Q1 2025 Plymouth Industrial REIT Inc Earnings Call
Speaker Change: [music].
Unknown Executive: © The Bulletproof Executive 2013 Good morning and welcome to the Plymouth Industrial REIT first quarter 2025 conference. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Good morning, and welcome to the Plymouth Industrial REIT first quarter 2025 conference call.
All participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist 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 and then 1 on your touch-tone phone. To withdraw your questions, you may press star and 2. Please note, today's event is also being recorded.
After todays presentation, there will be an opportunity to ask questions to ask a question you May press Star and then one on your Touchtone phone.
Draw. Your question you May press Star and two.
Please note today's event is also being recorded.
John Wolfong: I would now like to turn the conference call over to John Wolfong, Investor Relations. Sir, please go ahead. Thank you and good morning.
Speaker Change: I would now like to turn the conference call over to John Wolfgang Investor Relations. Sir. Please go ahead.
Speaker Change: Thank you and good morning, welcome to the Plymouth Industrial REIT Conference call to review the company's results for the first quarter of 2025 yesterday afternoon, we issued our earnings release and posted a copy of our prepared commentary and a supplemental deck on the quarterly results section of our Investor Relations Page. In addition to these.
John Wolfong: Welcome to the Plymouth Industrial Week conference call to review the company's results for the first quarter of 2025. Yesterday afternoon, we issued our earnings release and posted a copy of our prepared commentary and a supplemental deck on the quarterly results section of our investor relations page. In addition to these earnings documents, a copy of our 10-Q can be found on the SEC filings of our IR site.
Speaker Change: Earnings documents, a copy of our 10-Q can be found in our SEC filings.
Speaker Change: Our IR site, our supplemental deck includes our full year 'twenty 25 guidance assumptions detailed information on our operations portfolio and balance sheet and definitions of non-GAAP measures and reconciliations to the most comparable GAAP measures. We will reference this information in our remarks with me today is Jeff weather.
John Wolfong: Our supplemental deck includes our full year 2025 guidance assumptions, detailed information on our operations, portfolio and balance sheet, and definitions of non-GAAP measures and reconciliations to the most comparable GAAP measures. We will reference this information in our remarks.
John Wolfong: With me today is Jeff Witherell, Chairman and Chief Executive Officer, Anthony Saladino, President and Chief Financial Officer, Jim Connolly, Executive Vice President of Asset Management, and Ann Hayward, General Counsel. I would like to point everyone to our forward-looking statements on page 3 of our supplemental presentation and encourage you to read them carefully. They apply to statements made in this call, our press release, our prepared commentary, and in our supplemental financial information.
Speaker Change: Our chairman and Chief Executive Officer, Anthony Salad, Dino President and Chief Financial Officer, Jim Connolly Executive Vice President of asset management, and Anne Hayward General Counsel I.
Speaker Change: I would like to point, everyone to our forward looking statements on page three of our supplemental presentation and encourage you to read them carefully.
Jeff Weather: Statements made in this call our press release, our prepared commentary and in our supplemental financial information I will now turn the call over to Jeff.
Jeff Witherell: I will now turn the call over to Jeff. Thanks, John. Good morning. And thank you for joining us today. I hope that everyone had a chance to review the commentary and supplemental information we posted last night.
Jeff Weather: Thanks, John Good morning, and thank you for joining us today I hope that everyone had a chance to review the commentary and supplemental information we posted last night.
Jeff Witherell: First, I will hit a few highlights and then we'll go to Q&A. The first quarter of 2025 marked a strong start to the year, highlighted by record leasing activity, positive acquisition momentum, and stable core financial performance. We continue to be well positioned to scale our platform. ample strategic capital, and nearly 30% of annual rents rolling in 2025 and 2026 in markets benefiting from sequential rent growth, limited Class B supply, and favorable reshoring dynamics. We see a path for sustained internal growth and long-term value creation. On a macro level, as global supply chains adjust to the shifting geopolitical and trade landscape, we will continue to actively monitor the impact across our tenant base in target markets.
First I will hit a few highlights and then we'll go to Q&A.
Jeff Weather: The first quarter of 2000 and twenty-five marked a strong start to the year highlighted by record leasing activity positive acquisition momentum and stable core financial performance.
Jeff Weather: We continue to be well positioned to scale, our platform with ample strategic capital and nearly 30% of annual rents rolling in 2025, and 2026 and markets benefiting from sequential rent growth limited class B supply and favorable re shoring dynamics we.
Jeff Weather: We see a path for sustained internal growth and long term value creation.
Jeff Weather: On a macro level as global supply chain adjust to the shifting geopolitical and trade landscape. We will continue to actively monitor the impact across our tenant base in target markets.
Jeff Witherell: We have yet to see any material interruptions across our portfolio, but we have observed an increase in short-term space requirements. Primarily Driven by Tenants Responding to Inventory Adjustments and Shifting Trade Flows.
Jeff Weather: We have yet to see any material interruptions across our portfolio, but we have observed an increase in short term space requirements, primarily driven by tenants responding to inventory adjustments and shifting trade flows.
Jeff Witherell: Our strategic focus continues to be on acquiring and operating smaller footprint, infill industrial properties in dense, supply-constrained submarkets, areas where speculative development has primarily targeted large-scale bulk assets. In contrast to larger warehouses, which often face longer lease-up periods and a narrower tenant base, Our properties feature modular layouts and multi-tenant configurations that help mitigate binary vacancy risk and support more resilient cash flow. This flexibility enables us to adapt quickly to evolving tenant demands. including those driven by reshoring, inventory realignment, and supply chain diversification.
Jeff Weather: Our strategic focus continues to be on acquiring and operating smaller footprint infill industrial properties in dense supply constrained submarket areas, where speculative development is primarily targeted large scale bulk assets.
Jeff Weather: In contrast, the larger warehouses, which often face longer lease up periods and the narrow a tenant base our properties feature modular layouts and multi tenant configurations that help mitigate binary vacancy risk and support more resilient cash flows.
Jeff Weather: This flexibility enables us to adapt quickly to evolving tenant demand, including those driven by re shoring inventory realignment and supply chain diversification.
Jeff Witherell: Our acquisition strategy remains focused on expanding within our existing market. Our deal activity in the first quarter and at the end of 2024 was funded largely by the proceeds of the Sixth Street transaction. These acquisitions were located in key distribution hubs within our target markets located across the Golden Triangle. And as of today, we have approximately $205 million of acquisitions under agreement, representing roughly 2 million square feet at a targeted initial NOI yield of $6.5 to $6.75. Since our June 2017 IPO, we have acquired over 32 million square feet at an average cost under $50 per square foot, well below replacement costs, which not only provides a meaningful margin of safety, but also enhances cash flow returns and highlights our disciplined approach to capital deployment and value creation.
Jeff Weather: Our acquisition strategy remains focused on expanding within our existing markets.
Jeff Weather: Our deal activity in the first quarter and at the end of 'twenty 'twenty four was funded largely by the proceeds of the sixth Street transaction.
Jeff Weather: These acquisitions were located in key distribution hubs within our target markets located across the Golden triangle.
Jeff Weather: As of today, we have approximately $205 million of acquisitions under agreement, representing roughly 2 million square feet at a targeted initial NOI yield of six and a half to six and three quarters.
Jeff Weather: Since our June 2017, IPO, we have acquired over 32 million square feet at an average cost under $50 per square foot well below replacement cost, which not only provides a meaningful margin of safety, but also enhances cash flow returns and highlights our disciplined approach to <unk>.
Jeff Weather: Capital deployment and value creation.
Jeff Witherell: Moving to our balance sheet, we continue to have strong liquidity with over 88% of our debt being fixed, no debt maturities in 2025, and expect to operate in the six times range for the balance of the year. With the upsizing of our credit facility in last year's fourth quarter, we have $415 million of availability there, and with the capital secured through the Sixth Street transaction, we are well-positioned and have the critical financial flexibility to scale our platform and support long-term value creation for our shareholders.
Jeff Weather: Moving to our balance sheet, we continue to have strong liquidity with over 88% of our debt being fixed no debt maturities in 2020 five and expect to operate in the six times range for the balance of the year.
Jeff Weather: With the upsizing of our credit facility in last year's fourth quarter, we have $415 million of availability, there and with the capital secured through the sixth Street transaction, we are well positioned and have the critical financial flexibility to scale, our platform and support long term value creation for our shareholders.
Jeff Witherell: Finally, we have affirmed our previously issued full year 2025 guidance for core FFO. We anticipated a bit of a muted start to the year with a stronger second half driven by the stabilization of transitory vacancies in Cleveland and St. Louis. along with the full contribution from acquisitions expected to close in the second and third quarters. I look forward to providing further updates in the coming months as we execute on our leasing and capital deployment strategy.
Jeff Weather: Finally, we have affirmed our previously issued full year at 2025 guidance for core <unk>.
Jeff Weather: We anticipated a bit of a muted start to the year with a stronger second half driven by the stabilization of transitory vacancies in Cleveland and St. Louis along with a full contribution from acquisitions expected to close in the second and third quarters.
Jeff Weather: I look forward to providing further updates in the coming months as we execute on our leasing and capital deployment strategies.
Unknown Executive: I would now like to turn it over to the operator for questions. Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. You are using a speakerphone. We do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality. With these instructions in mind, once again, if you would like to ask a question, just press star and one.
Jeff Weather: I would now like to turn it over to the operator for questions.
Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session to ask a question you May Press Star and then one using a touchtone telephone switch all your questions you May press star two.
Speaker Change: You are using a speaker phone would you ask you. Please pick up the handset prior depressing the numbers to ensure the best sound quality.
Speaker Change: But these instructions in mind once again, if you would like to ask a question just press star and one.
Todd Thomas: Our first question today comes from Todd Thomas from KeyBank Capital Markets. Please go ahead with your question. Hi, thanks. Good morning. First question, in the prepared commentary, you noted the potential three-year renewal at the 624,000-square-foot asset in St. Louis and the backfill prospects you're negotiating with at ODW, the 772,000-square-footer in Columbus.
Speaker Change: Our first question today comes from Todd Thomas from Keybanc Capital markets. Please go ahead with your question.
Speaker Change: Hi, Thanks, good morning.
Speaker Change: First question in the prepared commentary you noted the potential three year renewal.
Speaker Change: 624000 square foot asset in St. Louis and the backfill prospects here.
Speaker Change: Negotiating with Oh, DW that the 772000 square footer in Columbus.
Jeff Witherell: Just in light of the current environment, how confident are you that those deals get done and have conversations changed at all over the last few weeks in light of the current environment here? Yes. Regarding St. Louis, we've come to terms on the renewal. been signed right now, so any day, three-year deal, and in ODW, they've agreed to take anywhere from 280,000 square feet to 400,000 square feet back for a period of time and that 265 of it is out for signature right now.
Speaker Change: Just in light of the current environment. How confident are you that those deals get done then and have conversations changed at all over the last few weeks.
Speaker Change: In light of the current environment here.
Speaker Change: Yes.
Speaker Change: Regarding St. Louis.
Speaker Change: We've come to terms with them on the renewal.
Speaker Change: It's been signed right now so any day.
Speaker Change: Three year deal and.
Speaker Change: And OTW.
Speaker Change: They have agreed to take anywhere from.
Speaker Change: 280000 square feet to 400000 square feet back for a period of time and that.
Speaker Change: 265 of it is out for signature right now.
Todd Thomas: Okay. And then in terms of the acceleration in growth in the back half of the year, so, you know, really strong second half in terms of increase in total and portfolio occupancy, the larger St. Louis asset, I guess, as a contributor of that, you backfilled and signed the lease there, the 769,000 square foot facility, but that was removed from the same store.
Speaker Change: Okay, and then in terms of.
Speaker Change: The acceleration in growth in the back half of the year. So you know really strong second half in terms of.
Speaker Change: Okay.
Speaker Change: Oh.
Speaker Change: Occupancy.
Speaker Change: The.
Speaker Change: Larger St. Louis asset I guess as a contributor of that you you backfill and signed lease there the 769000 square foot facility, but that was removed from the same store can you just walk through.
Jeff Witherell: Can you just walk through the key drivers behind the acceleration in the same store growth rate later in the year, what the primary drivers are there? Yeah, happily, and Todd, as a point of correction, that St. Louis asset is in the same store. So that is a key contributor to the growth. But as Jeff mentioned, we experienced a fairly moderate start to the year in the pool. That said, about 70% of 1.6 million square feet of speculative space, greater than 100,000 square feet. included in our guidance has now been leased. So the cadence of occupancy is the best way to illustrate the path to the full year growth.
Speaker Change: The key drivers behind the acceleration in our same store growth rate later in the year, what the primary drivers are there.
Speaker Change: Yeah happily and Todd.
Speaker Change: As a point of correction.
Speaker Change: St. Louis asset is in same store.
Speaker Change: So that is a key contributor to the growth but.
Speaker Change: As Jeff mentioned, we experienced a fairly moderate start to the year in the pool that said about 70% of one 6 million square foot square feet of speculative space greater than 100000 square feet.
Speaker Change: Included in our guidance has now been leased so the cadence of occupancy is the best way to illustrate the path to the full year growth starting.
Jeff Witherell: Starting back to Q4 2024 for this pool, occupancy was 92.2%. The lease up of this larger format space, which we just discussed, adds approximately 640 basis points of occupancy. This is going to be partially offset by a temporary 130 basis point vacancy expected in Q4, which results in a projected year-end same-store occupancy of about 97.3%.
Speaker Change: Back to Q4 2024 for this pool occupancy was 92, 2% the lease up of this larger format space, which we just discussed as approximately 640 basis points of.
Speaker Change: Occupancy this is going to be partially offset by a temporary 130 basis point vacancy expected in Q4.
Speaker Change: Results in our projected year end same store occupancy of about 97, 3%.
Todd Thomas: Okay, that's really helpful. Thanks. Sorry about that. I appreciate the clarification on St. Louis.
Speaker Change: Okay.
Speaker Change: That's really helpful. Thanks, and sorry about that I appreciate the clarification on St. Louis.
Jeff Witherell: And then last question, just in terms of the $205 million of acquisitions under agreement, can you just remind us and run through the funding sources for those investments from here, the timing of the remaining drawdown of the $79 million, preferreds, what you're anticipating there? And I guess, you know, in terms of funding, the balance, how we should think about that? Sure, so the funding mechanism is the line of credit. To your point, we have another $79 million to draw from the Series C Preferred, which we will do so in May. Thinking about the impact of that drawdown, you know, compared to current rates, there's about 125 basis point premium relative to our line.
Speaker Change: And then last question just in terms of.
Speaker Change: The $205 million of acquisitions under agreement can.
Speaker Change: Can you just remind us and run through the funding sources for those investments from from here.
Speaker Change: Timing of the remaining drawdown of the $79 million preferreds, what you're anticipating there and I guess in terms of funding the balance how we should think about that.
Speaker Change: Yeah sure. So the funding mechanism is the line of credit to your point.
Speaker Change: We have another $79 million to draw from the series C preferred which we will do so in may.
Speaker Change: Thinking about the impact of that drawdown.
Speaker Change: Compared to current rates about 125 basis point premium relative to our lines. So there'll be an uptick in interest expense post draw.
Jeff Witherell: So there'll be an uptick in interest expense post-draw. With respect to cadence of deployment, we identified the 200-plus million. There's probably another 150 right behind that. So there could be some chunky deployment in the middle of the year with tapering as we arrive at year end.
Speaker Change: With respect to cadence of deployment.
Speaker Change: We identified the 200 plus million Theres, probably another 150 right behind that.
Speaker Change: So there could be some chunky deployments in the middle of the year with.
Speaker Change: With tapering as we are.
Speaker Change: As we arrive at year end.
Speaker Change: Okay.
Unknown Executive: Okay. All right.
Speaker Change: Okay alright, thank you.
Unknown Executive: Thank you.
Rich Anderson: Our next question comes from Rich Anderson from Wedbush. Please go ahead with your question. Thank you. Good morning.
Our next question comes from Rich Anderson from Wedbush. Please go ahead with your question. Thank you good morning.
Speaker Change:
Anthony Saladino: So, where does the buyback stack up with you on your priorities from a capital deployment standpoint today? So, to be clear, we did not repurchase shares during Q1. Our view is that a balanced approach, deploying capital into both acquisitions and opportunistic repurchases, is the best way to optimize long-term shareholder value. The repurchase math is compelling given the current market dislocation, but expanding the platform remains our priority. Right. So, and the buyback also can just be disruptive from a balance sheet perspective. I assume if you did go that direction, it would be on a balance sheet neutral.
Speaker Change: Where does where does the buyback stack up with you on on your priorities from a.
Speaker Change: A capital deployment standpoint today.
Speaker Change: So to be clear, we did not repurchase shares during Q1.
Our our view is that a balanced approach deploying capital into both acquisitions and opportunistic repurchases is the best way to optimize long term shareholder value.
Speaker Change: The repurchase math is compelling given.
Speaker Change: The current market dislocation, but.
Speaker Change: Expanding the platform remains our priority.
Speaker Change: Right, so and the buyback also can just be disruptive from a balance sheet perspective, I assume if you did go that direction it would be on a balance sheet neutral.
Anthony Saladino: way is that, you know, taking again, taking taking capital from the Sixth Street transaction and just instead of portfolio expansion buyback and it would still be a balance sheet neutral transaction in your mind. Is that correct?
Speaker Change: <unk> is that you know taking again, taking taking capital from the sixth Street transaction and just instead of portfolio expansion buyback and it would still be a balance sheet neutral transaction in your mind is that correct it would be.
Anthony Saladino: It would be. And that's, you know, in part the motivation for a balanced approach to the deployment of the remaining capital. On ODW, you said 280 to 400 and some amount is being. you know, signed now or sort of it's sort of what was that was that 280 that's being being close to being signed. Is that what you said? I missed that, I apologize. Yes. 280. And you said period of time. Is that like another one of those short-term, six-month type situations or longer or shorter? How could you describe that?
Speaker Change: That's in part the motivation for a balanced approach to the deployment of the remaining capital Okay.
Speaker Change: On OTW, you said $2 80 to 400 and some amount is being.
Speaker Change: Signed now are sort of it's sort of what was that was at $2 80, that's being.
Speaker Change: Being a close to being signed is that that what you said I missed that I apologize yes.
Speaker Change: Yes.
Speaker Change: And you said period of time is that like a another one of those short term six months type situations or longer shorter or what.
Speaker Change: Could you.
Speaker Change: Yes.
Anthony Saladino: through the end of the year, plus into 26, with an undefined end date at this point. And the mentality there, generally, and maybe specifically for that is just, we don't know what's going on in front of us with tariffs, etc. and the economy. And so we're just want to don't want to make an overcommitment. Is that basically the commentary from your tenant? On that particular one, Rich, that's not the case, so they occupy the entire building. They have built out a newer campus, and so they're going through a flux of new contracts, expiring contracts, and moving to other space, so that's not a tariff.
Speaker Change: Through the end of the year plus into 'twenty six.
Speaker Change: A defined end date at this point and the mentality there generally and maybe specifically for that is just we don't know what's going on in front of us with tariffs et cetera, and in the economy and so we're just want don't want to make it over commitment is that basically the the commentary from your tenants.
Speaker Change: On that particular, one rich that's not the case so okay. The occupancy occupy the entire building they have.
Speaker Change: Built out a newer campus and so they're going through a flux of new contract expiring contracts and moving to two other space. So.
Speaker Change: It did that's not a tariff issue.
Jeff Witherell: As I recall, they have some presence in that area, but generally speaking, is that the mentality that you're hearing? So yeah, so in our, in our remarks, and in the commentary here, we have mentioned that that there is some short term You know, thought process going on from tenants to, you know, secure additional space, additional resources and all that. stocking material. So there is some dislocation. Again, we've said in here, we haven't really seen it in a in a significant manner across our portfolio yet. Yep.
Speaker Change: As I recall, they have some presence in that area, but it but generally speaking.
Speaker Change: Is that is that the sort of the mentality that you're hearing.
Speaker Change: So yes, so in our in our remarks and in the commentary here. We have mentioned that there is some short term.
Speaker Change:
Speaker Change: So.
Speaker Change: Thought process going on from tenants too.
Speaker Change: Additional space additional.
Speaker Change: Shockingly material. So there is some dislocation again, we've said in here, we haven't really seen it in a.
Speaker Change: In a significant manner across our portfolio yet yep, Okay and last for me you reiterated guidance you've got some acquisitions coming you know maybe some more after that.
Unknown Executive: Okay.
Rich Anderson: And last for me, you reiterated guidance. You got some acquisitions coming, you know, maybe some more after that. Some of your peers are saying we would have raised guidance had it not been for some of these uncertainties ahead. Would you make the same comment? Or would you say, you know, guidance is sort of captures whatever might happen in the future as stands. So it's not something that you would have raised, if not for some of the questions that are out there right now. I mean, I think our view is that that's a good range. And to Jeff's point, there hasn't been a lot of static.
Speaker Change: What some of your peers are saying, we would have raised guidance had it not been for some of these uncertainties ahead do you do you would you make the same comment or or would you say you know guidance is good.
Speaker Change: Try it it sort of captures whatever might happen in the future as Stan So it's not something that you would have raised if not for some of the questions that are out there right now.
Speaker Change: Broadly speaking.
Speaker Change: I mean, I think our view is that that's a good range.
Speaker Change: And to Jeff's point, there hasnt been a lot of static.
Anthony Saladino: And just given the momentum around leasing and the success in pursuing and ultimately deploying this capital, I think we're We're in a good position to achieve within The range that we previously reported and recently affirmed.
Speaker Change: And just given the momentum around leasing and.
Speaker Change: The success in pursuing and ultimately deploying this capital I think we're.
Speaker Change: We're in a good position to two.
Speaker Change: To achieve within.
Speaker Change: The range that we previously.
Speaker Change: Reported and recently affirmed okay fair enough. Thanks very much. Thank you.
Rich Anderson: Okay, fair enough. Thanks very much.
Nick Tillman: Our next question comes from Nick Tillman from Baird. Please go ahead with your question. Good morning. Appreciate all the commentary on some of the larger tenants. Anthony, I think you mentioned 140 basis points of occupancy loss in fourth quarter.
Speaker Change: Our next question comes from Nick Tillman from Baird. Please go ahead with your question.
Nick Tillman: Good morning.
Speaker Change: I appreciate all the commentary on some of the larger tenants Anthony I think you mentioned 140 basis points of occupancy loss in fourth quarter or is that related to any specific tenants or I know, Chris when we look through the schedule. That's like the next tenant that we didn't touch on was like communications test design.
Anthony Saladino: Is that related to any specific tenants? Or I know like as we look through the schedule, that's like the next tenant that we didn't touch on was like communications, test design. Any updates there?
Nick Tillman: Any updates there.
Jim Connolly: I'll let Jim fill you in on that, but it is not that tenant. It is a single tenant that we anticipate is more likely than not to vacate now in November. for RSVP DI. We have reached out to them about extending their lease. As you know, they only did a one-year renewal last time because they had a buyout in their contract, which just passed, so we're looking for them to extend longer this time. The plant is very busy and, um...
I'll, let Jim fill you in on that but it is not that tenant it is.
Speaker Change: It is a single tenant.
Nick Tillman: That we anticipate is more likely than not to vacate now.
Speaker Change: In November.
Speaker Change: As far as <unk>.
Speaker Change: We have reached out to them about extending that.
Speaker Change: Okay.
Speaker Change: As you know they only get a one year renewal last time, because they had a buyout in their contract.
Speaker Change: Which is passed so we're looking for them to extend longer this time.
Speaker Change: The plant is very busy and.
Unknown Executive: You're very good.
Speaker Change: Okay very good tenant.
Jeff Witherell: And maybe following up, Jeff, you kind of talked a lot about sort of the smaller tenant or smaller building multi tenant assets and kind of the focus there on the acquisition standpoint.
Jeff Weather: And maybe following up Jeff you kind of talked a lot about sort of the smaller tonnage.
Jeff Weather: Smaller building multi tenant assets and kind of the focus there on the acquisition standpoint is there any appetite from like a disposition side maybe.
Jeff Witherell: Is there any appetite from like a disposition side to maybe de-risk on some of these individual tenants and sell some of those assets given where the stock's trading today? I mean, Nick, we look at that all the time, but I don't think there's a situation of de-risking. You know, I think we've been very clear that if you look at the St. Louis property, I mean, if you look at our basis, we bought a Class A building at $72 a square foot. You know, that, you know, Unilever probably should have renewed there. They did a global...
Jeff Weather: De risk on some of these individual tenants and sell some of those assets given where the stocks trading today.
Jeff Weather: Okay.
Jeff Weather: I mean, if we look at that all the time.
Jeff Weather: But I don't think there is a situation of derisking.
I think we've been very clear that.
Jeff Weather: If you look at the St. Louis property I mean, if you look at our basis, we bought a class a building at $72 a square foot.
Jeff Weather: That Unilever, probably should renew there they did a global.
Jeff Witherell: I don't know. reorganization of their supply chain. You can see that we've backfilled it with a Fortune 500 Global Tenant, and they may take some more space in there. You know, what we're going through right now is is again is a lot of like one year extensions or six month extensions until they figure out their supply lines. I don't really think it's a lot of the stuff that we've talked about is tariff related. It's really just an inflection point of You know, groups like Unilever, you see Amazon has just, you know, made some major changes.
Jeff Weather: The reorganization of their supply chain.
Jeff Weather: You can see that we backfill it with a.
Jeff Weather: Fortune 500, global tenant and they may take some more space in there.
Jeff Weather: <unk>.
Jeff Weather: What we're going through right. Now is again is a lot of like one year extensions or a six month extensions until they figure out their supply lines I don't really think it's a lot of the stuff that we've talked about is tariff related.
Jeff Weather: It's really just an inflection point of.
Jeff Weather: Groups like Unilever, you see Amazon has just made some major changes Fedex is making some major changes.
Jeff Witherell: FedEx is making some major changes. Again, I don't think a lot of that's tariff related, quite frankly, it just seems to be that now's the time that a lot of these groups are starting to reorganize.
Jeff Weather: Again, I don't think a lot of that is tariff related quite frankly, it just seems to be that now is the time that a lot of these groups are starting to reorganize so.
Unknown Executive: So we always look at assets that we believe, you know, if we can sell them and reposition them into something better, we're always looking at that. So we'll see how it goes. That's very helpful.
Jeff Weather: We always look at assets that we believe we can sell them and reposition them into something better we're always looking at that.
Jeff Weather: So we'll see how it goes.
Speaker Change: No. That's very helpful. And then maybe just one last question quickly for for Anthony any changes to sort of what youre seeing on collections or bad debt within the portfolio or changes to the watch list.
Anthony Saladino: And then maybe just one last question quickly for for Anthony, any changes to sort of what you're seeing on collections or bad debt within the portfolio or changes to the watch list? No, the composition in terms of talent on the watch list hasn't hasn't really changed. We have 35 BIPs of bad debt embedded in our guidance, none of which was utilized in Q1. This compares favorably to our historical run of about 10 BIPs. For context, 2024 was an anomaly due to the Cleveland bankruptcies, which pushed bad debt above 100 BIPs. But excluding those events, bad debt for 2024 would have been approximately 20 basis points.
Speaker Change: No the composition in terms of talent.
Speaker Change: On the watch list hasn't.
Speaker Change: Hasnt really changed we have 35 bps of bad debt is embedded in our guidance none of which was utilized in Q1. This compares.
Speaker Change: Favorably to our historical run of about 10 bps for context, 2024 was an anomaly due to the Cleveland bankruptcies.
Speaker Change: <unk> pushed bad debt above a 100 bps, but excluding those events bad debt for 2024 would've been approximately 20 basis points.
Anthony Saladino: As of quarter-end, our watch list includes five tenants. They occupy a combined 290 square feet. Their total ABR is less than 1%. And in all but one of those, tenants is current on rent. And so when we zoom back and make these assessments in terms of our watch list. You know, today we think there's a 90 plus percent likelihood that those tenants will stay current or make full term payments over the remaining life of their lease, which across those five tenants is about 1.5 years.
Speaker Change: As of quarter end, our watch list includes 500 tenants.
Speaker Change: Occupy a combined 290 square feet.
Speaker Change: Their total ABR is less than 1%.
Speaker Change: And in all but one of those tenants is current on rent and so when we zoom back and make these assessments in terms of our watch list.
Speaker Change: Today, we think there is a 90 plus percent likelihood that those tenants will.
Speaker Change: We'll stay current or.
Speaker Change: Make full term payments.
Speaker Change: Over the remaining life of their lease which across those five tenants is about one five years.
Unknown Executive: Very helpful.
Speaker Change: Very helpful. Thank you guys.
Unknown Executive: Thank you, guys.
Nick Tillman: Thanks, Nick.
Unknown Executive: Once again, if you would like to ask a question, please press star and one.
Speaker Change: Once again, if you would like to ask a question. Please press star and one our next question comes from Mike Mueller from JP Morgan. Please go ahead with your question.
Mike Mueller: Our next question comes from Mike Mueller from JP Morgan. Please go ahead with your question. Yeah, hi. So I think you said you expected year end about 97.3% occupancy. And I guess I guess how much of that 97.3% is this short term leasing like 170,000 in St. Louis or something that you know, could be 30, 60, 90 days or something that could go away pretty quickly. So how much of that 97.3% could kind of go away within a couple of months or something? Mike, I would say about 25 bips of that. But here's the caveat.
Mike Mueller: Yes, hi.
Mike Mueller: So I think you said you expect at year end about 97, 3% occupancy and I guess I guess, how much of that 97. Three is this short term leasing like 170000 at St. Louis There something that could be 30, 60, 90 days or something that could go away pretty quickly.
Mike Mueller: How much of that 97, three could kind of go away within a couple of months or something.
Mike Mueller: Mike.
Speaker Change: I would say about 25 bps of that.
Mike Mueller: But here's.
Mike Mueller: Here's the caveat.
Anthony Saladino: With respect to the temp fill, there's prospects that we'll likely absorb that space on a longer And so we're not thinking about that space as being all that disruptive to the occupancy range. The 90-day out was actually added for benefit for us because we do have... in the space longer term. It's for us to be able to replace them with a longer term tenant.
Mike Mueller: With respect to the attempt Phil there's prospects that will likely.
Mike Mueller: Absorb that space on a longer term basis, and so we're not <unk>.
Mike Mueller: Thinking about that.
Mike Mueller: Space has been all that disruptive to the.
Mike Mueller: The occupancy ramp.
Speaker Change: Got it okay.
Mike Mueller: It was actually added for benefit for us because we do have interest.
Speaker Change: In this space longer term so.
Mike Mueller: It is for us to be able to replace them with them.
Speaker Change: Other term tenant.
Anthony Saladino: Got it. Okay. And then just to clarify, that 97.3, that does reflect 140 basis points of recapture, I think, that you were talking about in November? It does. Okay. It does. It's 130 BIPs, just for clarification's sake. Okay. Sounds good.
Mike Mueller: Got it okay.
Speaker Change: And then just to clarify that at 97, three that does reflect a 140 basis points of recapture I think that you were talking about in November.
Mike Mueller: Yes.
Mike Mueller: Got it Okay and then.
Speaker Change: I'm sorry, it's 130 bps, just just for clarification sake.
Mike Mueller: Okay.
Mike Mueller: Sounds good.
Anthony Saladino: And then one other question, I guess, how much capacity, and we talked about 200 million under contract, I think another 150 behind it, I guess, what's the capacity for acquisitions after that? Before you get to the point where you need to start thinking about the next round of equity as being critical to fund the acquisitions, I guess if the stock doesn't re-rate, how do you approach the next batch of acquisitions once you need to start thinking about equity? I think beyond those tranches, there remains ample capacity, you know, that to fund that kind of next iteration, there could, you know, there could be an uptick in recycling.
Mike Mueller: Then one other question I guess, how much capacity I know you talked about.
Mike Mueller: $200 million under contract I think another 150 behind it I guess, what's the capacity for acquisitions after that before.
Mike Mueller: Before you get to the point, where you need to start thinking about the next round of equity.
Mike Mueller: As being.
Critical to fund the acquisitions in.
Mike Mueller: So if the stock doesn't re rate.
Mike Mueller: Do you approach the next batch of acquisitions once you need to start thinking about equity.
Mike Mueller: I think beyond those tranches there remains ample capacity.
Mike Mueller: Yes.
Mike Mueller: To fund that kind of next iteration, there could there could be an uptick in recycling.
Mike Mueller: We'll evaluate that as we deploy through the balance of this year. But we do think post that deployment, specifically as it relates to the articulation of deployment and guidance, there's still a couple hundred million of capacity before we'd have to go back to the market. Got it. Okay. Appreciate it. Thank you. Thanks, Mike.
Mike Mueller: We'll evaluate that as we deploy through the balance of this year, but we do think post that deployment.
Mike Mueller: Specifically as it relates to the articulation of deployment and guidance Theres still.
Mike Mueller: Couple of hundred million dollars of capacity before we'd have to go back to the market.
Mike Mueller: Got it okay. Appreciate it thank you.
Mike Mueller: Thanks, Mike.
Speaker Change: Our next question comes from Eric Borden from BMO Capital markets. Please go ahead with your question.
Unknown Executive: Hey, good morning. I'm just going back to ODW. On the space that is being leased, about the one-third, you know, can you talk about any frictional vacancy? Is there any downtime associated? And do you plan or intend to split up the box? And if there's any capex involved there? There may be, depending on the term of the tenancy, some cost of demise, but we've had agreements with the prospects that we have in hand where we're just going to... Fence off to different areas. Okay, so it would be a minimal downtime in terms of occupancy and them paying rent, or would they immediately just pay rent and, you know, and the fence would go up rather quickly?
Eric Borden: Hey, good morning.
Eric Borden: Just going back to OTW on this space that is being leased about one third can you talk about any frictional vacancy is there any downtime associated in or do you plan or intend to split the box and if theres any capex involved there.
Eric Borden: There may be depending on the term of the tenancy.
Eric Borden: The mice, but.
Speaker Change: We've had agreements with the with the.
Speaker Change: The prospects that we have in hand, where we're just kind of.
Speaker Change: Okay thats off the different areas.
Speaker Change: Okay. So it would be a minimal downtime in terms of occupancy and paying rent or would they immediately just pay Brandon.
Speaker Change: And defense would go up rather quickly.
Unknown Executive: The latter. We would demise it very quickly and they would pay rent immediately. Okay, that's helpful. And then just following up on that, you know, when would ODW be added back to the same store pool? Once the space is Restabilized. So it's more likely than not that they'd be added back in 26.
Speaker Change: The latter.
Speaker Change: We would we would do.
Speaker Change: Very quickly and they will pay rent immediately.
Speaker Change: Okay. That's helpful and then just.
Speaker Change: Following up on that one would OTW be added back to the same store pool.
Speaker Change: Once the spaces.
Speaker Change: <unk> stabilized so it's more likely than not that they would be added back in 2006.
Speaker Change: Okay. Okay.
Jeff Witherell: um You talked about acquisitions being your priority focus, maybe with some stock buybacks, but just curious where new development starts to fit into the capital outlay. Understand that you started a smaller investment during the quarter. Just curious on your thoughts going forward for the development pool. Yeah, Eric. So we did start the last remaining parcel in one of our parks in Jacksonville. So it's 42,000 square feet. There's a lot of demand down there. So we feel that that was a build it and it'll come situation. And it's not a lot of money, so it's not a big issue for us.
Speaker Change: You talked about acquisitions being a priority of focus maybe with some stock buybacks, but just curious where no new development starts fit into the capital outlay understand that you started a smaller investment during the quarter just curious on your thoughts going forward towards the development tool.
Eric Borden: Yeah, Eric So we did start.
Speaker Change: The last remaining parcel.
Speaker Change: In our.
Speaker Change: All of our parks in Jacksonville, So its 42000 square feet.
Speaker Change: A lot of demand down there. So we feel that that was a build it and they will come situation and it's it's not a lot of money. So it's not a big issue for us.
Jeff Witherell: But we had this deal contracted. It just made a lot of sense to finalize construction in that park and stabilize it. So that's what we're doing.
Speaker Change: We had this deal contracted it just made a lot of sense to finalize construction in that park and stabilize it. So that's what we're doing aside from there I mean, we've mentioned in the past we have 200000 square feet ready to go in Cincinnati, We have I think a 115000 square feet.
Jeff Witherell: Aside from there, I mean, we've mentioned in the past that we have 200,000 square feet ready to go in Cincinnati. We have, I think, 115,000 square feet ready to go in the new acquisition in Memphis, that portfolio. They're being set up as built to suits right now. So unless someone comes today and wants us to build them a building at a high single digit yield to us, we're not going to build spec. You know, I don't think I don't think you're going to see us build spec, you know, the next couple of quarters.
Speaker Change: Square feet ready to go in.
Speaker Change: The new acquisition in Memphis that portfolio.
Speaker Change: They are being setup is built to suits right now so unless someone comes today and wants us to build them a building at a high single digit yield so us.
Speaker Change: We're not going to build spec.
Speaker Change: I don't think I don't think youre going to see us build spec.
Speaker Change: Next couple of quarters.
Unknown Executive: Great. Thanks for the time, guys. All right. Thank you.
Speaker Change: Great. Thanks for the time guys alright. Thank you.
Unknown Executive: And ladies and gentlemen, in showing no additional questions, we'll conclude today's question and answer session as well as today's conference call. We do thank everyone for joining. You may now disconnect your lines.
Speaker Change: And ladies and gentlemen, and showing no additional questions. We will conclude today's question and answer session as well as today's conference call. We do thank everyone for joining you may now disconnect your lines.