Q2 2024 Plymouth Industrial REIT Inc Earnings Call

Good day and welcome to the Plymouth Industrial REIT second quarter 2024 earnings call. All participants will be in a 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 made.

Unknown Executive: Good day and welcome to the Plymouth Industrial Read, 2nd quarter 2024, earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key, followed by zero.

Unknown Executive: 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. And to restore your question, please press star, then two. Please note this event is being recorded.

Speaker Change: Press Star then one on your Touchtone phone and 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 Mr. Tripp Sullivan with Investor Relations. Please go ahead Sir.

Tripp Sullivan: I would now like to turn the conference over to Mr. Tripp Sullivan with Investor Relations. And please go ahead, sir.

Tripp Sullivan: Thank you. Good morning.

Tripp Sullivan: Welcome to the Plymouth Industrial Read conference call to review the company's results for the 2nd quarter of 2024. Yesterday afternoon, we issued our earnings release and posted a copy of our prepared commentary and a supplemental deck on the court of the result section of our investor relations page. In addition to these earning documents, a copy of our 10-Q can be found on the SEC family meeting. This is our monthly earnings page of the IR site. Our supplemental deck includes our full year 2024 guidance assumptions, detailed information on our operations, portfolio, and balance sheet, and definitions of non-GAAP measures and reconciliation to the most comparable GAAP measures.

Unknown Executive: In addition to these earnings documents, a copy of our 10-Q can be found on the SEC Filings page of the IR site. We will reference this information in our remarks. With me today are Jeff Witherell, Chairman and Chief Executive Officer, Anthony Saladino, Executive Vice President and Chief Financial Officer, Jim Connolly, Executive Vice President of Asset Management, and Anne Hayward, General Counsel.

Tripp Sullivan: We will reference this information in our remarks.

Tripp Sullivan: With me today is Jeff Willarow, Chairman and Chief Executive Officer, Anthony Saladino, Executive Vice President and Chief Financial Officer, Jim Conley, Executive Vice President of Asset Management, and Hayward, General Counsel.

Tripp Sullivan: I'd like to point everyone to our forward-looking statements on page 1 of our supplemental presentation and encourage you to read them carefully. They apply the statements made in this call, our press release, our prepared commentary, and in our supplemental financial information.

Jeff Willarow: I'll now turn the call over to Jeff Willarow. Thanks, Trip. Good morning, and thank you for joining us today. I hope that everyone had a chance to review the commentary and supplemental information. I'll hit a few highlights first, and then we'll go to Q&A.

Tripp Sullivan: Joining us today.

Tripp Sullivan: I hope that everyone had a chance to review the commentary and supplemental information I'll hit a few highlights first and then we'll go to Q&A.

Jeff Willarow: First, we're pleased to be back in a growth posture. The acquisition in Memphis is a creative and significantly expands our presence in this core market to almost 7 million square feet. This portfolio fits the Plymouth model perfectly, a strong initial NLI yield and the ability to realize the mark-to-market opportunities relatively quickly to drive returns higher. Second, we've kept our balance sheet in good shape and maintained our liquidity by using disposition proceeds to help fund this acquisition. Leverage came down in the quarter to 6.4 times. Even with the Memphis acquisition, we will still operate in the 6 times range in 2024.

Speaker Change: First we're pleased to be back in a growth posture. The acquisition in Memphis is accretive and significantly expands our presence in this core market to almost 7 million square feet.

Speaker Change: This portfolio fits the Plymouth model perfectly a strong initial NOI yield and the ability to realize the mark to market opportunities relatively quickly to drive returns higher.

Speaker Change: And we've kept our balance sheet in good shape and maintained our liquidity by using disposition proceeds to help fund this acquisition.

Speaker Change: Leverage came down in the quarter to 6.4 times.

Speaker Change: Even with the Memphis acquisition, we will still operate in the six times range in 2024.

Jeff Willarow: The Q2 results were better than we expected, with the one-time benefits from favorable real estate tax appeals within our Chicago portfolio driving the FFO per share up sequentially in the same store NLI growth above our range. In our commentary, we outlined a couple of challenges in the portfolio that we need to lease up in the one tenant that muted the growth in the quarter. This caused us to tighten the top end of our full-year guidance range. We outlined the moving parts regarding this in the commentary.

Unknown Executive: We outlined the moving parts regarding this in the commentary.

Jeff Willarow: Lastly, with the development program getting close to 100% least, we can begin to see the benefit from full stabilization in those properties in 2025. I'm confident our team is ready for the opportunities we have in 2024 and 2025.

Unknown Executive: I would now like to turn it over to the operator for questions. Please pick up your handset before pressing the keys. If any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Operator: To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. And we will take our first question for today, and that will come from Mr. Todd Thomas with KeyBank Capital Markets. Please go ahead, sir.

Todd Thomas: And we will take our first question for today, and that will come from Mr. Todd Thomas with Key Bank Capital Markets. Please go ahead, sir.

Todd Thomas: Hi, thanks.

Todd Thomas: Hi, thanks. Good morning. First, I just wanted to ask about the Memphis investment going in at 8% with rent upside over time. You know, with regard to the near-term expirations, what kind of tenant retention do you anticipate as you look to capture that mark to market, and what's the timeline for that?

Todd Thomas: Good morning. First, I just wanted to ask about the Memphis investment going in 8% with rent upside over time. You know, with regard to the near term explorations, what kind of tenant retention do you anticipate as you look to capture that mark to market and what's the timeline for that?

Jeff Willarow: Tenant retention within that particular acquisition is estimated to be around 70%. And in terms of capturing the full mark to market, we anticipate that will be realized over the next, call it, three years. There's significant lift with respect to yield, which could climb above 9.5%.

Unknown Executive: And in terms of capturing the full mark to market, we anticipate that will be realized over the next

Todd Thomas: Okay. And it sounded like you were seeing an increase in investment opportunities and that the window was opening a bit.

Todd Thomas: You know, I'm assuming this is, you know, what you were referencing on some level, but just curious if you could talk about your appetite and if there's, you know, more behind Memphis that you're seeing today.

Jeff Willarow: Hey Todd. Yes, it's still a kind of a fractured market out there. I mean, you've seen some big portfolio trade. I think everyone's aware now of Brookfield's acquisition of the DRA portfolio, you know, 14 million square feet at a six cap. Pretty good barometer on the market. So we have a pretty robust pipeline as we usually do. Runs the game with the small portfolios to one-off deals.

Speaker Change: <unk> acquisition of the DRA portfolio 14 million square feet at a fixed cap.

Speaker Change: Pretty good barometer in the market.

Speaker Change: So we have a pretty robust pipeline as we usually do.

Speaker Change: Runs the gamut from small portfolios to one off deals.

Jeff Willarow: Our appetite, if it's a creative, we have an appetite for it.

Speaker Change: Our appetite.

Speaker Change: If it's accretive we have an appetite for it.

Todd Thomas: Okay.

Unknown Executive: Okay, and then

Speaker Change: Okay and then.

Todd Thomas: And then in Cleveland, so the tenant moved out at 21, 200 International Drive. What can you talk about the timeline to backfill that space and what kind of mark-to-market opportunity you see achievable there?

Speaker Change: And Cleveland, So the tenant moved out to 'twenty, one 'twenty 100 International drive.

Speaker Change: Can you talk about the timeline to backfill that space and what what kind of mark to market opportunity you see achievable there.

Jeff Willarow: I don't want to get into too much detail in the market, but it's, well, it's fairly substantial.

Unknown Executive: I don't want to get into too much detail on the market-to-market comparison, but it's, well...

Speaker Change: I don't want to get into too much detail on the mark to market.

Speaker Change: Well.

Speaker Change: It is fairly substantial.

Todd Thomas: The other, just because we're in negotiations with the tenant, the timeline is there out in June and we've got half the building lined up for occupancy in September October. and we have a backup prospect as well. Okay, got it. So that's for half of the building.

Speaker Change: The other just because we are in negotiations with the tenant.

Todd Thomas: What's tenant demand look like in general for the balance of the space, and is the backup for also half the space, or would that be potentially different or more? That's a full user that just came up in the last day.

Unknown Executive: OK, OK, and then I just have one last question I just had on the Chicago property tax appeal.

Todd Thomas: Okay, okay, and then I just had one last question I just had on the Chicago property tax appeal. A shopping center reported sort of a similar outcome in their Chicago portfolio, which they benefited from in the quarter. They're also going to see a longer-term improvement from that as well.

Unknown Executive: [inaudible]

Jeff Willarow: And I'm just wondering if the tax environment in Chicago has changed a little bit in your view. And are there more potential tax wins in the Chicago portfolio that you see that might be possible, you know, with that's Chicago being about 20% of the portfolio's ABR. Yeah, at 16801 exchange, we've had some vacancy in there during the year that the tax break does not include any benefit for that vacancy, which we should be receiving probably about $300,000 break right there. The assessments are valid for, you know, two more years after this, and the rates are just going to probably increase at an inflation rate of like 34%.

Speaker Change: Okay.

Speaker Change: For that vacancy, which we should be receiving.

Speaker Change:

Speaker Change: Probably about $300000 break right there.

Speaker Change: <unk>.

Speaker Change: The assessments are valid for two more years. After this and the rates just going to probably increase at an inflation rate of 3% to 4%.

Todd Thomas: Okay, do you feel that the tax environment, though, in Chicago, you know, has improved a little bit. I know that that's been, you know, a difficult call market for property taxes in the past. Do you feel that there's been a little bit of a change in taxes in Chicago and Cook County?

Speaker Change: Okay do you feel that the tax environment, though in Chicago.

Speaker Change: It has improved a little bit I know that that's been.

Speaker Change: Difficult market for.

Speaker Change: For property taxes in the past do you feel that theres been a little bit of a change in in.

Speaker Change: And taxes in Chicago, and Cook County.

Jeff Willarow: Yes. You know, again, it's locked into the strong word, but it's laid out for three years. And I can't tell you exactly how it's going to be in the fourth year, but I think it's positive.

Speaker Change: Yes.

Speaker Change: Again, it is locked into it.

Speaker Change: Locked into a strong word, but it's it's it's laid out for three years and.

Speaker Change: I can't tell you exactly how it's going to be in the fourth year, but I think it's.

Speaker Change: It is positive.

Todd Thomas: Okay.

Speaker Change: Okay alright, thank you.

Unknown Executive: All right.

Rich Anderson: Thank you. The next question will come from Rich Anderson with Wet Bush. Please go ahead.

Speaker Change: Yeah.

Rich Anderson: Thanks.

Rich Anderson: Good morning. And thanks for having me on the call. First time caller, longtime listener, I guess. So the 9.7, maybe you said this in the commentary in terms of the cash, same story.

Anthony Saladino: What would it have been without the tax situation in Chicago?

Anthony Saladino: It would have been 6.4. Okay. And when you, you know, back to the Memphis transaction. And you use disposition as to fund some of that.

Unknown Executive: And you use dispositions to fund some of that. Are there any dispositions within that that you think that, you know, is there something, anything in there that's non-core that you acquire that, you know, maybe would be sold over time? Or not?

Anthony Saladino: Is there any dispositions within that that you think that, you know, is there something anything in there that's non-core that you acquire that you maybe would be sold over time or do you want all of it?

Anthony Saladino: Yeah, I mean, there's always a couple of buildings there that you might want to move, but it's a little early to tell which ones that's going to bake. There's a lot of work to do in there; I think is why it's a perfect Plymouth product. Okay, in terms of the cash releasing spreads, you know, you did sort of working 15-ish, this Memphis is 18 to 20 in terms of future and market market. You know, you're way down by, you know, fixed renewals.

Anthony Saladino: Talk to me about the impact of that on, you know, what you could be achieving in the absence of the fixed renewals and when does that sort of truly burn off that we get the full gamut of cash releasing spreads out of the company. Yes, the burn off, there's still quite a bit in 2025 at the beginning of the year, but then in 26, they drop in half and then it continues to trend down from there. The actual rate without it would be, would be probably about 2% higher cross support.

Speaker Change: We burn off that we get the full gamut of cash.

Speaker Change: Cash releasing spreads out of the company.

Speaker Change: Yes.

Speaker Change: They burn off.

Speaker Change: There's still quite a bit in 2025 at the beginning of the year.

Speaker Change:

Speaker Change: But then in 2006, they dropped in half and then it continues to trend down from there.

Speaker Change: The actual rates without without it would be.

Speaker Change: Would be probably about 2% higher across the board.

Speaker Change: Okay.

Speaker Change:

Rich Anderson: You said you're closing on, in the end of your phase one of your development program. You know, my conversations as you're going through the launch the phase two process was sort of undefined.

Unknown Executive: You said you were closing in on, the end of phase one of your development program. You know, in my conversations as you were going through the launch, the phase two process was sort of...

Speaker Change: You said you're closing on in the end of your phase one of your development program.

Speaker Change: And then my conversations as you go into the launch.

Speaker Change: Phase two process with sort of.

Speaker Change: Undefined.

Jeff Willarow: And if that's the wrong word, I apologize, but I wonder, you know, how defined is that become now that you're kind of nearing the end of phase one and, you know, where you're looking to deploy capital in the phase two process of your development pipeline. Hey Rich, this is, this is that Jeff. I mean, I think it was defined, so I don't have to write word, but we've been pretty, we've been pretty vocal on the fact that we are not going to start spec development at this time. So it's really based on a build to suit, and we continue to have discussions regularly on potential built to suit opportunities, especially in Cincinnati.

Speaker Change: And if thats the wrong word I apologize, but I wonder.

Speaker Change: How defined as it become now that you are kind of nearing the end of phase, one and where youre looking to deploy capital in the phase two process of your development pipeline.

Unknown Executive: I mean, I think it was defined, so I don't know if that's the right word, but we've been pretty vocal on the fact that we are not going to start speculative development at this time. So it's really based on a built-to-suit, and we continue to have discussions regularly on potential built-to-suit opportunities, especially in Cincinnati. We have one site left in Jacksonville and then a variety of other sites. In fact, the Memphis portfolio comes with a piece of land to build just over 100,000 square feet. So we'll evaluate that. It's a very strong sub-market with low vacancy. I could see us doing something on that. But again, right now, it's going to be built-to-suit.

Jeff Willarow: We've been going to have one site left in Jacksonville and then a variety of other sites. In fact, the Memphis portfolio comes with a piece of land to build just over 100,000 square feet. So we'll evaluate that. It's a very strong, strong market; low vacancy. I could see us doing something on that, but again, right now it's going to be on built to suits.

Jeff Willarow: Okay, and then last for me, just to take your temperature on, you know, the whole ensuring movement, you know, it's, it's an important part of your thesis, you know, where you guys exist. Do you have any view about whether it's real or political, and by political, I mean, you know, get somebody elected and then come 2025 suddenly it's not moving as fast as we saw. I'm wondering where you stand. I hate to ask a cynical question, but can't help myself. No worries. No, it is real. I think if you look through the data that we put forth, you know, on our website, we have our white paper that's been updated on the Golden Triangle.

Jeff Willarow: You know, if you look at where the majority of the mega projects and even even less than mega projects, if you look at where they're cited in the United States, the majority of them fall within the Golden Triangle. And this goes back to our thesis about infrastructure and hate to hate to take up a lot of time. It's important. In my 30 years in this business, I have never seen the amount of tenants requesting additional power, like I've seen now. And so availability of power, water, you know, just the infrastructure alone, I mean, to restore America, you're going to need infrastructure.

Jeff Willarow: And, you know, rail is becoming an important part of it. The water ports are becoming an important part of it. Skilled labor is very important. So all these things coming together. And again. We have anecdotal information, but we also have some specifics. We have tenants that have least space because they've brought manufacturing or expanded manufacturing into the United States. So if you go to re-shortnow.org, shout out to our friend Harry Mojo over there, a ton of information, all facts. This phenomenon is real and it's not going to change. So this obviously a political component to it, but the facts are that we will be bringing back a lot of manufacturing to the United States.

Unknown Executive: A ton of information, all facts. This phenomenon is real, and it's not going to change. So there's obviously a political component to it, but the facts are that we will be bringing back a lot of manufacturing tonight.

Rich Anderson: Okay, good stuff. Thanks very much.

Unknown Executive: Thank you. See next question.

Operator: The next question will come from Nik Thillman with Baird. Please go ahead.

Nick Thillman: We'll come from Nick Thillman with Beards.

Nick Thillman: Please go ahead. Hi guys, hoping to get a little more commentary on the leasing front; just 2Q volume a little bit slower than 1Q. Understand the pipeline here is around 900,000 square feet.

Nick Thillman: I guess the slow down 2Q is just kind of the spaces that you guys have available or willing to address seems a little bit more large or chunkier deals. I guess maybe talk about the least destination sort of time on your deal and what today. Yeah, as far as Q2 is concerned, the actual volume was the third highest in the company's history. I would say it was probably a little bit of a low at the beginning of the quarter, but right now leasing is probably stronger than it has ever been. In the prepared remarks, I put down that there was working on roughly 2 million square feet of leases that people have called.

Nicholas Thillman: Yeah, I As far as Q2 is concerned, the actual volume was the third highest in the company's history.

Jeff Willarow: That's gone up like a million square feet in the past week. We've gotten a lot of calls for people wanting to renew 2025 leases now. I think the interest rates are going to go down and reds are going to go up, so they're very eager to get their space locked up.

Speaker Change: Yeah.

Nick Thillman: And then maybe I'm touching on the disposition sort of front.

Speaker Change: And then maybe touching on the disposition sort of front I guess what is the.

Unknown Executive: And then maybe I'm touching on the disposition sort of front, I guess. What is the, you outline kind of Columbus as the user buying that, but is there any other sort of disposition sort of slated for the back half of the year, and how does that look?

Jeff Willarow: I guess what is the roommate you outline kind of Columbus as the user buying that, but is there any other sort of disposition sort of slated to the back half of the year and causes that look. Hey Nick, yeah, there's a few things that we're looking at. We look at that all the time. And then we do get. You know, when an owner user comes in and wants to buy something, you know, we pay particular attention to that.

Speaker Change: You outlined kind of Columbus as the user buying that but is there any other sort of disposition sort of slated for the back half of the year in terms of outlook.

Speaker Change: Hey, Nick Yeah, there's a few things that we're looking at and when we look at that all the time and then we do get.

Unknown Executive: Hey, Nick. Yeah, there's a few things that we're looking at. And we look at that all the time. And then we do get them

Speaker Change: When it when the owner user comes in and wants to buy something.

Nick: We pay particular attention to that.

Nick Thillman: So I think you'll see something this year, but we're not going to put out. I think we put out a dollar figure in the past of about 40, 50 million dollars, and we're almost there. So I don't know what we want to throw out for people to start modeling, but it won't be a lot of sales. Between now and year to the air.

Speaker Change: So I think you'll see something this year, but we're not we're not going to put out I think we put out a dollar figure in the path of about $40 $50 million and we are almost there.

Speaker Change: So I.

Speaker Change: I don't know, what we want to throw out for people to start modeling, but there won't be a lot of sales.

Speaker Change: Between now and the end of the year.

Anthony Saladino: And then Anthony, just on clarification, but basically the reduction of the top end of the range is essentially you're not really expecting the FedEx face the kind of the lease at like in the next quarter or so. Maybe a by year end or something on those lines. And that's kind of a moving piece of offset some of the creation from them. That's exactly the way to look at it. That that upper bound was predicated all along on the assumption that the space in St. Louis would have a positive leasing outcome, you know, right about now.

Anthony: And then Anthony just one clarification, but basically the reduction of the top end of the range is essentially youre not really expecting the fedex space to kind of the lease.

Anthony Saladino: And then Anthony, just on clarification, but basically, the reduction in the top end of the range is essentially you're not really expecting the FedEx space to kind of be leased at like in the next quarter or so, maybe by year end, or something along those lines. And that's kind of a moving piece to help offset some of the accretion from the Memphis portfolio, correct?

Anthony: Like in the next quarter or so maybe by year end or something along those lines and that's kind of a moving piece help offset some of that accretion from that amount this portfolio correct.

Unknown Executive: That's exactly the way to look at it. That upper bound was... The space in St. Louis would have a positive leasing outcome right about now. We're still bullish on lease-up, and I think the timing that you just articulated is likely to be executed on.

Speaker Change: That's exactly the way to look at it.

Anthony Saladino: We're still bullish on lease up. And I think the timing that you just articulated is likely to be executed on.

Nick Thillman: That's it for me.

Unknown Executive: Thank you, guys. Thank you.

Bryan Maher: The next question will come from Bryan Maher with B. Riley. Please go ahead.

Bryan Maher: Thanks.

Bryan Maher: Just a couple from me must have been asked and answered. You know, it's been seen pretty under control. You know, aside from the future, potential for more tax appeals, and I'd be interested here if there are, you know, in other markets, potential for more tax appeals success.

Unknown Executive: for more tax appeal success. Is there anything going on in the variability of expenses, positively or negatively, that we should be thinking about?

Anthony Saladino: Is there anything going on in the variability of expenses, positively or negatively, that we should be thinking about? Not other than has been articulated. And you know, in terms of tax appeals, we do that regularly with the consultation of a third-party tax consultant. We don't anticipate meaningful reductions across the portfolio outside the ones that we've realized, but we are currently evaluating fiscal year 2024 estimates, which may yield some potential favorability on a net reimbursement basis.

Unknown Executive: None other than has been articulated, and you know that in terms of tax appeals, we do that regularly with the consultation of a third-party tax consultant. We don't anticipate meaningful reductions across the portfolio outside the ones that we've realized, but we are currently evaluating fiscal year 2024 estimates, which may yield

Bryan Maher: Okay.

Bryan Maher: And then, are there any other potential vacates that would be of material and nature that on your radar screen that maybe we should be thinking about? Going through the 25 upcoming aspirations, it's pretty, pretty solid. We're still trying to get different in the word from Merce. That's what the only one, but they, they can't leave at this point. Okay.

Speaker Change: In case that would be material in nature that on your radar screen that maybe we should be thinking about.

Unknown Executive: Going through the 25 upcoming expirations, it's pretty, pretty solid. We're still trying to

Speaker Change: Going through the 25 upcoming explorations, it's pretty pretty solid.

Speaker Change: We're still trying to.

Anthony: Get definitive word from Marcellus that's about the only one but they.

Speaker Change: They can't leave at this point.

Speaker Change: Okay good enough.

Bryan Maher: That's good enough.

Bryan Maher: And then just last for me, and maybe a little bit of an open ending question, would love a little commentary on, but, you know, between you guys and other industrial rates to recover, you know, this kind of 15, 20 plus percent rent increases on renewals that have been going on for some time and seem like it will go on for a bit longer given the demand that you talked about. You know, it can't go on forever. So how are you thinking about that, you know, not the next one to two years, but more in the next kind of three to five years?

Anthony: Just last for me and maybe a little bit.

Speaker Change: Open ended question would love a little commentary on but between you guys and other industrial Reits we cover.

Speaker Change: 15, 20, plus percent rent increases on renewals that have been going on for some time. It seemed like it will go on for a bit longer given the demand that you talked about it.

Speaker Change: It can't go on Forever. So how are you thinking about that not in the next one to two years, but more in the next kind of three to five years.

Jeff Willarow: Well, I mean, we face our projections off of market rate increases, which can you to go up at some point. There may be a reset, but I think with all ensuring that the man is still high. I think in combination with the catalyst that is reshoring and on shoring, there's also the market advantages that we have.

Speaker Change: Well I mean, we base our.

Speaker Change: Projections off of market rate increases.

Speaker Change: Which continue to go up.

Speaker Change: And at some point.

Speaker Change: There may be a reset, but I think with the onshore and the demand is still high.

Speaker Change: Yes, I think in combination with the catalyst that is reassuring and onshoring.

Bryan Maher: And more importantly, the fact of the lack of new supply for our types of buildings and our sizes of buildings will be, we think, a sizable advantage sequentially for many years to come. Thanks. That's helpful.

Unknown Executive: Thanks, that's helpful. And maybe just one, if I could slip it in. You know, you guys have a pretty specific niche, and you target, you know, a handful of certain markets, but I'm sure that you explore other markets as well, without necessarily identifying, you know, a new market for Plymouth. Is there something out there on the radar screen that would kind of fit your niche that you might explore?

Bryan Maher: Maybe just one if I could slip it in. Yeah, you guys have a pretty specific niche and, you know, you target, you know, a handful of certain markets, but I'm sure that you explore other markets as well without necessarily identifying, you know, a new market for climate. There's something out there on the radar screen that would kind of fit your niche that you may explore. and I would be kind of in use for us. Yeah, Bryan, the short answer is yes. I mean, we continue to look at deals, but I think you saw that we just acted at Kansas City.

Jeff Willarow: We pay close attention to our costs and have one asset in a market that you have to go out and visit, and you have to pay attention to, and I have to answer crazy questions from people like you about 50,000 square feet in the market. Like, we're just wasting time talking about a market that we own 50,000 square feet in.

Jeff Willarow: So, I don't mean a little facetious on that, but so, you know, there's a lot of room for us to grow. I think, you know, Memphis, we just hit the $6.8 million mark. I'm sorry, $6.8 million square foot mark. We've got a full team of people in Memphis, and the ability to scale the markets we're in with our own property management people is exciting. It's exciting for all of us to grow that aspect of the business.

Unknown Executive: So, you know, there's a lot of room for us to grow. I think, you know, Memphis, we just hit the $6.8 million mark. I'm sorry, 6.8 million square foot mark.

Unknown Executive: We've got a full team of people in Memphis, and the ability to scale the markets we're in with our own property management people is exciting. It's exciting for all of us to grow that aspect of the business. So we look at new markets, but I think there's just a ton of opportunity in the markets where we have boots on the ground.

Jeff Willarow: So, we look at new markets, but I think there's just a ton of opportunity in the markets where we have boots on the ground.

Bryan Maher: Thanks, and I hope we don't ask too many crazy questions. Not at all.

Unknown Executive: Thanks. And I hope we don't ask too many crazy questions. Not at all.

Unknown Executive: Thank you.

Operator: The next question will come from Mitchell Germain with Citizens JMP. Please go ahead.

Mitchell Germain: The next question will come from Mitchell Germain with Citizens JMP. Please go ahead.

Mitchell Germain: Thank you. You know, you did 70% seem so growth in the first quarter, 9.7. This quarter seems like you maintained your guidance for the year.

Anthony Saladino: Is that just a hint of conservatism, or is there a real deceleration that's, you know, come about in the back part? No, we don't anticipate that. I think we were trying to be thoughtful in terms of the variability that was brought forth by the pickup in real estate taxes, offset by the surprise credit loss. There is a little leasing to do as it relates to that one particular tenant in Q3. But as Jim outlined, there's tended demand lining up to take that space. And so we think that same store were ramped back up in the fourth quarter.

Anthony Saladino: We did leave a little conservatism with respect to the balance of the year as it relates to a non-specific vacancy and credit loss. But beyond that element of conservatism, we're bullish that the outcome will be range-bound. Thank you.

Mitchell Germain: Thank you. I know you're fully leased on the development now, but how much of that is actually income producing? Or there's still some sites that are, obviously, there's one lease that you just did, but some of that's still in the process of commencing.

Unknown Executive: I know you're fully leased on the development now.

Anthony Saladino: How much of that is actually income-producing, or are there still some sites that are, obviously, there's one lease that you just did, but, or some of that's still in process of commencing? Just backup. The one lease that we've come to terms with the $53,000 that's actually not signed yet. But we're talking about the next couple of days or two or a week. But as far as the income generating, there's one other building coming online in Jacksonville in the fourth quarter; other than that, it's all income generating. Gotcha. Okay.

Unknown Executive: Just back up. The one lease that we've come to terms with, the $53,000, that's actually not signed yet, but we're working to get it signed the next couple of days. Uh, days or two or a week, but the, but as far as the income, income generating, there's one other building coming online in Jacksonville, um, in the fourth quarter. Other than that, it's all income generating.

Speaker Change: Not signed yet, but we're not going to get it connects coupled.

Speaker Change: Oh, sorry, two or a week.

Speaker Change: But as far as the income income generating there's one other building coming online in Jacksonville.

Speaker Change: In the fourth quarter other than that it's all income generating.

Jeffrey Witherell: Jeff, maybe if you could just talk a little bit about the process around Memphis. You know, you've bought assets for the bulk of your career. I'm curious, you know, kind of, what the process is like.

Speaker Change: Gotcha Okay.

Jeff Willarow: Last one for me, Jeff. Maybe just, if you could just talk a little bit about the process around Memphis. You know, you've bought assets for bulk of your career. I'm curious; you know, kind of... What your sense of the potential bidding pool, you know, kind of how much organized capital was involved or maybe just even out bidding on properties would be I'd be curious. Yeah, I don't think we were the highest bidder on that necessarily, but I know we're the best bidder, right? So there's no financing contingencies. I think I think on the seven plus years we've been public.

Speaker Change: Last one for me just maybe just if you could just talk a little bit about the process around Memphis.

Speaker Change: You bought assets for bulk of your career I am curious.

Speaker Change: Kind of.

Speaker Change: What your sense of the potential bidding pool.

Speaker Change: You know kind of how much organized capital was involved or maybe just even out bidding on properties would be I'd be curious.

Speaker Change: Yeah.

Jeffrey Witherell: I don't think we were the highest bidder on that necessarily, but I know we're the best bidder, right? I think part of why there may not be a lot of bidders is there's a lot of work on this, right? So I mean, to get an eight yield, we don't want to be the top bidder.

Speaker Change: I don't think we were the highest bidder on that necessarily but I know, where the best bidder right. So.

Speaker Change: There is no financing contingencies I think I think on the seven plus years, we've been public. We just don't re trade deals I think if you ask brokers, we have a pretty good reputation in the marketplace and our guys are.

Jeff Willarow: We just don't re-trade deals. I think, think if you ask brokers, we have a pretty good reputation in the marketplace. And our guys are, you know, our people are experts at this. This is what we do. Having a full staff of people on the ground in Memphis helps facilitate this. I think I think part of why there may not be a lot of bidders is there's a lot of work on this, right? So I mean, to get an eight yield. You know, there's a lot of work. But that work is up. There's a lot of work outside for us.

Speaker Change: Our people are experts at this this is what we do.

Speaker Change: Having a full staff.

Speaker Change: People on the ground in Memphis help facilitate this.

Speaker Change: I think I think part of.

Speaker Change: Why there may not be a lot of bidders is theres a lot of work on this right. So I mean to get an eight yield.

Speaker Change: There's a lot of work, but that work is upside for us.

Jeff Willarow: There's a, there's some reteniting going on. You know, moving people around. We've got some, so a little bit of capex here and there over time. A lot of ten of relations in this 45 tenants here. So I think a lot of people might have backed away because they don't have the boots on the ground to efficiently take advantage of all the opportunities. That's probably the best way I say it. And that, and that seems to be the theme for us as we wind deals, because again, we're just not going to overpay. We don't want to be the top better.

Speaker Change: There's some re tenant ing going on.

Speaker Change: Moving people around we've got some a little bit of Capex here and there over time.

Speaker Change: A lot of tenant relations I mean, there's 45 tenants here.

Speaker Change: I think a lot of people might have backed away because they don't have the boots on the ground to efficiently.

Speaker Change: <unk> advantage of all the opportunities that's probably the best way I say it.

Speaker Change: And that seems to be the theme for us as we as we win deals.

Speaker Change: Because again, we're just not going to overpay.

Speaker Change: We don't want to be the top bidder.

Speaker Change: Yes.

Unknown Executive: So that's super helpful.

Speaker Change: So that's super helpful. Thanks, Alright. Thanks.

Unknown Executive: Thanks.

Unknown Executive: Yeah. All right. Thanks.

Nikita Bely: The next question will come from Nikita Belly with JP Morgan. Please go ahead.

Operator: The next question will come from Nikita Bely with J.P. Morgan. Please go ahead.

Nikita Bely: Any more? In your prepared comments, you talked about occupancy dipping in the 3Q and picking back up in 4Q.

Anthony Saladino: If we were to look at year-end occupancy, where exactly would you expect your year-end same store and the overall company occupancy to be at December 31 roughly? So, as it relates to same store, I think what guidance we provided, if you will, was that we'd see a dip in Q3, as you mentioned, down to around 96.5%. And then an expectation that we would return to, let's call it the 98% level by year-end. And that's the year end. And the same store. Yeah.

Unknown Executive: and the same story.

Anthony Saladino: Any other one-time items that there's potentially embedded in your second half of this year's outlook? No, I think we tried to do a comprehensive job of articulating the credit loss and resulting impacts.

Unknown Executive: No, you know, I think we tried to do a comprehensive job of articulating the credit loss and resulting impacts. I mean, we were certainly surprised by the velocity of the tenant decision. We consider that impact anonymous relative to... We articulated in the prepared commentary.

Speaker Change: No I think we we've.

Speaker Change: Tried to do.

Speaker Change: The comprehensive job of articulating the credit loss and resulting impacts we were certainly surprised by.

Anthony Saladino: I mean, we were certainly surprised by the velocity of the tenant decision. We consider that impact anonymous relative to our average lease tenor of under four years. That particular tenant had executed a 10-year lease with six months of free rent, resulting in the outsized impact on Q2 as we... C, we articulated in the prepared commentary.

Speaker Change: The velocity of the tenant decision.

Speaker Change: We consider that impact anonymous relative to.

Speaker Change: Our average lease tenure of under four years that particular tenant had executed.

Speaker Change: A 10 year lease with six months of free rent.

Speaker Change: Resulting in the the outsized impact on Q2 as we were.

Speaker Change: We articulated in the prepared commentary.

Speaker Change: Okay.

Anthony Saladino: And for the times that you guys are discussing for your stainless property, when would you expect for them to take occupancy and commence the rent payment? Oh, that's a big lease with 70 square feet, guys. Yes, we expect the occupancy roughly beginning of the year, probably rent starting in cash rent starting in Q2. 25 dollars.

Speaker Change: And now for the tenants that you guys are discussing your lowest property when would you expect to for them to take occupancy and commence the rent payment and also thats a big lease up 700000 square feet. Please.

Unknown Executive: Yes, we... We expect occupancy around the beginning of the year, probably...

Speaker Change: Yes.

Speaker Change: We expect the occupancy roughly beginning of the year.

Speaker Change: Probably.

Speaker Change: Rent starting in Q2 cash rent starting in Q2.

Speaker Change: Got it.

Speaker Change: Thank you.

Unknown Executive: Thank you.

Operator: Your next question will come from Anthony Hau with Truist. Please go ahead. Good morning, guys.

Speaker Change: Thank you. Your next question will come from Anthony Hau with tourists. Please go ahead.

Anthony Hau: Next question will come from Anthony Hau with the truest. Please go ahead.

Anthony Hau: Good morning, guys. Thanks for taking my question. So it seems like manufacturing is slowing down, with companies laying off employees, cutting production to counter falling all orders and raising industries. Just want to get your thoughts on that subject and whether you guys have any concern on the potential and back to demand in your markets. I just, we have not seen that to be the case in our markets with our tenants. Demand strong, I think the one company that did have the issue. The logistics company that was trying to, you know, it was really a tech company trying to be a logistics company, and they kind of didn't succeed on that.

Anthony Hau: Good morning, guys. Thanks for taking my question.

Anthony Hau: So it seems like manufacturing is slowing down, with companies laying off employees, and cutting production to counter falling orders and rising inventories. Just want to get your thoughts on that subject and whether you guys have any concern about the potential impact on demand in your markets.

Anthony Hau: So it seems like manufacturing is slowing down with companies laying off employees cutting production to counter.

Speaker Change: Following orders in a rising inventories just wanted to get your thoughts on that subject and whether you guys have any concern on the potential impact to demand in your markets.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Have not seen that to be the case in our markets with our with our tenants.

Speaker Change: Demand is strong I think.

Unknown Executive: Demand is strong. I think the one company that did have the issue. The logistics company that was trying to, you know, it was really a tech company trying to be a logistics company, and they kind of didn't succeed on that so.

Speaker Change: The one company that.

Speaker Change: Good good.

Speaker Change: Yes.

Speaker Change: Have the issue.

Speaker Change: As a logistics company that was trying to.

Speaker Change: It's really a tech company try to be at a logistics company and then kind of didn't succeed on that so.

Anthony Hau: Okay, thank you.

Speaker Change: Okay. Thank you.

Unknown Executive: Thanks.

Speaker Change: Thanks.

Brendan Lynch: The next question will come from Brendan Lynch with Barclays.

Speaker Change: The next question will come from Brendan Lynch with Barclays. Please go ahead.

Brendan Lynch: Please go ahead. Great. Thanks for taking my question.

Unknown Executive: Great, thanks for taking my question. I joined a bit late coming from another call, so I apologize if this has already been addressed, but with the St. Louis asset, there was a suggestion that some of the prospective tenants were looking to take the available space and would potentially commission a built-to-suit asset on the adjacent land. Are they still in the mix?

Brendan Lynch: Great. Thanks for taking my question.

Jeff Willarow: I joined a bit late, coming from another call. So I apologize if this has already been addressed. But with the St. Louis asset, there was a suggestion that some of the prospective tenants were looking to take the available space and would potentially commission to build the suit asset on the adjacent land. Are they still in the mix? There it is. One of the tenants that wanted to expand is still in the mix. Is there one dropped out?

Brendan Lynch: Joined a bit late coming from another call. So I apologize if this has already been addressed but.

Jeff Willarow: Okay, that's helpful. And maybe to the extent you haven't already discussed it, just any additional commentary that you could give on the two that you're further along in the negotiations with. What are the considerations that are kind of being ironed out now? Sorry, on St. Louis? Yes.

Unknown Executive: I'm sorry, are you in St. Louis? Yes. Yeah. I am right now.

Jeff Willarow: Right now, I think we're seeing across the board that the larger Class A space is just taking a long time for people to make decisions. And there's been a lot of companies inquiring about the space, and they're putting together their plans, but the manufacturing company requires a lot of financing equipment. So they're still working those details through.

Unknown Executive: I think we're seeing across the board that the larger Class A space is just taking a long time for people to make decisions, and there's been a lot of... A lot of companies inquiring about the space, and they're putting together their plans. But a manufacturing company requires a lot of financing, and equipment, so they're still working those details through. Okay, thanks for the call. Thanks. The next question will come from Stephen

Brendan Lynch: Okay, thanks for the call.

Unknown Executive: Thanks.

Stephen Dumansky: The next question will come from Stephen Dumansky with Janie.

Operator: The next question will come from Stephen Dumansky with Janney. Please go ahead.

Stephen Dumansky: Please go ahead. Thank you.

Jeff Willarow: Can you please provide further insight on the Jacksonville market, especially in reference to your current development and the recent completions? Maybe you could refine that question a little bit. You know, our recent developments. I mean, we have outside of the industrial properties that we have that are single site. We have three significant industrial parks that form the core of our portfolio in Jacksonville. I mean, occupancy there is always high 90s, strong demand. We do have one pad site left that we can build. It's another 40 to 50,000 square foot building on that we're entertaining built to suits on.

Speaker Change: Yeah.

Speaker Change: Hum.

Speaker Change: Maybe you could refine that question a little bit.

Speaker Change: A recent developments I mean, we have.

Speaker Change: Hum.

Unknown Executive: Outside of the industrial properties that we have that are single sites, we have three significant industrial parks that form the core of our portfolio in Jacksonville. I mean occupancy there is always high 90s. There's always strong, strong demand. We do have one pad site left that we can build on. It's another 40 to 50,000 square foot building that we're entertaining built to suit on. So, again, maybe you can give, you know, some more color to what the question is. I just, I guess I wanted to see.

Speaker Change: Outside of the industrial properties that we have that are that are single site, we have three significant <unk>.

Speaker Change: Industrial parks.

Speaker Change: That form the core of our portfolio in Jacksonville.

Speaker Change: I mean occupancy there is always high ninety's.

Speaker Change: <unk> strong demand, we do have one pad site left that we can build it's another $40 to 50000 square foot building on.

Speaker Change: That we're entertaining built to suits on.

Jeff Willarow: So thank you. Again, maybe you can give, you know, some more color to what the question. I just I guess I want to see if you currently see a significant difference between yields rather than between the secondary and primary markets. The Jacksonville market is very strong.

Speaker Change: So thank you again, maybe you can give some more color to what the question.

Speaker Change: I was just I guess I wanted to see if you currently see a significant difference between.

Speaker Change: Yields rather than between these secondary and primary markets.

Unknown Executive: So Jacksonville Markets is very strong. Thank you. This concludes our question and answer session, as well as our conference call for today. Thank you for attending today's presentation.

Speaker Change: So Jacksonville market is very strong.

Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

This concludes our question and answer session, as well as our conference call for today. Thank you for attending today's presentation.

Speaker Change: This concludes our question and answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.

You may now disconnect.

Speaker Change: [music].

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Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].