Q3 2020 Plymouth Industrial REIT Inc Earnings Call
[music].
Good morning, welcome to play in this industry, we third quarter 2020 earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
So today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.
I would now like to turn the conference over to Tripp Sullivan of Investor Relations. Please go ahead.
Thank you Kate good morning, welcome to the Plymouth's Industrial <unk> Conference call to review the company's results for the third quarter of 2020.
On the call today will be Jeff with the rail Chairman and Chief Executive Officer, and White, President and Chief Investment Officer, Dan Right Executive Vice President and Chief Financial Officer, and Jim Connelly Executive Vice President of asset management and in Hayward General Counsel.
Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our web site, along with our form 10-Q, and supplemental filed with the SEC.
A replay of this call will be available shortly after the conclusion of the call through November 13, 2020, the numbers to access. The replay are provided in the earnings press release for those who listen to the replay of this call. We remind you that the remarks made herein are as of today November six 2020.
Not be updated subsequent to this call.
During this call certain comments and statements we make may be deemed forward looking statements within the meaning prescribed by the securities laws, including statements related to the future performance of our portfolio our pipeline of potential acquisitions and other investments.
Through dividends and financing activities all forward looking statements represent some judgment as of the date of this conference call and are subject to risk and uncertainties that could cause actual results to differ materially from our current expectations.
Investors are urged to carefully review various disclosures made by the company, including the risks and other information disclosed in the Companys filings with the SEC.
We also will discuss certain non-GAAP measures, including but not limited to FFO.
Hey, AFFO and adjusted EBITDA Ari definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in our filings with the SEC I will now turn the call over the Jeff with <unk>. Please go ahead.
Thank you Tripp good morning, everyone. Thanks for joining us here today.
While our second quarter was primarily defensive in nature.
Third quarter was one where we are continually active on offense and our results reflect that work.
So collection and leasing activity have both continued on a positive trajectory, we had coming out of the second quarter also during the third quarter. We completed another overnight common equity offering which we are actively deploying please proceed.
Continuing along with the sports metaphor I am often saying that we hear EPS than that they're playing a team sport and as such we need to field. The best team we can we.
We have worked hard at building a strong foundation in each area of our business and our results over the past several months our major direct result of that effort.
I want to thank every one of my team members, who continue to put in the work to make that happen.
Our asset management and property management teams have done an outstanding job of staying close to our tenants and be responsive to their needs.
This shows up in our leasing results in occupancy, but also and how strong our rental collections have been with 99% of our rent collected for all three quarters. This year. So far in October already at 97%. We believe that speaks volumes for the quality of our tenants in our portfolio in general.
The strong leasing momentum, we are seeing backstop that statement as well.
We achieved a 14% cash increase on the leases that commenced this quarter.
He's up to 12% for all of the leases that have commenced through the first nine months.
Our portfolio occupancy remains stable around 90, 596% with our 2020 renewals largely taking care of our focus is turning to 2021 and beyond.
Turning to our balance sheet, our priorities have been to ensure that our dividend is well covered that our leverage profile continues to improve and that we are able to access multiple sources of capital to grow the portfolio.
We are well ahead of plan on each initiative.
With our reinstated guidance for the year, we're projecting dividend coverage for the year below 60% on both FFO and AFFO and below 50% for quarter two to quarter for.
That was an important consideration in the board's deliberations earlier this year and has allowed us to continue to pay a dividend throughout the pandemic.
Our common equity offering that we completed in August brought in $105 million of new capital. It was rewarding to see that the deal was upside to accommodate several new quality institutional investors.
We made the decision to deploy the proceeds with a lower low leverage profile than we have in the past.
Assuming we use only 40% leverage on the net proceeds we are targeting completing approximately $165 million in acquisitions we.
We believe this is striking the proper balance between growth and the path to lower leverage.
When we look at where we need to be over the long term for industrial results were significantly much larger than we are I think this offering has us on the right path and in our opinion much farther along than our larger peers were in their early years.
Outside of the quarter, we completed two major accomplishments, which should have a profound impact on the company in October we closed on a $300 million unsecured credit facility with our Bank group led by key Bank, which included Barclays JP Morgan capital, one and was joined by BMO.
Dan will give you some details on this in a moment.
Also in October we took another step in the right direction with the joint venture we entered into Madison International Realty, We have come to know them well since our preferred stock investment with them in 2018.
They are also one of our largest common stockholders.
We'll have a 20% ownership interest in the venture they'll have an 80% interest in the targeted initial equity investment between the partners of $150 million.
Which we expect to leverage profile to be between 60, 65%. This should give us buying power of approximately $430 million we.
We see this joint venture as a complimentary source of growth capital for us.
Gives us options that we otherwise would not have to pursue opportunities that are not a good initial fit for the week.
Very intentional and how we structured this venture and the 1% asset management fee will earn on the equity invested onto the promote that we're going to earn above certain return hurdles in the right of first offer to purchase the properties.
Also included is our day to day control.
We took our time to do this right. We believe we chose the right partner.
We will utilize this JV to acquire properties under two conditions, one they are more value add or opportunistic in nature due to heavy lease up in capex investments that would affect the short term cash flow into the re doesn't have enough capital to take on the acquisition. The first acquisition, we have under agreement with the venture as both of these qualification.
Our pipeline is active and continues to be driven by the incremental demand, we're seeing for industrial space in the country. It's worth repeating that we and many others. In this industry believe that they are currently isn't enough space to serve the demand that is coming particularly in infill locations, where a majority of class B properties are located just writing tied.
Benefiting all of us, but we believe it will have just as much of an impact on our markets in our portfolio as anyone else the.
The growth of E Commerce continues unabated.
Rationalization of the international supply chain around the protection of intellectual property protection of the size supply chain itself and the environmental impact of global shipping is continuing as well and that's not heavily influenced one way or another but which administration is in the white house, the economics associated with the supply demand imbalance of creating unique.
Opportunities for US we will continue to find the right way to pursue them at the right time.
That last tend to take you through the acquisition and update the joint venture.
Good morning.
That's hitting the pause button on a number of acquisition opportunities we were pursuing back in March and April.
Focus has been enhancing our pipeline with transactions from motivated sellers.
We also wanted to replicate what we've done in the past source attractive entry points to new markets find select opportunities to acquire be plus or minus properties at class B pricing.
Target new deals and fill locations near major urban areas.
We've been successful on each initiative during the quarter and that momentum has continued.
The proceeds from our August equity offering we were able to deploy our capital efficiently and prudently.
Including three separate transactions in September.
Totaling $51 million in Saint Louis and Jacksonville markets, where we have a growing presence.
We now have over 750000 square feet and Saint Louis and over 1.4 million square feet in Jacksonville.
In October we purchased another property in Ohio.
Second and a half million dollars.
And completed a $150 million equity.
Equity joint venture agreement with Madison.
These additions in our existing markets and Saint Louis Jacksonville, and Ohio extend our scale in each market with well tenanted properties that provides the opportunity to drive rental rates on renewal and generate incremental value.
They are a mixture of class a minus and class b properties and they are positioned to benefit from the strong fundamentals in these markets.
There are new markets, we are pursuing as well, where we believe we can obtain attractive entry points that look similar to our existing asset base.
Regarding the Madison JV, Jeff had some comments earlier on this but I want to reinforce how we are approaching this venture from an investment standpoint, I briefly mentioned the first acquisition we have under agreement.
For the last few years, we have seen a number of large portfolio transactions trade in our target markets have seen deals that are more value add or opportunistic in nature.
Not a good fit for the right at that time.
Now with Madison as a committed partner, we have the opportunity to push scale in our target markets.
An extent, we have not been able to do in the past.
For instance, our first opportunity is in Memphis market, we're very familiar with.
There we have under agreement 28 building 2.3 million square foot portfolio.
For approximately $86 million.
We know these properties very well and many of them are in close proximity to our existing assets in the market and Memphis was a tough industrial market with multiple demand drivers tied to logistics and distribution along with a strong manufacturing base.
This is more of a value add play in general as there are several properties within this portfolio that have some vacancy and will require some initial capex.
We expect this to close by year end subject to customary closing conditions.
As we look forward our pipeline is robust it's comprised of similar opportunities in class B, B, plus and some a minus properties in both existing markets as well as new ones.
For the most part they share the common theme being in locations, where having access to a skilled labor pool is important and where E. Commerce is creating demand for infill space close to urban markets.
Conversation with sellers, it's the same as it's always been in the deal.
Overall, industrial environment still fairly positive and leading to pricing stability and even some tightening in some situations. We are patiently taking advantage of the fragmented nature of the ownership of our type of product.
This is a good time to be invested in industrial fundamentals are strong and enduring for a multitude of reasons.
We have a number of opportunities to continue to grow the company in existing and new markets as well as opportunities to increase our scale with more value add and opportunistic situations with a great partner and Madison.
We look forward to reporting on our continued progress in the coming months.
So now I will turn it over to Jim Conway to walk through that leasing activity and portfolio operations.
Good morning as of September Thirtyth, we had addressed 82% of our leases that were due to expire in 2020. In addition, we have already addressed 29% of the forecasted 2021 explorations.
During the third quarter 16 leases commence totaling 408000 square feet.
This amount 242000 square feet was for leases six months or longer which was comprised of 102000 square feet of renewal leases and 240000 square feet of new leases overall, we had a 14% increase in rental rates on a cash basis over prior leases with duration over six months.
During the nine months ended September Thirtyth, some leases for space totaling 2.5 million square feet was either subject to renewal or expired of this space 1.6 million square feet or 62% was renewed and 400000 square feet for an 18% was leased to new tenants.
Additionally, 200000 square feet I previously vacant space was leased to new tenants.
Overall for the first three quarters of 2020, we had a 12.1% increase in let the wage on a cash basis over prior leases with a duration of over six months.
Portfolio wide occupancy.
September 30 was 95.5%.
About 40 basis points from Q2.
Mainly due to filling vacant space had a precise facility in Columbus, 20 basis points and the impact of the Q3 acquisitions, another 20 basis points.
Overall, we have seen a net negative 360000 square foot absorption during the year to Q3, resulting in a 1.7% increase in vacancy rates of properties. We held at the end of last year.
Factoring in the 2020 acquisitions, though the overall vacancy dropped to 1.1%.
The current vacancy includes.
340000 square feet that is being repositioned to four locations that are going through major renovations.
Excluding that space would bring our occupancy rate up to 97.2%, which would be 60.
Basis points higher.
And it wasn't the end of last year.
Included in the reposition space is 80000 square feet.
Which we received 565000 and lease termination fees related to move outs in Q1 and Q3.
The majority of our remaining 2020 scheduled expirations, which is down to less than 1% of our space are expected to renew.
We are forecasting positive absorption during Q4 with 60000 square feet of leases commencing in space that was vacant during Q3.
We continue to have minimal impact on the core operations of our plus.
Well, it's a little rate, it's related to COVID-19, and the feedback from our tenants has been positive and maintaining that business plans and our facilities.
10 31.
We have collected 99.1% of our rents built during Q3 and if you factor in our executed.
Deferrals apparel, especially when collections that 99.4% for the quarter October has seen.
And 97.4% Rick Rick collection, we had months end and there is there were no deferral agreements for the month.
Our focus now turns to the upcoming 2021 explorations.
Initially, we had 4.1 million square feet or 19.2% of the current portfolio slated to expire on 2021 to date, we have already addressed the 1.2 million square feet or 29% of the scheduled expirations.
You have a lot of activity in the works, including extensive marketing efforts at 3500 Southwest Boulevard facility in Columbus with stone crop will be vacating in April.
We have been working with several interested parties and have worked out plants are still comfortable fight really access to prospective tenants if required.
In an effort to continue to refine our disclosures related to our properties what to highlight that we've added a few statistics to a quarterly supplemental about composition of our portfolio. We now have a breakdown of our leased.
Square footage.
By lease incentive type as well as tenant size.
What these schedules show is it <unk> is how concentrated we are net leases and also when multi tenant buildings.
And as we look at at least can you segmented by size, we see that leases smaller than 10000 square feet, we seem to be the size. Most investors are concerned about only account for a 5.5% how about total in place plus uncommenced annualized base rent overall, you have a very strong.
Well tenanted portfolio with great diversification.
This point I'll turn it over to Dan to discuss our financial results.
Thank you Jim.
We posted strong third quarter results. Despite the near term headwind on same store NOI that we discussed last quarter.
We're making progress on releasing some vacancy in the same store portfolio burning off the free RAC from some of those leases.
Consistently high rent collections within the portfolio and the leasing momentum we've sustained not to mention the continued execution on our acquisition opportunities gave us the visibility and the confidence to reinstate our full year guidance. We also made significant progress on our balance sheet and August just got each of those in more detail.
First let me cover a few items of note for the quarter.
Significant year over year acquisition activity drove revenues ally.
Don Murray F. all at fault.
We had only a partial month contribution from $51 million of acquisitions completed in Q3.
The impact in the quarter.
FX Oh, after Oh available for share and unit holder or 42 cents and 38 cents respectively.
After the impact of the additional shares in a decline in same store NOI offset the impact from the office acquisitions well.
We're also requires a record $311000 noncash impairment.
Related to the carrying value.
On the right of use asset associated with the primary lease on our primary headquarters office, we have more detail on this impairment in the footnote on our kind of our 10-Q and they're already several days have already been in the reporting season, but it is a classic gap requirement leading to some headline confusion.
Adding back the two cents of non cash charge to reflect actual operations for the quarter, we've gotta yield at 44 cents and Oh for the quarter.
While down sequentially from Q2.
In a in the quarter increased year over year GE two additional professional fees and also for occupancy costs. As we were doing we would transition to our new office at 20 Cocky How street in the subway agreement there were to be executed for our prior space was being delayed.
Okay due to the Corona virus concerns at the sub tenant.
DNA includes approximately 324000 noncash expenses, representing amortization of stock compensation. This is an adjustment to a oh and approximately $154000 non cash expenses related to the occupancy time.
During the quarter, we raised approximately 104.5 million and net proceeds from our equity offering and with this offering we were able to make substantial reductions in our leverage and expect that we'll be able to operate with a lower assumption of leverage than in years past when applying those proceeds to acquisitions.
We are assuming we will deploy these proceeds with 40% leverage.
The 50% to 55% leverage from previous offerings.
At quarter end, we had nearly 80% of our debt in place we fixed interest rates at approximately 4.1% for the next two to eight years.
Bowels represents borrowings outstanding on our term loan.
Interest rate at September Thirtyth of 2.41% there were no borrowings on our credit facility at quarter end as we used 70 million, our offering proceeds to pay it down to zero.
Well leverage as of September Thirtyth was 40.8% based on debt to gross asset value compared to 49.7% at the end of the second quarter.
Our net debt to annualized adjusted EBITDAR was 5.9 times and 8.2 times. When you include debt and preferred stock.
These are down from 6.3, and 9.5 times, respectively from a year ago.
This is a meaningful reduction in leverage our goal is to bring our net debt plus preferred down by two to three times leverage over the next few years and this recent offering gives us the opportunity to take a turn or two off leverage.
Over the next year or so.
As of November 5th.
We had approximately $12.6 million in operating cash plus operating expense escrows for real estate taxes and insurance totaling approximately $7.7 million. In addition, we had availability under our line of credit of $111 million.
Consistent with our previous statements, we took care of our only material debt maturities until 2023 subsequent to quarter end, we closed on a new $300 million unsecured credit facility led by key back.
This was comprised of a new $200 million revolving credit facility and a new $100 million wont richer and 2024 and 2025, respectively.
In addition to substantial increases in availability, we continued to bring down our borrowing costs with a 50 to 55 basis point reduction in our pricing makers.
We were also able to negotiate a sports facilities on an unsecured basis.
Unsecured structure that gives us greater flexibility and efficiency going forward and is a major achievement and strengthening our balance sheet.
Jim noted earlier, so we've done a great job on collecting our rents with occupancy remaining stable and leasing momentum continued.
With the ability to grow up 99% of unless the last three quarters any improved visibility of our acquisitions and in capital markets. We have decided to reinstate our full year 2020 guidance for.
For the year, we are now expecting ECA or to be in the range of $1.83 to $1.85 per share and unit outstanding if we add back the two cents associated with the recent government I noted earlier that would be $1.85 to $1.87.
After all we are now anticipating $1.65 to $1.60, 7% annualized dividend payout of only 48%.
We have provided non-GAAP reconciliation in our earnings release and supplemental along with accompanying assumptions major assumptions include the completion of a $105 million of acquisitions before year end, which obviously will only have a small impact on the fourth quarter, our DNA associate associated with increased headcount.
To support our continued growth in professional fees and expenses for compliance and reporting along with lower recurring capital expenditures.
We are in good shape to execute on the opportunities Jackie and have described earlier and we've made substantial progress on reducing our leverage warmer ensuring access to capital to support growth.
As Jeff mentioned in his remarks. This has been a team effort as we have adjusted to working both remotely and onsite effort of our staff and the coordination of the various professionals is to be commended we'll.
I'll be happy to answer any additional questions on his commentary for and came away and operator, we're now ready to take questions.
We will now begin the question and answer session.
You ask a question do my press Star then one on your Touchtone phone.
It's scary using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
This time, we have a pause momentarily to assemble our roster.
Our first question is from Craig Mailman from Keybanc Keybanc capital markets go ahead <unk>.
Good morning, guys. Just one clarification the the April move out I think he said Stone Creek, how big is that.
[noise] I stone crop is 528000 square feet.
So thats going completely dark how what's kind of the underwriting assumption there on the backfill.
We only expect.
Like our assumption is it three months fake and we're already marketing the space were actually have waiting on an RFP right now.
Sewn crops working with us, they're basically shutting down operations, this month, and allowing us access to the building.
So if if if if we if we have a tenant sooner. We'll just we'll just terminate their leasing and moves the new tenant then.
Okay, great. Thanks, and then just moving to the joint venture Jeff could you, maybe just provide a little bit more detail about what type of threshold. There is further promote.
Timing of when you come into that that.
Opportunity.
And just also just kind of.
I guess a bridge the gap here you guys are trying to lower leveraged to 40% of incremental but you guys are using about 65% of debt in the JV can you kind of reconcile that for us.
Sure.
Yeah, I didn't get the first part of it you talked about timing I don't know, what you're referring to sorry.
Of the promote like when when do you guys would what triggers would promote kind of what's the threshold from a return perspective, just a little bit more detail on just how you know easy that that hurdle or difficult may be for you guys to hit.
Right. So I mean, obviously, we don't really envision too much of the promote on a cash flow basis right. I mean, if you cash flow gets up to.
15% on our equity will work will be in the promote but we're.
We're not we're not we're not underwriting that necessarily for us and our model, but and you have a.
No that's right that's right that's accurate I'm not going to hold what a lot of detail but.
We're we're.
Timing is a little bit unknown, because we don't know until we actually.
Well the properties. So we're just in the beginning stages of this.
On on that but but the thresholds are the first promote kicks in at 12%.
<unk>.
For us and will will increase not to be cryptic here. We did just that we prefer to get the details out when we actually close on the property in case anything changes you know you've got the structure of the JV, which allows for the asset management fee. It allows for you know a promote structure to us.
Now that could be tweaked right as is as the deals come up and we close on a deal. So we just.
On purpose, we just didn't put out a lot of detail on the met this property. There are things that we could be working on behind the scenes that would affect that deal. After we close.
Hypothetically you could sell off a building and the things that could go on that could change it right up until closing. So we just we just didn't want to get out ahead of ourselves and give all these detailed that could change we really don't think much it's going to change, but we're just trying to be conservative, but that's helpful. That's it.
So there's no blanket promote it's it's deal by deal that promotes can change.
You know what I'm, saying is that the JV has been negotiated so that we have our asset management fee and we do have a promote that staggered based on return metrics, what I'm, saying is that that's not good writing that solid that there has been negotiated but depending on a deal by deal comes in we need to change it a little bit and tweak it worse.
Only happy to do that can be flexible.
We don't envision that to happen, but it certainly could natus is that type of a partner.
Okay, and then just on the leverage.
In the JV versus kind of on balance sheet.
The decision there to use the higher.
The higher Ltvs.
Yes, we believe that the slightly higher leverage on the JV level is beneficial and at the time, if we ever got to the point, where we exercised their right of first offer on that is built into the JV agreement, we would revisit the leverage basis for that particular property based on the value at the time of the transaction.
Okay, Oh look through basis felt as if the JV gets the full <unk>.
For 30 kind of what do you think.
What do you think the impact could be if you guys. You know can you every deal at 40% kind of whats the net impact of that higher leverage on that because it's it's you know it's significant relative to the size of the company today, a full full investment right.
Yeah, I mean, it seems it's 20% of the equity right. We have 20 people would take 20% of the debt.
Correct.
Our proposition is 20% and obviously looking at.
On the road a it doesn't automatically mean that a if.
The investment were to be liquidated and sold it doesn't automatically flow back to permit there could be going to an independent third party and therefore your returns are completely separate.
Okay and then just one last one for me as you guys think about you know the two buckets of.
Value adder or too big for our balance sheet is there any different difference in return threshold you guys would want to go into the JV versus.
Keeping on balance sheet.
Yeah, I mean, I think I think by definition.
These deals are going to be higher I ours.
Right now the goal is to sell it.
I didn't catch your eye or I mean, that's what all the private equity partners want right. So.
Yes by definition of value add anything that's kind of opportunistic that the re can't do is you know this particular deal Memphis is there's a lot of capex and not capex needs to be managed correctly.
Overtime and there were some leasing to do there's some role there's as I said its potential to rejigger the portfolio a little bit and that's all going to create you.
Pretty good returns good I ours.
That.
You know are different than what's in the riet necessarily.
Is there like a target like two or 300 basis point premium for taking on the value add risk at that scale or is it just.
No.
Higher Capex just goes into the JV automatically.
Great Pride here I'm very general our target I are ours, and the JV or kind of in the mid teens, where as you know and the rate you would expect that to be a little bit less.
Awesome. Thank you guys.
Thank you Greg.
Our next question now so this is from garage not <unk> from National Securities Go ahead.
Yeah. Thanks, good morning.
Following up on JV I was hoping for a remote to provide any color on where Memphis acquisition that's under contract.
How is that being sourced what's gonna vacancy are you guys looking at and what the initial cap rate on that on that acquisition.
Yeah, we haven't closed on this deal yet.
We expect to within the next 30 days at that time, we can we can provide more more specific information.
Yeah grab we just don't want to get out ahead of ourselves and start modeling things. You know have you guys spent all the time on it the deal might get tweet right.
Yeah, we just don't seem to be not really superstitious around here, but we just don't think yeah, we're still tweaking some things, making some changes and as they said something could happen right. After closing that might change the dynamics I don't really want to get into it Oh.
Open call.
Yes, no that's up there and I guess you know as you guys are sourcing acquisition for the JV, how involved is Madison and in children's dog sourcing those deals.
Well.
I didn't hear the last part, but I just heard about sourcing or how involved we work together we're <unk>.
But that that that's why they have us I mean, that's the their third international capital provider and I think if you look at the press release run decrement is the president.
Of the firm and has expressed.
You know.
To the world that he believes in the plumbing platform as I mentioned on the prepared remarks. They are one of our largest common stockholders as well. So we you know.
Don't think we could have found a better joint venture partner, whose interests are aligned with the right.
Across the spectrum.
So we look at this as a win win but beyond that that's that's where we're doing this and you're not hopefully that's not get lost is that these deals are in our markets. They come to us they had been coming to us.
You know we've got people on the ground in some markets and we want to take advantage of that and provide you know opportunities for the week.
You know I mean, I think think about bringing a this particular portfolio into the wheat in the future you know there's no transaction costs, we've already been managing it I mean, if we if we decide to bring in a joint venture property I think you can rest assured that that well.
Were 110% on board on that property, if we bring it.
Okay. Thank you that's all I'm fine. Thank you.
Our next question is from Barry, Oxford from D.A. Davidson go ahead.
Great. Thanks, Dan I think this is for you how should we think about your bad debt expense going forward.
Say that again very pretty hard bad a bad debt expense going forward okay.
We think we've got a relatively under <unk>.
Really under control I think our experience I'm on bad debt has been minimal.
Right now we just don't have much at all I mean, that's as of right now and I think we touched on it any of these deferrals and we're collecting.
99, plus percent of our of our of our rent.
Right.
Hi, Jeff went went when would those deferrals.
The fully collected by you know 331 or 630.
Yeah as it at this point I believe you know we've already collected well over 50% of the deferrals and we expect to have significant portions of that collected by year end with only a handful.
Sliding into January and February of next year.
Okay. Okay. So so you'll have full collection fairly quickly over the next few months.
Absolutely yes.
Yeah, Great Great and then just you know Big picture question from you know an acquisition <unk> pricing over.
Over the last few months have had there been any real changes in a cap rate that my guess is if anything they've gone down and then second the volume of of inventories that you guys are seeing for sale has that changed over the last couple of months.
Yeah Barry.
Your first first question first question first regarding yeah, yeah, it's rehab.
We have we have seen cap rate compression in the last few months, they're not just from the <unk> and the and the primary markets, but we're seeing some in the in the secondary markets.
And you know kind of any anywhere from you know tend.
10 to 50 basis points, I think we see that more and single asset.
Properties versus multi tenant where there's been minimal change and and the cap rates, but but naturally you know each market is different.
And that's.
You know that's why we do what we do we we yeah were working in a very fragmented marketplace as you know, but but as a general comment we have seen some some some some compression has lot of capital chasing industrial these days for older. She's in such that you know.
Right.
So volume of deals <unk> did have a little I guess in the summertime and and their code that didn't help that but since labor day, we've definitely seen a tick.
Pick up on 'em on the amount of deals that have surfaced in the market. So.
It's still a it's quite active I can tell you right now.
I and our team our where we're busy 24, seven calling through through a fair amount of deals in our pipeline is over.
Over $360 million right now and we're busy so it's that's a good sign.
Right no great I, just want to make sure they should not for you guys to look at yeah.
Perfect. Thanks, guys appreciate it.
Im sorry.
Our next question is from Congress survived ski from Banbury God.
Everybody. Thank you for having me on the call first question Little high level I'm seeing some reports.
Showing a restriction and shipping capacity as we approach the end of the year into 2021 and I'm. Just wondering if there are any conversations with your tenants and related to that and if you think this could affect leasing going into next year.
Jim you got any insight to that.
We have not had any conversation about restrictions with our tenants and.
And we do not see hey, slowdown in leasing going into next year, we're already working on.
Yeah. The majority of these first half expirations with with tenants.
Okay. Okay, and then and then one other just on dispositions and I'm wondering if you're seeing any opportunities out there to engage in some capital recycling into 2021, maybe use that as a way to bring down leverage incrementally.
Yeah, I mean, I think first off we're bringing down leverage you know were 300 plus million dollar market cap, we and I don't think theres another read in our universe that as the leverage profile we have.
We have a significant spread between the cap rates, we buy and where our leverage is sub 3% on our on our facilities.
Look at where our net debt to EBITDA projections are.
You know.
Got sub sub seven you know could be low sixes.
You know.
That we don't see any issues with that you look if you look at where our gross assets are worth and look at where our leverage is.
You know sub 50% on that and we'll continue to drive that down over time because of the spread that works.
Selectively there are certain dispositions you.
I will.
The track record out there in the retail space that is very bifurcated.
Where you have people that have you know tried to go out and sell their higher cat property to go by low cap properties, sometimes it works a lot of times doesn't work. Our focus is yeah. We've got capital to deploy so recycling capital Olympic is really a big issue, we could yeah lots.
Things, we could do you may see some select sales of properties, we review that all the time.
Our.
A lot of our properties are generating 14, 50% on cash.
So I'm not so sure anybody in real estate business is going to be able to do that you know the next three or four years is to recycle that into that type of property.
So we've got good properties, they're not obsolete good cadence, we think they're going to renew that's part of our business, where it's one of our strong points is the ability to.
You know.
Forecast for the most part who's going to renew who is it.
And we think that that's going to work out really well for us. So if we were at 15% on cash we think we'll be going up to 16% to 17% on cash.
So it's kind of a long winded answer that we think the leverage is great and you certainly could see some select.
Some select sales.
What happens a lot of times its owner users would kind of approach us and want to buy out a facility. They seem to be their return thresholds are a lot different than other people. So they'll pay a lot more money for a property.
Especially if they're using it or if they're going to they're going to put a significant capital into the property or what have you.
So you might see some of that happen with us.
Okay I appreciate the color there that's all from me. Thanks, guys. Thank you.
Our next question is some day for I guess from Baird go ahead.
Hey, guys Nick on for Dave I, just had one quick question. Thanks for that clarity on the stone crop property, but I I think we've talked in the past for mast in chain. It's a 20 June 2021 exploration I think you guys mentioned that it's been like sublease that you guys are hoping to go direct with one of the comments there I just wonder if you guys.
So any updates there.
So the masses and can't space is roughly 350000 square feet expires in June they have to space fully sublet to two tenants one of which we've already done a seven year deal with once once accessing came expires for 172000 square feet.
And the remaining square feet is with a tenant that wants to.
Do at least with us and they did but they want to wait until the beginning of the year.
They also because they are not sure exactly what size. They want they may take on to another piece of the building as well so they can be it in 170 to 300000 square feet.
Okay, great. So we've got so we could have done and the other half is still in the works.
Okay.
Right.
This concludes our question and answer session I would now like to turn the conference back over to Jeff well for closing remarks go ahead.
Thank you Kate Thank you all for joining us this morning as always we're available for follow up questions throughout the day, and we'll talk again too. Thanks.
The conference has now concluded. Thank you for todays presentation you may now disconnect.