Plymouth (PLYM) Sells Asset to Up Flexibility & Fund Development
Plymouth Industrial REIT PLYM recently made a significant move in its portfolio by selling a 306,552-square-foot industrial building located at 6510 West 73rd Street in Chicago for $19.9 million. This strategic sale is expected to have a positive impact on the company's financial health, with net proceeds of $13.9 million after paying off the $5.8 million mortgage secured by the property and other adjustments. The undisclosed owner-user acquiring the property signals the attractiveness of Plymouth's assets to discerning investors.
Jeff Witherell, the chief executive officer and co-founder of Plymouth, emphasized the rationale behind this sale, stating, "We have previously identified a handful of properties across our portfolio that are either in one-off markets where we do not have scale, or the building is not a long-term hold.”
According to Witherell, the latest sale to an owner-user matches this, yielding a 4.9% cap rate on in-place net operating income and an internal rate of return of 31.1% over a six-year hold period. Further, he expects that at least one additional disposition will be completed by year-end, which could sell for around $17 million.
With this sale, Plymouth Industrial REIT takes a strategic step toward optimizing its portfolio. The move not only bolsters the company's financial position as PLYM intends to pay down outstanding borrowings on its credit facility but also creates room for further investment in its development program.
Importantly, as of Jun 30, 2023, Plymouth Industrial REIT had investments in 210 industrial buildings encompassing a total of 34.2 million square feet. The company has actively been pursuing a development program, with three projects totaling 260,322 square feet still in progress.
Remarkably, approximately 87% of the expected $23.9 million in development costs have already been funded. The ongoing development projects contribute to portfolio expansion and provide avenues for future revenue generation.
Plymouth's leasing activity has also been robust, reflecting its commitment to maintaining high occupancy rates and achieving favorable rental rates. In second-quarter 2023, the company secured leases for a total of 2,103,095 square feet, all with terms of at least six months, resulting in a remarkable 19.3% increase in rental rates on a cash basis, showcasing the strong demand for its industrial properties.
Apart from Plymouth’s recent sale strengthening its financial position and paving the way for further investments in its development program, we are encouraged by its strong leasing activity and a promising pipeline of leases, placing Plymouth well for growth in the industrial real estate sector. Investors should keep a close eye on this company as it continues to expand and optimize its portfolio, positioning itself as a key player in the industry.
Amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, the demand for industrial real estate space has been shooting up. This will offer opportunities to industrial landlords, including Plymouth, Prologis PLD and EastGroup Properties EGP, to enjoy a favorable market environment.
Shares of Plymouth, currently carrying a Zacks Rank #3 (Hold), have risen 6.8% in the past six months against the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
Prologis carries a Zacks Rank of 3 at present. Prologis’ long-term growth rate is projected at 9%. The Zacks Consensus Estimate for PLD’s 2023 funds from operations (FFO) per share of $5.59 suggests a 2% year-over-year increase. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
EastGroup Properties has a Zacks Rank of 3. The Zacks Consensus Estimate for EastGroup Properties’ current-year FFO per share has moved 1.1% north over the past two months to $7.62.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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