Q4 2021 Plymouth Industrial REIT Inc Earnings Call
Good morning, and welcome to the Plymouth Industrial REIT fourth quarter 2021 earnings call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your touch.
Tone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Tripp Sullivan of SCR partners. Please go ahead.
Thank you good morning, welcome to the Plymouth Industrial REIT Conference call to review the company's results for the fourth quarter of 2021 on.
On the call today will be Jeff Witherell, Chairman and Chief Executive Officer, Penn White, President and Chief Investment Officer, Dan Wright Executive Vice President and Chief Financial Officer, Jim Connolly Executive Vice President of asset management, Anthony <unk>, Chief Accounting Officer, and Anne Hayward General Counsel.
Sure.
Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our website, along with our Form 10-K and supplemental filed with the SEC.
A replay of this call will be available shortly after the conclusion of the call through March 2nd 2022.
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 graduate of today February 23, 2022, 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 law, 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.
Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the SEC.
We also will discuss certain non-GAAP measures, including but not limited to core asset so anti Boe and adjusted EBITDA are a 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, Trevor good morning, everyone and thank you for joining us today by any measure I think 2021 was a very good year for <unk>.
Before I get into the details I want to first thank our entire team in Boston as well as the regional offices in Columbus, and Memphis, and Jacksonville for a strong finish to 2021 and for making it possible to report these results.
I've talked about the next 12 to 18 months as a period of transformation for our company. We have an opportunity to continue growing in our markets. We have a large percentage of our leases rolling over in a historically strong period of rent growth and we have an opportunity to continue to simplify and strengthen our balance sheet.
Throughout the fourth quarter and to date in the first quarter, we have turned those opportunities into reality.
Another recognition that we've shared as a company was the inclusion in the R. N Z at the end of November This was a significant milestone for us and should help elevate our visibility within the REIT sector.
It's just a milestone, though and we are focused on how we drive growth from here.
Turning to our key operating stats for the quarter. We ended up at year end, where we had anticipated.
Occupancy was 97, 4%.
Cash re leasing spreads were 22, 1% and 11, 1% for the full year with over 5 million square feet signed during the year for 2021 explorations.
Same store NOI on a cash basis was up seven 6%.
Rent collections were 99, 9% and core F. F O N E. S. F O per share were in line with our forecast after factoring in a slightly higher share count.
In addition to the strong leasing activity, we had another record quarter of acquisitions. The use of the ATM provided us with the capital to fund our completed acquisitions as well as those assumed in our 2022 guidance.
What we have projected for Q1 2022 in early Q2 would represent one of our larger starts to the year in recent memory.
Our development program continues to gain momentum with 10 projects currently in various stages of planning and development in four different markets with three of them currently under construction or active development. All told we believe these projects will total 1.15 million square feet and representing an investment of approximately 87 million.
With the resulting yield targeted in the high single digit range.
In Cincinnati at our Fisher Industrial Park, we finished installing floors over the open claim pit areas in Q4 to create an additional 150000 square feet.
At an investment of approximately $4 $3 million.
As of this quarter all of that new space is leased and occupied.
We have two additional projects currently underway. The first project is two separate new buildings totaling almost 330000 square feet that are under development on additional acreage on the site.
We are on schedule to break ground with the first by early April and the second building during the summer the.
The second project is a potential third building that could be developed during 2023.
At our $7 5 million dollar 70000 square foot ground up development in Portland, Maine, We completed construction of the shell in December and expect to have a certificate of occupancy this quarter half of this building is leased commencing July one and we're working on proposals with other prospects for potentially earlier.
Occupancy of the balance of the space.
We broke ground on a new $13 million 240000 square foot industrial building in Atlanta in Q4, and expect to complete construction in Q3 of this year.
There are active proposals being worked with prospects for this building looking to occupy later this year.
We are under development with another 180000 square feet on an adjacent site that is likely to begin construction later this year.
Moving to Jacksonville, there are four buildings in the design phase right now for which we are waiting on final permitting. These are all located within two of our existing business parks and will total approximately 175000 square feet of new space.
Construction should start before the summer can we expect to have these buildings fully leased early to mid 2023.
As a reminder, the development projects. We are currently pursuing are adjacent to existing properties of ours will directly onsite.
All of them are on land, we already own and were included in the original purchase price essentially unlocking value from additional space that was unrealized on our balance sheet.
We have tightly controlled the size and scope of our new development program. So that it complements our acquisitions in market cluster strategy, while leveraging the leasing expertise we have within these markets.
Given the amount of investment in projects under construction and projected by year end. We do expect this program to temporarily add to our leverage until they are online, but we believe the returns more than compensate for that.
As you've heard me say before our top priorities with the balance sheet or to ensure that our dividend is well covered that our leverage profile continues to improve and that we have access to multiple sources of capital.
We did a great job managing those priorities again in 'twenty, one and based on our outlook for improvement in all three areas. The board elected to increase our quarterly common stock dividend by 4.8% effective with the first quarter dividend of 2022.
Even with this increase we continue to have one of the lowest payout ratios in our industry.
The strength of the economy, the ongoing challenges to the supply chain.
Availability of labor continue to hit the headlines every time, we look we believe each of these trends is driving the fundamentals within the industrial sector, particularly within where we are focused from the first mile to the last mile.
This is not only the time to own industrial buildings, but also the time to own them, where we do with strong rent growth and lower relative basis, and a team full of real estate operators.
Penn why don't you walk us through our acquisition activity.
Thanks, Jeff.
Good morning, everyone.
In the fourth quarter, we closed on $194.5 million of acquisitions totaling two 9 million square feet across 12 buildings.
The weighted average initial yield of the acquisitions completed was six 2% at.
At a weighted average cost of $69 per square foot well below replacement cost.
This record Q4 volume brought our total volume of acquisitions for the full year two.
$371 million or 52% increase over last year's total.
This is a testament to the Plymouth platform and the talented team members that make the platform work every day.
We are off to another strong start in 2022.
With $22 $1 million of already closed another $43 million expected to close later, this week and $154 million and closings projected by early Q2.
A couple of fourth quarter transactions I'd like to highlight one we acquired a two building two tenant portfolio in St. Louis and the Gateway East Submarket totaling.
Totaling $1 1 million square feet for $75 $1 million in going cap rate of five 8%.
Near term rollover combined with below market lease rates in a submarket with less than 4% vacancy.
<unk> us with the opportunity to sign both tenants to long term leases at current market rates.
Another property, we acquired in Dayton, Ohio.
Bill just five years ago.
$23 $5 million or <unk> $49 per square foot.
A single kind of building with over eight years remaining on the lease.
To say, we bought this class a building a class b pricing.
And that in going cap rate of six 2% with annual rent increases this accretive acquisition should provide <unk> with additional long term stable cash flow.
As I mentioned earlier.
We're off to a strong start for 2020 to.
The competition for industrial properties does remain quite strong as new investment capital both domestic and offshore continues to pour into U S industrial markets, which are experiencing low vacancy rates.
<unk> average rental growth and tenants, who are reevaluating their supply chain infrastructures, most notably focused on storing or warehousing enough safety stock to ensure rapid delivery to their end customers and consumers.
But that being said our pipeline remains very robust.
To efficiently identify and analyze transactions with attractive return metrics across all of our markets further our deep relationships with brokers and our ability to close deals quickly and smoothly and proven track record with multiple seller types.
Often results in us being the preferred buyer.
We have seen cap rates continue to compress, especially with a larger portfolios.
So with small to medium sized portfolios.
And our bread and butter, one off transaction deals what I call hitting singles and doubles, we're saying and going in cap rates between the high fives and high sixes.
Our deal criteria remains unchanged as we look for the right mix of utilitarian industrial buildings in markets exhibiting positive absorption.
Strong rent growth.
Limited institutional competition.
And that have the ability for us to efficiently use our regional property management teams to aggressively asset management the properties.
One of the more important data points, we focus on in our markets is projected rental growth.
Analyzing specific submarket growth rates is a key element in our underwriting.
Previously, we had mostly underwritten low single digit rent growth on new deals, but based on what we're experiencing within our own portfolio. We have reason to adjust those expectations to mid to high single digit rent growth over the next few years in fact.
Many of our more recent acquisitions due to a significant mark to market deltas pertaining to specific tenants, we can expect low double digit rental growth rates.
One place where this view on rent growth is having an impact.
As in our ability to pursue new portfolio opportunities.
While the larger portfolios are transacting in the mid four cap range or lower or lower smaller portfolio should transact around 5%.
Those types.
Like we discussed last quarter may provide a slightly lower initial yields compared to our average and going in cap rates, but with a much greater stabilized yield as we drive rents.
Also while most of our acquisitions in 2021 and 2020 for that matter.
It's usually been 90% to 100% leased.
We will likely see more opportunities in our pipeline that have more vacancy where required near term capex, where we can add value through leasing and improving the asset.
Yeah.
As our pace over the last.
Two quarters and the start to 2022 would indicate we continue to have success in leveraging our concentration and our key industrial markets.
Especially where we have boots on the ground to help source and conduct due diligence for new acquisition opportunities.
We look forward to reporting our progress next quarter and during the course of the year.
Now I'd like to turn it over to Jim Connolly to walk through the leasing activity and portfolio operations.
Good morning.
At the end of 2021 we'd address 92% of our leases that expired during the year.
<unk> is comprised of $5 4 million square feet expired during 2021, including adjustments for acquisitions in early terminations.
Of that amount $2 6 million square feet was renewed two 4 million square feet was leased to new tenants, leaving 385000 square feet that still needs to be addressed.
Significant progress has been made on leasing this space and many leases that nearing execution in.
In addition, we leased 413000 square feet of space that had been vacant at the start of 2021.
During 2021, we saw rental rates increased 11, 1% on commencing leases over prior lease rates on a cash basis. During Q4 rental rate increases were significantly higher at 22, 1%.
Portfolio wide occupancy at the end of 2021 was 97, 4% up 110 basis points from the end of Q3.
Of the 774000 square feet of vacancy within our portfolio 82000.
Square feet had been leased with Tennessee, starting in 2022 with another 532000 square feet categorized as being repositioned at four locations.
Excluding the reposition square footage occupancy rate would be 98, 7%.
These locations are showing results with 153000 square feet leased at the end of 2021 with an active prospects for the balance of the repositioned vacancy.
Through February 14th we have collected 99, 9% of our rents billed during 2021 and 99, 2% of the rent for January .
One small rent deferral was issued during Q1 2021 that was fully paid back in December .
2021 was a busy year with 140 leases executed well leave it to 2021 explorations in prior vacancies totaling $5 5 million square feet completed by the end of the year and additional 52 leases totaling $2 2 million square feet have been executed for leases expiring after two.
2021.
Looking at the current status of the 2022 lease explorations specifically.
Of the $6 1 million square feet scheduled to expire adjusted for acquisitions and early terminations.
$2 6 million square feet has been leased through February 14th this represents approximately 43% of the 2022 expirations as complete with an 11, 5% rental rate increase over expiring rents.
There was an additional 140000 square feet.
At least that was vacant prior to 2022.
There were seven leases scheduled to expire in 2022 of 200000 square feet or greater.
Two of these have already been addressed we expect to reach we knew while the other two are actively being negotiated with solid prospects.
These numbers exclude the two leases that were terminated early and we leased in 2021.
These results continue to reflect the high level of performance that <unk> asset and property management teams are delivering and show 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 fourth quarter results, our key metrics were in line with our full year forecast core <unk> was 46 cents up from 42 cents per weighted average common share and units a year ago and 43 in the third quarter.
<unk> was 39 cents compared with 38 cents, a year ago and 31 cents in the third quarter.
Both metrics were up year over year and sequentially on top of an increase in the share and unit counts, which demonstrates the continued strength of the portfolio.
Ability to closely match fund our capital markets activity and the improvement in our cost of capital.
Same store NOI, excluding early termination income increased four 4% on a GAAP basis with same store NOI on a cash basis, increasing seven 6%, excluding the impacts related to three leases aggregating 900000 square feet.
This quarter same store NOI brings us to a two 8% increase for the year to date, which is at the high end of our expectations.
As we look at the balance sheet, we have been able to lower our cost of capital with strong execution on the ATM program and expanding our unsecured credit facility at attractive terms.
Our debt to total market capitalization was 34.8% at quarter end.
And net debt to EBITDA was 6.6 times, both of which were below our targets for the year and benefited from the timing of acquisitions and our active ATM activity.
You've heard us say before that Leverages a moment in time and this is certainly one of those as we would expect that the timing of acquisitions and development in 2022 is having somewhat of an opposite impact as we should operate with slightly higher leverage earlier this year with our net debt and net debt plus preferred.
Likely converging by year end.
One point to note on this leverage is that we are carrying approximately 11 4 million in investments on the balance sheet.
At December 31, 2021 related to construction in progress associated with approximately $46 $7 million.
Development activity for the projects, Jeff outlined earlier.
We have not adjusted our leverage metrics to account for this projected development activity.
As we bring these projects online there will be a contributor to earnings as well as to net asset value creation.
As noted in our earnings release, and the 10-K subsequent to year end, we executed swap agreements on our two unsecured term loans.
First want to effectively fix the rate on our $100 million term loan until August 2026 at a maximum rate of 3% to 4%.
The second one factor, we fixed the rate on our $200 million term loan until February of 2020 seven.
At a maximum rate of $3 two 6%.
These swaps are baked into our full year guidance.
We believe given the continued expectation of increase in interest rate.
This was the right long term decision to make.
After factoring in these swaps the 95% of our debt is fixed interest rates at an average of 3.66%.
Balance remains floating at a current rate of 1.65%.
Our liquidity position remains strong as we presently have $9 $8 million of cash on hand.
Boston, an additional $5 million in operating expenses rose.
Mm $141 million of capacity on the revolving line of credit.
Now, let's turn to our full year 2022 guidance.
Based on the assumptions outlined in our release and supplemental we are expecting year over year growth in core <unk> per share.
Five 3% to eight 2%.
I'll briefly touch on several of the underlying assumptions.
As always the timing of and contributions from acquisitions continue to be a main factor as we continue to add scale in our respective markets.
After completing $195 million of acquisitions in Q4, we closed on an additional 22 million so far in Q1.
197 million expected to close by early Q2.
That is a much earlier start to the year than we've had the past several years in terms of transactions and that is factored into the guidance initial yields as indicated are again based on first year projected NOI on an annualized basis for transactions close to date and as Penn noted earlier portfolio.
Transaction should be close to 5% with a balance of anticipated to be in the 5% to 6% range.
We expect another year of strong leasing activity for both renewals and new leases with approximately $4 2 million square feet expiring during the year.
Our same store pool is expected to be a contributor as well with same store NOI for the year projected to increase in a range of 3.25% the four point to 5% and occupancy to be in the range of 96.5% to 98%.
G&A is up year over year based primarily on the impact of overall compensation for increased head count, reflecting continued growth and market expectations with existing staff.
And increased stock compensation expense due to the increase in the stock price during the past year as well as higher professional fees as a percentage of revenues G&A has continued to decline each year and we expect that to continue again this year.
As noted earlier in my leverage commentary.
We are expecting higher interest expense year over year due to development activity higher acquisition activity and the impact of fixing rates on our $300 million in term loans.
A higher weighted average share and unit count from the ATM activity now assumes we'll be at 37 million shares and units on a weighted average basis for the year.
Which is where we are as of today.
One point worth noting is we have not included in our guidance the conversion of the series B preferred stock to common stock.
Notwithstanding that the conversion threshold for the series D shares has been and continues to be achieved we cannot control the timing of when or if madison might convert their four 4 million shares or if they would convert their entire position in one transaction or a series of transactions. If they are current share.
Our holders and one of our largest for that matter.
When Jeff talks about the importance of the next 12 to 18 months and the life appointment.
The potential of simplifying our balance sheet with this series B paper working out exactly as intended.
And the ability to pay off our $51 million up series, a preferred stock at a seven 5% coupon and early 'twenty. Two 'twenty three are two great. Examples we're looking forward to being able to take these two series of preferred shares out of our capital stack.
I'll now turn it back over to Jeff.
Thanks, Dan.
I want to come back on with one more item of importance and that is to thank Dan.
As many of you know from our announcement in December . This is dance last earnings call as he is stepping down from the CFO position.
He has been with us since 2014 and I want to personally thank him for everything he has done to get Plymouth to this point.
He's been instrumental in our growth and has created a smooth transition over to Anthony as we've worked on this succession plan over the past year I'm also looking forward to him staying on as an advisor to Plymouth. So we were able to retain his historical knowledge operator, we're now ready to take questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Our first question today will come from Craig Mailman with Keybanc capital markets. Please go ahead.
Good morning, this is already on for Craig.
For outlining some of the stuff on G&A just a quick one as you guys think about sort of how you've built out the platform how should we expect G&A and sort of the investment that you guys can make in the platform continue to grow beyond 2022, do you guys think that you've kind of gotten to a point, where you can really achieve the scale that you want or do you think you can.
To make incremental investments into the platform.
Good morning, and thank you for the question I'll, just touch real briefly on it and then I'll yield over to Jeff.
I think we've made great strides and we're having an effective platform to be able to continue to grow our expectations would be that as the growth continues certain element elements of the overall staff structure would increase.
But.
At more of the production level, if you will as opposed to the senior executive level.
Jeff.
Yeah, Hey, you're already.
Appreciate the question on that.
No.
We have about 13 people right now that are in property management that get baked into the G&A. There's an offset there that we can we can you can get into later about how we handle that but when we when we have a regional office and we do our own property management. The first thing we look for is better service to our clients to our tenants.
And secondly, obviously your savings and so if we put those two together it's a win win for us.
But the scale.
It's always just a timing issue you're bringing in people ahead of you can't get behind as a public company. So you you want to get ahead of it on that but Dan as he answered it we've got.
We've got all the key people, we need and it's really just a matter of size, adding property management asset management.
People to manage the assets.
Got it. Thank you and then one more quick one if I could.
So you guys mentioned that you if I heard this right did 11, 5% expected mark to market on leases that you guys have signed that you expect to commence in 2022 is that sort of low double digit low teens kind of a good way to think about how you expect the mark to market on commenced leases to continue through the year.
Yes.
Actually.
At the beginning of the year has actually exceeded that a little bit so that number should be good.
Okay. Thank you.
Our next question comes from Qatar Seversky with Bahrenburg. Please go ahead.
Hi, everybody. Good morning, Thanks for me on the call.
It's a broad based question here, just kind of thinking out loud.
Geopolitical situation unfolding over in Europe seems to be obvious impact may be spiking energy prices for example.
Do you think this has any impact on where youre looking to continue your development pipeline or.
Even within your conversations with tenants and.
An impact on their need for space in the near term.
Hey, Conor it's Jeff.
<unk>.
You know that this topic has not come up with discussions with our tenants at all.
We were very active I think in some of the prepared remarks, we talked about how our new developments. We've got you know.
Multiple tours going on proposals going out on those properties. So we did we havent seen any impact on it.
From that perspective, and again from our development, we think that we think our developments where he focused on land we already own.
Utilities are already on site. So we're not taking kind of pioneer risk. If you will going out onto the Interstate way out building a park, bringing in sewer water and in a lot of infrastructure. So this is.
This is development that very very still called simple for us to execute on so we're going to continue to move forward with the projects that we've outlined.
We're very confident that the demand is there and that we will fill these these properties it it probably higher rate than we're underwriting.
Got it appreciate the color there and then just sticking on development so.
Thinking about the cluster model.
Apologies if you had mentioned this on the call, but do you see the opportunity to purchase more land.
Immediately adjacent to your existing footprint to engage in more of these greenfield projects.
Possibly but remember most of this product that we have is infill product. So it's again, we're not we're not out we're not out in the hinterlands right, where there's where there's just a lot of developable land. So.
Atlanta, maybe the exclusion, but theres a tremendous amount of development in <unk>.
And that the Calhoun area, where we are.
So we.
We always look for that I know, we've made a couple of acquisitions or have some things on a contract now that has additional land that comes with it that we will explore building on.
<unk>.
But.
We're always looking for that I, just don't think you're going to see a lot of opportunity for us to buy parcels next door down the street that we can just bolt on most of our most of our product is again as infill.
Got it okay. Thanks for the color sure.
Sure thing.
Our next question comes from Dave Rodgers with Baird. Please go ahead.
Yes, good morning, everybody Penn wanted to start with you just a little bit more on the acquisition pipeline you guys have given guidance, obviously just over kind of the first three to four months of the year in terms of acquisitions. So maybe talk a little bit more about the pipeline what youre seeing because you quoted small cap rate small portfolio cap rates at five and then maybe one offs in the low sixes.
<unk>. So what is the makeup of that acquisition pipeline today, how deep is that and how conservative is the $200 million and the acquisition guide for the year do you think.
Hey, Dave.
No we're pretty confident about.
Our prepared remarks.
We're going to be closing on in the first quarter, we typically don't give guidance on acquisitions for the entire year, but but.
The real color here is that our pipeline.
And really it has never been deeper or wider I guess is the best way to put it we're looking at deals that have cap.
Cap rates.
In the low fives derise Dare I say, even some in the high fours and then there are those in the high sixes I mean, they're really it's hard to generalize because.
Cap rates only tell a total a little bit of a story where we.
We're obviously focused on on an ingoing cap rates cash flow, obviously, but we're also focused on price per pound and we're very comfortable we're on.
Our acquisition price per square foot.
Has come in in the fourth quarter as well as the overall over the over the year and that.
Jive is very well with our overall investment strategy.
Thank you and then maybe on the leasing side you have a little more than 3 million square feet. It sounds like left to go maybe a third of that renews two thirds of that is new just piecing together your comments earlier.
Curious on how much downtime, maybe you've underwritten in the guidance for the year and how you might be able to overcome some of that whats embedded I guess in that outlook for that remaining kind of 3 million square feet or so that you have to tackle.
Good question.
The renewal rate is a little bit higher this year. So far so I think it's actually going to probably be the other way around we're going to have more renewables. So two thirds of it we know and maybe one third will be new tenants.
Yes, we've got.
We had nine large projects this year two of them were done before.
Last quarter, we early term the current tenant put new tenants in two other ones have already been leased up and we expect.
Only two of them not to to renew and we've already got a replacement for one of them lined up and the other one has got a lot of interest. So I don't think there is gonna be much downtime a lot of times.
When tenants are leaving.
They give us advance notice and were able to terminate them early and get the new tenant in there without with overlap so theres no downtime.
Been something we've been doing for the last year and a half.
Okay. Thank you for addressing that and I'm, just going to take one more and Jeff you mentioned that the option was your partners option on the preferred B what was under the impression that you guys could force the conversion of that is that not the case.
We cannot force if we can pay it off because its in the money, but we can't we can't force a conversion to stock because of.
The limitations in the agreement to the amount of stock taken on so.
So as.
As we sit here today, it's an either or.
We pay them off our cash for they convert.
Yes, yes, that's helpful. Thank you.
Yes.
Our next question will come from John Kim with BMO capital markets. Please go ahead.
Thank you first time caller.
I wanted to ask about funding requirements for the $197 million that you are expected to close on really this year.
As well as future acquisition.
In your guidance you don't have much of a share kind of increases have you guys noted, but do you expect this to be funded with an ATM or.
Another source.
The capital.
So.
We we already have all the capital allocated for that.
So between between debt and equity that we've raised.
And Thats why we didn't give out any additional guidance on acquisitions or ATM activity.
So the properties that we've identified.
In our release and in this script. If you will those are those are fully funded.
With the Atms with me because you've done year to date correct.
Okay.
And I appreciate you can't.
You don't have in your guidance the series B.
Potential conversion.
I was just wondering Jeff if you could provide some color on what you expect will happen.
Given that it's already in the money based on your conversations with Madison do you expect that something will be filed.
<unk> filed and announced this year or do you think.
It could be an event post 2022.
Right.
So.
My comments will not be based on any conversation I've had with Madison, So I'll preface everything with that okay.
My comments will factor.
Two pieces to my comments, the first piece is going to be that.
Next year, we can pay them off at the accrual rate.
So if our stock actually goes down you know, where we're going to benefit. So we don't want that to happen I'm not making a prediction here, but if our stock goes down we can pay them off next year, so that being said.
<unk>.
If I was Madison I would convert this year.
Where the stock price, where it is where it's in the money and they are in a good position. So.
The reason I will tell you I think they would convert this year is because that's what I would do if I was them.
Does that does that bridge it for you.
Yeah.
Surprised it happened already happened.
No one could have known what would happen to.
To share price to reach their prices this year, but.
I'm wondering why it hasn't happened yet.
Hi.
I can't answer that.
I'm too old to ever be surprised about too much at this point, John I'm, not trying to be too silly here, but.
I can't answer why they haven't done it.
On the $75 million St. Louis acquisition I, just wanted to clarify is it your anticipation that the tenants will renew at market rents or would you expect to release, it and where do you think that would take the yield.
So yes.
We are in negotiations with those tenants, so I don't want to get too too deep.
Details on this but yes they.
Wanted they want to stay in place.
And we are working those rates.
All I want to say.
And those are 2022 exploration.
Yes, they are in the third.
Quarter.
Okay.
Thanks for the color. Thank you.
Thank you.
Again, if you'd like to ask a question today. It is star then one star then one to ask your question.
Our next question comes from Anthony Hau with Truest. Please go ahead.
Good morning, guys.
What do you think market rent growth will be in 2022 for your target markets.
Hey, Anthony Penn here.
It's a good question.
I'm not going to go market by market, but.
In general we're looking at a kind of mid single digits.
Again kind of dependent on the.
On the market, we've seen that in the last.
12 to 18 months.
We're seeing much better than that in our own portfolio and our existing assets within those markets. So I think we can defend that that mid mid single digit.
Growth projection pretty pretty well and maybe maybe we'll be surprised.
Gotcha and now we keep hearing that a lot supply will be coming online in 2022, and 2023 for your target markets, especially Columbus in Indiana.
Can you give us an overview on where supply is today for your markets and Submarkets.
Yes.
There is new supply coming on.
But you can also make the argument that its still not keeping up with demand I mean, if you look at the.
Numbers the overall.
Leasing numbers.
For 2021, I mean across across the board coast to coast.
Over 430 million square feet were absorbed.
Last year.
Still didn't keep up with the demand that's an 80% increase over 2020.
You had rental rates now that on average exceed.
You did $9 per square foot for the first time ever so.
The demand is there.
We're seeing it in all markets not just the ones that we haven't happened to be in.
But all that being said.
We really focus on an acquired.
Acquiring existing existing properties, we own a lot of class B properties as you know.
Our rental rates are not nine $9 are our average rental rates across the board is just over $4. So there's a <unk>.
Significant delta between the National average and what our averages and that I think that benefits us.
In many ways so.
Most of our tenants.
Never say never but.
Highly unlikely that they're going to move from one of our.
Buildings into a brand new class, a 40 foot clear property that.
Opens its doors right down the street tomorrow charging $8 a square foot just just.
I haven't seen it happen I don't know, if we will but that's.
Well, we obviously monitor it because we hope these rental rates.
For brand new product keep keep going north.
That only helps us.
Gotcha and one last question for me what is the Mark to market on the portfolio today can you share that on a GAAP and cash basis.
On a cash basis.
You mentioned about a 12, 5%.
Yeah.
Through February 14th we had been 11, 5% increase on our rents.
It's Ben if we add in what's happened since then is actually quite a bit higher.
So there's plenty of room to grow and we don't typically disclose GAAP basis.
Gotcha, Thanks, guys.
Thank you.
Ladies and gentlemen, this will conclude our question and answer session I would like to turn the conference back over to Jeff Witherell for any closing remarks.
Yes.
Thank you all for joining us today, we appreciate it and we are available for follow up questions as usual.
Thank you see you next time.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.