you mentioned 140 basis points of occupancy loss in fourth quarter. Is that related to any specific tenants? Or I know as we looked through the schedule, that's the next tenant that we didn't touch on was Communications Test Design. Any updates there?

Anthony Saladino (President and CFO)

I'll let Jim fill you in on that, but it is not that tenant. It is a single tenant that we anticipate is more likely than not to vacate now in November.

Jim Connolly (EVP of Asset Management)

CTDI. We have reached out to them about extending their lease. As you know, they only did a one-year renewal last time because they had a buyout in their contract, which just passed, so we're looking for them to extend longer this time. The plant is very busy, and they're a very good tenant.

Nick Tillman (Senior Reasearch Analyst)

Maybe following up, Jeff, you kind of talked a lot about sort of the smaller tenant or smaller building, multi-tenant assets and kind of the focus there on the acquisition standpoint. Is there any appetite from a disposition side to maybe de-risk on some of these individual tenants and sell some of those assets given where the stock's trading today?

Jeff Witherell (Chairman and CEO)

I mean, Nick, we look at that all the time, but I don't think there's a situation of de-risking. I think we've been very clear that if you look at the St. Louis property, I mean, if you look at our basis, we bought a Class A building at $72 a sq ft. That Unilever probably should have renewed there. They did a global reorganization of their supply chain. You can see that we've backfilled it with a Fortune 500 global tenant, and they may take some more space in there. What we're going through right now is, again, a lot of one-year extensions or six-month extensions until they figure out their supply lines. I don't really think a lot of the stuff that we've talked about is tariff-related. It's really just an inflection point of groups like Unilever. You see, Amazon has just made some major changes.

FedEx is making some major changes. I don't think a lot of that's tariff-related, quite frankly. It just seems to be that now's the time that a lot of these groups are starting to reorganize. We always look at assets that we believe if we can sell them and reposition them into something better, we're always looking at that. We'll see how it goes.

Nick Tillman (Senior Reasearch Analyst)

No, that's very helpful. Maybe just one last question quickly for Anthony. Any changes to sort of what you're seeing on collections or bad debt within the portfolio or changes to the watch list?

Anthony Saladino (President and CFO)

No. The composition in terms of count on the watch list has not really changed. We have 35 basis points of bad debt embedded in our guidance, none of which was utilized in Q1. This compares favorably to our historical run of about 10 basis points. For context, 2024 was an anomaly due to the Cleveland bankruptcies, which pushed bad debt above 100 basis points. Excluding those events, bad debt for 2024 would have been approximately 20 basis points. As of quarter end, our watch list includes five tenants. They occupy a combined 290 sq ft. Their total ABR is less than 1%. In all but one of those tenants, rent is current.

When we zoom back and make these assessments in terms of our watch list, today, we think there's a 90+% likelihood that those tenants will stay current or make full-term payments over the remaining life of their lease, which across those five tenants is about 1.5 years.

Nick Tillman (Senior Reasearch Analyst)

Very helpful. Thank you, guys.

Jeff Witherell (Chairman and CEO)

Thanks, Nick.

Operator (participant)

Once again, if you would like to ask a question, please press star and one. Our next question comes from Mike Mueller from JPMorgan. Please go ahead with your question.

Mike Mueller (Stock Analyst)

Yeah. Hi. I think you said you expect at year-end about 97.3% occupancy. I guess how much of that 97.3% is this short-term leasing, like 170,000 at St. Louis or something, that could be 30, 60, 90 days or something that could go away pretty quickly? How much of that 97.3% could kind of go away within a couple of months or something?

Anthony Saladino (President and CFO)

Mike, I would say about 25 basis points of that. Here's the caveat. With respect to the temp fill, there are prospects that will likely absorb that space on a longer-term basis. We are not thinking about that space as being all that disruptive to the occupancy ramp.

Mike Mueller (Stock Analyst)

Got it.

Jim Connolly (EVP of Asset Management)

Ninety-DL was actually added for benefit for us because we do have interest in the space longer-term. It is for us to be able to replace them with a longer-term tenant.

Mike Mueller (Stock Analyst)

Got it. Okay. Just to clarify, that 97.3% does reflect the 140 basis points of recapture, I think, that you were talking about in November?

Anthony Saladino (President and CFO)

It does.

Mike Mueller (Stock Analyst)

It does. Okay.

Anthony Saladino (President and CFO)

It does.

Mike Mueller (Stock Analyst)

I guess.

Anthony Saladino (President and CFO)

It's 130 basis points, just for clarification's sake.

Mike Mueller (Stock Analyst)

Okay. Sounds good. One other question. I guess how much capacity? I know you talked about $200 million under contract, I think another $150 million behind it. I guess what's the capacity for acquisitions after that before you get to the point where you need to start thinking about the next round of equity as being critical to fund the acquisitions? I guess if the stock doesn't re-rate, how do you approach the next batch of acquisitions once you need to start thinking about equity?

Anthony Saladino (President and CFO)

I think beyond those tranches, there remains ample capacity. To fund that kind of next iteration, there could be an uptick in recycling. We'll evaluate that as we deploy through the balance of this year. We do think post that deployment, specifically as it relates to the articulation of deployment and guidance, there's still a couple hundred million of capacity before we'd have to go back to the market.

Mike Mueller (Stock Analyst)

Got it. Okay. Appreciate it. Thank you.

Jeff Witherell (Chairman and CEO)

Thanks, Mike.

Operator (participant)

Our next question comes from Eric Borden from BMO Capital Markets. Please go ahead with your question.

Eric Borden (VP)

Hey, good morning. Just going back to ODW, on the space that is being leased, about the one-third, can you talk about any frictional vacancy? Is there any downtime associated? Do you plan or intend to split up the box? If there is any CapEx involved there?

Jim Connolly (EVP of Asset Management)

There may be, depending on the term of the tenancy, some costs that demise. We have had agreements with the prospects that we have in hand where we are just going to fence off the different areas.

Eric Borden (VP)

Okay. It would be a minimal downtime in terms of occupancy and them paying rent, or would they immediately just pay rent and the fence would go up rather quickly?

Jim Connolly (EVP of Asset Management)

The latter. We would demise it very quickly, and they would pay rent immediately.

Eric Borden (VP)

Okay. That's helpful. And then just following up on that, when would ODW be added back to the same store pool?

Anthony Saladino (President and CFO)

Once the space is re-stabilized. It is more likely than not that they'd be added back in 2026.

Eric Borden (VP)

Okay. Okay. You talked about acquisitions being your priority focus, maybe with some stock buybacks, but just curious where new development starts fit into the capital outlay. Understand that you started a smaller investment during the quarter. Just curious on your thoughts going forward for the development pool.

Jeff Witherell (Chairman and CEO)

Yeah, Eric. We did start the last remaining parcel in one of our parks in Jacksonville. It is 42,000 sq ft. There is a lot of demand down there. We feel that that was a build-it-and-no-come situation, and it is not a lot of money. It is not a big issue for us. We had this deal contracted. It just made a lot of sense to finalize construction in that park and stabilize it. That is what we are doing. Aside from there, I mean, we have mentioned in the past that we have 200,000 sq ft ready to go in Cincinnati. We have, I think, 115,000 sq ft ready to go in the new acquisition in Memphis, that portfolio. They are being set up as built-to-suits right now.

Unless someone comes today and wants us to build them a building at a high single-digit yield to us, we're not going to build spec. I don't think you're going to see us build spec the next couple of quarters.

Rich Anderson (Managing Director)

Great. Thanks for the time, guys.

Jeff Witherell (Chairman and CEO)

All right. Thank you.

Operator (participant)

Ladies and gentlemen, showing no additional questions, we will conclude today's question and answer session as well as today's conference call. We do thank everyone for joining. You may now disconnect your lines.