Good day, and welcome to the Plymouth Industrial REIT Second Quarter 2019 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. After today’s presentation there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference call over to Mr.

Tripp Sullivan of Investor Relations. Mr. Sullivan, the floors is your sir..

Thank you, Mike. Good afternoon, everyone. Welcome to the Plymouth Industrial REIT conference call to review the company's results for the second quarter of 2019.

On the call today will be Jeff Witherell, Chairman and Chief Executive Officer; Dan Wright, Executive Vice President and Chief Financial Officer; and Jim Connolly, Senior Vice President of Asset Management..

Thanks, Tripp. Good afternoon, everyone. Thanks for joining us. In addition to Dan and Jim, Anne Hayward, our General Counsel is here with us. Pen White, our President and Chief Investment Officer is traveling today and won't be able to join us.

Our outlook for 2019 remains very positive and the actions we took during the second quarter and so far in the third quarter have solidified those expectations. We are executing well on acquisitions, as I will discuss in a moment, and on our leasing front as Jim will discuss as well.

We have stayed true to our strategy and the strong performance by our team is helping us capitalize on a number of opportunities within our existing portfolio and within our targeted markets. With leasing, we are benefiting from the strong location of our properties and the underlying fundamentals in the markets.

We had 714,000 square feet of leases commenced in quarter two, with the leases that were six months or longer generating an 8.3% increase in rental rate, and that's on a cash basis. We are still not including the lease-up of our Creekside space in Columbus, Ohio in our forecast, but Jim will discuss this asset in a few minutes..

Good afternoon. Leasing activities are in the second quarter continuing at a strong pace. During the quarter, 12 leases commenced comprised of 714,000 square feet. This total included a 141,000 square-foot short-term lease at our Creekside property in Columbus from April through the end of July.

The balance of the lease that was commencing during the quarter included 253,000 square feet of renewal leases and 320,000 square feet of new leases.

Significant leases included a new 7-year 269,000 square-foot lease with Elk at our Freeport, Illinois property previously under a mass lease with the prior owner, and a 5-year renewal on 111,000 square-feet at our Diamond Road Cleveland, Ohio property with Winston products.

Overall on leases commencing during the quarter, we had an 8.3% increase in rental rates on a cash basis over prior leases. Year-to-date we have seen a 10.9% increase in rent on commenced leases over prior leases.

During the quarter, we executed additional leases totaling 486,000 square feet that will commence later this year of which 286,000 square-feet was weighted to lease renewals in 200 square feet associated with a subtenant that will stay on for additional three years after Volvo leaves in October.

Also as previously announced, we executed a renewal with Ingram publishing services on 638,000 square feet that will commence during 2020. As mentioned by Jeff, I'd like to provide an update on our Creekside leasing activity. There have been numerous interested parties in this property.

Over the past few weeks, we have been negotiating leases with two strong potential candidates one of which is a logistics prospect that wants three quarters of the building over multiple years. We strongly believe that we will finalize that deal in short order and we'll be announcing further details on it in the next couple of weeks.

Occupancy at June 30 was 96.1% up 1.6% from Q1. For the balance of the year, we are confident that occupancy will meet our expected guidance of 95% to 96%. As previously mentioned, we have leases commencing later in the year along with significant interests in Creekside that is expected to keep overall occupancy levels high..

Thank you, Jim. The second quarter operating results were ahead of what we were anticipating when we raised guidance in May. We were up across the board on all metrics on a year-over-year and sequential basis on the strength of our acquisitions, leasing and the leveraging of G&A.

Our dividend coverage was stronger in the quarter on both an FFO and AFFO basis and our outlook for 2019 projects the dividend to be fully covered for the full year. The second quarter earnings release and supplemental outline our results and provide additional details.

I'd like to focus my time this afternoon on the color behind those results and what we have included in our updated guidance. For the second quarter, the primary factors driving our results were significant year-over-year acquisition activity that drove revenues NOI, EBITDA, FFO, and AFFO.

We had less than a month's contribution from the Indianapolis acquisition and the recent planned acquisitions in July and August should begin to have more of an impact in Q3 and further in Q4, further enhancing the sequential orderly progression we've been expecting all year.

G&A in the second quarter was in line with our previous guidance and includes approximately $305,000 of non-cash expense representing amortization of stock compensation that is an adjustment to AFFO.

The ATM activity in early April and the follow-on offering in May increased our weighted average share count and unit count by 102% compared with a year ago and by 36% compared with the first quarter.

That was $0.14 per share in unit impact FFO in the quarter and $0.12 per share impact to AFFO which is in line with what we expected when we completed the offering. We have factored the higher share count into our current guidance..

Thank you, sir. We will now begin the question-and-answer session. The first question will come from Barry Oxford of D.A. Davidson. Please go ahead..

Great. Thanks. Jeff you guys had nice occupancy gain in the quarter.

Was that a function of the lease up more so or was it a function of the acquisition being fully leased?.

Jim -- Barry, thanks for the question..

Barry that number was driven by the short-term lease we had at Creekside. So it was a four-month deal, which ended at the end of July, but we're working on that -- the new lease right now..

Right. Okay, perfect, perfect. From -- I know you probably don't want to discuss in great detail the July and August.

But Jeff, maybe from a macro sense, can you help us with cap rates?.

Yes. I mean I think if you look through the three acquisitions that I highlighted I think some of that information is in our earnings release as well. The cap rates are right in line where they've been for us.

Somewhat of a -- I think there's a disconnect in the market somewhere where large portfolios that can -- whatever those sizes are, there's hundreds of millions of dollars. It seems like those are getting done at low cap rates. And I'm not so sure that's a function of the real estate or is it a function that large amounts of cash to push out.

But these properties that we're buying, portfolios in these cap rates, there's obviously -- it's our strategy. We continue to find good deals that we can execute on..

Perfect. Thanks. That definitely helps when I’m trying to think about my model. Go ahead -- go ahead here the Florida, the people. Thanks..

Thanks, Barry..

And next we will have Gaurav Mehta from National Securities..

Thanks, guys.

I was hoping if you could comment on how your acquisition pipeline is looking, and in which markets are you looking for new product for the rest of the year?.

Yes. We probably say the same thing every call. I mean we continue to maintain what we call a robust acquisitions pipeline. We have a variety of sellers they come -- there are institutions to individuals and we have seen some small portfolios. We're under contract on two of them.

We've passed on a few and there are always one-off deals bouncing around and we take those. So our pipeline is pretty strong. We're going through a lot of product right now as you can see. But we're planning to stay at it..

Okay.

And second question, I was hoping if you could comment on what you're hearing from your customers and how was your tenant retention for the quarter?.

I didn't understand the last part of the question for the quarter..

Yeah.

The customer retention rate, I think in 1Q it was around 80%?.

Would you have that?.

Our customers are enjoying our landlord skills. We've done a great job. We've gotten a lot of positive feedback from property management and leasing. For the year, the retention rate is at 70.5%. The quarter is roughly the same, so that's where we stand..

Okay. Thank you..

Thank you..

Thank you, sir. The next question will come from Alexander Goldfarb of Sandler O'Neill..

Hey. Good afternoon. Just a few questions here. First, are -- so the guidance that you laid out just to be clear that's as you stand today with the $113 million closing by quarter end.

It doesn't include the remaining $25 million that was part of your IPO acquisition plan correct? Is that correct?.

That is correct..

Okay.

And then are you planning any ATM? Is there any ATM assumed in the back half of this year?.

The guidance, as I stated in the guidance, we don't factor in any change on -- drawdown of the ATM or an additional offer..

Okay, but I mean I'm just saying -- but you -- I mean clearly the acquisition environment is pretty healthy. Your stock has held up. So what are your thoughts on reengaging in the ATM as you did earlier in the year? Because it seems like from an acquisition standpoint, you guys are blessed with a lot of opportunity..

Yes, we are. We've had a board call yesterday, and we are going to assess the market as it goes forward. I mean the ATMs worked out well for a lot of people, and we will certainly use it if the time is right. You're right, we have plenty of acquisitions. That's not our issue..

Okay. And then the next question is on Creekside, obviously good to see some progress in the quarter and then appreciate the leasing commentary that's going on right now.

Just given the previous description of the asset as sort of unique in the market relative to the competitive set, do you think that assuming that you have this leased up by year-end that you would seek to sell it? Or Jeff do you think that you'll keep it based on what you're seeing in the market?.

It's hard for us to tell what we'll do. We evaluate everything every quarter, whether we want to keep it or sell it. I think it will depend on the tenant. It will depend on what we think. The role is going to be. From those particular tenants, how long this lease is and what we think the role will look like.

And so that's why we buy -- in fact, we buy -- a lot of our acquisitions are that way too Alex, right? If we think -- we buy them, because we think they're going to renew in two, three years. We have probably an educated guess that they're going to renew. We don't always win that, but we've won the majority of that.

And a lot of times these leases were below market. So, we see how this one plays out..

Okay. Great. Thank you..

Thank you..

Next we have Henry Coffey of Wedbush..

Yes. Sorry about my hoarse voice. Good afternoon everyone, and great quarter. Just to kind of summarize just to make sure I have it right. The three acquisitions that you've got under contract equal $113 million in total value, some of which will be assumed by.

Correct..

….some of which will be financed by assumable debt, right?.

The -- plus the other asset, we've already bought..

Right. So it's -- $113 million is total. That also includes the other two assets we have..

Yeah.

It's three, right?.

Well, the three new acquisitions were about $90 million..

$90 million, okay. And then plus the other two….

That's the goal but -- yes, the other two, St. Louis and Indianapolis..

Right. Okay.

And so and all of those should be on the books by the end of September?.

Definitely by the end of September right.

These again -- these are subject to final closing conditions, but all of our due diligence has been done, so we're happy with it it's just a matter of title and things like that and those -- sometimes those things pop up, right?.

Right..

So if these have been, which we think they will we believe they'll all be done certainly before September 1..

And so the -- and the amount of assumable debt that goes with total $113 million?.

Approximately $31 million..

Thank you. I just couldn't get it written down fast enough.

And the cap rate's in the like you sort of said in the 8s in total?.

That is correct. Low 8s, yeah..

And that's all that's in this guidance, and I think everybody on the call would not be surprised if you then added more acquisitions during the September, October period.

When you think about putting on properties, now that you've access to the ATM, what is the thought process either in terms of assumable debt or the amount of money you would borrow? So if you're putting on $100 of new assets, how much of it would you -- would have to be equity and how much of it equity/cash? And how much of it would you be comfortable financing either with assumable debt or the issuance of your own debt?.

So, there's kind of a two-part answer I think Henry. Just as we look across the portfolio we want to maintain our leverage, I mean, we were -- our model I think spoke to around 57% of debt-to-book value not market value, right? So we think the market value is higher.

So we think that number is obviously lower in the real world but on the financial statements it's about 57%. So that -- we've told you that sort of at the last overnight offering that we were going to maintain that 57% and then bring it down over time. So from a model perspective, we like to keep the portfolio at 57%.

I can say that on one of these particular acquisitions the leverage is 50%, Dan? So, each deal -- so the second part of the answer, I guess is that, on each deal, it just depends, right? I mean, if one deal is 65% levered. And the other one is 50%, that's -- you're going to get you to -- your 57%..

And then, just more of a technical question, I noticed, that property management cost, if I have my numbers right, was $6.3 million in the first quarter and a little over $6 million in the second. What -- is that seasonality and taxes and things? Or maybe you could help me understand, how that works a little bit..

Generally, you're absolutely right. It'll be -- some of that is seasonality. And part of it again is real estate taxes, and adjustments on a couple of the various locales, adjusting their real estate tax rates, as of the beginning of June, moving into fiscal year..

And then, for the rest of the year, we should assume. It's sort of a blend, of those two numbers, or assuming no news, well, with the acquisitions, obviously it'd be higher..

Yeah. And roughly, I would say, yes..

Okay. Great quarter and lots of progress and certainly, things have moved in right direction.

And what numbers would prompt you to increase the dividend? What do you want to see, kind of on a look-back basis, before you sit down with the board? And say, I think it's time to raise the number?.

Maybe it's a product of share price, as well Henry. We probably haven't really thought of that, all the way through. I mean, our first priority is, going to be makes sure our debt, is going the right way. So I think, that's our number one priority is to do that..

Well, it makes perfect sense given your....

Yeah. I mean, like right now, we – listen, as major shareholders, right? We love to raise the dividend, because it benefits us. But the marketplace right now, if we can raise the dividend 20%. And I don't know if the market's going to respond accordingly. I mean look at what our dividend yield is today. And look at what we've been able to execute on.

So, we just need probably a little more time, in the market. I think, the last kind of -- this is good information. But I think the last -- I should -- I apologize for not putting this in the prepared information. But, the overnight offering was very successful for us. We brought in 17 new institutional investors.

It was about 87% institutional deals, 10 of them were major investors with major orders. So, I think, that's a telltale sign, that they're supporting the company. They believe in and what we're doing. And they've indicated that, they'll -- they want to be with us into the future as well..

Great. No. I mean, it's a huge opportunity in your subsector. We had a commercial real estate call, with a bunch of brokers. And that's all, I could talk. When they weren't talk about, how wonderful multi-family was they, would switch the conversation to how active the industrial, real estate space so..

There you go. Retail and industrials blending so, that's a benefit..

Superb, oh, thanks for your remarks..

Thank you, Henry..

I'm showing no further questions, at this time. We'll go ahead and conclude our question-and-answer session. I would now like to turn the conference call back over to, Mr.

Jeff Witherell for any closing remarks, Sir?.

Yeah. Thank you all for joining us. And we are available for questions afterwards, as usual. Reach out to Tripp Sullivan. Thanks so much..

And we thank you, sir. And the rest of the management team for your time also today. The conference call has now concluded. At this time, you may disconnect your lines. Thank you. Take care. And have a great day, everyone..