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Plymouth Industrial REIT(PLYM) - 2023 Q4 - Annual Results

Introduction Opening Remarks and Procedural Changes The company altered its disclosure timing to provide analysts with earlier access to earnings materials - The company has changed its disclosure timing, releasing earnings materials the afternoon prior to the call to allow more time for review347 Management's Strategic Overview Key Strategic Themes for 2024 The company outlined four key strategic pillars for 2024 focused on onshoring, balance sheet strength, FFO growth, and shareholder returns - The company believes its markets in the 'Golden Triangle' are positioned to benefit from a multi-decade trend of onshoring and near-shoring of manufacturing8 - The balance sheet is the strongest in company history, with leverage reduced to 6.5x net debt to EBITDA and an anticipated operating range of 6.0x during 20249 - Projecting a 3%+ increase in FFO per share for 2024, driven primarily by portfolio operations and same-store NOI growth10 - The Board approved a 6.7% dividend increase for the first quarter, maintaining a 50-51% FFO payout ratio based on 2024 guidance11 2024 Financial Guidance and Performance Full-Year 2024 Guidance Details The 2024 guidance range is significantly influenced by the leasing outcome of a key FedEx facility in St Louis 2024 Guidance Assumptions | Guidance Scenario | Key Assumptions | | :--- | :--- | | Low End | FedEx St. Louis facility vacant from Aug 1st; buffered by a 125 bp improvement in portfolio expense recovery | | Midpoint | FedEx St. Louis facility remains tenanted; includes 25 bps of non-specific portfolio vacancy and credit loss | | High End | Accelerated lease-up in Chicago & another St. Louis property; savings in interest and general expenses | - The midpoint guidance was set to account for a range of possibilities regarding the FedEx lease, as the outcome could be less disruptive than the downside scenario60 Same-Store NOI and Quarterly Cadence Same-store NOI growth is expected to start slow and accelerate in the second half, mirroring the 2023 cadence - The quarterly performance cadence is expected to be muted in Q1 due to weather and timing of professional fees, then ramp up in the second half of the year48 - If the St Louis property (FedEx) were included in the same-store pool, the 2024 same-store NOI growth guidance range would have been 6.0% to 6.5%61 Portfolio Operations and Leasing Strategy Leasing Activity and Key Vacancies The company is actively managing key vacancies in St Louis and Chicago with a strong pipeline of prospects - For the FedEx property in St Louis (3919 Lakeview Corporate Drive), the ideal plan is to secure one or two tenants, and there has been some interest to date16 - At 9150 Latty Ave in St Louis, a lease is being negotiated with a prospect who is working with the city on incentives18 - The Chicago property at 16801 Exchange has a long list of prospects, and RFPs are expected very shortly18 Tenant Watchlist and Bad Debt The tenant watchlist remains stable, and the 2024 guidance includes a conservative bad debt assumption Bad Debt Comparison | Metric | Value (bps) | | :--- | :--- | | 2024 Guidance Assumption | 25 bps | | 2023 Realized Bad Debt | 12 bps | | Potential Watchlist Impact | < 10 bps | - The tenant watchlist has not materially changed in terms of its composition or size38 Impact of Onshoring on Demand The company's strategy focuses on versatile warehouses that support ancillary services for large-scale manufacturing reshoring - The company is seeing increased leasing interest from foreign, light manufacturing-oriented companies, especially in markets like Atlanta42 - The strategy is not to own pure manufacturing facilities but rather utilitarian warehouses that benefit from ancillary services supporting major manufacturing projects3335 Capital Allocation and Growth Strategy Acquisition and Transaction Market Outlook Management is tracking a significant pipeline, focusing on smaller, high-yield acquisitions in existing markets - The company is tracking a $500 million pipeline of potential opportunities as the transaction market becomes more active2324 - The acquisition focus is on small, one-off deals with higher cap rates, which is how the company was originally built24 - Opportunities are emerging from sellers facing debt maturities or re-tenanting challenges, with some properties trading at or below their acquisition prices from 2-3 years ago5253 Disposition and Development Strategy The disposition strategy targets markets lacking scale, while development focuses on build-to-suit projects - The company may sell assets in markets where it does not have scale, such as Milwaukee and Kansas City, following the recent sale of its single New Jersey asset2644 - Development activity is primarily driven by build-to-suit opportunities on existing vacant land36 - The company is also open to JV opportunities, particularly for heavy value-add assets that require significant capital and leasing efforts2354 Balance Sheet and Shareholder Returns Leverage and Dividend Policy The company achieved its strongest balance sheet to date and increased its dividend to enhance shareholder returns Balance Sheet and Dividend Metrics | Metric | Value | | :--- | :--- | | Net Debt to EBITDA | 6.5x | | 2024 Target Leverage Range | ~6.0x | | Q1 2024 Dividend Increase | 6.7% | | 2024 FFO Payout Ratio Target | 50% - 51% |