INDUS REALTY TRUST, INC. Overview
INDUS Realty Trust, Inc. (f/k/aGriffin Industrial Realty, Inc. ) ("INDUS" or the "Company") is a real estate business principally engaged in developing, acquiring, managing and leasing high-quality industrial/logistics properties in select supply-constrained and high growth markets inthe United States . The Company seeks to add to its property portfolio through the development of land or the acquisition of modern, market-appropriate logistics buildings in the markets it targets, all of which can serve multiple drivers of demand in the modern supply chain. Although the Company's real estate holdings primarily consist of industrial/logistics properties, INDUS also owns a limited number of office/flex properties and undeveloped land parcels. The Company may sell certain office/flex properties or portions of its undeveloped land that it has owned for an extended time and the use of which is not consistent with the Company's core industrial and logistics strategy. OnDecember 31, 2020 , INDUS changed its name fromGriffin Industrial Realty, Inc. INDUS intends to elect to be taxed as a real estate investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code") for the taxable year endingDecember 31, 2021 . In connection with the anticipated REIT election, the Company changed its fiscal year end fromNovember 30 to December 31 , effective for the fiscal year that started onJanuary 1, 2021 and will end onDecember 31, 2021 ("fiscal 2021"). As a result of the change in fiscal year, there was a one-month transition period ofDecember 1, 2020 throughDecember 31, 2020 (the "Transition Period"). The Company's unaudited consolidated results of operations, consolidated balance sheet and consolidated statement of cash flows for the Transition Period are reported in Part I, Item 1. Financial Statements of this Quarterly Report on Form 10-Q and are discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations. The three months endedMarch 31, 2020 are referred to as the "2020 first quarter." The significant accounting policies and methods used in the preparation of INDUS's unaudited consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q are consistent with those used in the preparation of INDUS's audited consolidated financial statements for its fiscal year endedNovember 30, 2020 ("fiscal 2020") included in INDUS's Annual Report on Form 10-K ("Form 10-K") as filed with theUnited States Securities and Exchange Commission (the "SEC") onFebruary 18, 2021 . The preparation of financial statements in accordance with accounting principles generally accepted inthe United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. INDUS regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation expense and the valuation of derivative instruments and financial instruments. INDUS bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by INDUS may differ materially and adversely from INDUS's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The significant accounting estimates used by INDUS in the preparation of its financial statements for the three months endedMarch 31, 2021 (the "2021 first quarter") are consistent with those used by INDUS to prepare its consolidated financial statements for fiscal 2020. Summary The Company incurred a net loss of approximately$0.8 million in the 2021 first quarter, as compared to a net loss of approximately$0.3 million for the 2020 first quarter. The higher net loss in the 2021 first quarter, as compared to the 2020 first quarter, principally reflected increases of approximately$0.9 million and$0.5 million in general and administrative expenses and operating expenses of rental properties, respectively, and a decrease of approximately$0.6 million in gain on sales of real estate assets in the 2021 first quarter, as compared to the 2020 first quarter, partially offset by an approximately$1.2 million increase in rental revenue in the 2021 first quarter, as compared to the 2020 first quarter. The 2021 first quarter also included a gain of approximately$0.3 million from the change in the fair value of 25
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financial instruments that were issued on
The Company's net operating income ("NOI"), which is defined as rental revenue
less operating expenses of rental properties and real estate taxes, increased to
approximately $7.0 million in the 2021 first quarter from approximately
$6.3 million in 2020 first quarter, reflecting the increase in rental revenue
partially offset by the increase in operating expenses of rental properties. The
increase in rental revenue was due mostly to leasing of first generation space.
The increase in operating expenses principally reflected higher costs for snow
removal. NOI is not a financial measure in conformity with U.S. GAAP. See below
under "Non-GAAP Reconciliations" for information regarding why the Company
believes NOI and other non-GAAP measures are meaningful supplemental measures of
its performance and reconciliations of these measures from net income (loss),
presented in accordance with U.S. GAAP.
The increase in general and administrative expenses in the 2021 first quarter,
as compared to the 2020 first quarter, principally reflected higher expenses
related to the Company's non-qualified deferred compensation plan in the 2021
first quarter as compared to the 2020 first quarter. In the 2021 first quarter,
sales of real estate assets reflected nine of the remaining sixteen residential
lots from the Company's residential subdivision ("Stratton Farms ") in Suffield,
Connecticut being sold at a minimal gain, whereas sales of real estate assets in
the 2020 first quarter reflected a gain of approximately $0.6 million from the
sale of approximately seven acres of undeveloped land in Windsor, Connecticut
(the "2020 Windsor Land Sale").
Results of Operations
Impact of Covid-19
SinceMarch 2020 , the world has been impacted by the coronavirus (COVID-19) pandemic, which has created significant economic uncertainty and volatility. The full extent to which the coronavirus pandemic further impacts the Company's business or impacts the Company's operations, liquidity and financial results will depend on numerous evolving factors that the Company is not able to predict at this time, including: the duration and scope of the pandemic; governmental, business and individuals' actions that have been and continue to be taken in response to the pandemic; the availability, adoption and effectiveness of vaccines to combat COVID-19; the impact on economic activity from the pandemic and actions taken in response, including ongoing travel restrictions; the impact on the availability and pricing of certain materials and supplies; the effect on the Company's tenants and their businesses; the ability of tenants to make their rental payments; any closures of tenants' facilities; the ability of existing or prospective tenants to evaluate or enter into leases; and the Company's ability to complete sales and acquisitions of real estate assets or planned construction and development. Any of these events could materially adversely impact the Company's business, financial condition, results of operations or stock price. Recently, COVID-19 has disrupted the availability, supply and costs of raw materials, particularly the increased cost and decreased availability of structural steel, which could result in an increase in the Company's cost of construction and a delay in the completion of the Company's projects. Additionally, as a result of the pandemic there could be a reduction in the Company's rental revenue, particularly with respect to its office/flex portfolio. COVID-19 did not have a material impact on the Company's rent collections in the 2021 first quarter as over 99% of cash rent due each month in the 2021 first quarter, inclusive of rent relief agreements, was collected. In the 2021 first quarter, the Company entered into an agreement with the tenant that leases the approximately 7,200 square foot restaurant building (included in the Company's office/flex portfolio) providing for rent relief. The rent relief granted is less than$20,000 over the remainder of that tenant's lease term. As a result of the pandemic, there could be additional reductions in the Company's rental revenue, particularly with respect to its office/flex portfolio. Subsequent to the end of the 2021 first quarter, the Company and the tenant entered into a lease amendment whereby the tenant agreed to purchase the small restaurant building for approximately$0.6 million (see Liquidity and Capital Resources section below).
See Part I, Item 1A "Risk Factors" in the Company's fiscal 2020 Form 10-K for further discussions of the possible impact of the COVID-19 pandemic on the Company's business.
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2021 First Quarter Compared to 2020 First Quarter
The Company's total square footage and leased square footage of its industrial/logistics properties and its total real estate portfolio were as follows:
Total Leased
Square Square Percentage
Industrial/Logistics Properties Footage Footage Leased
As of March 31, 2021 4,206,000 4,174,000 99.2%
As of December 31, 2020 4,206,000 3,972,000 94.5%
Total Portfolio
As of March 31, 2021 4,599,000 4,454,000 96.8%
As of December 31, 2020 4,599,000 4,252,000 92.5%
As of March 31, 2021 , the Company's industrial/logistics square footage
comprised 91.5% of its total square footage. The increase in the percentage of
leased industrial/logistics space as of March 31, 2021 , as compared to
December 31, 2020 , reflected the completion of several leases of first
generation space aggregating approximately 202,000 square feet in the 2021 first
quarter. These new leases included one lease in 160 International Drive
("160 International") and two leases in 180 International Drive
("180 International") that resulted in those two buildings, aggregating
approximately 283,000 square feet and completed in November 2019 , becoming fully
leased at the end of the 2021 first quarter. Rental revenue from the leases
executed in the 2021 first quarter is expected to commence by August 31, 2021 as
tenants take occupancy upon completion of tenant improvements. There was no
change in the amount of leased office/flex space during the 2021 first quarter,
as the Company's approximately 393,000 square feet of office/flex space,
aggregating 8.5% of the Company's total square footage, remained 71.3% leased as
of March 31, 2021 .
Rental revenue increased to approximately $10.1 million in the 2021 first
quarter from approximately $8.9 million in the 2020 first quarter. The
approximately $1.2 million increase in rental revenue in the 2021 first quarter,
as compared to the 2020 first quarter, was principally due to increases in
rental revenue of: (a) approximately $0.5 million and approximately $0.2 million
from new leases of first generation space and second generation space,
respectively, that commenced subsequent to the 2020 first quarter;
(b) approximately $0.4 million from an increase in reimbursements of building
operating expenses from tenants; and (c) approximately $0.2 million from
increases in rent on leases renewed subsequent to March 31, 2020 ; partially
offset by a decrease in rental revenue of approximately $0.1 million due to
lease expirations.
Operating expenses of rental properties increased to approximately $1.6 million
in the 2021 first quarter from approximately $1.1 million in the 2020 first
quarter. The approximately $0.5 million increase in operating expenses of rental
properties was due primarily to higher snow removal expenses in the 2021 first
quarter, as compared to the 2020 first quarter. Most of the increase in snow
removal expenses was reimbursed by tenants in the industrial/logistic buildings
under the terms of their leases. Real estate taxes of approximately $1.4 million
in the 2021 first quarter were essentially unchanged as compared to the 2020
first quarter.
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The Company's NOI and NOI on a cash basis ("Cash NOI") 1 for
industrial/logistics properties ("Cash NOI of Industrial/Logistics Properties")
and for its total real estate portfolio for the 2021 first quarter and the 2020
first quarter were as follows:
Industrial/Logistics Properties Total Portfolio
(dollars in thousands) 2021 2020 2021 2020
First First First First
Quarter Quarter Quarter Quarter
Rental revenue $ 8,644 $ 7,327 $ 10,087 $ 8,862 Operating expenses of rental properties (1,066) (633)
(1,633) (1,172) Real estate taxes (1,249) (1,163) (1,447) (1,381) NOI 6,329 5,531 7,007 6,309 Noncash rental revenue including straight-line rents (396) (309) (437) (532) Cash NOI$ 5,933 $ 5,222 $ 6,570 $ 5,777 Industrial/Logistics Properties Total Portfolio (dollars in thousands) December December December December 2020 2019 2020 2019 Rental revenue$ 2,868 $ 2,574 $ 3,345 $ 3,083
Operating expenses of rental properties (338) (412)
(497) (681)
Real estate taxes (416) (385) (482) (458)
NOI 2,114 1,777 2,366 1,944
Noncash rental revenue including
straight-line rents (232) (115) (250) (157)
Cash NOI $ 1,882 $ 1,662 $ 2,116 $ 1,787
The increases in NOI and Cash NOI principally reflected the increase in rental
revenue, partially offset by the increase in operating expenses of rental
properties as described above. See below for information regarding why the
Company believes NOI and Cash NOI are meaningful supplemental measures of its
performance and reconciliations of these measures from net income (loss),
presented in accordance with U.S. GAAP.
Depreciation and amortization of approximately $3.3 million in the 2021 first
quarter was essentially unchanged as compared to the 2020 first quarter. An
increase of approximately $0.1 million from the 2020 first quarter reflecting a
full period of depreciation and amortization expense on 3320 Maggie Boulevard
("3320 Maggie") and 170 Sunport Lane ("170 Sunport"), two industrial/logistics
buildings in Orlando, Florida that were purchased in the 2020 first quarter, was
offset by a decrease of approximately $0.1 million of depreciation expense
related to the nursery farm in Quincy, Florida (the "Florida Farm ").
General and administrative expenses increased to approximately $3.0 million in
the 2021 first quarter from approximately $2.1 million in the 2020 first
quarter. The increase of approximately $0.9 million in general and
administrative expenses in the 2021 first quarter, as compared to the 2020 first
quarter, principally reflected an approximately $0.8 million increase in expense
related to INDUS's non-qualified deferred compensation plan and an approximately
$0.1 million increase in all other general and administrative expenses. The
expense increase related to INDUS's non-qualified deferred compensation plan
reflected the effect on participant balances of higher stock market performance
in the 2021 first quarter, as compared to the 2020 first quarter, that resulted
in an increase in the non-qualified deferred compensation plan liability in the
2021 first quarter, as compared to a decrease in the non-qualified deferred
compensation plan liability in the 2020 first quarter.
1 INDUS defines "Cash NOI" as rental revenue less operating expenses of rental
properties, real estate taxes and non-cash rental revenue, including
straight-line rents and "Cash NOI of Industrial/Logistics Properties" as rental
revenue less operating expenses of rental properties, real estate taxes and
non-cash rental revenue, including straight-line rents, for industrial/logistics
properties. Cash NOI and Cash NOI of Industrial/Logistics Properties are not
financial measures in conformity with U.S. GAAP. See below under "Non-GAAP
Reconciliations" for information regarding why the Company believes these are
meaningful supplemental measures of its performance and reconciliations of these
measures from net income (loss), presented in accordance with U.S. GAAP.
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In the 2021 first quarter, the Company's sale of nine residential lots at
Stratton Farms for net proceeds of approximately $0.5 million was essentially
break-even. In the 2020 first quarter, the Company completed the 2020 Windsor
Land Sale for net cash proceeds of approximately $0.7 million and a gain of
approximately $0.6 million . Sales of real estate assets occur periodically and
year to year changes in such transactions may not be indicative of any trends in
the Company's real estate business.
The 2021 first quarter income of approximately $0.3 million from the change in
the fair value of financial instruments reflected the change in fair value of
the Warrant (as defined below) and the CVR (as defined below) that were issued
on August 24, 2020 . Because the Warrant and the CVR each contain cash settlement
provisions, they are reported as liabilities at their fair values on the INDUS's
consolidated balance sheet as of March 31, 2021 (see Note 3 to the Company's
consolidated financial statements included in Item 1 of this Quarterly Report on
Form 10-Q). Although the fair value of the Warrant liability was approximately
$8.7 million as of March 31, 2021 , the maximum amount the Company would be
required to pay if the Warrant were to be settled in cash is approximately
$2.0 million . The CVR and the cash settlement feature of the Warrant expireonAugust 24, 2021 , one year from the issuance date of each.
Interest expense decreased to approximately$1.7 million in the 2021 first quarter from approximately$1.8 million in the 2020 first quarter. The decrease of approximately$0.1 million in interest expense in the 2021 first quarter, as compared to the 2020 first quarter, principally reflected an approximately$0.1 million increase in capitalized interest in the 2021 first quarter, as compared to the 2020 first quarter. As the Company intends to elect to be taxed as a REIT under Sections 856 through 860 of the Code for the taxable year endingDecember 31, 2021 , the Company did not record an income tax benefit in the 2021 first quarter on its pretax loss of approximately$0.8 million . In the 2020 first quarter, the Company had an income tax benefit of approximately$0.1 million that reflected the federal statutory rate of 21% (applicable to the Company at that time) on the pretax loss of approximately$0.4 million adjusted for the effects of permanent differences and state income tax benefits. Transition Period
InDecember 2020 , the Company had net income of approximately$2.0 million , as compared to a net loss of approximately$0.3 million inDecember 2019 . The net income inDecember 2020 , as compared to theDecember 2019 net loss, principally reflected income of approximately$2.8 million from the change in fair value of derivative instruments along with an approximately$0.3 million increase in rental revenue and an approximately$0.2 million decrease in operating expenses of rental properties, partially offset by an approximately$0.5 million increase in general and administrative expenses and approximately$0.3 million of other expense inDecember 2020 .
The approximately$0.3 million increase in rental revenue inDecember 2020 , as compared toDecember 2019 , principally reflected more space under lease inDecember 2020 than inDecember 2019 due primarily to leasing previously vacant space in 2020 and rental revenue from 3320 Maggie and 170 Sunport, the industrial/logistics buildings inOrlando that were purchased in the 2020 first quarter. The approximately$0.2 million decrease in operating expenses of rental properties inDecember 2020 , as compared toDecember 2019 , principally reflected higher snow removal expenses inDecember 2019 . The approximately$0.5 million increase in general and administrative expenses inDecember 2020 , as compared toDecember 2019 , principally reflected expenses, primarily legal fees, related to the Company's decision to operate as a REIT effective onJanuary 1, 2021 . The approximately$2.8 million of income from the change in fair value of derivative instruments inDecember 2020 reflected the change in fair value of the Warrant and the CVR that were issued onAugust 24, 2020 . The approximately$0.3 million other expense inDecember 2020 reflected the write-off of deferred costs related to the universal shelf registration filed with theSEC in 2018 (the "2018 Shelf Registration"). As the 2018 Shelf Registration was terminated as a result of the completion, inDecember 2020 , of an internal merger to reincorporate inMaryland , the deferred costs related to the 2018 Shelf Registration were written off. Non-GAAP Reconciliations The Company uses NOI, Cash NOI, NOI of Industrial/Logistics Properties, Cash NOI of Industrial/Logistics Properties, Funds from Operations ("FFO"), Core Funds from Operations ("Core FFO"), Cash Core Funds from 29
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Operations ("Cash Core FFO"), Earnings before Interest, Taxes, Depreciation and
Amortization for Real Estate ("EBITDAre") and Adjusted EBITDAre as supplemental
non-GAAP performance measures. Management believes that the use of these
measures combined with net (loss) income (which remains the Company's primary
measure of performance), improves the understanding of the Company's operating
results among the investing public and makes comparisons of operating results to
other REITs more meaningful. The most comparable U.S. GAAP measure to FFO, Core
FFO, Cash Core FFO, EBITDAre and Adjusted EBITDAre is net income (loss).
These measures exclude expenses that materially impact the Company's overall
results of operations and, therefore, should not be considered as substitute
measures derived in accordance with U.S. GAAP. Furthermore, these metrics may
not be comparable to other similarly titled measures of other companies.
Certain of these measures may be calculated based on or substantially in
accordance with definitions set forth by The National Association of Real Estate
Investment Trusts ("Nareit"). Nareit is widely recognized as a representative
organization for REITs and real estate companies with an interest in U.S. real
estate. Nareit's members are REITs and other real estate companies throughout
the world that own, operate, and finance income-producing real estate, as well
as those firms and individuals who advise, study, and service those businesses.
For periods prior to the Company's conversion to a REIT, the Company further
adjusts Nareit definitions to remove the impact of income tax benefits or
provisions in order to enhance the comparability of the Company's performance
prior to its conversion to a REIT with its performance following its conversion
to a REIT. This tax adjustment was not required for the 2021 first quarter.NOI, Cash NOI, NOI of Industrial/Logistics Properties and Cash NOI of Industrial/Logistics Properties
NOI is a non-GAAP measure that includes the rental revenue, operating expenses and real estate taxes directly attributable to the Company's real estate properties. The Company uses NOI as a supplemental performance measure because, in excluding real estate depreciation and amortization expense, general and administrative expenses, interest expense, gains (or losses) on the sale of real estate assets and other non-operating items, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. The Company also believes that NOI will be useful to investors as a basis to compare its operating performance with that of other REITs. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of the Company's properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties (all of which have real economic effect and could materially impact the Company's results from operations), the utility of NOI as a measure of the Company's performance is limited. Other equity REITs may not calculate NOI in a similar manner and, as such, the Company's NOI may not be comparable to such other REITs' NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of the Company's performance. NOI should not be used as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs. NOI should not be used as a substitute for cash flow from operating activities in accordance withU.S. GAAP. Cash NOI is a non-GAAP measure that the Company calculates by adding or subtracting non-cash rental revenue, including straight-line rental revenue, from NOI. The Company uses Cash NOI, together with NOI, as supplemental performance measures. Cash NOI should not be used as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs. Cash NOI should not be used as a substitute for cash flow from operating activities computed in accordance withU.S. GAAP. The Company presents NOI and Cash NOI for its industrial/logistics properties by subtracting the NOI and Cash NOI attributable to its non-industrial/logistics properties from the NOI and Cash NOI, as applicable, for its total real estate portfolio. 30 Table of Contents Below is a reconciliation of NOI, Cash NOI, NOI of Industrial/Logistics Properties and Cash NOI of Industrial/Logistics Properties to net income (loss) as reported in the Company's consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q: (dollars in thousands) 2021 2020 First First December December Quarter Quarter 2020 2019 Net (loss) income ($ 768 ) ($ 286 )$ 1,981 ($ 255 ) Income tax benefit - (85) - (76) Pretax (loss) income (768) (371) 1,981 (331) Exclude:
Depreciation and amortization expense 3,343 3,306 1,122 1,059 General and administrative expenses 2,970 2,143 1,172 629 Interest expense 1,749 1,840 602 589 Change in fair value of financial instruments (260) - (2,785) - Gain on sales of real estate assets (20) (584)
- -
Other expense - - 281 -
Investment income (7) (25) (7) (2)
NOI 7,007 6,309 2,366 1,944Noncash rental revenue including straight-line rents (437) (532)
(250) (157)
Cash NOI $ 6,570 $ 5,777 $ 2,116 $ 1,787
NOI $ 7,007 $ 6,309 $ 2,366 $ 1,944
Exclude:
Rental revenue from non-industrial/logistics
properties (1,443) (1,535) (477) (509)
Operating expenses of non-industrial/logistics
properties 567 539 159 269
Real estate taxes of non-industrial/logistics
properties 198 218 66 73
NOI of industrial/logistics properties 6,329 5,531 2,114 1,777 Noncash rental revenue including straight-line rents of industrial/logistics properties
(396) (309) (232) (115)
Cash NOI of Industrial/Logistics Properties $ 5,933 $ 5,222 $ 1,882 $ 1,662 In an effort to improve the understanding of the Company's operating results as compared to its operating results in a prior period and that of other REITs, the Company presents a funds from operations metric substantially similar to funds from operations, as calculated in accordance with standards established by Nareit ("Nareit FFO"). Nareit FFO is calculated as net income (calculated in accordance withU.S. GAAP), excluding: (a) depreciation and amortization related to real estate, (b) gains and losses from the sale of certain real estate assets, (c) gains and losses from change in control and (d) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The Company defines FFO as Nareit FFO, plus an adjustment to remove the impact of an income tax benefit or provision in the periods prior toJanuary 1, 2021 . The Company includes the adjustment for income taxes because, beginning with the taxable year endingDecember 31, 2021 , the Company intends to elect to be taxed as a REIT and believes including this adjustment enhances the comparability of the Company's results for periods prior to this tax election. The Company believes it is useful to investors to have enhanced transparency into the way in which its management evaluates operating performance to prior comparable periods and with that of other REITs. This tax adjustment was not required for the
2021 first quarter. Core Funds from Operations
The Company defines Core FFO as FFO excluding (a) costs related to the REIT Conversion, (b) change in fair value of financial instruments, and (c) gains or losses on insurance recoveries and/or extinguishment of debt or derivative instruments.
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Cash Core Funds from Operations
The Company defines Cash Core FFO as Core FFO less (a) non-cash rental revenue including straight-line rents, plus (b) amortization of debt issuance costs, (c) non-cash compensation expenses included in general and administrative expenses and (d) non-real estate depreciation & amortization expense.
Below is a reconciliation of FFO, Core FFO and Cash Core FFO to net (loss) income as reported in the Company's consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q:
(dollars in thousands) For the Three Months Ended
For the One Month Ended
Mar. 31, 2021 Mar. 31, 2020 Dec. 31, 2020 Dec. 31, 2019
Net (loss) income ($ 768 ) ($ 286 ) $ 1,981 ($ 255 )
Exclude:
Depreciation and amortization expense 3,343 3,306 1,122 1,059 Non-real estate depreciation & amortization expense (16) (20) (6) (6) Gain on sales of real estate assets (20) (584) - - Income tax provision (benefit) - (85) - (76) FFO 2,539 2,331 3,097 722
Exclude:
General and administrative expenses related to REIT conversion (1) 207 109 430 - Change in fair value of financial instruments (260)
- (2,785) - Other expense - - 281 - Core FFO 2,486 2,440 1,023 722 Exclude: Noncash rental revenue including straight-line rents (437) (532) (250) (157) Amortization of debt issuance costs 166 105 42 34 Noncash compensation expenses 390 (490) 197 100 Non-real estate depreciation & amortization expense 16 20 6 6 Cash Core FFO$ 2,621 $ 1,543 $ 1,018 $ 705 For the three months endedMarch 31, 2021 , includes legal fees of$201 and
consulting costs of
(1) consulting costs related to compensation and recruitment of personnel of
and consulting costs related to compensation and recruitment of personnel of
$32 .
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate
The Company defines EBITDAre in accordance with standards established by Nareit. EBITDAre represents net income (loss) (computed in accordance withU.S. GAAP) excluding (a) interest expense, (b) income tax expense, (c) depreciation and amortization expense, (d) gains and losses on the disposition of real estate assets (including gains or losses on change of control), (e) impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and (f) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates. INDUS does not currently have any unconsolidated properties or joint ventures.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate
The Company defines Adjusted EBITDAre as EBITDAre plus (a) general and administrative expenses related to the REIT Conversion, (b) non-cash stock-based compensation expense and expenses or credits related to the Company's non-qualified deferred compensation plan that are included in general and administrative expenses, (c)
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change in fair value of financial instruments, and (d) gains or losses on the extinguishment of debt or derivative instruments.
A reconciliation of net (loss) income to EBITDAre and Adjusted EBITDAre is as
follows:
(dollars in thousands) For the Three Months Ended For the One Month Ended
Mar. 31, 2021 Mar. 31, 2020 Dec. 31, 2020 Dec. 31, 2019
Net (loss) income ($ 768 ) ($ 286 ) $ 1,981 ($ 255 )
Interest expense 1,749 1,840 602 589Depreciation and amortization expense 3,343 3,306 1,122 1,059 Gain on sales of real estate assets (20) (584) - - Income tax provision (benefit) - (85) - (76) EBITDAre 4,304 4,191 3,705 1,317 General and administrative expenses related to REIT Conversion (1) 207 109 430 - Noncash compensation expenses 390 (490) 197 100 Change in fair value of financial instruments (260) - (2,785) - Other expense - - 281 - Adjusted EBITDAre$ 4,641 $ 3,810 $ 1,828 $ 1,417 For the three months endedMarch 31, 2021 , includes legal fees of$201 and
consulting costs of
(1) consulting costs related to compensation and recruitment of personnel of
and consulting costs related to compensation and recruitment of personnel of
$32 .
Off Balance Sheet Arrangements
INDUS does not have any material off balance sheet arrangements.
Liquidity and Capital Resources
Net cash provided by operating activities was approximately$1.1 million in the 2021 first quarter, as compared to approximately$1.2 million in the 2020 first quarter. The approximately$0.1 million decrease in net cash provided by operating activities in the 2021 first quarter, as compared to the 2020 first quarter, principally was the result of changes in assets and liabilities. Net cash used in investing activities was approximately$1.0 million in the 2021 first quarter, as compared to approximately$15.2 million in the 2020 first quarter. The net cash used in investing activities in the 2021 first quarter reflected: (a) cash payments of approximately$1.2 million for additions to real estate assets; and (b) cash payments of approximately$0.3 million for deferred leasing costs and other uses (mostly lease commissions paid to brokers); partially offset by (c) cash proceeds of approximately$0.5 million from the sale of nineStratton Farms residential lots. The approximately$1.2 million of cash payments for additions to real estate assets in the 2021 first quarter reflected approximately$0.9 million for new building construction (including site work) and approximately$0.3 million for building improvements, mostly at 170 Sunport for renovations to upgrade that building to attract new tenants. The cash payments for new construction (including site work) in the 2021 first quarter reflected approximately$0.6 million for a build-to-suit project (the "Charlotte Build-to-Suit ") on the Company's 44 acre parcel of land inCharlotte, North Carolina (the "Charlotte Land") (see below) and approximately$0.3 million for the start of construction of an approximately 103,000 square foot industrial/logistics building on an approximately 14 acre parcel of land ("Chapmans Road ") in theLehigh Valley ofPennsylvania that was purchased in fiscal 2019 (see below). The Company expects construction of the building onChapmans Road to be completed bySeptember 30, 2021 at an estimated cost (before tenant improvements) of approximately$8.9 million . 33 Table of Contents The net cash used in investing activities in the 2020 first quarter reflected: (a) cash payments totaling approximately$13.7 million for the acquisitions of 3320 Maggie and 170 Sunport; (b) cash payments of approximately$3.1 million for other additions to real estate assets; and (c) cash payments of approximately$0.2 million for deferred leasing costs and other uses (mostly lease commissions paid to brokers); partially offset by (d) cash proceeds of approximately$1.0 million from a decrease in short-term investments; and (e) cash proceeds of approximately$0.7 million from the 2020 Windsor Land Sale.
The approximately
Tenant and building improvements related to leasing
Cash payments for tenant and building improvements in the 2020 first quarter related to new leases signed in the latter part of fiscal 2019 and the 2020 first quarter, with approximately$1.4 million of such tenant and building improvements related to leases of first generation space. Cash payments for new building construction (including site work) in the 2020 first quarter reflected final payments of the construction costs for 160 International and 180 International, which were completed in the 2019 fourth quarter. Cash payments in the 2020 first quarter for development costs and infrastructure improvements principally reflected planning and design costs related to the Charlotte Land andChapmans Road land parcels. The$1.0 million of cash from the decrease in short-term investments in the 2020 first quarter reflected the maturity of Griffin's repurchase agreement that was collateralized with securities issued by the United States Government or its sponsored agencies, withWebster Bank, N.A. ("Webster Bank "). Net cash provided by financing activities was approximately$103.8 million in the 2021 first quarter, as compared to approximately$24.1 million in the 2020 first quarter. The net cash provided by financing activities in the 2021 first quarter reflected approximately$108.7 million from the sale of Common Stock, partially offset by (x) an approximately$3.4 million dividend payment; (y) approximately$1.3 million of principal payments on mortgage loans; and (z) approximately$0.3 million of payments of debt issuance costs. OnFebruary 2, 2021 , INDUS filed a universal shelf registration statement on Form S-3 (the "Universal Shelf") with theSEC . Under the Universal Shelf, the Company may offer and sell up to$500 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, units or any combination of such securities during the three year period that commenced upon the effective date of the Universal Shelf. Under the Universal Shelf, the Company may periodically offer one or more types of securities in amounts, at prices and on terms announced. When INDUS obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If the Company incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict INDUS's operations. It is possible that the Company will not obtain additional capital under the Universal Shelf on favorable terms, or at all. See "Risk Factors-Risks Related to the Real Estate Industry-Volatility in the capital and credit markets could materially adversely impact the Company" and "Risk Factors-Risks Related to the Company's Common Stock-Issuances or sales of the Company's Common Stock or the perception that such issuances or sales might occur could adversely affect the per share trading price of the Company's Common Stock" included in Part I, Item 1A "Risk Factors" of the Company's Form 10-K for fiscal 2020. In the 2021 first quarter, under its Universal Shelf, INDUS completed an underwritten public offering of 1,927,049 shares of its Common Stock at a price to the underwriters of$56.85 per share. INDUS received net proceeds, after expenses, of approximately$108.7 million . The Company intends to use the proceeds from the sale of its Common Stock to finance its development pipeline and acquisitions and for other corporate purposes.
As of
Subsequent to the end of the 2021 first quarter, a subsidiary of INDUS entered
into a construction loan agreement (the "2021 JPM Construction Loan") with
34
Table of Contents
the development costs of the Charlotte Build-to-Suit . Total borrowings under the JPM Construction Loan will be the lesser of$28.4 million or 67.5% of the total cost (as defined in the 2021 JPM Construction Loan) of theCharlotte Build-to-Suit . The term of the 2021 JPM Construction Loan is two years, with a one-year extension at the Company's option. Interest under the 2021 JPM Construction Loan is at 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 in the Charlotte Build-to-Suit . The net cash provided by financing activities in the 2020 first quarter reflected: (a)$15.0 million of proceeds from a mortgage loan; (b) proceeds of$11.1 million from a net increase in borrowings under the Company's credit lines withWebster Bank ; and (c)$2.5 million from the sale of Common Stock pursuant to a Stock Purchase Agreement withGordon DuGan (see below); partially offset by (d) approximately$4.3 million of principal payments on mortgage loans; and (e) approximately$0.2 million of payments of debt issuance costs. The 2020 first quarter mortgage proceeds reflected a$15.0 million nonrecourse mortgage loan (the "2020 State Farm Mortgage") withState Farm Life Insurance Company ("State Farm "). OnJanuary 23, 2020 , two wholly owned subsidiaries of INDUS entered into the 2020 State Farm Mortgage, which is collateralized by 6975 Ambassador and871 Nestle Way , two industrial/logistics buildings in theLehigh Valley ofPennsylvania aggregating approximately 254,000 square feet. Approximately$3.2 million of the proceeds from the 2020 State Farm Mortgage were used to repay the mortgage loan on871 Nestle Way that was scheduled to mature onJanuary 27, 2020 . The net increase in cash of$11.1 million in the 2020 first quarter from the borrowings under the Company's credit lines withWebster Bank reflected a net increase of$7.0 million under the Company's Revolving Credit Line withWebster Bank for general corporate purposes and an increase of$4.1 million under the Company's Acquisition Line of Credit withWebster Bank that was used to fund a portion of the purchase price of 3320 Maggie. OnMarch 3, 2020 ,Mr. DuGan was appointed as Chairman of the Board of Directors.Mr. DuGan and the Company entered into the Advisory Agreement wherebyMr. DuGan also agreed to serve as a non-employee advisor to the Company on, amongst other things, growth strategy, including identifying markets, acquisitions and other transactions, recruitment of key personnel, potential capital raising efforts and general management advice (collectively the "Advisory Services"). OnMarch 9, 2020 , the Company completed the sale of 53,293 shares of its Common Stock at a price per share of$46.91 , for cash proceeds of approximately$2.5 million , in accordance with the Advisory Agreement and pursuant to the Stock Purchase Agreement, dated as ofMarch 5, 2020 , betweenMr. DuGan and INDUS. The approximately$4.3 million of principal payments on mortgage loans in the 2020 first quarter reflected approximately$3.2 million for the repayment of the mortgage loan on871 Nestle Way and approximately$1.1 million of recurring principal payments on the Company's nonrecourse mortgage loans. Subsequent to the end of the 2021 first quarter, the Company entered into an agreement (the "Blue Hills Sale Agreement") with the full-building tenant in1985 Blue Hills Avenue ("1985 Blue Hills "), an approximately 165,000 square foot industrial/logistics building inWindsor, Connecticut , to sell1985 Blue Hills and two adjacent parcels of undeveloped land aggregating approximately 39 acres to the tenant for a purchase price of$18.0 million . The completion of the sale contemplated under the Blue Hills Sale Agreement is subject to satisfactory completion of due diligence by the buyer. Under the terms of the Blue Hills Sale Agreement, closing on the sale is to take place upon 30 days written notice from INDUS to the buyer, but in no event shall it be later thanDecember 15, 2021 . There is no guarantee that the sale contemplated by the Blue Hills Sale Agreement will be completed under its current terms, or at all. The Company also has several agreements in place for the sales of certain of its non-core real estate assets, which includes undeveloped land, a former nursery farm and certain office/flex properties. The total proceeds from these potential sales would be approximately$26.0 million if these transactions were completed under their current terms. There is no guarantee that any of these transactions will be completed under their current terms, or at all. The potential sales of non-core real estate assets currently under agreement reflect the following:
On
Granby/Windsor Option Agreement") whereby the Company granted the buyer an
? exclusive option, in exchange for a nominal fee, to purchase approximately 280
acres of undeveloped land inEast Granby andWindsor, Connecticut for use as a solar farm. The 35 Table of Contents
option has been extended through
range from a minimum of
the projected amount of electricity to be generated from the site. The land
subject to the
approvals that would be required for the buyer's planned use of the land. A
closing on the land sale contemplated by the
Agreement is subject to several significant contingencies, including the buyer
securing contracts under a competitive bidding process and obtaining local and
state approvals for that planned use of the land. Given these contingencies, it
is possible that the land sale contemplated under the
Agreement will not be completed under its current terms, or at all. OnFebruary 3, 2020 , the Company entered into an option agreement (the
"Meadowood Option Agreement") with a national land conservation organization
(the "
Meadowood (the "Meadowood Land"). For a nominal fee, the Meadowood Option
Agreement grants the
Meadowood Land for open space and farmland preservation whereby the Company
would receive net proceeds of approximately
is exercised. The Meadowood Option Agreement granted the Conservation
? Organization an initial term of twelve months, with one six-month extension, to
exercise its option to acquire the Meadowood Land. On
sale of the Meadowood Land contemplated under the Meadowood Option Agreement is
subject to several contingencies, including the
securing funding from several public and private sources to acquire the
Meadowood Land. Given these contingencies, it is possible that a sale of the
Meadowood Land will not be completed under the current terms of the Meadowood
Option Agreement, or at all.
On
2021), the Company entered into an agreement (the "Stratton Agreement") to
sell, for a purchase price of
remaining sixteen lots in
provides for the sale to take place in two phases: (i) nine lots were sold on
?
transaction costs; and (ii) the remaining seven lots are scheduled to be sold
for a purchase price of approximately
with the closing to take place on or before
guarantee that the second phase of sales of this transaction will be completed
under its current terms, or at all.
On
Land Sale Agreement") to sell approximately 91 acres of undeveloped land in
subject to the Southwick Land Sale Agreement does not have any of the approvals
? that would be required for the buyer's planned use of the land and closing on
the land sale is subject to several significant contingencies, including the
buyer obtaining governmental approvals for the planned use of the land. Given
these contingencies, it is possible that the transaction contemplated under the
Southwick Land Sale Agreement will not be completed under its current terms, or
at all.
On
Sale Agreement") to sell, for a purchase price of
transaction costs, all real estate assets of the
? by
of this transaction is subject to the satisfactory outcome of the buyer's due
diligence. There is no guarantee that the transaction contemplated under the
Florida Farm Sale Agreement will be completed under its current terms, or at
all.
36
Table of Contents
On April 5, 2021 , the Company entered into an agreement (the "60 GRS
Agreement") to sell approximately 34 acres of undeveloped land in
? transaction is subject to significant contingencies, including the buyer's
completion of due diligence. There is no guarantee that the transaction
contemplated under the 60 GRS Agreement will be completed under its current
terms, or at all.
On
(the "Third Amendment") with the tenant in the Company's approximately
7,200 square foot restaurant building in
? Company's office/flex portfolio). Under the terms of the Third Amendment, the
tenant exercised its option to purchase the restaurant building for
approximately
2021. There is no guarantee that the transaction contemplated under the Third
Amendment will be completed under its current terms, or at all.
On
Sale Agreement ) to sell: (a) 5 and 7
multi-story office buildings aggregating approximately 161,000 square feet;
(b)
? building; and (c) 25 Griffin Road North, an approximately 8 acre parcel of
undeveloped land, for a total purchase price of
the sale contemplated under the
satisfactory completion of due diligence by the buyer. There is no guarantee
that the transaction contemplated under the
be completed under its current terms, or at all.
On
Sale Agreement") to sell approximately 8 acres of undeveloped land in East
? Completion of this transaction is subject to significant contingencies,
including the buyer's completion of due diligence. There is no guarantee that
the transaction contemplated under the East Granby Land Sale Agreement will be
completed under its current terms, or at all. In the near-term, the Company plans to continue to invest in its real estate business, including the potential acquisition of additional properties and/or undeveloped land parcels in the Middle Atlantic, Northeast and Southeast regions to expand the industrial/logistics portion of its real estate portfolio, construction of additional buildings on its undeveloped land, expenditures for tenant improvements as new leases and lease renewals are signed, and infrastructure improvements required for future development of its real estate holdings. The following are the current projects in the Company's acquisition and development pipeline: In the 2021 first quarter, the Company entered into a fifteen-year lease agreement and a development agreement with Amazon for theCharlotte Build-to-Suit , a last-mile industrial/logistics facility. TheCharlotte
Build-to-
? Land and includes an approximately 141,000 square foot building. The Company
estimates that the total development cost for the Charlotte Build-to-
be between
complete this facility by
expected to fund a portion of the development costs. In the 2021 first quarter, the Company entered into a seven-year lease agreement with a leading global shipping and logistics company for
approximately 156,000 square feet of a to-be-built approximately 234,000 square
foot industrial/logistics building ("110 Tradeport") on a parcel of the
Company's undeveloped land in New England Tradeport ("NE Tradeport"), the
? Company's industrial park in
terms of the lease agreement, the tenant will relocate from its existing
approximately 74,000 square foot space in one of the Company's existing NE
Tradeport industrial/logistics buildings into 110 Tradeport upon its
completion, which is expected byJune 30, 2022 . The Company estimates that it will spend approximately 37 Table of Contents
the pre-leased space in this building. OnApril 9, 2021 , the Company entered into an agreement (the "Allentown Agreement") to acquire an approximately 127,500 square foot fully leased
industrial/logistics building in
? of
subject to satisfactory completion of due diligence by the Company. There is no
guarantee that the building acquisition contemplated under theAllentown Agreement will be completed under its current terms, or at all.
In the 2021 first quarter, the Company commenced construction, on speculation,
of an approximately 103,000 square foot industrial/logistics building on an
approximately 14 acre parcel of undeveloped land ("
?
started speculative construction of this building on
the building to be completed by
construction costs for the building (excluding the cost of land and tenant
improvements) will be approximately$9.0 million .
Subsequent to the end of the 2021 first quarter, the Company closed on the
purchase of an approximately 14 acre parcel of undeveloped land in
transaction costs. Approximately
Jetport Land was paid using the proceeds that had been held in escrow from the
sales in
? parcels under Section 1031 Like-Kind Exchanges under the Code. The balance of
the purchase price was paid from the Company's cash on hand. INDUS plans
speculative construction of two industrial/logistics buildings totaling
approximately 195,000 square feet on the Jetport Land. The Company estimates
that construction cost (excluding the cost of land and tenant improvements) for
the buildings expected to be built on the Jetport Land will be approximately
$12.5 million .
On
Purchase Agreement") to acquire, for a purchase price of
approximately 18 acre parcel of undeveloped land in the
Purchase Agreement") to acquire, for a purchase price of
approximately 5 acres of undeveloped land that abuts the 18 acre parcel to be
acquired under the First Allentown Purchase Agreement. Closings on the land
acquisitions contemplated under the First Allentown Purchase Agreement and the
Second Allentown Purchase Agreement are subject to significant contingencies,
? including the Company obtaining all governmental approvals for its planned
speculative development of an approximately 206,000 square foot
industrial/logistics building on the land parcels that would be acquired. The
Company estimates that construction costs for the building (excluding the cost
of land and tenant improvements) expected to be developed on the land to be
acquired under the First Allentown Purchase Agreement and the Second Allentown
Purchase Agreement will be approximately
contingencies, it is possible that the land acquisitions, as contemplated under
the First Allentown Purchase and the Second Allentown Purchase Agreement, will
not be completed under their current terms, or at all. Real estate acquisitions may or may not occur based on many factors, including real estate pricing. The Company may commence speculative construction projects on its undeveloped land that is either currently owned or acquired in the future if it believes market conditions are favorable for such development. The Company may also construct build-to-suit facilities on its undeveloped land if lease terms are favorable. The total estimated spending for INDUS's current and planned development and acquisition activities described above is approximately$107.1 million , with approximately$11.3 million spent as ofApril 15, 2021 . Real estate acquisitions and planned construction projects may or may not occur or reach completion based on many factors, including, without limitation real estate pricing and the impacts of the COVID-19 pandemic (see "Risk Factors-The COVID-19 pandemic has caused and could continue to 38
Table of Contents
cause disruptions to INDUS's business, and its financial condition, results or operations or stock price may be adversely impacted by the COVID-19 pandemic" included in Part I, Item 1A "Risk Factors" of the Company's Form 10-K for fiscal 2020). As ofMarch 31, 2021 , the Company had cash and cash equivalents of approximately$132.0 million . Management believes that its cash and cash equivalents as ofMarch 31, 2021 , cash generated from leasing operations and sales of real estate assets (if any),$50.0 million in borrowing capacity under its AmendedWebster Credit Line and the Acquisition Credit Line and availability under the 2021 JPM Construction Loan will be sufficient to meet its working capital requirements, fund planned construction of industrial/logistics buildings, close on real estate acquisitions currently under agreement, make other investments in real estate assets, pay obligations, if any, under the Contingent Value Rights Agreement and the Warrant liability and pay regular dividends on its Common Stock, when and if declared by the Board of Directors, for at least the next twelve months. Forward-Looking Information
The above information in Management's Discussion and Analysis of Financial
Condition and Results of Operations includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act of 1934, as amended. These forward-looking statements include, but are not
limited to the possibility of sales of real estate assets pursuant to certain
option agreements; completion of sales of real estate assets under agreement;
anticipated closing dates of such sales and the Company's plans with regard to
the foregoing properties; potential vacancies in the Company's buildings; the
acquisition and development of additional properties and/or undeveloped land
parcels; construction of additional buildings, estimated construction costs and
completion dates of buildings under construction and expected to be built;
tenant improvements and infrastructure improvements; expectations regarding any
potential issuance of securities under the Universal Shelf; the Company's
anticipated future liquidity and capital expenditures; expectations regarding
the Company's REIT tax status; expectations regarding the payment of dividends
on the Company's Common Stock; expectations and uncertainties related to
COVID-19 and other statements with the words "believes," "anticipates," "plans,"
"expects" or similar expressions. Although the Company believes that its plans,
intentions and expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such plans, intentions or expectations
will be achieved. The forward-looking statements made herein are based on
assumptions and estimates that, while considered reasonable by the Company as of
the date hereof, are inherently subject to significant business, economic,
competitive and regulatory uncertainties and contingencies, many of which are
beyond the control of the Company. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various important factors, including those set forth in Part I, Item
1A "Risk Factors" in the Company's Form 10-K for fiscal 2020.
39
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