BOSTON - Plymouth Industrial REIT, Inc. (NYSE: PLYM), a company specializing in the acquisition and management of industrial properties, has entered into a strategic partnership with global investment firm Sixth Street. The agreement, aimed at propelling Plymouth's growth in the industrial real estate sector, includes a $250 million investment from Sixth Street.
The transaction is designed to provide Plymouth with capital to pursue acquisitions and joint venture opportunities without solely depending on public equity markets. It consists of two main components: a joint venture and a preferred equity investment. In the joint venture, Sixth Street will own 65% of Plymouth's Chicago portfolio, which includes 34 properties totaling approximately 5.9 million square feet, valued at a 6.2% capitalization rate and approximately $356 million in gross asset value. Plymouth will retain a 35% stake in this venture.
Additionally, Sixth Street will make a $140 million non-convertible preferred equity investment into Plymouth's Operating Partnership (OP). This investment commenced with an initial $61 million on Monday, and an additional $79 million is expected within the next nine months. The preferred equity will carry an annual return of 7.0%, with a 4.0% cash pay portion contributing to Plymouth's Core FFO and AFFO calculations.
This strategic infusion is anticipated to be leverage-neutral, with Plymouth's overall leverage projected to decline in the fourth quarter, aligning with its leverage targets for 2024. Plymouth also confirmed its 2024 Core FFO full-year guidance range of $1.88 to $1.90 per share, initially provided on August 1, 2024.
The partnership is expected to close within the next 45 days, resulting in approximately $294 million of gross proceeds to Plymouth, with about $212 million deployable after mortgage assumptions and other costs. The deal will also enable Plymouth to pay down borrowings and remove roughly $67 million of existing secured debt from its balance sheet.
Jeff Witherell, Plymouth's Co-Founder, Chairman, and CEO, expressed enthusiasm for the partnership, which he believes will position the company well for the remainder of 2024 and into 2025. Marcos Alvarado, Partner and Head of U.S. Real Estate at Sixth Street, highlighted Plymouth's strong track record and the potential for further growth in the industrial real estate sector, which continues to show robust demand, particularly in the sub-250,000-square-foot building segment.
The agreement also includes the issuance of 11.76 million detachable warrants to Sixth Street, allowing for the purchase of OP common units, adding a potential future equity component to the investment.
This news is based on a press release statement and reflects the strategic moves by Plymouth Industrial REIT, Inc. to expand its industrial real estate portfolio and strengthen its financial position through a partnership with Sixth Street.
In other recent news, Plymouth Industrial REIT disclosed robust Q2 2024 financial results, exceeding expectations and demonstrating improved financial health with leverage decreasing to 6.4 times. The company expanded its market presence by successfully acquiring a property in Memphis, bringing their total to nearly 7 million square feet. This was accompanied by the third highest leasing volume in Plymouth's history, signaling strong tenant demand. Truist Securities updated its outlook on shares of Plymouth Industrial REIT, raising the price target to $26.00 from $24.00 while maintaining a Buy rating. The adjustment reflects a positive view on the company's recent leasing activities and a lower interest rate environment. Recent developments include strategic expansions and a development program nearing completion, with full stabilization expected by 2025. Additionally, Plymouth reported about 2 million square feet of leases in progress and high tenant interest in renewals. Despite a temporary dip in occupancy in Q3, the company expects a rebound to around 98% by year-end. Analysts noted potential challenges in leasing up certain properties and longer decision-making times for Class A space due to financing needs for manufacturing equipment. However, the overall outlook remains positive, with strong demand in markets anticipated to continue and full benefits from the development program to be seen in 2025.
InvestingPro Insights
Plymouth Industrial REIT, Inc. (NYSE: PLYM) has shown a notable performance in recent times, and the strategic partnership with investment firm Sixth Street is set to further bolster its position in the industrial real estate market. According to InvestingPro data, Plymouth's market capitalization stands at $1.12 billion, reflecting the company's considerable scale within its sector.
An InvestingPro Tip highlights that Plymouth is currently trading at a low P/E ratio relative to near-term earnings growth, which could signal an attractive valuation for investors considering the company's growth prospects. This is particularly relevant as the company has announced its guidance for 2024 Core FFO, indicating confidence in its earnings potential.
Another InvestingPro Tip notes that Plymouth is trading near its 52-week high, with the price 95.62% of the 52-week high, suggesting strong market sentiment towards the company. This correlates with the strong return over the last three months, where the company has seen a price total return of 21.31%.
InvestingPro data also reveals that Plymouth has a PEG Ratio of 0.22 for the last twelve months as of Q2 2024, suggesting that the company's earnings growth is potentially undervalued relative to its peers. Additionally, the company's dividend yield as of the second quarter of 2024 stands at 3.93%, coupled with a dividend growth of 6.67%, which may appeal to income-focused investors.
For readers interested in more detailed analysis and additional metrics, InvestingPro offers a suite of tools and insights, including a total of 7 InvestingPro Tips for Plymouth Industrial REIT, Inc., which can be accessed at InvestingPro Plymouth. These tips could provide further context on the company's financial health and investment potential, especially in light of its recent strategic moves.
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