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Plymouth Teams Up With Sixth Street to Expand & Bolster Growth
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Plymouth Industrial REIT (PLYM - Free Report) announced a partnership with Sixth Street aimed at securing long-term growth capital to enhance earnings growth and expand the platform in key industrial markets.
The strategic investment of $250 million from Sixth Street will allow Plymouth to fund additional growth while maintaining a leverage-neutral position without dependence on the public equity markets.
This JV also enables Plymouth to mitigate risks associated with legacy assets into an off-balance sheet structure. It also facilitates the generation of incremental fee income, allows for the repayment of borrowings on the revolver stemming from its recent acquisition of Memphis portfolio and removes nearly $67 million of existing secured debt from the company’s balance sheet.
Per Jeff Witherell, co-founder, chairman and CEO of Plymouth, “By teaming up with Sixth Street, we are able to access a significant amount of capital to fuel accretive growth while keeping us within our stated leverage boundaries for 2024. With this investment, we are well positioned for the balance of 2024 and 2025 as we face an evolving market with increasingly interesting opportunities.”
Investment Deal Terms of Sixth Street
The investment by Sixth Street in PLYM is structured through two main elements: (i) an allocation of $116 million, representing 65% joint venture (“JV”) ownership in Plymouth’s Chicago portfolio, and (ii) an investment of $140 million in non-convertible preferred equity of the company’s operating partnership (OP).
Plymouth will contribute its Chicago portfolio consisting of 34 wholly-owned properties to the JV with Sixth Street. It will be contributed at a 6.2% capitalization rate for approximately $356 million of gross asset value. For Plymouth, the JV will generate approximately $212 million of deployable proceeds after the mortgage assumption, transaction costs and capital expenditure escrows.
The Preferred Equity, which is eligible for redemption at any point following the initial closing, had an initial closing of $61 million on Aug. 26, 2024. An additional $79 million is to be contributed within nine months following the initial closing.
Furthermore, Sixth Street will receive 11.76 million detachable warrants to purchase OP common units. The warrants will have a duration of five years, with a two-year extension option based on certain conditions.
PLYM’s Strengths
Plymouth, with its strong leasing activity and strategically planned development program, is well-positioned to benefit from these market trends. The company's impressive leasing results, highlight its ability to attract and retain tenants. The anticipated rental rate increases demonstrate the financial growth potential of PLYM. Additionally, ongoing development projects contribute to portfolio expansion and provide avenues for future revenue generation.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 13.5% compared with the industry’s growth of 14.7%.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has moved marginally northward over the past month to $2.66.
The Zacks Consensus Estimate for Lamar Advertising’s current-year FFO per share has been marginally raised over the past month to $8.09.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Plymouth Teams Up With Sixth Street to Expand & Bolster Growth
Plymouth Industrial REIT (PLYM - Free Report) announced a partnership with Sixth Street aimed at securing long-term growth capital to enhance earnings growth and expand the platform in key industrial markets.
The strategic investment of $250 million from Sixth Street will allow Plymouth to fund additional growth while maintaining a leverage-neutral position without dependence on the public equity markets.
This JV also enables Plymouth to mitigate risks associated with legacy assets into an off-balance sheet structure. It also facilitates the generation of incremental fee income, allows for the repayment of borrowings on the revolver stemming from its recent acquisition of Memphis portfolio and removes nearly $67 million of existing secured debt from the company’s balance sheet.
Per Jeff Witherell, co-founder, chairman and CEO of Plymouth, “By teaming up with Sixth Street, we are able to access a significant amount of capital to fuel accretive growth while keeping us within our stated leverage boundaries for 2024. With this investment, we are well positioned for the balance of 2024 and 2025 as we face an evolving market with increasingly interesting opportunities.”
Investment Deal Terms of Sixth Street
The investment by Sixth Street in PLYM is structured through two main elements: (i) an allocation of $116 million, representing 65% joint venture (“JV”) ownership in Plymouth’s Chicago portfolio, and (ii) an investment of $140 million in non-convertible preferred equity of the company’s operating partnership (OP).
Plymouth will contribute its Chicago portfolio consisting of 34 wholly-owned properties to the JV with Sixth Street. It will be contributed at a 6.2% capitalization rate for approximately $356 million of gross asset value. For Plymouth, the JV will generate approximately $212 million of deployable proceeds after the mortgage assumption, transaction costs and capital expenditure escrows.
The Preferred Equity, which is eligible for redemption at any point following the initial closing, had an initial closing of $61 million on Aug. 26, 2024. An additional $79 million is to be contributed within nine months following the initial closing.
Furthermore, Sixth Street will receive 11.76 million detachable warrants to purchase OP common units. The warrants will have a duration of five years, with a two-year extension option based on certain conditions.
PLYM’s Strengths
Plymouth, with its strong leasing activity and strategically planned development program, is well-positioned to benefit from these market trends. The company's impressive leasing results, highlight its ability to attract and retain tenants. The anticipated rental rate increases demonstrate the financial growth potential of PLYM. Additionally, ongoing development projects contribute to portfolio expansion and provide avenues for future revenue generation.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 13.5% compared with the industry’s growth of 14.7%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Cousins Properties (CUZ - Free Report) and Lamar Advertising (LAMR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has moved marginally northward over the past month to $2.66.
The Zacks Consensus Estimate for Lamar Advertising’s current-year FFO per share has been marginally raised over the past month to $8.09.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.