Q2 2021 Plymouth Industrial REIT Inc Earnings Call
Good morning, and welcome to the Plymouth Industrial REIT second quarter 2020 of them on the earnings call. All participants will be on muscle only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then 1 on your Touchtone phone to withdraw your question. Please press Star then 2.
Please note. This event is being recorded on now.
Let's turn the conference over the Tripp Sullivan of SCR partners.
Go ahead.
Thank you good morning, welcome to the Plymouth Industrial REIT Conference call to review the company's results for the second quarter of 2021.
On the call today will be Jeff Witherell, Chairman and Chief Executive Officer, Pen White, President and Chief investment Officer.
Dan Wright Executive Vice President and Chief Financial Officer, Jim Connolly Executive Vice President of asset management, and Anne 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 website the law.
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 August 13th 2021.
The numbers to access the replay of 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 August 6.2021, it will 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 future dividends and financing activities.
All forward looking statements represent plymouth's judgment as of the date of this conference call and are subject to risks and uncertainties that can cause actual results to differ materially from our current expectations at.
Investors are urged to carefully review various disclosures made by the company, including the risk and then and the other information disclosed in the company's filings with the SEC.
We will also discuss certain non-GAAP measures, including but not limited to core as debt though.
The handset, though and adjusted EBITDA definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in our filings with the SEC I'll now turn the call over to Jeff Witherell. Please go ahead.
Thanks Tripp good.
Everyone and thank you for joining us today.
Our strong performance in the second quarter is a combination of having a great team and the relentless focus on operations.
Our leasing and asset management activity combined with the strong rental rate increases have led to continued growth within our portfolio.
We have expanded our scale in our targeted markets have an improving balance sheet and have a robust earnings outlook. We will discuss some details on our progress in each of these areas. This morning.
Let's start with our portfolio of staff at quarter end, we noted on our last call debt. This quarter would look a lot like Q1 and that was definitely the case.
Occupancy was 96, 2% cash.
Cash re leasing spreads were 7%, bringing us to 9% through the first half of the year.
Collections were at 99%.
<unk> and <unk> per share are in line with our forecast.
We continue to trust our processes and believe our heritage as real estate operators combined with our longer term approach to value creation will continue to reward our shareholders.
Acquisitions will continue to be our primary method of inorganic growth and Penn will discuss our buildings acquired to date as well as the increase in our acquisition targets of the year.
I want to spend a few moments on development as it is a natural extension of our skills across the teams and can complement that acquisitions growth.
We are deploying our capital in a measured and disciplined fashion to unlock the developable GLA within our existing portfolio. Our updated disclosure on page 14 of our supplemental will help track our progress on this front and within the markets, where we are pursuing these opportunities.
I noted last quarter that we'd begun redevelopment at our $1.1 million square foot Fisher Park building in Cincinnati, having already reconfigured tenant layouts to increase marketable space by 40000 square feet and commenced construction on an additional 58000 square feet. We've now expanded that reach.
Development to a new total of a 150000 square feet that should generate of projected cash yield of 14% on our $4.1 million dollar of investment.
We aren't using any of the 30 additional acres yet at this property. We are creating this 150000 square feet of new space by installing floors over the open crane pits left from this building's legacy as gm's iconic manufacturing facility.
As noted on page 5 of the supplemental we continue to make progress on our 70000 square foot ground up development in Portland, Maine, We broke ground during the second quarter and we're expecting to complete shell construction in December 2021 at a cost of approximately $7.2 million.
We continue to be in discussions with potential tenants to take this space. Our targeted returns to this development are in the high single digits.
Moving to Atlanta, we expect to break ground on a new 240000 square foot industrial building during the fourth quarter. This building will be constructed adjacent to our existing building that is currently of 100% leased and based on existing absorption trends in rent growth within this sub market. We are confident there.
Will be strong demand.
The cost is anticipated to be between $12, 8 and $13.2 million with the targeted return again in the high single digits.
In Jacksonville.
It's another market, where we have continued to actively explore value creation opportunities and have identified a 180000 square feet for potential development within 1 of our existing business parks.
With the infrastructure already in place and this part we should be able to accelerate our plans. There if per permitting proceed as planned we will have a better update for you on our third quarter call in terms of timing and development cost 1 last point to make on Jacksonville. This is an opportunity that has arisen due to the <unk>.
<unk> taken in the local knowledge of our team on the ground there.
In addition to the Jacksonville office, we are intentionally supported our increasing scale in markets, such as Columbus, and Memphis with regional offices. The latter of which is now fully staffed a local present presence is inappropriate for every market, where we have substantial scale, but we do see these as a competitive advantage for us.
In terms of asset management property management leasing and deal sourcing.
We have made some of our greatest strides on the balance sheet as Dan will describe later, we have continued to bring down our cost of capital with expanded borrowing capacity on an unsecured basis and successful execution of our ATM program to match fund our acquisition activity, we have strong support from our banking group.
And have been able to expand that support with the largest syndicate and create options to latter our upcoming debt maturities.
Our top priorities for the balance sheet or to ensure that our dividend is well covered our leverage profile continues to improve and that we have access to multiple sources of capital the dividend remains well covered with an annualized payout ratio of less than 50% on core <unk> and 58% on an <unk> base.
On our full year midpoint, while leverage ticked down this quarter due to the timing of the ATM activity. The higher net proceeds we are receiving from this program has enabled us to substantially increase our full year acquisitions target, while the affirming our full year guidance and our target of approximately 7 times net debt to adjusted EBITDA by year.
Fred.
With another quarter in the books, we are focused on maintaining our leasing momentum executing on our acquisition and development pipeline and efficient property operations. The industrial fundamentals are strong in our markets and elsewhere. Now is the time to on industrial buildings from the first mile to the last mile and we're capitalizing on the opportunity.
These that can provide the most embedded growth and extend the platform that we believe is incredibly difficult to replicate in our markets.
And why don't you walk us through our acquisition activity.
Thanks, Jeff Good morning, everybody, we continue to be very active in increasing our footprint within our existing markets, where the total of $91 million and acquisitions completed the year to date.
We have another $85 million of properties under contract that are expected to close in the coming weeks.
Based on that pace and the composition of our pipeline, we have increased our full year target once again to $280 million in wholly owned acquisitions for 2021.
After adding to our presence across 5 of our Midwest markets in the first quarter our portfolio additions from the second quarter and through July we're focused in Memphis and St. Louis.
And so on Louis we acquired a 150000 square foot property fully leased for $8.8 million or <unk> $57 per square foot at an initial yield of 6.7%.
We added some color on this multi tenant industrial property on page 4 of our supplemental this acquisition brought us to over 1 million square feet in St. Louis and will give us an opportunity to leverage our leasing capabilities there.
The Memphis acquisitions were completed in late June and throughout July and represented a total of 625000 square feet.
That brings us to $2.4 million square feet of wholly owned properties and Memphis. In addition to the $2.3 million square feet owned is true the Madison joint venture.
The first was the single tenant industrial building that is 100% occupied.
We acquired the 75000 square foot building for $5.3 million, an initial yield of 7.0%.
While on the smaller side recall that in our previous commentary on Memphis, there of strong tenant demand there for buildings of the size.
Also in Memphis, we acquired of 230000 square foot multi tenant industrial building, 87% leased 49.9 million and an initial yield of 7.7%.
We have not assumed any lease up on the vacant space in the first year. So if we are able to leverage the activity in the market quicker than expected, we could see some upside to the projected yield.
And last week, we closed on a 317000 square foot multi tenant industrial building that is 100% occupied for $6.3 million.
At an initial yield of 8%.
This quarter's activity was consistent with our strategy of acquiring industrial properties at attractive yields while methodically building scale in our target markets.
At this point of year ago, we had only 2 buildings totaling less than 200 of thousands square feet in St. Louis now, we've reached 1 million square feet across 8 buildings and we.
We'll be expanding there again in the third quarter and.
And in Memphis, while we've made our biggest sleep with the Madison JV, we've increased our wholly owned portfolio by 1 third in the same timeframe.
The added scale and Memphis has enabled us to create a local office there as Jeff mentioned earlier and it has also helped us source of additional acquisition opportunities.
The 2 buildings, we have under contract in St. Louis and Chicago are good examples of local scale, leading to new opportunities. These acquisitions are under contract and expected to close during the third quarter subject to customary closing conditions. There. Both the single tenant buildings that are 100% occupied and will represent of total.
Of investment of approximately $85 million.
At ingoing yields consistent with our targeted range as of mid 6% to mid 7%.
What we've added to our portfolio of the last several months of what you might call classic Plymouth properties.
<unk> been acquired 1 off at attractive initial yields with the balance of stabilized cash flows and lease up as well as lease renewal opportunities.
They have also helped us fill in where we have existing clusters of properties.
The methodical approach to scale up in markets experiencing strong rent growth.
Positive absorption and limited institutional competition is creating solid value.
While this focus on singles and doubles comprises the largest share of our pipeline. We continue to actively explore smaller portfolios within our markets and the larger transactions such as the 2 in St. Louis from Chicago.
We look forward to reporting on our additional investment activity next quarter.
I'll now turn it over to Jim to walk through the leasing activity and portfolio operations.
Good morning.
Through the end of July we had addressed the 81% of our leases that was scheduled to expire during the year.
This is comprised of $4.9 million square feet scheduled to expire in 2021, including adjustments for acquisitions in early terminations of.
Of that amount $2.5 million square feet has been renewed $1.5 million squeeze square feet has been leased to new tenants, leaving 900000 square feet that still needs to be addressed during the remainder of the remainder of the year significant progress has been made on leasing the space and many leases of nearing execution. In addition.
We have leased 210000 square feet of space that had been vacant at the start of 2021.
During Q2 and year to date, we saw rental rates increased 7% and 9% respectively on commenced leases over prior lease rates on a cash basis during the quarter, we saw rents increase higher than anticipated, including leases negotiated for subsequent subsequent quarters.
Therefore, we expect to be well within our guidance range of 8% to 10% for the year.
Portfolio wide occupancy at the end of Q2 was 96, 2% down 40 basis points from the end of Q1 the vacancy within our portfolio included 540000 square feet that is being repositioned at 4 locations.
Figure increased this quarter due to the inclusion of the 300000 square foot building in Chicago that is going through some upgrades prior to releasing.
Excluding the reposition of square footage occupancy rate would've increased to 98, 4%.
Efforts at these locations are beginning to show benefits, 50% of 140000 square foot per.
The in Chicago was leased in April and we have active prospects for all of the reposition vacancy.
Through 731, we have collected 99, 7% of our ranch built during Q2 and 98, 5% of the rent for July.
1 small went to flow was issued during Q1 debt will be paid back by the end of the year.
It has been a busy year through July with 113 leases executed related to 2021 explorations and prior vacancies totaling $4.2 million square feet.
In the digital 24 leases totaling 830000 square feet has been executed for leases expiring beyond this year with many more of leases nearing execution.
These numbers reflect the high level of performance that limits asset and property management teams are delivering.
So that we are well positioned to meet our leasing and management requirements long into the future at this point I'll turn it over to Dan to discuss our financial results.
Thank you Jim first I would call your attention to the supplemental information filed earlier, which provides more detailed disclosures. In addition to those referenced in these prepared remarks.
Looking at our second quarter results, our key metrics were in line with what we projected namely the core of <unk> and <unk> will be similar to the first quarter.
Core <unk> was slightly higher at 41 per weighted average common share and units and <unk> remained at 32.
Notwithstanding a 7.5% sequential increase sequentially in the weighted average share count.
Same store NOI increased 2.6% on a GAAP basis with the same store NOI on a cash basis decreasing 1.6%.
This inversion between GAAP and cash same store NOI, primarily reflects the impact of free rent disproportionately impacting the second quarter offset for the balance of the year.
Specifically free rent for a new 500000 square foot 10 year Triple net lease previously of gross lease more than double the average quarterly run rate for free rent to approximately $800000.
On a full year basis, we anticipate having total free rent in line with the average annual rent.
Including the Spike in Q2.
As noted in our earnings release, we have again affirmed our full year 2021 guidance ranges for net loss core <unk> and <unk>, while adjusting the underlying assumptions.
The main drivers for the exchanges or the anticipated increased acquisition volume and the higher share count from the ATM activity in the second quarter and to date in the third quarter.
I'll briefly touch on several of these assumptions.
Acquisition timing remains the primary factor in the quarterly cadence for the back half of the year.
With $91 million completed through the end of July and another $85 million under contract for closing in the third quarter, we will see the sequential ramp up in the third quarter and again in the fourth quarter.
With an additional 110 million projected for the full year, we will not see the full impact from that activity in the fourth quarter, but it will set the stage for of solid run rate heading into 2022.
The impact of strong leasing activity for both renewals and new leases as Jim discussed.
As our full year guidance implies.
We've been able to match fund our acquisition activity with our ATM.
Year to date, we have raised $107 million through the ATM with steadily improving pricing and have been able to put it to work that capital raised when combined with the assumed acquisitions should keep us below our target of 7 times net debt to adjusted EBITDA at year end.
The higher weighted average share and unit count from the ATM activity now assumes that we will be at $30.7 million shares and units on a weighted average basis for the year.
As of today, we are of a total of $32.4 million common shares and units outstanding.
As we look at the balance sheet, we continue to achieve our leverage targets and bring down our cost of capital with strong execution on the ATM program and further reduction with the recent commitments from our banking group for an expanded unsecured credit facility on attractive terms, our net debt to EBITDA.
At quarter end was 6.2 times, which is lower than we had anticipated for this quarter due to the ATM activity and the timing of acquisitions, but we are still on track to stay below 7 times at year end.
The composition of our balance sheet continues to improve with 33% of our debt unsecured with the rate presently under 2% from 67% of our debt with fixed interest rates.
That is likely to change a bit during the second half of the year as we put in place our expanded credit facility that is anticipated to close by the end of this month.
We have secured commitments to expanding existing unsecured credit facility of $300 million $200 million of our revolving line of credit and $100 million term loan presently to $500 million with the addition of a new $200 million turmoil with the accordion provisions that would increase the total.
Borrowing capacity to $1 billion.
The modifications to the existing credit facility and the expanded capacity reflect decreases in costs with the rate spread reductions to LIBOR.
The zero based floor versus 30 bps presently and reduced margin of 130 to 190 basis points, which is an improvement of 10 to 15 basis points to the existing structure.
The existing $100 million term loan that matures in October of 2025, we will have an extended maturity date to 2026 day.
The incremental new $200 million term loan will mature in 2027.
When combined with the utilization of our ATM program. The expanded facility will give us significant flexibility for future growth opportunities with well lettered maturities and improved borrowing costs.
Our liquidity position remains strong as presently we have $13.4 million of cash on hand, plus an additional $11.3 million in operating expense S growth and of 132 million of.
Of capacity on the revolving line of credit.
Operator, we're now ready to take questions.
We will now begin the question and answer session to ask a question on My Press Star then 1 on your Touchtone phone.
You are using a speakerphone please pick up your handset before pressing on the keys to withdraw your question. Please press Star then 2.
Our first question today will come from Dave Rodgers with Baird. Please go ahead.
Hey, good morning, everybody. Thanks for all of the added color. This quarter wanted to ask about just the broader acquisition pipeline you've done a great job of obviously growing it through the first half of the year, adding some office has probably helped but can you talk about the depth of that pipeline as we look out even a little bit further than just the third quarter and into the fourth and can you talk about kind of.
Titian that youre starting to see for these kind of 1 off assets is that picking up are just hearing more and more rumors in discussions about the tougher competition out there.
Sure Dave <unk> here.
We have we've always maintained a pretty a pretty robust pipeline right now it hovers around $600 million worth of deals that we're currently in various stages of of analyzing so we feel very very good.
Confident about achieving our renewed goals for 2021.
The competition is out there it always has been.
I think theres less competition for the singles and doubles that we pursue obviously more competition for some of the portfolios that we have.
Monitor we've.
We're not doing deals just for the sake of doing deals on which sometimes we walk away from deals.
But we're very very comfortable with our with our pipeline right now and and.
I mentioned looked.
We look forward to achieving our acquisition goals for the rest of the year.
Great and then maybe just the second question I wanted to maybe peak if we could into the 2022 year in terms of any major explorations that we should be looking forward. The it's a pretty decent sized year of expirations for Plymouth overall, and so just wondering if you guys have any early read on on any tenants we should be watching.
Or any early successes that you've had either way.
Yes, there is a few.
A few of larger tenants that are going to expire, but we've been working with them.
For instance, we have 1 that's leaving the <unk>.
January of 200000 square feet of already found the replacement tenant for that space and we're working to the termination deal to move those people in.
We also have another.
We're 1 of roughly about the same size during the middle of the year of which we're doing the same thing we're going to have somebody moving early.
So basically if someone's leaving.
We find out in advance we find a new tenant and then we work of termination agreements. Some of those those explorations will be will be largely reduced by the end of this year.
Subject subject, obviously to it not happening David right.
Clear.
Just to be clear.
Well it sounds good that you're finding replacement tenants.
The other 1 but just.
Obviously, it's the kind of doesn't square feet in total there out of those tenants moving the bigger spaces would be are those tenants that have struggled with just a little color on those 2 particular tenants on all the yield the floor.
Not struggling the most of the what we're finding is tenants.
A lot of times 1 of them expand in general.
Business is good people want to expand and the movement to a larger facility and we because of the robust economy. We are finding new tenants right away that didn't need the space. So it's just a matter of where they are on the business cycle.
Alright Thats helpful. Thanks, guys.
Yes.
Our next question will come from Craig Mailman with Keybanc capital markets. Please go ahead.
Hey, good morning, guys.
Maybe just a quick 1 looking at the <unk> acquisitions here. It looks like you guys are all of the you are paying less of about 20 Bucks a foot for the 300000 square foot building in Memphis is there.
Capital, that's kind of need to be put into that building over time or what explains the lower cost versus what you've historically the mine.
Yes, Craig you're right there.
Obviously.
Acquired debt at a significant discount to replacement cost, but we are anticipating.
Some some capital into that the property.
I kind of call of that kind of a b minus property. If you will that will bring up to a b plus stage on the.
The tenant on there has got 2 more years left on the lease so that were taking a little bit of risk on that the renewal, but we feel we've underwritten that quite.
Well.
<unk> of our downside quite quite nicely on that so are we.
We like we like that do a lot of towards the other 2 deals that we closed on the Memphis and look forward to adding to our footprint there in the near future.
So does that get put on the readout of portfolio on 2 years once the tenant moves out or do you do the improvements with the tenant in place.
We will probably be doing it in place that's the.
That's the scheduled right now.
And then you guys had talked last quarter about cap rate compression in the portfolio deals kind of go on in the 6 cap range, but you've still been able to kind of source deals on that.
Uh huh.
7 to 8 cap range I mean has the comp has the.
The cap rate compression cooled off at all or are you guys.
Are these just deals that had been in the pipeline.
The 85 million under contract and the 600 million of our pipeline those cap rates of our compression could you just give us a little color on where yields are headed.
Yeah and.
Just to clarify when we talk about cap rates credit, especially when it applies to plummet.
The cap rate on it tell us 1.1 part of the story when we analyze deals we're looking at the.
Tenants, how long, they're there and the build in when their exploration data is how much capex there is.
There's a lot of metrics.
That go into analyzing the properties so.
We're still able to source deals.
On the 6 to 7.
The cap rate range.
Of them have.
The tenants that are paying below market. So you might have going on at a lower going in yield some or maybe even above market.
That would justify higher yields on the Capex therefore.
Higher yield solar.
That's just 1 metric out of out of multiple metrics that we look at but in general we're still finding.
Deals that are in our typical 6.5% of 77 quarter range. When it comes the portfolios as I said last quarter, we're seeing.
In our premium applied to portfolios, especially portfolios that might have assets in multiple cities the loss.
Of the portfolio it seems the.
Greater the premium.
2 of these days so it's.
It can be all over the map and it's kind of of our job too.
To sift through the deals like I said, we have $600 million worth of deals. We're looking at right now in <unk> and.
And because of that.
We're in a good position to pick and choose what we want to pursue.
Okay. That's helpful. But just 1 last 1 from me.
Jeff on the development side. It sounds like you guys are kind of doing bolt on deals on on adjacent to fully leased buildings.
How big at any 1 point do you want kind of dollars committed to development to be.
Versus.
Acquisitions or.
Any kind of metric in terms of kind of risk mitigation.
As you guys look to to increase the development activity.
Yes, Craig I think Thats, a difficult question to answer exactly what dollar amount.
At the moment in time right. So I think as we sit here now with roughly $8 million to be invested in Portland to be delivered in December breaking.
Breaking ground in Atlanta.
This fall.
For another $12 million to $13 million, that's not that's not.
That's minimal.
So I think I think as we go through time.
When you look and see if.
The Portland, we're getting a lot of traction up there right now on prospective tenants.
Existing tenants looking at the space as well requesting proposals same thing in Atlanta on 1 of our existing tenants was really the impetus for us to start that project.
We will see if we get them in the building. So I think it's going to just be part of the.
Of the continuation as we go each month on month to month.
As to how much we're going to put into the ground.
If there's no activity on these buildings.
You're probably not going to build more.
So I don't think of it again at the moment in time I don't.
I don't know if we have a dollar figure and we thought the thought to that.
Right and I guess, maybe another way to get out of it as you guys are doing it on land that's kind of gotten through acquisitions are you going to start to look at.
De Novo land sites.
That are outside of the existing footprints or kind of start to land bank accounts.
Trying to get on how big the development business do you want versus the.
Just the kind of blocking tackling on the acquisition front.
Yeah, I mean, I think it comes down to really just opportunity and we are never say never but we have no plans in the near future to go into some of these large development markets and start buying land and trying to compete with the other guys out of developing just not just we're finding.
The other opportunities right, we're buying properties as Penn mentioned, a good yields they require expertise with the.
Some tenant improvements and things like that.
We're finding better better value there, but if we can build at high single digit yields than that complements our strategy of what we're buying.
For existing product.
So again, you won't see us going outside of our markets land banking and things like debt now.
Now.
Opportunities present US won 1 in Florida is presenting to US now which is adjacent to 1 of our business parks there of land for sale. So we could get debt at the right price, but again, what's that link on the cost of $600000 on a <unk>.
750 million market cap again, we're just not going to be out buying lots of land.
Where it's contiguous where it makes sense, where we have guys on the ground that will continue to do that I think that thats great business.
Okay. Thanks for the color.
Thank you.
Our next question comes from Gaurav Mehta with National Securities. Please go ahead.
Yeah. Thanks, good morning.
Question on building the scale and Colombian markets, you talked about the same trend lines on.
And Matt.
I was wondering how you think about building scale is there any kind of cap that you have.
In terms of the home of exploring the launch of any given market and then on markets such as Boston and Philadelphia on 1 property out of those markets as well.
Total <unk> in the future.
Yes.
Good question a couple of questions. There I think the answer your first 1 of it.
Don't have a set cap per se in terms of.
If we decided to limit out on a particular market.
We do try to achieve some semblance of balance between the markets that we're in.
Right right now.
But we're it's.
As Jeff touched on earlier, we try to be opportunistic we.
Opportunities present themselves.
To us.
We certainly don't ignore them, whether they are in markets, where we've already scaled up considerably or in markets, where we haven't such as you mentioned Philadelphia in the Boston area.
But we are we are looking at opportunities in those markets will continue to do so.
And.
We're like I touched on earlier with the type of pipeline that we have where I.
I think we're in the.
On a good position to be.
We continue to explore opportunities in markets, where we have a lot of scale right now and those that we're looking to build the buildup.
Okay great.
Going back to the development I was wondering if you would comment on what kind of trends youre seeing in regards to the construction cost.
That's impacting your used it on.
Sure Yeah construction costs are up we all we all know that we see that.
We've seen somewhat.
Of the leveling off in our world.
As we talk about basically steel prices and things like that.
So.
But what what we pay attention to is.
Rents are going up.
<unk>.
At the same time.
So that's the balance I mean net.
That gets out of whack, you don't want to be developing and so we're certainly monitoring that across all of the markets that we mentioned in the.
In my prepared remarks, as well as in some of our supplemental information So places like Jacksonville, Florida Atlanta.
On a pure in new England.
Certainly in Cincinnati on the profit on the land we own there so.
But we do.
We're talking about.
Our fixed price contracts is what we're working on for development.
The builders that are.
Gonna do those for us.
The monitor steel prices daily and so we're locking in forward contracts on steel so that our pricing is not going to go up to us and catch us by surprise.
Okay. Thank you.
Thanks.
Our next question comes from caller Seversky with Brandenburg. Please go ahead.
Good morning, everybody. Thanks, Rami on the call.
Curious on the prepared remarks, as Youre expanding head count from those local offices.
Any idea of what or how this could impact the G&A ramp over say the next 3 to 5 years or.
Even on the higher level, what your head count needs look like at present.
Sure Conor this is Jeff.
A couple of things so our head count over the thing that was in our <unk> 39, 39, as we sit here today 12 of those 39 are in property management.
So in our local offices that property management head count.
In effect doesn't it doesn't hit our G&A.
We get reimbursed from tenants for property management.
And all of our leases basically have that in there.
3% reimbursement for property management, so as we've stated in the past we I don't know say, we wait we make money and property management, but we save.
We haven't done that the recent tally, but it's well north of over $1 million as far as savings is concerned for third party property management.
As we sit here today.
We don't see a lot of expansion.
In the property management team.
We feel kind of fill the holes.
And that's where we are there and at the corporate level, probably the same thing.
You'll see as we add properties, we will add <unk>.
That service properties, which would be asset management in the county property accountants, but as far as an executive level.
The administratively and so forth we're in good shape from that.
Okay I appreciate the color there and then on the OTW of Logistics District Centre, just noticing the square footage of the building as this is the largest asset we now have within the portfolio and is this kind of what youre going to be targeting going forward can we expect to see maybe a move towards some of these.
Maybe approaching the million square feet or more.
Somewhat atypical.
We have of 1.1 larger in Cincinnati Fisher part, but.
Youre going to see mostly.
Our bread and butter deals, where typically kind of on the 150 to 300000 square foot range.
Okay. That's helpful. That's all from me. Thank you. Thank you.
Our next question comes from Barry, Oxford with Colliers. Please go ahead.
Great. Thanks, Jeff just building on the development it looks like most of it is is spec right now would you entertain build to suit or the yields are not strong enough in build to suit of given where we are in the industrial cycle spec just makes a lot more sense because chances are I'm going on.
On a lease it.
Hi, Barry.
Yes so.
I think what you're saying makes sense.
Maybe in the broad sense, right where mhm.
But were specific so we've got our land is not out on the frontier. We're not we're not in the zone, where theres a lot of development. So.
The tenant whether existing tenants or new tenants they want to be in this location, we own the land and we can build the building so.
I actually think debt because we can build spec and we can get the rates, we're looking for in the spec market the.
Of the built to suit market theyre going to pay the same.
Okay.
It does yes, so that was all of the impetus for Atlanta was the 1 of the existing tenants wanted to expand the 1 real close by so what happens in this in this business as those tenants seem to think the kind of have you in.
The negotiated for awhile in the months roll by and you can kind of figure out of build to suit.
And then we decided to move forward and start building on spec and those tenants usually come up come around pretty quickly and start out for an RFP.
Okay. So it was kind of of hybrid maybe exactly.
Yeah, Okay no no the all all of that makes sense.
And then Jeff.
Geoff I know, it's hard to comment on the dividend, but if I'm just kind of looking at this just in my mind, 58% payout ratio and you look like you're going to have a strong run rate going into 'twenty 'twenty..2 there's no reason to think that 2022 wont be a good year.
Yeah.
Should I be thinking about.
The dividend increase.
Given the fact that you guys probably at some point start pushing the bottom.
The bottom end of the REIT laws.
Yes.
As far as payout right.
So I think it's good to think in terms of we're going to look at this annually.
So we're not going to be discussed on this every single quarter moving things around we have a great handle.
Dan and the team have a great handle on where we are from a tax perspective. So.
We don't really see a need to have to do anything from a tax perspective for the next couple of quarters. So.
But as you know we are big believers in why Reits were invented in the first place which was the dividend income so <unk>.
<unk> and that we loved the payout ratio, where we are I think we're 1 of the lowest out there and we've got a little work to do on the balance sheet and retaining that capital. We think is going to be very helpful. As we all of <unk>.
Book to possibly.
Removing some of these preferreds in the next year or 2 so.
I think we've got a great handle on it.
Perfect. Thanks for the color.
Thanks, guys.
Ladies and gentlemen, this will conclude our question and answer session I would like to turn the conference back over to Jeff with the URL for any closing remarks.
Great. Thanks, everyone for joining us this morning as usual we are available for questions and follow ups. So have a great day. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.