Forward-Looking Statements
This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements that are not historical facts. Forward-looking statements can be identified by their use of forward-looking words, such as "may," "will," "anticipate," "expect," "believe," "intend," "plan," "should," "seek" or comparable terms, or the negative use of those words, but the absence of these words does not necessarily mean that a statement is not forward-looking. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described below and are described under the above heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" above and the headings "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2020 . These and other risks, uncertainties and factors could cause our actual results to differ materially from those included in any forward-looking statements we make. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors that could cause actual results to differ materially from our expectations include, among others:
? the ability of our tenants to make payments under their respective leases;
? our reliance on certain major tenants;
our ability to re-lease properties that are currently vacant or that become
? vacant;
? our ability to obtain suitable tenants for our properties;
changes in real estate market conditions, economic conditions in the industrial
sector, the markets in which our properties are located and general economic
? conditions;
the inherent risks associated with owning real estate, including local real
estate market conditions, governing laws and regulations and illiquidity of
? real estate investments;
? our ability to acquire, finance and sell properties on attractive terms;
? our ability to repay debt financing obligations;
our ability to refinance amounts outstanding under our debt obligations at
? maturity on terms favorable to us, or at all;
? the loss of any member of our management team;
? our ability to comply with debt covenants;
our ability to integrate acquired properties and operations into existing
? operations;
continued availability of proceeds from issuances of our debt or equity
? securities;
? the availability of other debt and equity financing alternatives;
changes in interest rates, including the replacement of the LIBOR reference
rate, under our current credit facility and under any additional variable rate
? debt arrangements that we may enter into in the future;
? our ability to successfully implement our selective acquisition strategy;
our ability to maintain internal controls and procedures to ensure all
transactions are accounted for properly, all relevant disclosures and filings
are timely made in accordance with all rules and regulations, and any potential
? fraud or embezzlement is thwarted or detected;
changes in federal or state tax rules or regulations that could have adverse
? tax consequences;
? declines in the market prices of our investment securities;
25 Table of Contents
? the effect of COVID-19 on our business and general economic conditions;
? our ability to qualify as a REIT for federal income tax purposes;
? potential adverse effects on our business as a result of a publicly announced
proxy contest for the election of directors at our annual meeting or other
shareholder activism; ? inability to complete the proposed transaction with Equity Commonwealth
because, among other reasons, one or more conditions to the closing of the
proposed transaction may not be satisfied or waived;
? uncertainty as to the timing of completion of the proposed transaction;
? potential adverse effects or changes to relationships with Equity
Commonwealth's or Monmouth's respective tenants, employees, service providers
or other parties resulting from the announcement or completion of the proposed
transaction;
? the outcome of any legal proceedings that may be instituted against the
parties and others related to the merger agreement;
? possible disruptions from the proposed transaction that could harm Equity
Commonwealth's or Monmouth's respective business, including current plans and
operations;
? unexpected costs, charges or expenses resulting from the proposed transaction;
and
? uncertainty of the expected financial performance of Equity Commonwealth
following completion of the proposed transaction, including the possibility
that the benefits anticipated from the proposed transaction will not be realized or will not be realized within the expected time period.
You should not place undue reliance on these forward-looking statements, as events described or implied in such statements may not occur. Although we have entered into the merger agreement with Equity Commonwealth, there can be no assurance that the merger and other transactions contemplated by the merger agreement will be completed.
Merger with Equity Commonwealth
As previously announced, inJanuary 2021 , our Board of Directors unanimously decided to explore strategic alternatives to maximize shareholder value. Following a comprehensive strategic alternatives process, onMay 4, 2021 , we entered into a definitive merger agreement with Equity Commonwealth under which, on the terms and subject to the conditions set forth in the merger agreement, the Company will merge with and into a new wholly-owned subsidiary of Equity Commonwealth, resulting in Equity Commonwealth acquiring the Company in an all-stock transaction. The merger agreement provides that, upon closing of the merger, our common stockholders will receive 0.67 shares of Equity Commonwealth stock for every share of our common stock they own. We plan to continue to pay our regular quarterly common stock dividend and our Series C Cumulative Redeemable Preferred Stock dividend until closing of the transaction. The transaction is expected to close during the second half of calendar 2021, subject to customary closing conditions, including approval by common stockholders of both Equity Commonwealth and the Company. This proposed merger is the culmination of the comprehensive strategic alternatives review conducted by our Board. As part of the review, our Board of Directors, working with the Company's legal and financial advisors, carefully considered a full range of strategic alternatives. The Company and its advisors engaged with and solicited proposals from a broad range of highly reputable strategic and financial counterparties, all with significant access to capital, comprising approximately 100 different potential buyers, including industrial, triple-net and other REITs, private equity sponsors, sovereign wealth funds and pension funds, among other domestic and international investors. At the conclusion of this process, the Board unanimously concluded that the merger with Equity Commonwealth is the best outcome to maximize long-term value for the
Company's stockholders. Overview and Recent Activity The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto provided elsewhere herein and our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2020 .
We operate as a real estate investment trust (REIT). We seek to invest in well-located, modern single-tenant industrial buildings leased primarily to investment-grade tenants or their subsidiaries on long-term net-leases. We were founded in 1968 and are one of the oldest public equity REITs in the world.
During the six months endedMarch 31, 2021 , we purchased two new built-to-suit, net-leased, industrial properties, located in theColumbus, OH , andAtlanta, GA Metropolitan Statistical Areas (MSAs) totaling approximately 1.1 million square feet, for$170.0 million . The two properties are net-leased for terms of 15 and 20 years, respectively resulting in a weighted average lease term of 17.9 years and are expected to generate annualized rental income over the life of their leases of$10.1 million . In connection with the two properties acquired during the six months endedMarch 31, 2021 , we obtained a 15 year, fully-amortizing mortgage loan and a 17 year, fully-amortizing mortgage loan, respectively. The two mortgage loans originally totaled$104.0 million with a weighted average maturity of 16.1 years and a weighted average fixed interest rate of 3.11%. As ofMarch 31, 2021 , we owned 121 properties with total square footage of 24.6 million. These properties are located in 31 states. Subsequent to quarter end, onApril 15, 2021 , we sold our 60,400 square foot building located in Carlstadt (New York, NY ), NJ. As of the quarter endedMarch 31, 2021 , our weighted average lease term was 7.4 years, our occupancy rate was 99.7%, and our annualized average base rent per occupied square foot was$6.51 . As ofMarch 31, 2021 , the weighted average building age, based on the square footage of our buildings, was 9.9 years. In addition, total gross real estate investments, excluding marketable REIT securities investments of$131.7 million , were$2.2 billion
as ofMarch 31, 2021 . See PART I, Item 1 - Business in our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2020 for a more complete discussion of the economic and industry-wide factors relevant to us and the opportunities, challenges, and risks on which we are focused. The future effects of the COVID-19 Pandemic are uncertain, however, at this time COVID-19 has not had a material adverse effect on our financial condition. We invest in modern single-tenant, industrial buildings, leased primarily to investment-grade tenants or their subsidiaries on long-term net-leases. Our investments are exclusively situated in the continentalUnited States , and are primarily located in strategic locations that are mission-critical to our tenants' needs. In many cases our buildings are highly automated in order to better serve the omni-channel distribution networks that have become essential today. Approximately 83% of our revenue is derived from investment-grade tenants, or their subsidiaries as defined byS&P Global Ratings (www.standardandpoors.com) and by Moody's (www.moodys.com). The references in this report toS&P Global Ratings and Moody's are not intended to and do not include, or incorporate by reference into this report, the information ofS&P Global Ratings or Moody's on such websites. 26 Table of Contents For many years, ecommerce demand has increased, and it has now become an integral part of the retail landscape. The COVID-19 Pandemic has created an even greater move towards on-line shopping. As a result of state and local government-mandated shutdowns, public health guidance and changing consumer demand, ecommerce sales as a percentage of total retail sales has substantially increased during the past year. The COVID-19 Pandemic has also created a need for supply chain reconfiguration. It is estimated that ecommerce sales require three times the warehouse space relative to brick and mortar retail sales. Increased inventory stocking is currently taking place across many industries and it appears that this trend will continue in order to accommodate surges
in demand. Our portfolio of modern, net-leased industrial properties, continues to provide shareholders with reliable and predictable income streams. Our resilient occupancy rates and rent collection results during these challenging times, highlight the mission-critical nature of our assets and underscore the essential need for our tenants' operations. Furthermore, because our weighted average lease term is 7.4 years and our weighted average fixed rate mortgage debt maturity is 11.3 years, we expect our cash flow to remain resilient over long periods of time. Our overall occupancy rate and our base rent collections have remained strong throughout the COVID-19 Pandemic. Our base rent collections have averaged 99.9% throughout the COVID-19 Pandemic and we expect future months to be consistent with this trend. Our overall occupancy rate and our base rent collections during the COVID-19 Pandemic were as follows: Month Occupancy Percentage of Base Rent Collected March 2020 99.4 % 100.0 % April 2020 99.4 % 99.9 % May 2020 99.4 % 99.9 % June 2020 99.4 % 99.9 % July 2020 99.4 % 99.9 % August 2020 99.4 % 99.7 % September 2020 99.4 % 99.8 % October 2020 99.4 % 99.8 % November 2020 99.4 % 99.9 % December 2020 99.7 % 99.9 % January 2021 99.7 % 99.9 % February 2021 99.7 % 99.9 % March 2021 99.7 % 99.9 % April 2021 99.7 % 99.9 %
We evaluate our financial performance using Net Operating Income (NOI) from property operations, which we believe is a useful indicator of our operating performance. NOI is a non-GAAP financial measure that we define as Net Income Attributable to Common Shareholders plus Preferred Dividend Expense, General and Administrative Expenses, Non-recurring Severance Expense, Depreciation, Amortization of Capitalized Lease Costs and Intangible Assets, Interest Expense, including Amortization of Financing Costs,Unrealized Holding (Gains) Losses Arising During the Periods, less Dividend Income and Lease Termination Income. The components of NOI are recurring Rental and Reimbursement Revenue, less Real Estate Taxes and Operating Expenses, such as insurance, utilities, and repairs and maintenance. Other REITs may use different methodologies to calculate NOI and, accordingly, our NOI may not be comparable to all other REITs. 27 Table of Contents The following is a reconciliation of our Net Income Attributable to Common Shareholders to our NOI for the three and six months endedMarch 31, 2021 and 2020 (in thousands): Three Months Ended Six Months Ended 3/31/2021 3/31/2020 3/31/2021 3/31/2020 Net Income (Loss) Attributable to Common Shareholders$ 25,913 $ (75,078 ) $ 51,659 $ (71,551 ) Plus: Preferred Dividend Expense 8,416 6,764 16,587 12,862 Plus: General & Administrative Expenses 2,091 2,396 4,117 4,660 Plus: Non-recurring Strategic Alternative & Proxy Costs 1,993 -0- 2,239 -0- Plus: Non-recurring Severance Expense -0- -0- -0- 786 Plus: Depreciation 13,064 11,475 25,141 22,907 Plus: Amortization of Capitalized Lease Costs and Intangible Assets 879 767 1,687 1,521 Plus: Interest Expense, including Amortization of Financing Costs 9,387 9,050 18,546 18,259 Less/Plus:Unrealized Holding (Gains) Losses Arising During the Periods (19,186 ) 83,075 (38,906 ) 86,710 Less: Dividend Income (1,587 ) (3,404 ) (3,195 ) (6,642 ) Less: Gain on Sale of Securities Transactions (2,248 ) -0- (2,248 ) -0- Less: Lease Termination Income -0- -0-
(377 ) -0- Net Operating Income- NOI$ 38,722 $ 35,045 $ 75,250 $ 69,512
The components of our NOI for the three and six months ended
Three Months Ended Six Months Ended 3/31/2021 3/31/2020 3/31/2021 3/31/2020 Rental Revenue$ 39,246 $ 35,114 $ 76,091 $ 69,983 Reimbursement Revenue 7,119 6,594 13,856 13,424 Total Rental and Reimbursement Revenue 46,365 41,708 89,947 83,407 Real Estate Taxes (5,604 ) (5,029 ) (10,922 ) (10,064 ) Operating Expenses (2,039 ) (1,634 ) (3,775 ) (3,831 ) Net Operating Income- NOI$ 38,722 $ 35,045 $ 75,250 $ 69,512
NOI from property operations increased$3.7 million , or 10%, for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 . NOI from property operations increased$5.7 million , or 8%, for the six months endedMarch 31, 2021 as compared to the six months endedMarch 31, 2020 . This increase was due to the acquisition of two new built-to-suit, net-leased, industrial properties, located in theColumbus, OH andAtlanta, GA MSAs totaling approximately 1.1 million square feet purchased during the six-month period endedMarch 31, 2021 and the fiscal 2020 acquisitions consisting of five new built-to-suit, net-leased, industrial properties, located in theIndianapolis, IN ,Columbus, OH ,Greensboro, NC ,Salt Lake City, UT andOklahoma City, OK MSAs totaling approximately 1.2 million square feet. Acquisitions
OnDecember 17, 2020 , we purchased a newly constructed 488,000 square foot industrial building, situated on 99.0 acres, located in theColumbus, OH MSA. The building is 100% net-leased toFedEx Ground Package System, Inc. for 15 years throughSeptember 2035 . The purchase price was$73.3 million . We obtained a 15 year, fully-amortizing mortgage loan of$47.0 million at a fixed interest rate of 2.95%. Annual rental revenue over the remaining term of the lease averages$4.6 million . 28 Table of Contents
OnDecember 24, 2020 , we purchased a newly constructed 658,000 square foot industrial building, situated on 129.9 acres, located in theAtlanta, GA MSA. The building is 100% net-leased toHome Depot U.S.A., Inc. for 20 years throughNovember 2040 . The purchase price was$96.7 million . We obtained a 17 year, fully-amortizing mortgage loan of$57.0 million at a fixed interest rate of 3.25%. Annual rental revenue over the remaining term of the lease averages
$5.5 million .
FedEx Ground Package System, Inc.'s ultimate parent, FedEx Corporation andHome Depot U.S.A., Inc's ultimate parent, Home Depot, Inc. are publicly-listed companies and financial information related to these entities are available at theSEC's website, www.sec.gov. The references in this report to theSEC's website are not intended to and do not include, or incorporate by reference into this report, the information on the www.sec.gov website. Expansions
During the six months endedMarch 31, 2021 , we completed the first phase of a two-phase parking expansion project forFedEx Ground Package System, Inc. at our property located inOlathe (Kansas City ), KS. The first phase of this parking expansion project was completed for a total cost of$3.4 million , which resulted in a$340,000 increase in annualized rent effectiveNovember 5, 2020 increasing the annualized rent from$2.2 million to$2.6 million . We will soon be starting the second phase of this parking expansion project at this location, which will increase the rental rate further and extend the lease term. Commitments We have entered into agreements to purchase six new build-to-suit, industrial buildings that are currently being developed inAlabama (2),Georgia ,Tennessee ,Texas andVermont . These six future acquisitions total 1.8 million square feet, with net-leased terms ranging from 10 to 15 years, resulting in a weighted average lease term of 13.5 years. The aggregate purchase price for these six properties is$238.1 million . Five of these six properties, consisting of approximately 1.3 million square feet, or 70%, are leased for 15 years toFedEx Ground Package System, Inc. , with the remaining property, consisting of approximately 530,000 square feet or 30%, leased for 10 years toMercedes Benz US International, Inc. All properties are leased to companies, or subsidiaries of companies, that are considered Investment Grade byS&P Global Ratings (www.standardandpoors.com) and by Moody's (www.moodys.com). Subject to satisfactory due diligence and other customary closing conditions and requirements, we anticipate closing three of these transactions during fiscal 2021, two in the first half of fiscal 2022 and one in the second half of fiscal 2022. In connection with five of the six properties, we have entered into commitments to obtain five, 15 year, fully-amortizing mortgage loans, totaling$128.1 million with fixed interest rates ranging from 2.5% to 3.05%, resulting in a weighted average fixed interest rate of 2.74%. We have several FedEx Ground parking expansion projects in progress with more under discussion. Currently there are eight parking expansion projects underway which we expect to cost approximately$31.4 million . These parking expansion projects will enable us to capture additional rent while lengthening the terms of these leases. We are also in discussions to expand the parking at nine additional locations bringing the total recently completed and potential parking lot expansion projects to 18 currently.
Significant Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with Accounting Principles Generally Accepted inthe United States of America (U.S. GAAP). The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our Consolidated Financial Statements. Actual results may differ from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We believe that there have been no material changes to the items that we disclosed as our significant accounting policies and estimates under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on Form 10-K for fiscal year endedSeptember 30, 2020 . 29 Table of Contents
Changes in Results of Operations
As ofMarch 31, 2021 , we owned 121 properties with total square footage of 24.6 million, as compared to 116 properties with total square footage of 23.0 million, as ofMarch 31, 2020 , representing an increase in square footage of 7.0%. Subsequent to quarter end, onApril 15, 2021 , we sold our 60,400 square foot building located in Carlstadt (New York, NY ), NJ. At quarter end, the Company's weighted average lease term was approximately 7.4 years, as compared to 7.4 years at the end of the prior year period. Our occupancy rate was 99.7% as ofMarch 31, 2021 , as compared to 99.4% as ofMarch 31, 2020 , representing an increase of 30 basis points. Our weighted average building age was 9.9 years as ofMarch 31, 2021 , as compared to 9.4 years as ofMarch 31, 2020 . Fiscal 2021 Renewals In fiscal 2021, approximately 5% of our gross leasable area, representing ten leases totaling 1.2 million square feet, is set to expire. Eight of these ten leases have been renewed thus far, for a weighted average term of 4.1 years, at a rental rate increase of 7.2% on a GAAP basis and an increase of 0.4% on a cash basis. These eight lease renewals represent 1.1 million square feet, or 91% of the expiring square footage for fiscal 2021. We have incurred or we expect to incur leasing commission costs of$536,000 in connection with four of these lease renewals and we have incurred or we expect to incur tenant improvement costs of$436,000 in connection with three of these lease renewals. The table below summarizes the lease term of the leases that were renewed. In addition, the table below includes both the tenant improvement costs and the leasing commission costs, which are presented on a per square foot (PSF) basis averaged annually over the renewal terms. Tenant Former Renewal Improvement Leasing U.S. GAAP U.S GAAP Renewal Cost Commission Cost Straight- Line Former Former Straight- Line Initial Renewal Renewal PSF over PSF over Square Rent Cash Rent Lease Rent Cash Rent Lease Term Renewal Renewal Property Tenant Feet PSF PSF Expiration PSF PSF Expiration (years) Term (1) Term (1) Rinnai
2.0 $ -0- $ 0.13 Victory Fayetteville, Packaging, NC L.P. 148,000 3.33 3.50 2/28/21 3.40 3.25 2/28/25 4.0 -0- 0.20 Winston-Salem, Style Crest, NC Inc. 106,507 3.39 3.77 3/31/21 4.10 3.90 3/31/26 5.0 0.30 -0- Augusta, GA FedEx Ground 59,358 8.64 8.64 6/30/21 8.64 8.64 6/30/23 2.0 -0- -0- Pittsburgh Glass Works,O'Fallon , MO LLC 102,135 4.37 4.446/30/21 5.05 4.886/30/26 5.0 0.20 -0-
Corpus
Christi, TX FedEx Ground 46,253 9.03 9.42 8/31/21 9.89 9.89 8/31/26 5.0 -0- -0- Kansas City, Bunzl MO Distribution 158,417 4.65 4.86 9/30/21 4.44 4.26 9/30/26 5.0 -0- 0.27 Woodstream St. Joseph, MO Corporation 256,000 3.57
3.70 9/30/21 3.89 3.75 9/30/26 5.0 0.14 0.12 Total 1,094,790 Weighted Average $ 4.30$ 4.47 $ 4.61$ 4.49 4.1$ 0.10 $ 0.12
Amount calculated based on the total cost divided by the square feet, divided
(1) by the renewal term. These eight lease renewals have aU.S. GAAP straight-line lease rate of$4.61 per square foot. The renewed initial cash rent per square foot is$4.49 . This compares to the former rent of$4.30 per square foot on aU.S. GAAP straight-line basis and the former cash rent of$4.47 per square foot, resulting in an increase of 7.2% on aU.S. GAAP straight-line basis and an increase of 0.4% on a cash basis. 30 Table of Contents EffectiveOctober 1, 2020 , we entered into a lease termination agreement withRGH Enterprises, Inc. (Cardinal Health) for our 75,000 square foot facility located inHalfmoon (Albany ), NY whereby we received a termination fee in the amount of$377,000 representing approximately 50% of the then remaining rent due under the lease, which was set to expire in 1.2 years onNovember 30, 2021 . We simultaneously entered into a 10.4 year lease agreement with United Parcel Service, Inc. (UPS) which became effectiveNovember 1, 2020 . The lease agreement withUPS provides for five months of free rent, after which, onApril 1, 2021 , initial annual rent of$510,000 , representing$6.80 per square foot, will commence, with 2.0% annual increases thereafter, resulting in a straight-line annualized rent of$541,000 , representing$7.21 per square foot over the life of the lease, which expiresMarch 31, 2031 . This compares to the formerU.S GAAP straight-line rent of$574,000 , representing$7.65 per square foot and former cash rent of$8.19 per square foot, resulting in a decrease of$33,000 , representing a 5.8% decrease on aU.S GAAP straight-line basis and a decrease of 17.0% on a cash basis. The new 10.4 year lease agreement withUPS provides for an additional 9.3 years of lease term versus the old lease with Cardinal Health. EffectiveDecember 15, 2020 , we entered into a 10.3 year lease withHartford HealthCare Corporation for our previously vacant 55,000 square foot facility located inNewington (Hartford ), CT, thereby increasing our current overall occupancy rate to 99.7%. The new lease has free rent for the first four months, after which initial annual rent will be$288,000 , representing$5.25 per square foot with 2.0% annual increases thereafter, resulting in aU.S. GAAP straight-line annualized rent of$307,000 , representing$5.60 per square foot over the life of the lease.Hartford HealthCare Corporation is rated "investment-grade" as defined byS&P Global Ratings (www.standardandpoors.com) and by Moody's (www.moodys.com). Rental Revenue increased$4.1 million , or 12%, for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 . Rental Revenue increased$6.1 million , or 9%, for the six months endedMarch 31, 2021 as compared to the six months endedMarch 31, 2020 . These increases were due to the acquisition of two new built-to-suit, net-leased, industrial properties located in theColumbus, OH andAtlanta, GA MSAs totaling approximately 1.1 million square feet during the six months endedMarch 31, 2021 and the increase was due to the fiscal 2020 acquisitions of five new built-to-suit, net-leased, industrial properties, located in theIndianapolis, IN ,Columbus, OH ,Greensboro, NC ,Salt Lake City, UT andOklahoma City, OK MSAs totaling approximately 1.2 million square feet. Our single-tenant properties are subject to net-leases, which require the tenants to reimburse us for the cost of Real Estate Taxes as well as certain Operating Expenses such as insurance and the majority of repairs and maintenance. Reimbursement Revenue increased$525,000 , or 8%, Real Estate Tax Expense increased$575,000 , or 11%, and Operating Expenses increased$405,000 , or 25% for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 . For the six months endedMarch 31, 2021 , Reimbursement Revenue increased$432,000 , or 3%, Real Estate Tax Expense increased$858,000 , or 9%, and Operating Expenses decreased$56,000 , or 1% as compared to the six months endedMarch 31, 2020 . Reimbursement Revenue as a percentage of Real Estate Taxes and Operating Expenses for the three months endedMarch 31, 2021 was 93% compared to 99% for the three months endedMarch 31, 2020 . Reimbursement Revenue as a percentage of Real Estate Taxes and Operating Expenses for the six months endedMarch 31, 2021 was 94% compared to 97% for the six months endedMarch 31, 2020 . General and Administrative Expenses decreased$305,000 , or 13%, for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 . General and Administrative Expenses decreased$543,000 , or 12%, for the six months endedMarch 31, 2021 as compared to the six months endedMarch 31, 2020 . General and Administrative Expenses, as a percentage of gross revenue (which includes Rental Revenue, Reimbursement Revenue and Dividend Income) was 4.4% for the three months endedMarch 31, 2021 as compared to 5.3% for the three months endedMarch 31, 2020 and was 4.4% for the six months endedMarch 31, 2021 as compared to 5.2% for the six months endedMarch 31, 2020 . Annualized General and Administrative Expenses, as a percentage of undepreciated assets (which is our total assets excluding accumulated depreciation) was 34 basis points for the six months endedMarch 31, 2021 as compared to 43 basis points for the six months endedMarch 31, 2020 . During the six months endedMarch 31, 2021 , we have incurred Non-recurring Strategic Alternative & Proxy Costs of$2.2 million related to the evaluation of strategic alternatives approved by our Board of Directors and the related proxy process. 31 Table of Contents OnDecember 23, 2019 , our former General Counsel,Allison Nagelberg , announced her retirement effectiveDecember 31, 2019 . In accordance with her severance package, during the first quarter of fiscal 2020, we incurred a one-time, Non-recurring Severance Expense of$786,000 . Depreciation increased$1.6 million , or 14%, for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 . Depreciation increased$2.2 million , or 10%, for the six months endedMarch 31, 2021 as compared to the six months endedMarch 31, 2020 . Amortization of Capitalized Lease Costs and Intangible Assets increased$112,000 , or 15%, for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 . Amortization of Capitalized Lease Costs and Intangible Assets increased$166,000 , or 11%, for the six months endedMarch 31, 2021 as compared to the six months endedMarch 31, 2020 . These increases were primarily due to the acquisition of two industrial properties purchased during the first half of fiscal 2021 and five industrial properties purchased during fiscal 2020. In addition, the increases in depreciation and amortization expenses were also the result of the capital improvements and leasing costs incurred over the last
four quarters. The recognition of Unrealized Holding Gains (Losses) Arising During the Periods was due to the adoption of ASU 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities," which became effective at the beginning of the prior fiscal year. With the adoption of ASU 2016-01, the changes in net unrealized holding gains and losses are recognized through net income. Therefore, the implementation of this accounting rule has resulted in increased volatility in our reported earnings and some of our key performance metrics. Unrealized Holding Gains arising during the three and six months endedMarch 31, 2021 were$19.2 million and$38.9 million , respectively and Unrealized Holding Losses arising during the three and six months endedMarch 31, 2020 were$83.1 million and$86.7 million , respectively. The components of the Unrealized Holding Gains (Losses) Arising During the Periods included in the accompanying Consolidated Statements of
Income are as follows: Three Months Ended Six Months Ended 3/31/2021 3/31/2020 3/31/2021 3/31/2020 Unrealized Holding Gains (Losses)$ 21,434 $ (83,075 ) $ 41,154 $ (86,710 ) Reclassification Adjustment for Net (Gains) Realized in Income (2,248 ) -0- (2,248 ) -0- Unrealized Holding Gains (Losses) Arising During the Period$ 19,186 $ (83,075 ) $ 38,906 $ (86,710 ) We recognized dividend income on our investments in securities of$1.6 million and$3.4 million for the three months endedMarch 31, 2021 and 2020, respectively, representing a$1.8 million decrease. We recognized dividend income on our investments in securities of$3.2 million and$6.6 million for the six months endedMarch 31, 2021 and 2020, respectively, representing a$3.4 million decrease. This decrease is due to reduced dividends from our REIT securities portfolio. The REIT securities portfolio's weighted average yield for the six months endedMarch 31, 2021 was approximately 4.9% as compared to 8.9% for the six months endedMarch 31, 2020 . We held$131.7 million in marketable REIT securities as ofMarch 31, 2021 , representing 5.4% of our undepreciated assets. Interest Expense, including Amortization of Financing Costs, increased by$337,000 , or 4%, for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 . Interest Expense, including Amortization of Financing Costs, increased by$287,000 , or 2%, for the six months endedMarch 31, 2021 as compared to the six months endedMarch 31, 2020 . We had a decrease of 17 basis points in the weighted average interest rate of the Fixed Rate Mortgage Notes Payable, which decreased from 4.04% atMarch 31, 2020 to 3.87% atMarch 31, 2021 . The decrease in Interest Expense, including Amortization of Financing Costs, was partially offset by an increase in the Fixed Rate Mortgage Notes Payable balance, which increased by$86.6 million fromMarch 31, 2020
toMarch 31, 2021 . Preferred Dividend Expense increased$1.7 million , or 24%, for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 and increased$3.7 million , or 29% for the six months endedMarch 31, 2021 as compared to the six months endedMarch 31, 2020 . These increases were due to the additional$120.4 million of 6.125% Series C Cumulative Redeemable Preferred Stock issued betweenMarch 31, 2020 andMarch 31, 2021 . 32 Table of Contents
Changes in Financial Condition
We generated
Real Estate Investments increased by$143.8 million fromSeptember 30, 2020 toMarch 31, 2021 . This increase was mainly due to the purchase of two net-leased industrial properties, located in theColumbus, OH MSA and theAtlanta, GA MSA, totaling approximately 1.1 million square feet, for$170.0 million . The increase was partially offset by Depreciation Expense on Real Estate Investments for the six months endedMarch 31, 2021 of$25.1 million . Securities Available for Sale increased by$22.8 million fromSeptember 30, 2020 toMarch 31, 2021 . The increase was primarily due to an Unrealized Holding Gain of$38.9 million for the six months endedMarch 31, 2021 . There were also sales and redemptions of securities during the six month period totaling$18.8 million which resulted in a realized gain of$2.2 million . Fixed Rate Mortgage Notes Payable, net of Unamortized Debt Issuance Costs (Mortgage Notes Payable), increased by$66.7 million fromSeptember 30, 2020 toMarch 31, 2021 . The increase was mostly due to the origination of two fully-amortizing mortgage loans for$104.0 million , with a weighted average interest rate of 3.11%, obtained in connection with the two industrial properties purchased during the first half of fiscal 2021. Details on these two fixed rate mortgages are as follows: Mortgage Interest Property (MSA) amount (in thousands) Maturity Date Rate Columbus, OH $ 47,000 1/1/2036 2.95 % Atlanta, GA $ 57,000 1/1/2038 3.25 % The increase in Mortgage Notes Payable was also partially due to the amortization of financing costs associated with the Mortgage Notes Payable of approximately$482,000 . This increase was partially offset by scheduled payments of principal of$37.2 million and we fully prepaid two Mortgage loans. One mortgage loan was a$6.2 million mortgage loan for our property located inKansas City, MO that was originally set to mature onDecember 1, 2021 and had an interest rate of 5.18%. The second mortgage loan was a$159,000 mortgage loan for our property located inTopeka, KS that was originally set to mature onAugust 10, 2021 and had an interest rate of 6.50%. In addition, the increase in Mortgage Notes Payable was partially offset by the addition of deferred financing costs of approximately$569,000 , which is associated with two mortgages obtained in connection with two industrial properties purchased during the first quarter of fiscal 2021. Excluding Debt Issuance Costs, the weighted average interest rate on the Fixed Rate Mortgage Notes Payable decreased by 17 basis points from the prior year quarter, from 4.04% atMarch 31, 2020 to 3.87% atMarch 31, 2021 . We are scheduled to repay a total of$73.6 million in mortgage principal payments over the next 12 months. We may make these principal payments from the cash on hand, funds generated from Cash from Operations, the DRIP, the At-The-Market Sales Agreement Program (Preferred Stock ATM Program), the Equity Distribution Agreement (Common Stock ATM Program), and draws from the unsecured line of credit facility. 33 Table of Contents
Liquidity and Capital Resources
Net Cash Provided by Operating Activities was$54.4 million and$47.9 million for the six months endedMarch 31, 2021 and 2020, respectively. Dividends paid on common stock for the six months endedMarch 31, 2021 and 2020 were$34.4 million and$33.1 million , respectively (of which$1.0 million and$5.6 million , respectively, were reinvested). We pay dividends from cash generated from operations. As ofMarch 31, 2021 , we held$131.7 million in marketable REIT securities, representing 5.4% of our undepreciated assets, which we define as total assets excluding accumulated depreciation. Total assets excluding accumulated depreciation were$2.4 billion as ofMarch 31, 2021 . In general, we may borrow up to 50% of the value of the marketable securities. The interest rate charged on the margin loan is the bank's margin rate and was 0.75% as ofMarch 31, 2021 . AtMarch 31, 2021 , there was no amount drawn down under the margin loan. As ofMarch 31, 2021 , we had net Unrealized Holding Losses on our portfolio of$87.9 million as compared to net Unrealized Holding Losses of$126.8 million as ofSeptember 30, 2020 , representing an Unrealized Holding Gain of$38.9 million for the six months endedMarch 31, 2021 . There have been no open market purchases of securities during the six months endedMarch 31, 2021 . We recognized dividend income on our investments in securities of$1.6 million and$3.2 million for the three and six months endedMarch 31, 2021 . During the six months endedMarch 31, 2021 , UMH Properties, Inc. (UMH), a related REIT, redeemed all of its outstanding 8.00% Series B Cumulative Redeemable Preferred Stock at a cash redemption price of$25.00 per share, plus all accrued and unpaid dividends, of which we owned 100,000 shares at a total cost of$2.5 million . In addition to the$2.5 million of UMH 8.00% Series B Cumulative Redeemable Preferred Stock that was redeemed during the six months endedMarch 31, 2021 , we also sold marketable REIT securities for gross proceeds totaling$16.3 million with an original cost basis of$14.1 million , resulting in a realized gain of$2.2 million . OnNovember 15, 2020 , we entered into a new line of credit facility (the "New Facility") consisting of a$225.0 million unsecured line of credit facility (the "Revolver") and a new$75.0 million unsecured term loan (the "Term Loan"), resulting in the total potential availability under both the Revolver and the Term Loan of$300.0 million , which is an additional$100.0 million over the former line of credit facility. In addition, the Revolver includes an accordion feature that will allow the total potential availability under the New Facility to further increase to$400.0 million , under certain conditions. The$225.0 million Revolver matures inJanuary 2024 with two options to extend for additional six-month periods. Availability under the New Facility is limited to 60% of the value of the borrowing base properties. The value of the borrowing base properties is determined by applying a capitalization rate to the NOI generated by our unencumbered, wholly-owned industrial properties. Under the New Facility, the capitalization rate applied to our NOI generated by our unencumbered, wholly-owned industrial properties was lowered from 6.5% under the former line of credit facility to 6.25%, thus increasing the value of the borrowing base properties under the terms of the New Facility. In addition, the interest rate for borrowings under the Revolver was lowered by a range of 5 basis points to 35 basis points, depending on our leverage ratio, and will, at our election, either i) bear interest at LIBOR plus 135 basis points to 205 basis points, depending on our leverage ratio, or ii) bear interest at Bank of Montreal's (BMO) prime lending rate plus 35 basis points to 105 basis points, depending on our leverage ratio. Currently, our borrowings bear interest under the Revolver at LIBOR plus 145 basis points, which results in an interest rate of 1.56%. As of the quarter end and currently, we do not have any amount drawn down under our Revolver, resulting in the full$225.0 million being currently available. The$75.0 million Term Loan maturesJanuary 2025 . The interest rate for borrowings under the Term Loan will at our election, either i) bear interest at LIBOR plus 130 basis points to 200 basis points, depending on our leverage ratio, or ii) bear interest at BMO's prime lending rate plus 30 basis points to 100 basis points, depending on our leverage ratio. To reduce floating interest rate exposure under the Term Loan, we also entered into an interest rate swap agreement to fix LIBOR on the entire$75.0 million for the full duration of the Term Loan resulting in an all-in rate of 2.92%. As ofMarch 31, 2021 , we owned 121 properties, of which 62 carried mortgage loans with outstanding principal balances totaling$874.2 million . Subsequent to quarter end, onApril 15, 2021 , we sold our 60,400 square foot building located in Carlstadt (New York, NY ), NJ and we paid off the mortgage in the amount of$1.1 million . The 59 unencumbered properties could be refinanced to raise additional funds, although covenants in our New Facility limit the amount of unencumbered properties that can be mortgaged. As ofMarch 31, 2021 , Loans Payable represented$75.0 million outstanding under our Term Loan. 34 Table of Contents As ofMarch 31, 2021 , we had total assets of$2.1 billion and liabilities of$972.3 million . Our net debt (net of unamortized debt issuance costs and net of cash and cash equivalents) to total market capitalization as ofMarch 31, 2021 was approximately 29% and our net debt, less marketable securities (net of unamortized debt issuance costs, net of cash and cash equivalents and net of marketable securities) to total market capitalization as ofMarch 31, 2021 was approximately 24%. Our debt consists of 92% amortizing fixed rate debt with a weighted average interest rate of 3.87% and a weighted average loan maturity of 11.3 years. We believe that we have the ability to meet our obligations and to generate funds for new investments. OnJanuary 14, 2021 , our Board of Directors unanimously decided to explore strategic alternatives to maximize shareholder value. Following a comprehensive strategic alternatives process, we entered into a definitive merger agreement by which Equity Commonwealth (NYSE: EQC) will acquire Monmouth in an all-stock transaction. Under the terms of the merger agreement, Monmouth shareholders will receive 0.67 shares of Equity Commonwealth stock for every share of Monmouth stock they own. Under the terms of the merger agreement, Monmouth plans to continue to pay its regular quarterly common stock dividend and its Series C Cumulative Redeemable Preferred Stock dividend between signing and closing of the transaction. The transaction is expected to close during the second half of calendar 2021, subject to customary closing conditions, including the approval of both Equity Commonwealth and Monmouth stockholders. OnFebruary 6, 2020 , we entered into a Common Stock ATM Program withBMO Capital Markets Corp. ,B. Riley FBR, Inc. ,D.A. Davidson & Co. ,Janney Montgomery Scott LLC ,J.P. Morgan Securities LLC andRBC Capital Markets, LLC (together the "Distribution Agents") under which we may offer and sell shares of our common stock,$0.01 par value per share, having an aggregate sales price of up to$150.0 million from time to time through the Distribution Agents. Sales of the shares of Common Stock under the Agreement, if any, will be in "at the market offerings" as defined in Rule 415 under the Securities Act, including, without limitation, sales made directly on or through the NYSE, or on any other existing trading market for the Common Stock, or to or through a market maker or any other method permitted by law, including, without limitation, negotiated transactions and block trades. We implemented the Common Stock ATM program for the flexibility that it provides to opportunistically access the capital markets and to best time our equity capital needs as we close on acquisitions. To date, we have elected to not raise any equity though our Common Stock Equity Program. OnJune 29, 2017 , we entered into a Preferred Stock At-The-Market Sales Agreement Program withB. Riley FBR, Inc. , orB. Riley (formerlyFBR Capital Markets & Co. ), that provided for the offer and sale of shares of our 6.125% Series C Preferred Stock, having an aggregate sales price of up to$100.0 million . OnAugust 2, 2018 , we replaced this program with a new Preferred Stock At-The-Market Sales Agreement Program that provides for the offer and sale from time to time of$125.0 million of our 6.125% Series C Preferred Stock, representing an additional$96.5 million , with$28.5 million being carried over from the Preferred Stock At-The-Market Sales Agreement Program entered into
onJune 29, 2017 . OnDecember 4, 2019 , we replaced the Preferred Stock At-The-Market Sales Agreement Program entered into onAugust 2, 2018 with another Preferred Stock At-The-Market Sales Agreement Program that provides for the offer and sale from time to time of$125.0 million of our 6.125% Series C Preferred Stock, representing an additional$101.0 million , with$24.0 million being carried over from the Preferred Stock At-The-Market Sales Agreement Program entered into
onAugust 2, 2018 . OnNovember 25, 2020 , we replaced the Preferred Stock At-The-Market Sales Agreement Program entered into onDecember 4, 2019 with another new Preferred Stock At-The-Market Sales Agreement Program (Preferred Stock ATM Program) that provides for the offer and sale from time to time of up to$150.0 million of our 6.125% Series C Preferred Stock, representing an additional$149.3 million , with$747,000 being carried over from the Preferred Stock At-The-Market Sales Agreement Program entered into onDecember 4, 2019 . 35 Table of Contents
Sales of shares of our 6.125% Series C Preferred Stock under the Preferred Stock ATM Program are in "at the market offerings" as defined in Rule 415 under the Securities Act, including, without limitation, sales made directly on or through the NYSE, or on any other existing trading market for the 6.125% Series C Preferred Stock, or to or through a market maker, or any other method permitted by law, including, without limitation, negotiated transactions and block trades. We began selling shares through these programs onJuly 3, 2017 . Since inception throughMarch 31, 2021 , we sold 13.6 million shares of our 6.125% Series C Preferred Stock under these programs at a weighted average price of$24.91 per share, and generated net proceeds, after offering expenses, of$332.4 million , of which 3.1 million shares were sold during the six months endedMarch 31, 2021 at a weighted average price of$24.88 per share, generating net proceeds after offering expenses of$76.0 million . As ofMarch 31, 2021 , there is$108.3 million remaining that may be sold under the Preferred Stock ATM Program. No shares have been sold pursuant to the Preferred Stock ATM Program sinceDecember 2020 .
As of
We raised$1.3 million (including dividend reinvestments of$1.0 million ) from the issuance of 87,000 shares of common stock under our DRIP during the six months endedMarch 31, 2021 . Of this amount, UMH made total purchases of 13,000 common shares under our DRIP for a total cost of$205,000 , or a weighted average cost of$15.68 per share.
During the six months endedMarch 31, 2021 , we paid$34.4 million in total cash dividends, or$0.35 per share to common shareholders, of which$1.0 million
was reinvested in the DRIP.
OnJanuary 14, 2021 , our Board of Directors approved a 5.9% increase in our quarterly common stock dividend, raising it to$0.18 per share from$0.17 per share. This represents a 5.9% increase in our quarterly common stock dividend, raising it to$0.18 per share from$0.17 per share and represents an annualized dividend rate of$0.72 per share. This increase is the third dividend increase in the past five years, representing a total increase of 20%. We have maintained or increased our common stock cash dividend for 30 consecutive years. We are one of the few REITs that maintained our dividend throughout the Global Financial Crisis. We are also one of the few REITs that is paying out a higher per share dividend today than prior to the Global Financial Crisis. OnApril 1, 2021 , our Board of Directors declared a dividend of$0.18 per common share to be paid onJune 15, 2021 to common shareholders of record as of the close of business
onMay 17, 2021 . During the six months endedMarch 31, 2021 , we paid$16.2 million in Preferred Dividends, or$0.765625 per share, on our outstanding 6.125% Series C Preferred Stock for the periodSeptember 1, 2020 throughFebruary 28, 2021 . As ofMarch 31, 2021 , we had accrued Preferred Dividends of$2.8 million covering the periodMarch 1, 2021 toMarch 31, 2021 . Dividends on the 6.125% Series C Preferred Stock are cumulative and payable quarterly at an annual rate of$1.53125 per share.
OnApril 1, 2021 , our Board of Directors declared a dividend of$0.3828125 per share to be paidJune 15, 2021 to the 6.125% Series C Preferred shareholders of record as of the close of business onMay 17, 2021 . We have used a variety of sources to fund our cash needs in addition to cash generated from operations. In the past, we considered selling marketable securities from our investment portfolio, borrowing on our unsecured line of credit facility or securities margin loans, finance or refinance debt, or raising capital through the DRIP, the Preferred Stock ATM Program, the Common Stock ATM Program or capital markets. We have been raising capital through our DRIP, the Preferred Stock ATM Program, mortgage loans, draws on our unsecured line of credit, sale of marketable securities and funds generated from our investments in net-leased industrial properties. We may also raise capital through registered direct placements, public offerings of common and preferred stock and through our Common Stock
ATM Program. 36 Table of Contents
We have a concentration of properties leased to FedEx Corporation (FDX) and FDX subsidiaries, consisting of 63 separate stand-alone leases covering 11.2 million square feet as ofMarch 31, 2021 and 60 separate stand-alone leases covering 10.4 million square feet as ofMarch 31, 2020 . FDX is experiencing record demand due to the continued strong growth in ecommerce. Additionally, in periods of unprecedented turbulence, the services of FedEx are essential in keeping supply chains moving and in delivering critically needed supplies throughout the world. As ofMarch 31, 2021 , the 63 separate stand-alone leases that are leased to FDX and FDX subsidiaries are located in 26 different states and have a weighted average lease maturity of 7.8 years. The percentage of FDX and its subsidiaries leased square footage to the total of our rental space was 46% (5% to FDX and 41% to FDX subsidiaries) as ofMarch 31, 2021 and 45% (5% to FDX and 40% to FDX subsidiaries) as ofMarch 31, 2020 . As ofMarch 31, 2021 , the only tenants, other than FDX and its subsidiaries, that leased 5% or more of our total square footage were subsidiaries of Amazon.com, Inc (Amazon), which consists of five separate stand-alone leases for properties located in four different states, containing 1.5 million total square feet, comprising 6% of our total leasable square feet. None of our properties are subject to a master lease or any cross-collateralization agreements. Annualized Rental and Reimbursement Revenue from FDX and its subsidiaries is estimated to be approximately 55% (5% to FDX and 50% to FDX subsidiaries) of total Rental and Reimbursement Revenue for fiscal 2021, and was 58% (5% to FDX and 53% to FDX subsidiaries) of total Rental and Reimbursement Revenue for fiscal 2020. The only tenants, other than FDX and its subsidiaries, that we estimate will comprise 5% or more of our total Rental and Reimbursement Revenue for fiscal 2021 are subsidiaries of Amazon, which is estimated to be 7% of our Annualized Rental and Reimbursement Revenue for fiscal 2021 and was 6% for of our Annualized Rental and Reimbursement Revenue for fiscal 2020. For the six months endedMarch 31, 2021 , no other tenant accounted for 5% or more of our total Rental and Reimbursement Revenue.
FDX and Amazon are publicly-listed companies and financial information related
to these entities are available at the
During the six months endedMarch 31, 2021 , we completed the first phase of a two-phase parking expansion project forFedEx Ground Package System, Inc. at our property located inOlathe (Kansas City ), KS. The first phase of this parking expansion project was completed for a total cost of$3.4 million which resulted in a$340,000 increase in annualized rent effectiveNovember 5, 2020 increasing the annualized rent from$2.2 million to$2.6 million . We will soon be starting the second phase of this parking expansion project at this location, which will increase the rental rate further and extend the lease term. We have entered into agreements to purchase six new build-to-suit, industrial buildings that are currently being developed inAlabama (2),Georgia ,Tennessee ,Texas andVermont . These six future acquisitions total 1.8 million square feet, with net-leased terms ranging from 10 to 15 years, resulting in a weighted average lease term of 13.5 years. The aggregate purchase price for these six properties is$238.1 million . Five of these six properties, consisting of approximately 1.3 million square feet, or 70%, are leased for 15 years toFedEx Ground Package System, Inc. , with the remaining property, consisting of approximately 530,000 square feet or 30%, leased for 10 years toMercedes Benz US International, Inc. All properties are leased to companies, or subsidiaries of companies, that are considered Investment Grade byS&P Global Ratings (www.standardandpoors.com) and by Moody's (www.moodys.com). Subject to satisfactory due diligence and other customary closing conditions and requirements, we anticipate closing three of these transactions during fiscal 2021, two in the first half of fiscal 2022 and one in the second half of fiscal 2022. In connection with five of the six properties, we have entered into commitments to obtain five, 15 year, fully-amortizing mortgage loans, totaling$128.1 million with fixed interest rates ranging from 2.50% to 3.05%, resulting in a weighted average fixed interest rate of 2.74%. 37 Table of Contents We have several FedEx Ground parking expansion projects in progress with more under discussion. Currently there are eight parking expansion projects underway which we expect to cost approximately$31.4 million . In addition, the first phase of a parking expansion project was completed during the prior quarter at our property located inOlathe (Kansas City ), KS for a total project cost of$3.4 million . This first phase of the expansion resulted in a$340,000 increase in annualized rent effectiveNovember 5, 2020 increasing the annualized rent from$2.2 million to$2.6 million . We will soon be starting the second phase of this parking expansion project at this location, which will increase the rental rate further and extend the lease term. These parking expansion projects will enable us to capture additional rent while lengthening the terms of these leases. We are also in discussions to expand the parking at nine additional locations bringing the total recently completed and potential parking lot expansion projects to 18 currently. We intend to acquire additional net-leased industrial properties on long-term leases, primarily to investment grade tenants or their subsidiaries, and, when needed, expand our current properties. To the extent that funds or appropriate properties are not available, fewer acquisitions will be made.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements.
Funds From Operations and Adjusted Funds From Operations
We assess and measure our overall operating results based upon an industry performance measure referred to as Funds From Operations (FFO), which we believe is a useful indicator of our operating performance. FFO is used by industry analysts and investors as a supplemental operating performance measure of a REIT. FFO, as defined by theNational Association of Real Estate Investment Trusts (Nareit), represents net income attributable to common shareholders, as defined by accounting principles generally accepted inthe United States of America (U.S. GAAP), excluding extraordinary items, as defined underU.S. GAAP, gains or losses from sales of previously depreciated real estate assets, impairment charges related to depreciable real estate assets, plus certain non-cash items such as real estate asset depreciation and amortization. Included in the Nareit FFO White Paper - 2018 Restatement, is an option pertaining to assets incidental to our main business in the calculation of Nareit FFO to make an election to include or exclude mark-to-market changes in the value recognized on these marketable equity securities. In conjunction with the adoption of the FFO White Paper - 2018 Restatement, for all periods presented, we have elected to exclude unrealized gains and losses from our investments in marketable equity securities from our FFO calculation. Nareit created FFO as a non-GAAP supplemental measure of REIT operating performance. We define Adjusted Funds From Operations (AFFO) as FFO, excluding stock based compensation expense, depreciation of corporate office tenant improvements, amortization of deferred financing costs, lease termination income, non-recurring strategic alternative & proxy costs, non-recurring severance expense, effect of non-cashU.S. GAAP straight-line rent adjustments and subtracting recurring capital expenditures. We define recurring capital expenditures as all capital expenditures that are recurring in nature, excluding capital expenditures related to expansions at our current locations or capital expenditures that are incurred in conjunction with obtaining a new lease or a lease renewal. We believe that, as widely recognized measures of performance used by other REITs, FFO and AFFO may be considered by investors as supplemental measures to compare our operating performance to those of other REITs. FFO and AFFO exclude historical cost depreciation as an expense and may facilitate the comparison of REITs which have a different cost basis. However, other REITs may use different methodologies to calculate FFO and AFFO and, accordingly, our FFO and AFFO may not be comparable to all other REITs. The items excluded from FFO and AFFO are significant components in understanding our financial performance. 38 Table of Contents FFO and AFFO are non-GAAP performance measures and (i) do not represent Cash Flow from Operations as defined byU.S. GAAP; (ii) should not be considered as an alternative to Net Income or Net Income Attributable to Common Shareholders as a measure of operating performance or to Cash Flows from Operating, Investing and Financing Activities; and (iii) are not an alternative to Cash Flows from Operating, Investing and Financing Activities as a measure of liquidity. FFO and AFFO, as calculated by us, may not be comparable to similarly titled measures reported by other REITs.
The following is a reconciliation of our
Three Months Ended Six Months Ended 3/31/2021 3/31/2020 3/31/2021 3/31/2020 Net Income (Loss) Attributable to Common Shareholders$ 25,913 $ (75,078 ) $ 51,659 $ (71,551 ) Less/Plus:Unrealized Holding (Gains) Losses Arising During the Periods (19,186 ) 83,075 (38,906 ) 86,710 Plus: Depreciation Expense (excluding Corporate Office Capitalized Costs) 13,007 11,409 25,026 22,788 Plus: Amortization of Intangible Assets 600 508 1,132 1,016 Plus: Amortization of Capitalized Lease Costs 305 285 606 557 FFO Attributable to Common Shareholders 20,639 20,199 39,517 39,520 Plus: Depreciation of Corporate Office Capitalized Costs 57 66 116 118 Plus: Stock Compensation Expense 77 114 134 270 Plus: Amortization of Financing Costs 346 322 676 758 Plus: Non-recurring Strategic Alternative & Proxy Costs 1,993 -0- 2,239 -0- Plus: Non-recurring Severance Expense -0- -0- -0- 786 Less: Gain on Sale of Securities Transactions (2,248 ) -0- (2,248 ) -0- Less: Lease Termination Income -0- -0- (377 ) -0- Less: Recurring Capital Expenditures (403 ) (717 ) (563 ) (936 ) Less: Effect of Non-cashU.S. GAAP Straight-line Rent Adjustment (1,043 ) (632 ) (1,661 ) (1,232 ) AFFO Attributable to Common Shareholders$ 19,418 $ 19,352 $ 37,833 $ 39,284 The following are the Cash Flows provided (used) by Operating, Investing and Financing Activities for the six months endedMarch 31, 2021 and 2020 (in thousands): Six Months Ended 3/31/2021 3/31/2020 Operating Activities$ 54,426 $ 47,854 Investing Activities (153,511 ) (101,388 ) Financing Activities 94,951 69,268
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