INDUS Realty Trust, Inc. (Nasdaq: INDT) (“INDUS” or the
“Company”), a U.S. based industrial/logistics REIT,
announced the following updates on leasing, its acquisition and
development pipeline, its potential dispositions and other
corporate matters for the three months ended June 30, 2021 (the
“2021 second quarter”):
Highlights
- Agreed to proposed terms and
received commitments for a new secured revolving credit facility of
up to $100 million, which is expected to close in the 2021 third
quarter, subject to the completion of a definitive credit
agreement
- Acquired two industrial/logistics
buildings, one in Charlotte, North Carolina (395,000 square feet)
and one in the Lehigh Valley of Pennsylvania (127,500 square feet),
for a combined purchase price of $53.7 million
- Acquired approximately 14 acres of
undeveloped land in Orlando, Florida for $5.25 million, upon
which the Company plans to construct two industrial/logistics
buildings totaling approximately 195,000 square feet
- Entered into an agreement to sell
approximately 670 acres of land in Granby and East Granby,
Connecticut that comprise the Connecticut Nursery Farm, for
anticipated proceeds of $10.3 million, if consummated
- Closed on the sale of an
approximately 7,200 square foot office/flex property in Windsor,
Connecticut, in addition to two small parcels of undeveloped land
in separate transactions
- The in-service stabilized
industrial/logistics portfolio1 was 99.4% leased as of June 30,
2021
Leasing Activity
During the 2021 second quarter, INDUS executed
one industrial/logistics lease totaling approximately 4,800 square
feet at its recently renovated property located at 170 Sunport Lane
in the Orlando market. This new lease has a term of over 5 years
and a leasing cost per square foot per year2 of $2.01. 170 Sunport
Lane was a value-add acquisition that was mostly vacant at closing
in March 2020. As of June 30, 2021, approximately 27,000 square
feet at 170 Sunport remains vacant. In addition to this vacancy,
INDUS has approximately 197,500 square feet of vacancy that was
added to its industrial/logistics portfolio through the Company’s
newest value-add acquisition in the Charlotte market completed in
June 2021 (see below).
As of June 30, 2021, INDUS’s 32
industrial/logistics buildings aggregated approximately 4.7 million
square feet and represented 92.5% of INDUS’s total real estate
portfolio. INDUS’s in-service industrial/logistics portfolio’s
percentage leased was as follows:
|
Jun 30,2021 |
Mar 31,2021 |
Dec 31,2020 |
Aug 31, 2020 |
Percentage Leased |
95.3% |
99.2% |
94.5% |
94.3% |
Percentage Leased – Stabilized Properties |
99.4% |
99.2% |
95.7% |
99.7% |
In the 2021 second quarter, INDUS completed two
lease extensions of office/flex space that resulted in a net
expansion of approximately 10,000 square feet under lease. The
first of these lease extensions was for approximately 11,000 square
feet for 10 years and included the tenant leasing approximately
12,000 square feet in an adjoining building that was vacated during
the 2021 second quarter. The second lease extension was for
approximately 14,000 square feet for 5 years in 5 Waterside
Crossing, whereby the tenant will reduce its square footage by
approximately 2,000 square feet. 5 Waterside Crossing is currently
under agreement for sale with two other office/flex properties (see
below).
INDUS’s ten office/flex buildings, which
aggregate approximately 385,000 square feet and comprise 7.5% of
INDUS’s total real estate portfolio by square footage, were 70.8%
leased as of June 30, 2021, as compared to 71.3% at March 31, 2021.
Of these ten office/flex buildings, three buildings totaling
approximately 209,000 square feet are currently under agreement for
sale.
Additionally, on June 16, 2021, the Company
entered into an option agreement for a long-term lease extension of
a ground lease with a cell tower operator on a small portion of the
land known as 686 College Highway in Southwick, Massachusetts. In
exchange for the lease extension, the cell tower operator has
agreed to make a lump sum payment to the Company of $1.0 million.
The lease extension is expected to close in the third quarter of
2021, prior to the sale of the entire parcel for approximately $5.3
million (see below). The lease extension and sale of 686 College
Highway (the “Southwick Land”) are both subject to the satisfaction
of certain contingencies, and there can be no assurance that these
transactions will be consummated.
Acquisition & Development Pipeline
On May 12, 2021, INDUS purchased a 127,500
square foot industrial/logistics building on approximately 13.7
acres of land in the Lehigh Valley for a purchase price of $11.7
million (the “Lehigh Valley Acquisition”). The Lehigh Valley
Acquisition is fully leased through November 2022 to a single
tenant that is a subsidiary of a publicly traded multinational
chemical company and has a 4.5% in-place cash capitalization rate
(first full year Cash NOI/purchase price). The Lehigh Valley
Acquisition has excess, unutilized land that INDUS believes could
receive approvals to be used for additional parking, for outdoor
storage or to expand the existing building. The Lehigh Valley
Acquisition increased the Company’s Lehigh Valley
industrial/logistics portfolio to seven buildings totaling
approximately 1.4 million square feet, not including properties in
the Company’s development pipeline (see below).
On June 28, 2021, INDUS purchased a recently
constructed, 50.1% leased, 395,000 square foot industrial/logistics
building in Charlotte (the “Charlotte Acquisition”). The Company
used cash on hand to pay the $42.0 million purchase price and
expects an estimated underwritten stabilized yield of 4.5% on the
property. The Charlotte Acquisition is located in the Airport
submarket of Charlotte and has excellent access to both I-485 and
I-85. The Charlotte Acquisition increased the Company’s Charlotte
industrial/logistics portfolio to four buildings totaling
approximately 1.0 million square feet, not including the
approximately 141,000 square foot build-to-suit warehouse currently
under construction that is expected to be completed by September
30, 2021 (the “Charlotte Build-to-Suit”).
The following is a summary of INDUS’s
development pipeline for its industrial/logistics portfolio as of
July 8, 2021:
Name |
Market |
Building Size (SF) |
Type |
Expected Delivery |
Owned Land |
|
|
|
|
Charlotte Build-to-Suit |
Charlotte, NC |
141,000 |
Build-to-Suit |
Q3 2021 |
Lehigh Valley Land |
Lehigh Valley, PA |
103,000 |
Speculative |
Q4 2021 |
110 Tradeport Development |
Hartford, CT |
234,000 |
67% Pre-leased |
Q3 2022 |
Orlando Land |
Orlando, FL |
195,000 |
Speculative |
Q3 2022 |
|
|
|
|
|
Land Under
Purchase & Sale Agreement |
First & Second Allentown Purchase Agreements |
Lehigh Valley, PA |
206,000 |
Speculative |
Q4 2022 |
Total |
|
879,000 |
|
|
INDUS expects that the total development and
stabilization costs of developments in its pipeline will total
approximately $121.7 million, which includes the impact of recent
market price increases for raw materials such as steel bar joists,
rubber used in roofing and PVC piping used in sitework. The Company
estimates that the underwritten weighted average stabilized Cash
NOI yield on its development pipeline is between 5.8% - 6.3%.3
Actual initial full year stabilized Cash NOI yields may vary from
INDUS’s estimated underwritten stabilized Cash NOI yield range
based on the actual total cost to complete a project or acquire a
property and its actual initial full year stabilized Cash NOI.
On May 7, 2021, a wholly owned subsidiary of the
Company entered into a construction loan agreement to fund a
portion of the development costs for the Charlotte Build-to-Suit.
Total borrowings under the construction loan will be the lesser of
$28.4 million or 67.5% of the project cost of the Charlotte
Build-to-Suit. The construction loan matures on May 7, 2023, with a
one-year extension at the Company’s option. The interest rate under
the construction loan, to be adjusted monthly, is one-month LIBOR
plus 1.65%, reduced to one-month LIBOR plus 1.40% upon completion
of the Charlotte Build-to-Suit and commencement of rental payments
by the tenant, which is anticipated to be in the quarter ending
September 30, 2021.
Completion of the development pipeline and
stabilization of completed buildings in the development pipeline
are subject to various significant contingencies and cannot be
guaranteed to be completed in the expected timing, at the Company’s
estimated underwritten yields, or at all.
Dispositions
As of July 8, 2021, INDUS had agreements in place to sell the
following non-core properties and undeveloped land parcels:
Name |
Location |
Property
Size |
Expected
Closing |
Sale
Price ($ in millions) |
5
& 7 Waterside Crossing; 21 Griffin Road N |
Windsor, CT |
209,000 SF |
Q3
2021 |
$6.6 |
Florida Nursery Farm |
Quincy, FL |
1,066 acres |
Q3 2021 |
$1.1 |
60 Griffin Road South Land |
Bloomfield, CT |
34 acres |
Q3 2021 |
$0.6 |
Stratton Farms Residential
Parcels4 |
Suffield, CT |
7 lots |
Q3 2021 |
$0.4 |
1985 Blue Hills Avenue &
Adjacent Land |
Windsor, CT |
165,000 SF; 39 acres |
Q4 2021 |
$18.0 |
Connecticut Nursery Farm |
E. Granby/Granby, CT |
670 acres |
Q4 2021 |
$10.3 |
Meadowood Residential
Parcels |
Simsbury, CT |
277 acres |
Q4 2021 |
$5.4 |
Southwick Land |
Southwick, MA |
91 acres |
Q4 2021 |
$5.3 |
East Granby/Windsor Parcels |
E. Granby/Windsor, CT |
280 acres |
2022 |
$6.0 |
Total
Gross Proceeds of Dispositions Under Agreement, if
Consummated |
|
$53.7 |
Closings on these potential dispositions are
subject to various significant contingencies and cannot be
guaranteed to be completed in the expected time-frame, at the
expected sales prices shown, or at all.
Corporate Updates
During the 2021 second quarter, INDUS agreed to
proposed terms and received initial commitments for a new secured
revolving credit facility of up to $100 million (the “New
Facility”) that would replace both its existing revolving credit
line and acquisition credit line with Webster Bank, N.A. (“Webster
Bank”), which total $50 million in the aggregate and are scheduled
to expire on September 30, 2021. Under the proposed terms, the New
Facility is expected to have a three year term with two one-year
extensions at the Company’s option. The New Facility is also
expected to include an uncommitted incremental facility, which
would enable the New Facility to be increased up to $250 million in
the aggregate. Borrowings under the New Facility are expected to
bear interest subject to a pricing grid for changes in the
Company’s total leverage. Based on the Company’s current leverage
and the proposed terms, the initial annual interest rate under the
New Facility would be one-month LIBOR plus 1.20% compared to a rate
of one-month LIBOR plus 2.50% and one-month LIBOR plus 2.75% under
its current revolving credit line and acquisition credit line,
respectively, with Webster Bank. Closing on the New Facility is
subject to the completion of a definitive credit agreement between
INDUS RT, LP (see below) and the lenders under the New
Facility.
Additionally, on June 28, 2021, INDUS Realty
Trust, LLC, a Maryland LLC and a wholly-owned subsidiary of the
Company, was converted into a Maryland limited partnership and the
entity’s name was changed from INDUS Realty Trust, LLC to INDUS RT,
LP (the “Operating Partnership”). The Operating Partnership is 99%
owned by the Company as the general partner, and 1% owned by INDUS
RT, LLC as limited partner, a Maryland limited partnership which is
100% owned by the Company. The Operating Partnership structure
provides additional capital flexibility for INDUS, as it will allow
the Company to offer shares in its Operating Partnership (“OP
Units”) to sellers of real estate assets in exchange for ownership
of those assets. Sellers may hold OP Units pursuant to their own
tax deferral strategies or may convert the OP Units into shares of
the Company’s common stock, subject to certain conditions.
About INDUS
INDUS is a real estate business principally
engaged in developing, acquiring, managing and leasing
industrial/logistics properties. INDUS owns 42 buildings totaling
approximately 5.1 million square feet (including 32
industrial/logistics buildings aggregating approximately 4.7
million square feet) in Connecticut, Pennsylvania, North Carolina
and Florida in addition to over 3,400 acres of undeveloped
land.
Forward-Looking Statements:
This Press Release 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. These forward-looking statements include
INDUS’s beliefs and expectations regarding future events or
conditions including, without limitation, statements regarding the
completion of acquisitions and dispositions under agreements,
construction and development plans and timelines, expected total
development and stabilization costs of developments in INDUS’s
pipeline, anticipated leasing activity, the estimated underwritten
stabilized Cash NOI yield of the Company’s pipeline, entry into a
definitive credit agreement for the New Facility and expected terms
of the New Facility, capital flexibility provided by the Operating
Partnership structure and ability to use OP Units for future
purchases of real estate assets, and expected capital availability
and liquidity. Although INDUS 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 projected information disclosed
herein is based on assumptions and estimates that, while considered
reasonable by INDUS 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 INDUS and which could cause actual results and events to
differ materially from those expressed or implied in the
forward-looking statements. Other important factors that could
affect the outcome of the events set forth in these statements are
described in INDUS’s Securities and Exchange Commission filings,
including the “Business,” “Risk Factors” and “Forward-Looking
Statements” sections in INDUS’s Annual Report on Form 10-K for the
fiscal year ended November 30, 2020, filed with the SEC on February
18, 2021. INDUS disclaims any obligation to update any
forward-looking statements as a result of developments occurring
after the date of this press release except as required by law.
1 Stabilized Properties reflect buildings that have reached
90% leased or have been in service for at least one year since
development completion or acquisition date, whichever is earlier.
7800 Tuckaseegee Road, the Charlotte Acquisition, which was 50.1%
leased as of June 30, 2021, was acquired on June 28, 2021, and is
not included in the Stabilized Properties pool for the 2021 second
quarter.2 Lease cost per square foot per year reflects total lease
costs (tenant improvements, leasing commissions and legal costs)
per square foot per year of the lease term.3 As a part of INDUS’s
standard development and acquisition underwriting process, INDUS
analyzes the targeted initial full year stabilized Cash NOI yield
for each development project and acquisition target and establishes
a range of initial full year stabilized Cash NOI yields, which it
refers to as “underwritten stabilized Cash NOI yields.”
Underwritten stabilized Cash NOI yields are calculated as a
development project’s or acquisition’s initial full year stabilized
Cash NOI as a percentage of its estimated total investment,
including costs to stabilize the buildings to 95% occupancy (other
than in connection with build-to-suit development projects and
single tenant properties). INDUS calculates initial full year
stabilized Cash NOI for a development project or acquisition by
subtracting its estimate of the development project’s or
acquisition’s initial full year stabilized operating expenses, real
estate taxes and non-cash rental revenue, including straight-line
rents (before interest, income taxes, if any, and depreciation and
amortization), from its estimate of its initial full year
stabilized rental revenue.4 The sale of the 16 Stratton Farms
Residential Parcels for a total of approximately $0.9 million is to
be completed in two parts. The sale of the first 9 lots closed in
February 2021 and accounted for approximately $0.5 million of the
gross sales price. The sale of the remaining 7 lots is expected to
close in the 2021 third quarter and represents approximately $0.4
million of the total gross sales price.
CONTACT:Anthony
GaliciChief Financial
Officer(860)
286-1307agalici@indusrt.com
Ashley PizzoDirector, IR & Capital
Markets(212)
218-7914apizzo@indusrt.com
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