Item 2.02 Results of Operations and Financial Condition
The information set forth in Item 7.01 below is incorporated by reference into
this Item 2.02.
Item 7.01 Regulation FD Disclosure
On July 8, 2021, INDUS Realty Trust, Inc. ("INDUS" or the "Company") issued a
press release announcing the following updates on leasing, its acquisition and
development pipeline, its potential dispositions and Corporate updates.
Leasing Activity
During the three months ended June 30, 2021 (the "2021 second quarter"), INDUS
executed one industrial/logistics lease totaling approximately 4,800 square feet
at its recently renovated property located at 170 Sunport Lane in the Orlando
market. This new lease has a term of over 5 years and a leasing cost per square
foot per year 1 of $2.01. 170 Sunport Lane was a value-add acquisition that
was mostly vacant at closing in March 2020. As of June 30, 2021, approximately
27,000 square feet at 170 Sunport remains vacant. In addition to this vacancy,
INDUS has approximately 197,500 square feet of vacancy that was added to its
industrial/logistics portfolio through the Company's newest value-add
acquisition in the Charlotte market completed in June 2021 (see below).
As of June 30, 2021, INDUS's 32 industrial/logistics buildings aggregated
approximately 4.7 million square feet and represented 92.5% of INDUS's total
real estate portfolio. INDUS's in-service industrial/logistics portfolio's
percentage leased was as follows:
Jun 30, Mar 31, Dec 31, Aug 31, 2020
2021 2021 2020
Percentage Leased 95.3% 99.2% 94.5% 94.3%
Percentage Leased - Stabilized Properties 2 99.4% 99.2% 95.7% 99.7%
In the 2021 second quarter, INDUS completed two lease extensions of office/flex
space that resulted in a net expansion of approximately 10,000 square feet under
lease. The first of these lease extensions was for approximately 11,000 square
feet for 10 years and included the tenant leasing approximately 12,000 square
feet in an adjoining building that was vacated during the 2021 second quarter.
The second lease extension was for approximately 14,000 square feet for 5 years
in 5 Waterside Crossing, whereby the tenant will reduce its square footage by
approximately 2,000 square feet. 5 Waterside Crossing is currently under
agreement for sale with two other office/flex properties (see below).
INDUS's ten office/flex buildings, which aggregate approximately 385,000 square
feet and comprise 7.5% of INDUS's total real estate portfolio by square footage,
were 70.8% leased as of June 30, 2021, as compared to 71.3% at March 31, 2021.
Of these ten office/flex buildings, three buildings totaling approximately
209,000 square feet are currently under agreement for sale.
1 Lease cost per square foot per year reflects total lease costs (tenant
improvements, leasing commissions and legal costs) per square foot per year of
the lease term.
2 Stabilized Properties reflect buildings that have reached 90% leased or have
been in service for at least one year since development completion or
acquisition date, whichever is earlier. 7800 Tuckaseegee Road, the Charlotte
Acquisition, which was 50.1% leased as of June 30, 2021, was acquired on June
28, 2021, and is not included in the Stabilized Properties pool for the 2021
second quarter.
Additionally, on June 16, 2021, the Company entered into an option agreement for
a long-term lease extension of a ground lease with a cell tower operator on a
small portion of the land known as 686 College Highway in Southwick,
Massachusetts. In exchange for the lease extension, the cell tower operator has
agreed to make a lump sum payment to the Company of $1.0 million. The lease
extension is expected to close in the third quarter of 2021, prior to the sale
of the entire parcel for approximately $5.3 million (see below). The lease
extension and sale of 686 College Highway (the "Southwick Land") are both
subject to the satisfaction of certain contingencies, and there can be no
assurance that these transactions will be consummated.
Acquisition & Development Pipeline
On May 12, 2021, INDUS purchased a 127,500 square foot industrial/logistics
building on approximately 13.7 acres of land in the Lehigh Valley for a purchase
price of $11.7 million (the "Lehigh Valley Acquisition"). The Lehigh Valley
Acquisition is fully leased through November 2022 to a single tenant that is a
subsidiary of a publicly traded multinational chemical company and has a 4.5%
in-place cash capitalization rate (first full year Cash NOI/purchase price). The
Lehigh Valley Acquisition has excess, unutilized land that INDUS believes could
receive approvals to be used for additional parking, for outdoor storage or to
expand the existing building. The Lehigh Valley Acquisition increased the
Company's Lehigh Valley industrial/logistics portfolio to seven buildings
totaling approximately 1.4 million square feet, not including properties in the
Company's development pipeline (see below).
On June 28, 2021, INDUS purchased a recently constructed, 50.1% leased, 395,000
square foot industrial/logistics building in Charlotte (the "Charlotte
Acquisition"). The Company used cash on hand to pay the $42.0 million purchase
price and expects an estimated underwritten stabilized yield of 4.5% on the
property. The Charlotte Acquisition is located in the Airport submarket of
Charlotte and has excellent access to both I-485 and I-85. The Charlotte
Acquisition increased the Company's Charlotte industrial/logistics portfolio to
four buildings totaling approximately 1.0 million square feet, not including the
approximately 141,000 square foot build-to-suit warehouse currently under
construction that is expected to be completed by September 30, 2021 (the
"Charlotte Build-to-Suit").
The following is a summary of INDUS's development pipeline for its
industrial/logistics portfolio as of July 8, 2021:
Building Expected
Name Market Size (SF) Type Delivery
Owned Land
Charlotte Build-to-Suit Charlotte, NC 141,000 Build-to-Suit Q3 2021
Lehigh Valley Land Lehigh Valley, PA 103,000 Speculative Q4 2021
110 Tradeport Development Hartford, CT 234,000 67% Pre-leased Q3 2022
Orlando Land Orlando, FL 195,000 Speculative Q3 2022
Land Under Purchase & Sale Agreement
First & Second Allentown Purchase
Agreements Lehigh Valley, PA 206,000 Speculative Q4 2022
Total 879,000
INDUS expects that the total development and stabilization costs of developments
in its pipeline will total approximately $121.7 million, which includes the
impact of recent market price increases for raw materials such as steel bar
joists, rubber used in roofing and PVC piping used in sitework. The Company
estimates that the underwritten weighted average stabilized Cash NOI yield on
its development
pipeline is between 5.8% - 6.3%. 3 Actual initial full year stabilized Cash
NOI yields may vary from INDUS's estimated underwritten stabilized Cash NOI
yield range based on the actual total cost to complete a project or acquire a
property and its actual initial full year stabilized Cash NOI.
On May 7, 2021, a wholly owned subsidiary of the Company entered into a
construction loan agreement to fund a portion of the development costs for the
Charlotte Build-to-Suit. Total borrowings under the construction loan will be
the lesser of $28.4 million or 67.5% of the project cost of the Charlotte
Build-to-Suit. The construction loan matures on May 7, 2023, with a one-year
extension at the Company's option. The interest rate under the construction
loan, to be adjusted monthly, is one-month LIBOR plus 1.65%, reduced to
one-month LIBOR plus 1.40% upon completion of the Charlotte Build-to-Suit and
commencement of rental payments by the tenant, which is anticipated to be in the
quarter ending September 30, 2021.
Completion of the development pipeline and stabilization of completed buildings
in the development pipeline are subject to various significant contingencies and
cannot be guaranteed to be completed in the expected timing, at the Company's
estimated underwritten yields, or at all.
Dispositions
As of July 8, 2021, INDUS had agreements in place to sell the following non-core
properties and undeveloped land parcels:
Expected Sale
Name Location Property Size Closing Price ($
in
millions)
5 & 7 Waterside Crossing; 21 Windsor, CT 209,000 SF Q3 2021 $6.6
Griffin Road N
Florida Nursery Farm Quincy, FL 1,066 acres Q3 2021 $1.1
60 Griffin Road South Land Bloomfield, CT 34 acres Q3 2021 $0.6
Stratton Farms Residential Suffield, CT 7 lots Q3 2021 $0.4
Parcels 4
1985 Blue Hills Avenue & Windsor, CT 165,000 SF; Q4 2021 $18.0
Adjacent Land 39 acres
Connecticut Nursery Farm E. Granby/Granby, CT 670 acres Q4 2021 $10.3
Meadowood Residential Parcels Simsbury, CT 277 acres Q4 2021 $5.4
Southwick Land Southwick, MA 91 acres Q4 2021 $5.3
East Granby / Windsor Parcels E. Granby/Windsor, CT 280 acres 2022 $6.0
Total Gross Proceeds of Dispositions Under Agreement, if
$53.7
Consummated
3 As a part of INDUS's standard development and acquisition underwriting
process, INDUS analyzes the targeted initial full year stabilized Cash NOI yield
for each development project and acquisition target and establishes a range of
initial full year stabilized Cash NOI yields, which it refers to as
"underwritten stabilized Cash NOI yields." Underwritten stabilized Cash NOI
yields are calculated as a development project's or acquisition's initial full
year stabilized Cash NOI as a percentage of its estimated total investment,
including costs to stabilize the buildings to 95% occupancy (other than in
connection with build-to-suit development projects and single tenant
properties). INDUS calculates initial full year stabilized Cash NOI for a
development project or acquisition by subtracting its estimate of the
development project's or acquisition's initial full year stabilized operating
expenses, real estate taxes and non-cash rental revenue, including straight-line
rents (before interest, income taxes, if any, and depreciation and
amortization), from its estimate of its initial full year stabilized rental
revenue.
4 The sale of the 16 Stratton Farms Residential Parcels for a total of
approximately $0.9 million is to be completed in two parts. The sale of the
first 9 lots closed in February 2021 and accounted for approximately $0.5
million of the gross sales price. The sale of the remaining 7 lots is expected
to close in the 2021 third quarter and represents approximately $0.4 million of
the total gross sales price.
Closings on these potential dispositions are subject to various significant
contingencies and cannot be guaranteed to be completed in the expected
time-frame, at the expected sales prices shown, or at all.
Corporate Updates
During the 2021 second quarter, INDUS agreed to proposed terms and received
initial commitments for a new secured revolving credit facility of up to $100
million (the "New Facility") that would replace both its existing revolving
credit line and acquisition credit line with Webster Bank, N.A. ("Webster
Bank"), which total $50 million in the aggregate and are scheduled to expire on
September 30, 2021. Under the proposed terms, the New Facility is expected to
have a three year term with two one-year extensions at the Company's option. The
New Facility is also expected to include an uncommitted incremental facility,
which would enable the New Facility to be increased up to $250 million in the
aggregate. Borrowings under the New Facility are expected to bear interest
subject to a pricing grid for changes in the Company's total leverage. Based on
the Company's current leverage and the proposed terms, the initial annual
interest rate under the New Facility would be one-month LIBOR plus 1.20%
compared to a rate of one-month LIBOR plus 2.50% and one-month LIBOR plus 2.75%
under its current revolving credit line and acquisition credit line,
respectively, with Webster Bank. Closing on the New Facility is subject to the
completion of a definitive credit agreement between INDUS RT, LP (see below) and
the lenders under the New Facility.
Additionally, on June 28, 2021, INDUS Realty Trust, LLC, a Maryland LLC and a
wholly-owned subsidiary of the Company, was converted into a Maryland limited
partnership and the entity's name was changed from INDUS Realty Trust, LLC to
INDUS RT, LP (the "Operating Partnership"). The Operating Partnership is 99%
owned by the Company as the general partner, and 1% owned by INDUS RT, LLC as
limited partner, a Maryland limited partnership which is 100% owned by the
Company. The Operating Partnership structure provides additional capital
flexibility for INDUS, as it will allow the Company to offer shares in its
Operating Partnership ("OP Units") to sellers of real estate assets in exchange
for ownership of those assets. Sellers may hold OP Units pursuant to their own
tax deferral strategies or may convert the OP Units into shares of the Company's
common stock, subject to certain conditions.
Forward-Looking Statements:
This Current Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Exchange Act. These forward-looking statements include INDUS's beliefs and
expectations regarding future events or conditions including, without
limitation, statements regarding the completion of acquisitions and dispositions
under agreements, construction and development plans and timelines, expected
total development and stabilization costs of developments in INDUS's pipeline,
anticipated leasing activity, the estimated underwritten stabilized Cash NOI
yield of the Company's pipeline, entry into a definitive credit agreement for
. . .
Item 9.01 Financial Statements and Exhibits.
Exhibit 99.1: INDUS's July 8, 2021 Press Release (attached hereto).
Exhibit 104: The cover page from this Current Report on Form 8-K, formatted in
Inline XBRL.
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