INDUS Realty Trust, Inc. (Nasdaq: INDT) (“INDUS” or the
“Company”), a U.S. based industrial/logistics REIT, reported
financial results for the quarter ended March 31, 2023:
2023 First Quarter & Recent
Highlights
- Net loss of $5.8 million, or $0.57 per basic share, for the
2023 first quarter compared to net income of $0.3 million, or $0.03
per basic and diluted share, for the 2022 first quarter
- Core Funds from Continuing Operations (“Core FFO from
continuing operations”)1 of $5.3 million, or $0.51 per diluted
share, for the 2023 first quarter compared to $4.0 million, or
$0.38 per diluted share, for the 2022 first quarter
- Net Operating Income from Continuing Operations (“NOI from
continuing operations”)1 of $10.5 million for the 2023 first
quarter compared to $8.7 million for the 2022 first quarter
- As of March 31, 2023, both the stabilized2 portfolio and total
in-service portfolio were 98.8% leased
- Executed one first generation lease totaling 99,176 square feet
and one renewal lease totaling 24,062 square feet across the
Company’s portfolio during the 2023 first quarter
- Announced a quarterly cash dividend of $0.18 per share of
common stock for the first quarter of 2023
- Entered into a definitive merger agreement under which
affiliates of Centerbridge Partners, L.P. (“Centerbridge”) and GIC
Real Estate, Inc. (“GIC”) have agreed to acquire all of the
outstanding shares of the Company for $67.00 per share in cash,
subject to certain adjustments
Results of Operations
INDUS reported total rental revenue of approximately $13.6
million for the 2023 first quarter, as compared to approximately
$11.3 million for the 2022 first quarter. The 20% increase in
rental revenue for the 2023 first quarter over the comparable prior
year period was primarily due to development and acquisition
activity totaling 0.7 million square feet that was completed
subsequent to March 31, 2022.
For the 2023 first quarter, INDUS recorded a net loss of
approximately $5.8 million as compared to net income of
approximately $0.3 million for the comparable prior year
period.
Core FFO from continuing operations for the 2023 first quarter
increased to approximately $5.3 million, or $0.51 per diluted
share, compared to approximately $4.0 million, or $0.38 per diluted
share for the comparable prior year period.
NOI from continuing operations, which is defined as rental
revenue less operating expenses of rental properties and real
estate taxes, increased to approximately $10.5 million in the 2023
first quarter from approximately $8.7 million in the 2022 first
quarter. The increase in NOI from continuing operations is
primarily attributable to the same acquisitions and developments as
noted above for rental revenue.
Cash NOI from continuing operations for the 2023 first quarter
increased to approximately $9.8 million as compared to
approximately $7.9 million for the comparable prior year period.
The increase in Cash NOI from continuing operations was primarily
attributable to the factors discussed above.
General and administrative expenses increased to approximately
$9.6 million for the 2023 first quarter as compared to
approximately $2.9 million for the comparable prior year period.
The increase was primarily attributable to approximately $5.9
million in strategic transaction costs related to the proposed
merger and $0.4 million related to the Company’s non-qualified
deferred compensation plan due to the effect of higher stock market
performance in the first quarter of 2023 as compared to the first
quarter of 2022.
Interest expense increased to approximately $1.8 million for the
2023 first quarter as compared to approximately $1.5 million in the
2022 first quarter. The increase in interest expense primarily
reflects $1.0 million related to the delayed draw term loan that
commenced in April 2022 and a decrease of $0.1 million in
capitalized interest offset by a decrease of $0.8 million related
to the repayment of mortgage debt subsequent to March 31, 2022.
Leasing Activity
For the 2023 first quarter, INDUS reported the following second
generation leasing metrics3:
Number of Leases
Square Feet
Weighted Avg. Lease Term in
Years
Weighted Avg. Lease Costs PSF
per Year4
Weighted Avg. Rent
Growth5
Straight-line Basis
Cash Basis
New Lease
0
0
n/a
n/a
n/a
n/a
Renewal Lease
1
24,062
3.0
$0.00
42.5%
31.6%
Total/Average
1
24,062
3.0
$0.00
42.5%
31.6%
In addition to the second generation renewal noted above, INDUS
executed a 99,176 square foot first generation lease at the
Company’s recently delivered two-building development project in
the Orlando, Florida market (“Landstar Logistics”). With the
addition of this lease, Landstar Logistics is now 100.0%
leased.
As of March 31, 2023, INDUS’ 42 buildings aggregated 6.1 million
square feet. INDUS’ portfolio percentage leased and percentage
leased of stabilized properties were as follows:
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Mar. 31,
2022
Percentage Leased
98.8%
97.2%
97.6%
99.4%
100.0%
Percentage Leased – Stabilized
Properties
98.8%
98.8%
100.0%
100.0%
100.0%
Acquisitions Under
Contract
The following is a summary of INDUS’ acquisitions under contract
as of March 31, 2023:
Market
Building Count
Building Size (SF)
Type
Purchase Price
(in millions)
Charleston
1
263,000
Forward (100.0% pre-leased)
$28.0
Nashville
2
184,000
Forward (100.0% pre-leased)
$28.4
Greenville-Spartanburg
1
284,400
Forward
$28.5
Charlotte
1
231,000
Forward
$21.2
Total Acquisitions Under
Contract
5
962,400
$106.1
Subsequent to the end of the 2023 first quarter, INDUS completed
the acquisition of the Charleston forward property indicated in the
table above. The remaining acquisitions under contract are each
subject to certain remaining contingencies. There can be no
guarantee that these transactions will be completed under their
current terms, anticipated timelines, or at all.
Development Activities
As of March 31, 2023, INDUS had one ongoing development project
in the Lehigh Valley (“American Parkway”). The American Parkway
development is a speculative development project consisting of one
building totaling approximately 206,000 square feet.
During the 2023 first quarter, INDUS completed the acquisitions
of 11 acres of land in the Lehigh Valley, Pennsylvania market (the
“Lehigh Valley Land”) and 75 acres of land in the greater Orlando,
Florida market (the “Orlando Land”). The Lehigh Valley Land is
entitled to support the development of a 90,000 square foot
building and the Orlando Land is entitled to support the
development of three buildings totaling 574,000 square feet. INDUS
completed the acquisitions of the Lehigh Valley Land and the
Orlando Land, for a combined purchase price of $19.8 million, after
transaction costs.
Closing on the purchase of any previously disclosed land under
contract as well as the commencement, completion and/or
stabilization of any existing or new development projects are each
subject to a number of contingencies. There can be no guarantee
that these transactions and developments will be completed under
their current terms, anticipated timelines, or at all.
Liquidity & Capital
Resources
As of March 31, 2023, the Company maintained approximately
$177.0 million of liquidity which reflects approximately $23.8
million of cash and cash equivalents, $60.0 million of available
draws under the Company’s delayed draw term loan facility (the
“DDTL Facility”) and $93.2 million of borrowing capacity under the
revolving credit facility. The Company currently has no borrowings
outstanding under its revolving credit facility; however, as of
March 31, 2023, the revolving credit facility was used to secure
approximately $6.8 million in standby letters of credit related to
INDUS’ development activities. Additionally, the Company has no
floating rate debt outstanding as the Company’s DDTL Facility,
including future available draws, is hedged at a fixed effective
interest rate of 4.15%.
During April 2023, the Company completed the third and final
draw totaling $60.0 million under its DDTL Facility and currently
has the full $150.0 million balance outstanding.
Common Stock Dividend
During the 2023 first quarter, INDUS’ board of directors
declared a quarterly cash distribution on its common stock of $0.18
per share. The 2023 first quarter dividend was paid on April 14,
2023 to stockholders of record on March 31, 2023.
Pending Merger
Transaction
On February 22, 2023, INDUS entered into an Agreement and Plan
of Merger (the “Merger Agreement”) whereby affiliates of
Centerbridge Partners, L.P., a leading global private investment
firm with deep experience in real estate, and GIC Real Estate,
Inc., a global institutional investor, will acquire all outstanding
shares of INDUS’ common stock through a merger transaction (the
“Merger”) in which INDUS will be the surviving entity. Subject to
the terms and conditions set forth in the Merger Agreement, each
share of INDUS’ common stock will be cancelled and converted into
the right to receive an amount in cash equal to $67.00, without
interest, subject to certain adjustments as set forth in the Merger
Agreement. The Merger is expected to close in the summer of 2023,
subject to the satisfaction or waiver of certain closing
conditions, including approval of the Merger by the affirmative
vote of the holders of at least a majority of the outstanding
shares of the INDUS’ common stock entitled to vote on the Merger
and the clearance by the Committee on Foreign Investment in the
United States and the approval by the European Commission under
Council Regulation (EC) No. 139/2004 (as amended). INDUS can
provide no assurances regarding whether the Merger will close when
expected or at all.
About INDUS
INDUS is a real estate business principally engaged in
developing, acquiring, managing and leasing industrial/logistics
properties. INDUS owns 42 industrial/logistics buildings totaling
6.1 million square feet in Connecticut, Pennsylvania, North
Carolina, South Carolina and Florida.
Additional Information and Where to Find It
In connection with the proposed transaction, the Company has
filed with the Securities and Exchange Commission (“SEC”) a proxy
statement on Schedule 14A on April 14, 2023. Promptly after filing
its definitive proxy statement with the SEC, the Company commenced
a mailing process to deliver the definitive proxy statement and a
proxy card to each stockholder entitled to vote at the special
meeting relating to the proposed transaction. INVESTORS AND
SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY
STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY
OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE TRANSACTION THAT
THE COMPANY HAS FILED OR FILES WITH THE SEC WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. The definitive proxy statement, the
preliminary proxy statement and any other documents filed by the
Company with the SEC may be obtained free of charge at the SEC’s
website at www.sec.gov or by accessing the Investor Relations
section of the Company’s website at https://www.indusrt.com.
Participants in the Solicitation
The Company and its directors and certain of its executive
officers may be deemed to be participants in the solicitation of
proxies from the Company’s stockholders with respect to the
proposed transaction. Information about the Company’s directors and
executive officers and their ownership of the Company’s securities
is set forth in the Company’s proxy statement on Schedule 14A for
its 2022 annual meeting of stockholders, filed with the SEC on
April 27, 2022, and subsequent documents filed with the SEC.
Additional information regarding the identity of participants in
the solicitation of proxies, and a description of their direct or
indirect interests in the proposed transaction, by security
holdings or otherwise, are set forth in the proxy statement and
other materials to be filed with the SEC in connection with the
proposed transaction when they become available.
Cautionary Statement Regarding Forward Looking
Statements
Some of the statements contained in this release constitute
forward-looking statements within the meaning of the federal
securities laws. Forward-looking statements relate to expectations,
beliefs, projections, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that
are not historical facts. In some cases, you can identify
forward-looking statements by the use of forward-looking
terminology such as “may,” “will,” “should,” “expects,” “intends,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” or
“potential” or the negative of these words and phrases or similar
words or phrases which are predictions of or indicate future events
or trends and which do not relate solely to historical matters. You
can also identify forward-looking statements by discussions of
strategy, plans or intentions.
The forward-looking statements contained in this release reflect
the Company’s current views about future events and are subject to
numerous known and unknown risks, uncertainties, assumptions and
changes in circumstances, many of which are beyond the control of
the Company, that may cause actual results and future events to
differ significantly from those expressed in any forward-looking
statement, which risks and uncertainties include, but are not
limited to: the ability to complete the proposed Merger on the
proposed terms or on the anticipated timeline, or at all, including
risks and uncertainties related to securing the necessary
stockholder approval and satisfaction of other closing conditions
to consummate the Merger; the occurrence of any event, change or
other circumstance that could give rise to the termination of the
Merger Agreement relating to the proposed Merger; risks that the
proposed Merger disrupts the Company’s current plans and operations
or diverts the attention of the Company’s management or employees
from ongoing business operations; the risk of potential
difficulties with the Company’s ability to retain and hire key
personnel and maintain relationships with customers and other third
parties as a result of the proposed Merger; the failure to realize
the expected benefits of the proposed Merger; the risk that the
proposed Merger may involve unexpected costs and/or unknown or
inestimable liabilities; the risk that the Company’s business may
suffer as a result of uncertainty surrounding the proposed Merger;
the risk that stockholder litigation in connection with the
proposed Merger may affect the timing or occurrence of the proposed
Merger or result in significant costs of defense, indemnification
and liability; effects relating to the announcement of the Merger
or any further announcements or the consummation of the proposed
Merger on the market price of the Company’s common stock.
While forward-looking statements reflect the Company’s good
faith beliefs, they are not guarantees of future performance or
events. Any forward-looking statement speaks only as of the date on
which it was made. The Company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes
in underlying assumptions or factors, of new information, data or
methods, future events or other changes. For a further discussion
of these and other factors that could cause the Company’s future
results to differ materially from any forward-looking statements,
see the section entitled “Risk Factors” in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2022, filed
with the SEC on March 6, 2023, as updated by the Company’s
subsequent periodic reports filed with the SEC.
Note Regarding Non-GAAP Financial Measures:
The Company uses FFO, Core FFO from continuing operations, Core
FFO from continuing operations per share, Adjusted FFO from
continuing operations, NOI from continuing operations, and Cash NOI
from continuing operations, as supplemental non-GAAP performance
measures. Management believes that the use of these measures
combined with net income (loss) (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 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
with U.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 Core FFO from continuing operations and Core
FFO per share from continuing operations as FFO and FFO per share,
respectively, excluding: (a) discontinued operations, (b) strategic
transaction costs related to the proposed merger, and (c) expense
related to the performance of the non-qualified deferred
compensation plan. Per share metrics are calculated as Core FFO
from continuing operations for the period divided by the weighted
average diluted share count for the period.
The Company defines Adjusted FFO from continuing operations as
Core FFO from continuing operations less (a) noncash rental revenue
including straight-line rents, (b) amortization of debt issuance
costs, (c) noncash compensation expenses, (d) non-real estate
depreciation and amortization expense, (e) tenant improvements and
leasing commissions of second generation space and (f) maintenance
capital expenditures needed to maintain the Company’s existing
buildings.
NOI from continuing operations is a non-GAAP measure that
includes the rental revenue and operating expenses and real estate
taxes directly attributable to the Company’s real estate
properties. The Company uses NOI from continuing operations as a
supplemental performance measure because, in excluding real estate
depreciation and amortization expense, general and administrative
expenses, interest expense, investment income, other expenses 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 from continuing operations will be useful to investors as a
basis to compare its operating performance with that of other
REITs. However, because NOI from continuing operations 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 a real economic effect and
could materially impact the Company’s results from operations), the
utility of NOI from continuing operations as a measure of the
Company’s performance is limited. Other equity REITs may not
calculate NOI from continuing operations in a similar manner and,
accordingly, the Company’s NOI from continuing operations may not
be comparable to such other REITs’ NOI from continuing operations.
Accordingly, NOI from continuing operations should be considered
only as a supplement to net income (loss) as a measure of the
Company’s performance. NOI from continuing operations 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 from
continuing operations should not be used as a substitute for cash
flow from operating activities in accordance with U.S. GAAP.
Cash NOI from continuing operations is a non-GAAP measure that
the Company calculates by adding or subtracting non-cash rental
revenue, including straight-line rental revenue, from NOI from
continuing operations. The Company uses Cash NOI from continuing
operations together with NOI from continuing operations, as
supplemental performance measures. Cash NOI from continuing
operations 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 from continuing operations should
not be used as a substitute for cash flow from operating activities
computed in accordance with U.S. GAAP.
INDUS REALTY TRUST, INC.
Consolidated Statements of
Operations
(dollars and share count in
thousands, except per share data)
(unaudited)
Three Months Ended March
31,
2023
2022
Rental revenue
$
13,570
$
11,318
Expenses:
Operating expenses of rental
properties
1,213
1,098
Real estate taxes
1,842
1,477
Depreciation and amortization expense
5,110
4,156
General and administrative expenses
9,552
2,934
Total expenses
17,717
9,665
Other income (expense):
Interest expense
(1,759
)
(1,519
)
Investment and other income
130
21
Other expense
(1
)
(3
)
Total other expense
(1,630
)
(1,501
)
(Loss) income from continuing
operations
(5,777
)
152
Discontinued operations:
Gain on sale of properties and
equipment
—
203
Loss from discontinued operations
—
(86
)
Income from discontinued
operations
—
117
Net (loss) income
$
(5,777
)
$
269
(Loss) income per Common
Share-Basic:
(Loss) income from continuing
operations
$
(0.57
)
$
0.02
Income from discontinued operations
—
$
0.01
Net (loss) income per common share
$
(0.57
)
$
0.03
(Loss) income per Common
Share-Diluted:
(Loss) income from continuing
operations
$
(0.57
)
$
0.02
Income from discontinued operations
—
$
0.01
Net (loss) income per common share
$
(0.57
)
$
0.03
Weighted average shares outstanding -
basic
10,194
10,185
Weighted average shares outstanding –
diluted
10,194
10,421
INDUS REALTY TRUST, INC.
Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
March 31, 2023
December 31, 2022
ASSETS
Real estate assets at cost, net
$
517,813
$
489,661
Cash and cash equivalents
23,323
52,014
Restricted cash
450
358
Interest rate swap assets
4,504
6,971
Assets of discontinued operations
—
29
Other assets
45,031
47,774
Total assets
$
591,121
$
596,807
LIABILITIES AND STOCKHOLDERS'
EQUITY
Mortgage loans, net of debt issuance
costs
$
79,125
$
79,653
Delayed draw term loan, net of debt
issuance costs
88,787
88,713
Deferred revenue
6,332
6,741
Accounts payable and accrued
liabilities
15,115
10,940
Dividends payable
1,835
1,835
Liabilities of discontinued operations
—
119
Other liabilities
12,267
11,537
Total liabilities
203,461
199,538
Stockholders' equity
Common stock
102
102
Additional paid-in capital
401,840
401,370
Accumulated deficit
(19,098
)
(11,486
)
Accumulated other comprehensive income
4,816
7,283
Total stockholders' equity
387,660
397,269
Total liabilities and stockholders'
equity
$
591,121
$
596,807
INDUS REALTY TRUST, INC.
Non-GAAP Reconciliations – Funds
from Operations (“FFO”) and Core FFO
(dollars and share count in
thousands, except per share measures)
(unaudited)
Three Months Ended
March 31,
2023
2022
Net (loss) income:
$
(5,777
)
$
269
Exclude:
Depreciation and amortization expense
5,110
4,156
FFO adjustments related to discontinued
operations
—
240
Non-real estate depreciation &
amortization expense
(66
)
(26
)
FFO
(733
)
4,639
Exclude:
Core FFO adjustments related to
discontinued operations
—
(357
)
Non-qualified deferred compensation plan
performance
133
(288
)
Strategic transaction costs
5,862
—
Core FFO from continuing
operations
5,262
3,994
Exclude:
Noncash rental revenue including
straight-line rents
(724
)
(843
)
Amortization of debt issuance costs
181
228
Noncash compensation expenses
503
273
Non-real estate depreciation and
amortization expense
66
26
Tenant improvements and leasing
commissions (2nd generation space)
(1,497
)
(225
)
Maintenance capital expenditures
(428
)
(23
)
Adjusted FFO from continuing
operations
$
3,363
$
3,430
Weighted average number of shares
outstanding - basic
10,194
10,185
Dilutive securities
167
236
Weighted average number of shares
outstanding – diluted
10,361
10,421
Core FFO from continuing
operations/share – diluted
$
0.51
$
0.38
INDUS REALTY TRUST, INC.
Non-GAAP Reconciliations – NOI
and Cash NOI
(dollars in thousands)
(unaudited)
Three Months Ended
March 31,
2023
2022
Net (loss) income
$
(5,777
)
$
269
Income from discontinued operations
—
(117
)
Pretax (loss) income from continuing
operations
(5,777
)
152
Exclude:
Depreciation and amortization expense
5,110
4,156
General and administrative expenses
9,552
2,934
Interest expense
1,759
1,519
Other expense
1
3
Investment and other income
(130
)
(21
)
NOI from continuing operations
10,515
8,743
Noncash rental revenue including
straight-line rents
(724
)
(843
)
Cash NOI from continuing
operations
$
9,791
$
7,900
__________________________________ 1 Core FFO from continuing
operations, Core FFO from continuing operations per share, NOI from
continuing operations and Cash NOI from continuing operations are
not financial measures in conformity with generally accepted
accounting principles in the United States of America (“U.S.
GAAP”). For additional information see “Note Regarding Non-GAAP
Financial Measures.” 2 Stabilized Properties reflect buildings that
have reached 90% leased or have been in service for at least one
year since development completion or acquisition date, whichever is
earlier. 3 Leasing metrics exclude new and renewal leases which
have an initial term of twelve months or less, as well as leases
for first generation space on properties acquired or developed by
INDUS. Leasing metrics also exclude leases tied to properties
undergoing redevelopment or repositioning. 4 Lease cost per square
foot per year reflects total lease costs (tenants improvements,
leasing commissions and legal costs) per square foot per year of
the lease term. Lease costs exclude any base building improvements.
5 Weighted average rent growth reflects the percentage change of
annualized rental rates between the previous leases and the current
leases. The rental rate change on a straight-line basis represents
average annual base rental payments on a straight-line basis for
the term of each lease including free rent periods. Cash basis rent
growth represents the change in starting rental rates per the lease
agreement on new and renewed leases signed during the period, as
compared to the previous ending rental rates for that same space.
The cash rent growth calculation excludes free rent periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005714/en/
Ashley Pizzo Vice President, Capital Markets &
Investor Relations (212) 218-7914
apizzo@indusrt.com
Jon Clark Executive Vice President, Chief Financial
Officer (860) 286-2419 jclark@indusrt.com
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