Plymouth Industrial REIT Inc (PLYM) 2020 Q4 法說會逐字稿

Good day, and welcome to the Plymouth Industrial REIT Fourth Quarter 2020 Earnings Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Tripp Sullivan of Investor Relations. Please go ahead.

Thank you. Good morning. Welcome to the Plymouth Industrial REIT conference call to review the company's results for the fourth quarter of 2020. On the call today will be Jeffrey Witherell, Chairman and Chief Executive Officer; Pen White, President and Chief Investment Officer; Dan Wright, Executive Vice President and Chief Financial Officer; and Jim Connolly, Executive Vice President of Asset Management; and Anne Hayward, General Counsel.

Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our website, along with our Form 10-K and supplemental filed with the SEC. A replay of this call will be available shortly after the conclusion of the call through March 5, 2021.

The numbers to access the replay are provided in the earnings press release. For those who listen to the replay of this call, we remind you that the remarks made herein are as of today, February 26, 2021, and will not be updated subsequent to this call.

During this call, certain comments and statements we make may be deemed forward-looking statements within the meaning prescribed by the securities laws, including statements related to the future performance of our portfolio, our pipeline of potential acquisitions and other investments, future dividends and financing activities.

All forward-looking statements represent Plymouth's judgment as of the date of this conference call and are subject to risks and uncertainties that can cause actual results to differ materially from our current expectations. Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the SEC.

We will also discuss certain non-GAAP measures including, but not limited to, FFO, AFFO and adjusted EBITDAre. Definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in our filings with the SEC.

I'll now turn the call over to Jeff Witherell. Please go ahead

Thanks, Tripp. Good morning, everyone, and thank you for joining us today. The year 2020 was the most disruptive period that most of us have endured. Despite the challenges that we are all aware of, Plymouth had an outstanding year. Our property portfolio performed exceptionally well, and the fundamentals in our markets are as strong as ever.

Our leasing pace has been strong, and we have already addressed nearly half of our 2021 expirations. We continue to source attractive new opportunities in our target markets and have made much progress on improving our balance sheet.

I want to thank the entire Plymouth team for their commitment. They've worked hard together wherever they were in doing whatever it takes to produce these results. Our experience as real estate operators has once again proven itself out.

Let's start today with our portfolio. I don't have to add too much color here as the stats speak for themselves. Occupancy at year-end was 96.4%. Cash re-leasing spreads of 8.7% for the full year. We collected 99% of our rents throughout the pandemic. Same-store NOI on a cash basis was growth of 3.7% in the fourth quarter.

And core FFO and AFFO dividend payout ratios of 52% and 59%, respectively, for the year. We are projecting this strength to continue in 2021, with cash re-leasing spreads expected to be in the 8% to 10% range and same-store NOI on a cash basis to be in the 3% plus range. As we look across the landscape of our public industrial peers, those figures stack up exceptionally well. Where I do want to provide more color is on how this portfolio is being valued based upon the fundamentals.

We've added additional information in our supplemental that should help in properly valuing our portfolio. We've added data on replacement costs, components of NAV, rent collections, primary and secondary market concentrations, a breakout of potential developable land and value creation as well as our joint venture and relevant features of our preferred stock.

A few points stand out. If we look at the data, we'll see an acquired investment basis of $41 a square foot versus a replacement cost of $75 a square foot. Compare that to an implied total enterprise value of $46 a square foot based on yesterday's stock price.

We are also seeing an implied cap rate quoted on us of around 8% versus acquisitions planned for 2021 at cap rates in the 7% range and larger portfolios in our markets, trading with a 6-handle in the cap rate.

Looking across our industrial peers, we see implied cap rates and implied enterprise values per square foot well above to -- exponentially above ours. We think that the delta is unsustainable and, quite frankly, unwarranted. We'll be working hard throughout the year to drive home that comparison and better educate the investment community on that disconnect.

We believe our core FFO and AFFO guidance for 2021 is solid, with a slight decline year-over-year, which reflects the impact for the August equity offering and the ATM activity we had in December and January, which collectively increased our share count by 13% since September 30. The full year and first quarter guidance implies a significant ramp-up in the second half of the year. And assuming a status quo with these investments in place, it would also imply an outlook that is right on top of what the Street consensus is for the next 2 years.

As I've stated before, our balance sheet priorities have been to ensure that our dividend is well covered, that our leverage profile continues to improve and that we have access to multiple sources of capital. Our dividend was well covered in 2020 and is projected to be so again in 2021. We are targeting a net-debt-to-adjusted-EBITDA ratio of less than 7x and by year-end 2021, which is the same target we outlined in August of 2020.

We have capacity to acquire wholly-owned assets with cash on hand from recent ATM activity, and we have access to over $340 million of remaining biopower through our Madison joint venture. We are bullish on the outlook for industrial in general and within our targeted markets in particular.

Rents are going up, new supply is constrained in our target markets and now is the time to own these type of industrial properties that are positioned to benefit from a favorable supply-demand dynamic and access to large pools of skilled labor. That being said, we will remain disciplined in growing our portfolio, and I believe we've proven that to be the case over the last several years. Pen, why don't you walk us through our acquisition activity?

Thanks, Jeff. Good morning, everyone. I'll touch on our wholly-owned acquisitions first and then walk through our first joint venture transaction.

After our last offering in August, we projected putting $165 million to work between September and the first quarter of 2021. We are right on track with that plan, with a $51 million in transactions we discussed last quarter in St. Louis and Jacksonville.

And then in the fourth quarter, we completed 2 separate transactions to add to our presence in Ohio for a total of $106 million invested. The first acquisition was a multi-tenant industrial building located north of Columbus. The second was a portfolio of 10 industrial buildings in Akron and Canton. With our regional office in Columbus and a footprint that now totals 7.6 million square feet in Ohio, we have created 1 of the larger institutional portfolios in the state with significant scale to put our leasing and asset management expertise to work on the ground.

This is a footprint that we've assembled for approximately $41 per square foot, well below the replacement cost of approximately $75 per square foot, we've shown on Page 5 of our supplemental.

Wrapping up the initial targets we outlined in September, we completed another transaction in mid-February in Kansas City, our first entry into that market. The property is a 220,000 square foot industrial building, 100% leased to 2 tenants, which we acquired for $8.6 million and is expected to provide an initial yield of approximately 8.8%.

We've targeted Kansas City as it's a large distribution and logistical market with attractive economic drivers, rent growth and low vacancy. It absorbed approximately 7.3 million square feet last year, a near record, second only to 2017 when it absorbed 7.7 million square feet, and its vacancy rate has now fallen to 4.2%, so we look forward to expanding our footprint in that market in the near future.

Switching gears. We completed our first acquisition with our joint venture partner in Madison International during the fourth quarter. This was a 28-building portfolio in Memphis, which transacted at $86 million. We have a new page in our supplemental that provides specific details on the transaction and the joint venture, but I wanted to highlight a few points. The deal was funded with $30 million of equity from the partners with a balance from a secured mortgage.

Our share accounted for $6 million equity, and we expect to receive an annualized asset management fee of $300,000 on the partner's initial equity investment in addition to our share of the net operating income. The 28 buildings are located in infill markets in the Memphis metropolitan area, with many of them in close proximity to our existing properties. Adding them brought our footprint in the Memphis market to over 4 million square feet. We believe this was a solid value-added investment with Madison, and we are actively reviewing additional opportunities in our existing markets that fit within our previously stated investment criteria for the joint venture.

Looking ahead to our plans for the balance of the year, we are targeting slightly under $150 million in wholly-owned acquisitions for the year. Our published guidance outlines the expected timing, and we are anticipating the cap rates for these acquisitions would be in the low 7% range or even high 6s, given strong rental growth rates and mark-to-market opportunities in selected markets.

As Jeff noted earlier, the industrial fundamentals are strong in our markets. We have broad exposure to both primary and secondary markets within our current portfolio. We don't have any plans to migrate to gateway markets where pricing remains very frothy, but we are seeing some continued cap rate compression in our target markets, particularly as it relates to larger portfolios.

That obviously speaks well for the value of the portfolios we have already assembled in these markets and supports our ability to lease-up our properties and drive internal growth, but we aren't that surprised.

Because rent growth is strong, new supply remains constrained for our preferred product, and we are seeing positive absorption in the markets where we are invested and continue to invest.

I'll now turn it over to Jim to walk through the leasing activity and portfolio operations.

Thanks, Pen. Good morning. Through the end of 2020, we had released 88% of our leases that were scheduled to expire during the year. Leases comprised 2.9 million square feet of space were scheduled to expire going into 2020. And of that amount, 1.9 million square feet renewed, 601,000 square feet was leased to new tenants and 383,000 square feet was vacated.

In addition, we leased 238,000 square feet of space that was vacant at the start of the year. Portfolio-wide at year-end 2020 -- portfolio-wide occupancy at year-end 2020 was 96.4%, up 90 basis points from Q3. During 2020, we also saw rental rates increase 8.7% over prior lease rates on a cash basis. These metrics underscore the resiliency and growth of our portfolio, especially when one considers the impact of the pandemic.

In the fourth quarter, 23 leases commenced comprising of a total of 608,000 square feet, which included 558,000 square feet related to leases 6 months or longer in duration.

Of this amount, 383,000 square feet was renewed, and the remaining 175,000 square feet was leased to new tenants. While we saw a 0.4% decrease in rental rates on a cash basis from prior lease rates, the decrease was influenced by just a few deals: one, a 5-year deal for 243,000-square feet in Chicago that started flat from the expiring rent; and 6 smaller leases totaling 62,000 square feet that although had lower starting rents averaged 4.8 years in lease term.

As I mentioned, our year-end portfolio occupancy was up 90 basis points over the third quarter, mainly due to the commencement of 11 new leases addressing 170,000 square feet of previously vacant space. Vacancy within our portfolio at year-end included 340,000 square feet that is being repositioned at 4 locations.

Excluding that square footage, our occupancy rate would have increased to 97.9%, which will be 130 basis points higher than it was at the end of 2019. Included in the repositioned space is 80,000 square feet that we received $595,000 in lease termination fees for related to move-outs in Q1 and Q3.

We continue to have minimal impact on the core operations of this -- of our portfolio related to COVID-19. And the impact from our tenants has been -- the -- and the feedback from our tenants has been positive on maintaining their business plans in our facilities. To date, we have collected 99.6% of our rents billed during Q4.

Q1 through February 23 has seen a 97.5% rent collection rate. The only rent deferral agreements established were in mid-2020. They have now been paid in full, and no other -- no others have been granted since last year. With our focus now squarely set on 2021 expirations, we have made great progress to date. Initially, we had 4.4 million square feet or 18.8% of the current portfolio, slated to expire in 2021.

To date, we've addressed 2 million square feet or 45.2% of the scheduled expirations. Included in this amount is a 5-year 503,000 square foot lease at South Bend, a 10-year 236,000 square foot lease in Cincinnati and a 7-year 173,000 square foot lease in Indianapolis, just to name a few. Thus far, our rental rates have increased 8.5% over prior rates on a cash basis for leases over 6 months in duration.

At this point, I'll turn it over to Dan to discuss our financial results.

Thank you, Jim, and good morning. We've provided a very thorough set of disclosures in our earnings release and in our supplemental, which have been expanded with additional information, as mentioned previously. I would encourage you to take the opportunity to review those disclosures.

I will focus my time this morning on providing some detail on our results, our liquidity and guidance for the year and for the first quarter of 2021.

Fourth quarter FFO and AFFO results of $0.42 and $0.38 per weighted average common share in units, respectively, brought us in at the midpoint of our full year 2020 FFO range and $0.02 below the midpoint of the AFFO range, the latter of which was primarily due to the increased share count resulting from the fourth quarter, ATM activity and a handful of smaller leasing commissions being applied against our recurring CapEx that were not anticipated to be executed until the first quarter of '21.

We saw strong same-store property NOI growth on a cash basis of 3.7% and 3.6% for the 3 months and 12 months ended December 31, '20, which is within the midpoint for the industrial sector.

Same-store property NOI growth was predominantly driven by the strong leasing spreads realized in 2020. Our net debt to adjusted EBITDAre ratio at year-end of 6.7x was comparable to year-end 2019. The composition of our balance sheet has continued to improve, with nearly 35% of our debt unsecured, thanks to our new unsecured term loan and line of credit.

We have ample liquidity currently, with $16 million of cash on hand plus an additional $5 million in operating expense escrows for real estate taxes and insurance and $135 million of capacity on the line, with another $200 million available under the accordion provision if required.

Our full year 2021 guidance of core FFO of $1.72 and AFFO of $1.46 at the midpoint is built on the assumptions we have outlined in our earnings release and in the supplemental. In addition to the targeted yield range provided earlier by Pen, some additional key assumptions include, same-store property NOI growth on a cash basis is projected in the range of 3% to 3.4%.

Acquisition timing will be a primary factor in the quarterly cadence, and we expect the second quarter to have much like the first quarter, with a contribution from anticipated first quarter acquisitions being offset by higher share count from the first quarter ATM activity.

We expect to see the second half of the year benefit from the sequential ramp-up of transactions within the first and second quarters of this year. The higher weighted average share and unit count comes into play as well for the full year guidance, as the 2021 weighted average share in unit count is up 48% from full year 2020.

As Jeff mentioned earlier, we are on track to stay below the 7x net debt to adjusted EBITDAre at year-end '21, which was the goal we set last quarter. Again, the timing of acquisitions affects this by quarter as we're starting off the year below that number, and it could be slightly above it in the 2 middle quarters before selling in for Q4.

Our first quarter 2021 guidance of core FFO is $0.38 and AFFO of $0.29 at the midpoint. With regard to this, I will call out the following: fourth quarter 2020 had a partial benefit of the Mansfield, Ohio acquisitions in October; and the large portfolio acquired in Canton, Ohio portfolio acquisition in late November; as well as a couple of weeks benefit from the JV acquisition in Memphis that Pen indicated. First quarter, we'll see a full benefit of all 3 transactions plus half a quarter from our recent Kansas City transaction.

The impact on a per share basis is attributable to the additional shares issued on the ATM in the fourth quarter that will be fully reflected in Q1 '21 plus the ATM activity so far in the first quarter that was completed by the end of January. That activity equates to a 9.4% increase on a weighted average per share and unit basis from the fourth quarter of 2020 to the first quarter of 2021 and as of today, a 13% increase in total shares outstanding over the 9/30/2020 period end.

Same-store property NOI growth on a cash basis for the first quarter is projected to increase approximately 1% compared to Q1 2020, predominantly impacted by higher operating expense due to the recent extreme weather experienced within our markets.

Same-store property NOI growth on a cash basis compared to Q4 2020 is projected to decrease approximately 3%, predominantly driven down by higher operating expense due to the extreme weather, with an overall anticipated timing related to tenant rollover and rental escalations and extensions.

Our overall financial position has never been stronger, and we have a good plan for 2021 to continue to take advantage of opportunities to benefit from rental growth in our markets and gain exposure to additional markets, consistent with our overall investment objectives.

Operator, we are now ready to take questions.

(Operator Instructions) The first question comes from Dave Rogers with Baird.

Thanks for all the added disclosures. There was some nice improvements in the supplement this quarter. Jeff, you and the team talked and gave a lot of detail about the 2021 lease expirations and renewals you've accomplished already. Wanted to check in on Madison and Canton and Stonecrop, which is -- who we talked about previously, maybe the 500 was related to that, but some color on those 2 leases, in particular, and what's left in the other 55% that you still have to tackle?

Yes, David. Thank you. I wasn't prepared for that to be the first question, but glad you asked it. I mean as we sit here today, we actually have a lease out on that property, which is actually 3,500 Southwest Boulevard in Columbus, Ohio. We have a lease out for signature with a new tenant. So the disclosure is, it's out for signature, it should get signed today. It may, but it may not. It may never get signed, right? Those are the risk you run. So that's really good news. Jim and his team did a great job on that. And as far as Canton is concerned.

Yes, I'd just add, so that the new lease at 3,500 was not included in the results that were discussed. And Memphis and Canton, that space is -- currently, half of it is leased to a new tenant. It takes -- it's a subtenant now that takes over the lease when Memphis and Canton expires. There's another subtenant in the other half of the space that is wants to do a long-term deal, but they may expand into additional parts of our building as well. So we're working that out.

Hopefully, you got that, David, but it's a little complicated, but it's a lot of activity in that space, the Canton space.

That sounds really good. And maybe just a follow-up, the downtime on Stonecrop and then the 8.5% cash basis roll up so far in '21, really strong, and that's a really positive number. Thanks for giving that. Would you anticipate as we get through the year that you can hold a similar number?

Yes. Yes, that's been pretty consistent all along for the last couple of years.

And then the downtime on this, I don't know if we can...

There's 4 months of buildout, but lease stocks immediately after Stonecrop expires. So from a GAAP basis, there's no downtime.

No downtown on rents.

Okay. Great. And then maybe just lastly for me. On the acquisition outlook. You did mention, I think it was just under $150 million in the guidance for the year. And that was the wholly-owned, so I guess, in total, do you have a bigger number that you're anticipating deploying? If you said it, I missed it. And then maybe just give us a sense. It sounds like there are some acquisitions in the pipeline, but can you talk about the size of the pipeline today and maybe how that compares to what you've seen in the past?

Yes, we have a fairly robust pipeline, like we always have. Right now, it's about $520 million, $530 million worth of deals that we're looking at or underwriting or what have you. So we feel very, very comfortable about the number that we gave out earlier in the phone call. As Jeff mentioned also, we have a fair amount of buying capacity with our joint venture partner, with Madison.

We also -- we have probably over $300 million worth of pipeline activity just for the joint venture itself. So we're feeling very confident that, certainly, the lion's share, if not all of that capital will be deployed before year-end.

The next question comes from Barry Oxford with D.A. Davidson.

Great. Looking at your dividend and the $0.20 and given that the payout ratio is in the low 50% range, I got to imagine you guys are fairly close to minimum payout to retain lead status. If you guys continue to grow the company, which you guys are, is that dividend going to have to increase at some point just by definition in '21?

Barry, thanks for the question. Quite possibly. Quite possible it will. I mean I don't know if that's a question or a content, but we got to be careful on the future...

I guess what I'm saying is, look, my analysis is not far off, I guess, that's what I'm asking.

Correct.

Okay. Okay. Great. And then when I look at your ATM activity, obviously very strong in the first quarter. And then I look at your guidance for the share count, it looks as if you guys aren't planning on utilizing the ATM here in '21 any further.

It looks like we're not. Is that your question?

Yes. Yes. Because I'm looking at the share count, weighted average for the full year. And it doesn't look like you guys have a lot or much really kind of baked into more shares being issued off the ATM.

Right. When we put our guidance out, we're not going to speculate on equity offerings heading forward, right? But the ATM has proven to be very effective for us. I think you may have seen some filings from some large institutional investors, and they've -- people continue to want to build a position in Plymouth as they should. And everything is on the table for us, Barry, when it comes to those types of things. So -- but as far as our corporate modeling is concerned, right, we don't -- we're not modeling in equity offerings.

Okay. Okay. All right. So don't overread into this that, look, if our acquisition pipeline leaks up and stuff and of course, we're going to utilize the ATM, especially if the stock price is within a range that we like.

Right. At least that's -- we're -- there's a tremendous amount of opportunity to grow this business, as you know. We're kind of the only ones that do what we do. And the call -- those numbers that we've talked about all through last year, the revised JLL reports or whatever that is claiming that there's a need for 1 billion square feet of space, I mean, those estimates keep getting pushed up. So the next 4 or 5 years in industrial should be good, and we plan to be a good piece of that.

The next question is from Craig Mailman with KeyBanc.

Just following up on the acquisitions, what you have dialed in to guidance, that $105 million, is that fully identified either under contract or LOI at this point?

It's not fully identified. No. We have bits and pieces. It's always flowed in, as you probably know, but it's not 100% identified.

Okay. So there is some spec in there that you guys can either hit or exceed?

Yes.

Okay. And then, Pen, you had mentioned cap rates are kind of low 7%, maybe even creeping into the high 6% range on some of these deals. And listen, I get the fact that you can mix in some lower cap rate deals in, but how do you guys kind of evaluate how much to buy when your stock's trading kind of mid-7 caps on an implied basis, at least on my numbers, and you guys will be buying inside of that?

And I get from an earnings standpoint, you could easily make it accretive with debt. But just from an NAV standpoint, you're issuing around NAV and buying stuff inside of where you're trading.

What's that, Jeff?

Okay.

Yes. No, I think just to comment on that, we -- as Jeff just wanted to say, we look at every deal. We want to make money on every single deal. We're not just aggregating assets for the sake of aggregated assets. And these days, what we're seeing from the ground level up is good, strong rental growth.

And if you kind of zoom out and take a macro look, what happened last year in terms of total absorption across the country, you had 225 million square feet absorbed, which is a record, it was 11.8% above 2019's numbers. Vacancy rate across the board is 4.6%. Asking rents across the board increased to 8.25%, that's up 8.3% from 2019.

I mean, these are all indicative of the type of -- the kind of the win that we have behind our back right now. So we're seeing these numbers play out in our own assets. We're seeing good, solid rental growth. We're seeing deals in the mid-7s. We're seeing deals in the high-6 s. And each deal is different. And that's -- and we look at it that way.

So if we're buying something or we find ourselves buying something in the high 6s, for instance, you can probably bet that we're buying an asset that has tenants that are paying below market rents. And there's a pretty good chance that we're going to be able to mark-to-market in the near term. I hope that answers your question.

Yes, it did. So you guys are talking more about going in, which I get. I mean I guess if you look at it on, to your point, you're buying stuff with below market rents. As you guys evaluate, where generally have kind of your view of stabilized cap rates been versus where you've gone in?

And maybe that's a better way to look at it, right, because of where the stock is trading if you can roll it up 50 to 100 basis points within a year or 2, that's how you recoup that NAV. I mean is that kind of the range of what you guys have been targeting relative to going-in cap rates?

Yes. No, I think that's a pretty good observation and a way to look at it. We're -- the deals we're looking at, yes, we will look at, obviously, the ingoing yield, but not just -- we just don't look at the first year, we look at the second and third, fourth and so on and so forth. So a lot of it depends if it's a single-tenant versus multi-tenant, and it's multi-tenant, we have some more moving parts.

We look at it as a way to most likely recapture rent growth amongst these tenants. So it could be 50 to 100 basis points, like you said, maybe more, the way things are going right now across our markets. So we're feeling quite optimistic about this. We really are. So I think you'll see more deals along those lines.

Okay. And where are you guys seeing kind of your product type creep into the 6s? What markets?

I think you're seeing -- a lot of it depends, not just the market, as you know, but the quality or the vintage, the age of the building and also the quality of the tenants. So I think that's -- it's hard to generalize that way, but you're seeing cap rates come down moderately in places like Atlanta, in Chicago.

Obviously, they've come down tremendously in the gateway markets that I mentioned earlier, but we're not chasing those types of deals. To us, we look at that pricing as pretty frothy. So anyway, that's...

Craig, and a lot of this has to do with portfolio size. I think that's what I alluded to in my remarks was you take a portfolio of 2 million, 3 million square feet, I mean, we closed on the REIT portfolio at the end of last year, was it how many...

High 7s.

Yes, it was high 7s on that. That's Cleveland market, that's our market. So the cap rates are really indicative of really the size of the portfolio, who could put money to work. I mean we've closed on some deals that are probably -- that are not in the highlights here, but it will be in the supplement. And we just -- we entered the -- some properties in St. Louis. We entered the Kansas City market. I mean some of these cap rates are significantly high, but they're one-off deals, smaller size, but we can aggregate them.

And so the -- a lot of it has to do with large portfolios, I think.

Yes, that's accurate.

Got you. And I apologize on my phone cut out early in the call. I think you guys had said spreads of 8% to 10% in '21. Is that inclusive of Stonecrop? Or is that just on the role that you guys have addressed already?

That's just on -- the historical one does not include Stonecrop in it. And yet, we're still projecting on a company-wide basis that we expect those re-leasing spreads to continue into this year into next year.

Okay. So Stonecrop should be in that range? Or is that one because of the size, maybe a little bit lower, but it gets offset later in the year?

I'm not going to say exactly what it is, but it's not going to be lower.

Okay. Okay. And then just 1 last one, apologies. Just I appreciate the added disclosure around the JV with Madison. I'm just kind of curious, as you guys kind of put the waterfall out there, are you -- those are levered returns, right, the 12% and 15%? So you guys would be sort of already in that 12% waterfall bucket?

Yes, that's right.

So are you getting your -- it should be slightly above that. So you're already starting to accrue some of that 10% that goes to you guys?

Right, right. We're -- that's correct.

The next question comes from Connor Siversky with Berenberg.

Just jumping back to the acquisition pipeline and timing. So I'm looking at $150 million about in acquisitions and then the footnote in the supplemental states that these are going to be finished by June 30 this year. So I'm just wondering what the sense is that these are actually all completed by June 30? And then what are the chances that this pace continues through the end of 2021?

Yes. I mean the -- which -- it's not an exact science, right? I mean we're buying properties. We have more properties to buy than we do capital. That's been the case since we started the company, right?

We're deep in the markets that we're in. We see a lot of off-market deals, all kinds of opportunities all over the place. And because we buy short duration, we're not a net lease REIT, so we're not out there competing with 10-year leases. So there's a big variety of product out there. So we will meet or exceed the numbers that are in our filings, by far.

Okay. Okay. And then just wondering in terms of financing, looking at leverage a bit higher than the group still, what can we expect the debt-to-equity mix to look like through these acquisitions through June 30?

Yes. We don't look at it on a per acquisition basis because, I mean, we're working off of -- 1 thing that we really didn't highlight that much that is that -- I'll bring out, I'll answer it now because I think it's amazing, right? I mean look at a company with our market cap who's moved into a fully unsecured credit facility of its size, I think it's somewhat unprecedented. And I think that's a testament to Plymouth, the way we operate, the relationships we have with our lenders.

But it's also the asset class, it's industrial. I'm not going to take -- we're not going to take 100% credit, we're going to take 80% credit for that. But we don't look at -- so we're not looking at this asset and say, oh, we're going to lever this one 40%, the next one, 50%, right?

So we've made a claim that we want to keep our leverage on a net-debt-to-EBITDA basis of under 7%. That's what we told our investors, and I think everyone's realized that when Plymouth says something, that's what they do. And so that's how we look at that.

And again, you go out in the universe and look at a $400 million market cap REIT and look at our leverage and our growth, it doesn't exist out there. So we're not worried about leverage from that perspective. Our rents are going up, and we're going to continue to chip away at leverage over time. When it's relevant, when we're a $1 billion market cap, again, our leverage profile will be the best of any $1 billion market cap REIT that's out there.

It certainly be a positive development, I appreciate the color there. And then just a little higher level, looking at the disclosure, particularly on developable land, I'm just wondering if you can provide any color here, maybe what the long-term plan is for, some of this excess land, whether it's expanding the facilities, parking, building new? Any kind of outlook appreciated there?

Yes. So we've put that out there. I mean Pen and I brought this to Plymouth from our last place which was when you go out and buy a property and we bought plenty of them. For instance, we've got a property now it's got to -- we can build a 75,000 square-foot building on it on existing land.

When we bought that property, we bought it at a 9% cap, and the land is included. And so in industrial, in particular, in a lot of our markets, the land is not that expensive, relatively speaking.

So it kind of gets thrown into the deal. It's not like, well, if you want the building, it's x, and if you want the excess land, it's -- we're going to charge a extra $300,000 or $400,000. So we've always been kind of sneaky good at that, where if we're going to buy the building, we're going to want the excess land to come with it. It only makes sense.

And so we do have the ability to build almost 2 million square feet of space, and we can build it now in certain markets and achieve the yields that we want. So if we can buy a deal at 7% or 8% cap rate range, and we could build to that yield. And our tenants want that, we would do that. We're not necessarily spec developers.

We do have the expertise in-house to develop, that's my background as well as a few other people here. And we have a couple of tenants, 1 right now that we're negotiating with them to build a building right next to their existing building for over 200,000 square feet.

So if the tenants want it, it's going to be real good business for us to go do that. And again, the yields of getting there, price per square foot is getting there, it's just taken a little bit of time in some of our markets, but it's approaching where it makes a lot of sense.

The next question comes from Aaron Hecht with JMP.

Guys, you talked about how portfolios were getting lower cap rate bids compared to the one-off transactions. Just wondering where you think the size threshold crosses where you get that cap rate compression and the larger buyer groups come in and play on those type of assets?

Aaron, you're kind of coming through a little muffled. I think I'll rephrase the question and see if Pen can answer it. I think what you said was talking about kind of at what size of our portfolio, the cap rate changes? I mean is that...

That's right.

Okay.

Yes. It's kind of all over the board, it's hard to generalize. But we've seen really since the first of the year, portfolios that are kind of $100 million and up have definitely traded at a portfolio premium, meaning extraordinarily low cap rates, both in -- all the markets and whether it's Class A or Class B.

So it goes out saying that when we buy some of the properties, as we have been doing on a one-off basis, as we were -- our going-in yields are higher. So I don't know if that answers the question. I think if there's a portfolio that -- sometimes portfolios might not -- obviously, they're not all over $100 million, they might be in the $20 million to $30 million range, so you might not have a significant portfolio premium at that level as you would, $100 million and up, if that makes sense.

Yes, that was my question, where the threshold kind of cross. And then secondly, JV, just want to get your higher-level thoughts on desire to drive fee income and expand that platform longer term?

Because you guys talk about you're the only ones that do kind of what you do. How big do you think that can get? What's the desire to grow it, longer-term plans from a JV standpoint?

Yes, Aaron. So that -- the JVs are an outgrowth of what can the REIT do at any -- any one point in time, which is our size has limitations. As we've said in the past, the properties that go into the JV are going to require -- there's going to be probably low yield starting out potentially.

And there is obviously leasing to do. And then it could be some substantial CapEx in the case of the current properties in Memphis, so it's really a product of that. We like the fee income, but it's a little more strategic than really all that.

So we're in these markets, we know the markets well. We want to be able to be a buyer of more product in these markets and gain even greater scale, and the JV affords us that opportunity. So obviously, our financials do not reflect any type of really promote structure and things like that.

That, to us, is going to be all gravy. We think we'll get there, especially with Madison on this JV. They have significant capital. There's not a lack of capital for industrial. So we will continue to balance the deals we do in the JV with what we do in the REIT.

But make no mistake about it, our business is to grow the REIT, is to build this REIT up accretively and prudently. As I'm -- people tired of me saying it, but everybody in Plymouth, part of their compensation is stock.

And I know some REITs buy into that and some REITs don't. Their investor -- their employees have no stock, and I find that to be strange. So we're all in this together, and so we're doing what we believe is right. But I don't think you're going to see the JV platform overshadow what happens in the REIT itself.

Okay. So no expectation to really start ramping fee services because the REIT platform is where the focus is, plus you don't want to give up scale and add too much of your focus away from your own core assets. Is that fair to say?

That is fair to say. But I mean these joint ventures are our assets, right? And so in markets that we have a strong presence, we bring a lot to the table as a JV partner. So for the most part, you're correct in what you've just stated.

The next question comes from Alexander Goldfarb with Piper Sandler.

Happy Friday. So 2 questions. First, just going to the guidance, you guys pointed 38 -- sorry, in the first quarter, you're guiding $0.38.

And as you said, the guidance doesn't include any additional equity. So on annualized basis, that's, call it $1.52. The $150 million in acquisitions, if you assume sort of a 4% spread on funding costs, whether line of credit, et cetera, and the yield gets you somewhere in the $0.20, low $0.20 range, that's obviously annualized.

So obviously, this would only be a partial period. So that gets you -- if it was annualized, we got you to $1.72, which is the midpoint of your range. But obviously, it's not all going to be in for the full year, so that means you're somewhere in the sort of low 160s, maybe high 150s.

What are the -- where are the other pennies coming from that gets you into that? Is that some of the leasing that you're doing? Is that some rent roll ups? Or what are the other areas of growth that we should think about driving the guidance range this year in addition to the acquisitions?

Well, Alex, it's -- I think what we did state in there was that the first quarter, it was going to ramp up from there. So we've given guidance in the first quarter, we haven't given it in the first quarter, but we've given it for the full year.

We've got embedded growth. We got rental rate increases going on across the portfolio, so we're going to get to those numbers and -- without any problem. I can assume -- unless something changes, the macro event like we've seen early last year. But outside of the...

Yes, it was macros. Yes, we've had enough of macros.

Right. But within us, it's good. And when I look out on '22, I see really great things in 2022 on a status quo basis. So I don't know if we can get into a discussion with you here on this call about every penny, every which way. But if we've got cash leasing spreads of 8% to 10% and we give guidance on the first quarter, we haven't given any to you the second, third and fourth quarter, but I can tell you it goes up every quarter. So that's how we'll bridge it.

Jeff, that's helpful. So basically what you're saying is if the embedded growth in the portfolio that's going to drive that delta?

Correct.

Okay, cool. Second question is, going to the acquisitions and the funding. So you have $16 million of cash and then obviously, you have ample line of credit capacity, which would both have to satisfy the remainder of the $150 million of fully owned plus fund, whatever you would do on the JV.

But sort of going back to Craig's question earlier on the call, this creates that imbalance where the line of credit cost is cheaper than your equity cost. So how -- I guess if you do use the remainder line of credit, which you talked about for both wholly and funding, whatever you do on the JV, that obviously needs to be offset with equity at some point. So in your internal modeling, when do you think that you guys sort of bridge that gap where your equity cost is more in line with your line of credit costs?

I'm going to have to leave that to somebody that understands the question, Alex, but I don't get it. Dan, do you have an answer to that?

I think, Alex, we can explore that in detail on a follow-up call, but I think the reality is that the existing line of credit, obviously, is advantage us roughly less at a sub-2% interest cost. And then the cost of equity, our equity cost, is clearly a factor of pricing within the market.

So that -- where that line actually crosses is something north of where we are today, and we think that at this point in time, our share price is definitely undervalued. So we would look to have that happen as we move forward on a pricing increase in our market cap.

At the same time, taking advantage of the additional acquisitions within the status quo structure further drives NOI and further drives performance, as Jeff said, particularly going into the second half of this year, and we would see that as beneficial overall to our position. But the exact crossover between an equity cost versus debt cost is determined predominantly by market price.

Okay. Dan, you answered my question, and I guess, Craig hit it initially in his question, which is that the constant thing that we look for, obviously, is a point of where the dilution from equity does offset the great internal growth that you guys have in the portfolio.

The next question comes from Gaurav Mehta with National Securities.

You guys did enter a new market post this quarter, which is Kansas City. I was hoping if you could talk about what kind of things you like about Kansas City, how much you plan to grow there? And then maybe are there any other new markets that you guys are looking at?

Yes. We've been looking at a number of markets, as we've mentioned in our past calls and looking at the right entry points. Kansas City, like other markets, we don't go into unless we feel we're going to be able to create a cluster of properties or create a portfolio down the line.

So this is our first of what I would think would be many in the near future. Kansas City is a great market, it's our type of market. It's absorbed over 7 million square feet last year, a new record, low vacancy rate. It is -- it's got all the right economic drivers between the hospitality sector and in the hospital sector and financial services and you name it, so it's well-diversified from that standpoint.

There are other markets that we're currently looking at, mostly in the southeast. And I can't -- we don't have any -- we can't really comment on where we are in terms of letters of intent or purchase and sale agreements.

But our pipeline is, as I mentioned before, is deep and wide and include some new markets that, I think, down the road, we'll be able to make some announcements when it makes sense to make announcements.

Okay, great. Second question, it seems like there was a small amount of repurchase of effort shares in 4Q. Maybe provide some color on that? And then are you expecting to repurchase more of that in 2021?

Gaurav, I didn't quite hear the whole thing. Are you talking about the Series A preferred?

Yes.

Yes. I mean that's just the math equation that our fantastic CFO runs the numbers on. And the coupon on that is 7.5%. And just under 2 years now, we can call that. And we figured if -- when the price was right, we would take advantage of that. It's been minimal so far, but I think we would continue to do that. I think -- we think it's a great use of excess cash.

This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Witherell for any closing remarks.

Great. Thank you. Thanks, everyone, for joining us. And again, as always, we enter our own phones here at Plymouth, so give us a call, and we'll answer any questions you have. Thanks so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.