UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
FOR THE QUARTERLY PERIOD ENDED
OR
FOR THE TRANSITION PERIOD FROM TO
Commission File Number
(Exact name of registrant as specified in its charter)
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Registrant’s Telephone Number, Including Area Code (
______________________________________________________________________________________
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Large accelerated filer ☐ | Accelerated filer ☐ | |||||
Smaller reporting company | Emerging growth company |
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Number of shares of Common Stock outstanding at May 6, 2022:
INDUS REALTY TRUST, INC.
FORM 10-Q
Index
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDUS REALTY TRUST, INC.
Consolidated Balance Sheets
(dollars in thousands, except per share data)
(unaudited)
March 31, 2022 | December 31, 2021 | ||||
ASSETS | |||||
Real estate assets at cost, net | $ | $ | |||
Cash and cash equivalents | | | |||
Restricted cash | | | |||
Other assets | | | |||
Assets of discontinued operations | | | |||
Total assets | $ | $ | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
Mortgage loans and construction loan, net of debt issuance costs | $ | $ | |||
Deferred revenue | | | |||
Accounts payable and accrued liabilities | | | |||
Dividends payable | | | |||
Other liabilities | | | |||
Liabilities of discontinued operations | | | |||
Total liabilities | | | |||
Stockholders' Equity | |||||
Common stock, par value $ | | | |||
Additional paid-in capital | | | |||
Accumulated deficit | ( | ( | |||
Accumulated other comprehensive income (loss) | | ( | |||
Total stockholders' equity | | | |||
Total liabilities and stockholders' equity | $ | $ |
See Notes to Consolidated Financial Statements.
3
INDUS REALTY TRUST, INC.
Consolidated Statements of Operations
(dollars in thousands, except per share data)
(unaudited)
For the Three Months Ended | ||||||
| March 31, 2022 |
| March 31, 2021 | |||
Rental revenue | $ | | $ | | ||
Expenses: | ||||||
Operating expenses of rental properties |
| |
| | ||
Real estate taxes | | | ||||
Depreciation and amortization expense |
| |
| | ||
General and administrative expenses |
| |
| | ||
Total expenses |
| |
| | ||
Other income (expense): | ||||||
Interest expense |
| ( |
| ( | ||
Change in fair value of financial instruments | — | | ||||
Gain on sales of real estate assets | — | | ||||
Investment and other income | | | ||||
Other expense | ( | — | ||||
( | ( | |||||
| ||||||
Income (loss) from continuing operations | | ( | ||||
Discontinued operations: | ||||||
(Loss) income from discontinued operations | ( | | ||||
Gain on sale of equipment | | — | ||||
Income from discontinued operations |
| |
| | ||
Net income (loss) | $ | | $ | ( | ||
Income (loss) per Common Share-Basic: | ||||||
Income (loss) from continuing operations | $ | | $ | ( | ||
Income from discontinued operations | $ | | $ | - | ||
Net income (loss) per common share | $ | | $ | ( | ||
Income (loss) per Common Share-Diluted: | ||||||
Income (loss) from continuing operations | $ | | $ | ( | ||
Income from discontinued operations | $ | | $ | - | ||
Net income (loss) per common share | $ | | $ | ( | ||
Weighted average shares outstanding - basic | | | ||||
Weighted average shares outstanding - diluted | | |
See Notes to Consolidated Financial Statements.
4
INDUS REALTY TRUST, INC.
Consolidated Statements of Comprehensive Income
(dollars in thousands)
(unaudited)
For the Three Months Ended | |||||
March 31, 2022 |
| March 31, 2021 | |||
Net income (loss) | $ | | $ | ( | |
Other comprehensive income: | |||||
Reclassifications included in net income (loss) | | | |||
Unrealized gain on cash flow hedges |
| |
| | |
Total other comprehensive income |
| |
| | |
Total comprehensive income | $ | | $ | |
See Notes to Consolidated Financial Statements.
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INDUS REALTY TRUST, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(dollars in thousands)
(unaudited)
For the Three Months Ended March 31, 2022 and 2021 | |||||||||||||||||
Shares of |
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| Additional |
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| Accumulated Other |
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| ||||||
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| Common Stock |
| Common |
| Paid-in |
| Accumulated |
| Comprehensive |
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| ||||
|
| Issued |
| Stock |
| Capital |
| Deficit |
| Income (Loss) |
| Total | |||||
Balance at December 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Equity awards issued | | — | — | — | — | — | |||||||||||
Stock-based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Shares acquired to satisfy employee tax withholding requirements on stock awards | ( | — | ( | — | — | ( | |||||||||||
Common stock dividend, $ | — | — | — | ( | — | ( | |||||||||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Total other comprehensive income, net of tax | — | — | — | — | | | |||||||||||
Balance at March 31, 2022 |
| | $ | | $ | | $ | ( | $ | | $ | | |||||
Balance at December 31, 2020 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Stock-based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Exercise of stock options | | — | | — | — | | |||||||||||
Sale of common stock, net | | | | — | — | | |||||||||||
Special dividend | | | | ( | — | ( | |||||||||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Total other comprehensive income, net of tax | — | — | — | — | | | |||||||||||
Balance at March 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
See Notes to Consolidated Financial Statements.
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INDUS REALTY TRUST, INC.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
|
| For the Three Months Ended | ||||
|
| March 31, 2022 |
| March 31, 2021 | ||
Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
Depreciation and amortization |
| |
| | ||
Noncash rental revenue including straight-line rents | ( | ( | ||||
Stock-based compensation expense |
| |
| | ||
Amortization of debt issuance costs |
| |
| | ||
Gain on sales of equipment | ( | — | ||||
Change in fair value of financial instruments | — | ( | ||||
Gain on sales of real estate assets |
| — |
| ( | ||
Changes in assets and liabilities: | ||||||
Other assets | | | ||||
Accounts payable and accrued liabilities |
| ( |
| ( | ||
Deferred revenue |
| ( |
| ( | ||
Other liabilities |
| ( |
| | ||
Net cash provided by operating activities | | | ||||
Investing activities: | ||||||
Acquisitions of land and buildings | ( | — | ||||
Additions to real estate assets |
| ( |
| ( | ||
Deposits on building and land acquisitions | ( | — | ||||
Proceeds from sale of equipment, net of expenses | | — | ||||
Deferred leasing costs and other | ( | ( | ||||
Proceeds from sales of real estate assets, net of expenses | — | | ||||
Net cash used in investing activities |
| ( |
| ( | ||
Financing activities: | ||||||
Principal payments on mortgage loans |
| ( |
| ( | ||
Dividends paid to stockholders |
| ( |
| ( | ||
Proceeds from mortgage and construction loans |
| | — | |||
Proceeds from sale of common stock | — | | ||||
Payment of debt issuance costs |
| — |
| ( | ||
Proceeds from exercise of stock options |
| — |
| | ||
Net cash (used in) provided by financing activities |
| ( |
| | ||
Net (decrease) increase in cash and cash equivalents and restricted cash |
| ( |
| | ||
Cash and cash equivalents and restricted cash at beginning of period |
| |
| | ||
Cash and cash equivalents and restricted cash at end of period | $ | | $ | |
See Notes to Consolidated Financial Statements.
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INDUS REALTY TRUST, INC.
Notes to Consolidated Financial Statements
(dollars in thousands unless otherwise noted, except per share data)
(unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
INDUS Realty Trust, Inc., a Maryland corporation, (“INDUS” or the “Company”) is a real estate business that has elected to be taxed as a real estate investment trust (“REIT”) as defined in the Internal Revenue Service Code of 1986, as amended (the “Code”) and is principally engaged in developing, acquiring, managing and leasing high-quality industrial and logistics properties in select supply-constrained markets in the United States. The Company conducts substantially all of its business through its operating partnership, INDUS RT, LP, a Maryland limited partnership (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership. As used herein, the “Company” refers to INDUS Realty Trust, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership, except where context otherwise requires.
As of March 31, 2022, INDUS owned
The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year. Certain amounts from the prior year periods have been reclassified to conform to the current presentation.
INDUS’ consolidated financial statements reflect its accounts and its consolidated subsidiaries. INDUS consolidates the subsidiaries it controls through (i) voting rights or similar rights or (ii) by means other than voting rights if INDUS is the primary beneficiary of a variable interest entity (“VIE”). There have been no VIEs in which INDUS is not a primary beneficiary.
These financial statements have been prepared in conformity with the standards of accounting measurement set forth by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 270, “Interim Reporting” and in accordance with the accounting policies stated in INDUS’ audited consolidated financial statements for the year ended December 31, 2021 included in INDUS’ Annual Report on Form 10-K, filed with the SEC on March 11, 2022. These financial statements should be read in conjunction with the Notes to Consolidated Financial Statements appearing in that report. All adjustments, comprising only normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods, have been reflected and all intercompany transactions have been eliminated.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The actual results experienced by INDUS may differ materially and adversely from INDUS’ estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
There are various accounting updates recently issued which represent technical corrections to the accounting literature or apply to specific industries. INDUS does not expect the application of any of these other updates to have an impact on its consolidated financial statements.
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Cash, Cash Equivalents and Restricted Cash
INDUS considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. INDUS’ restricted cash primarily consists of reserves for real estate taxes as required by certain mortgage note obligations as well as proceeds from property sales held by a qualified intermediary to be used for a tax deferred Section 1031 Like-Kind Exchanges (“1031 Like-Kind Exchange”) under the Code.
The following table presents a reconciliation of cash, cash equivalents and restricted cash:
March 31, | December 31, | ||||
2022 | 2021 | ||||
Cash and cash equivalents | $ | | $ | | |
Restricted cash | | | |||
Total cash, cash equivalents and restricted cash | $ | | $ | |
Discontinued Operations
Operating results and the gain or loss on sale for a component or groups of components, whose disposition represents a strategic shift that has or will have a major effect on the Company’s operations and financial results, are presented as discontinued operations in the statements of operations and the assets and liabilities of the component to be disposed of are classified as held for sale. In March 2022, INDUS commenced the sale process to fully exit its legacy investment in its remaining office/flex properties (“Office/Flex Portfolio). The Office/Flex Portfolio is comprised of
Reclassifications
Reclassifications were made related to discontinued operations as discussed in Discontinued Operations above. These reclassifications did not affect the Company's total financial position, results of operations or cash flows.
2. Sales of Common Stock
Public Offering
On February 2, 2021, INDUS filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”) with the SEC. Under the Universal Shelf, the Company could offer and sell up to $
On March 5, 2021, under its Universal Shelf, INDUS completed an underwritten public offering of
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3. Fair Value
INDUS applies the provisions of ASC 820, which establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs, when measuring fair value. The categorization of an asset or liability within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value, as follows:
Level 1 applies to assets or liabilities for which there are quoted market prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 2 assets and liabilities include INDUS’ interest rate swap agreements (see Note 5). These inputs are readily available in public markets or can be derived from information available in publicly quoted markets, therefore, INDUS has categorized these derivative instruments as Level 2 within the fair value hierarchy.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The following are INDUS’ financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:
|
| March 31, 2022 | |||||||
|
| Quoted Prices in |
| Significant |
| Significant | |||
|
| Active Markets for |
| Observable |
| Unobservable | |||
|
| Identical Assets |
| Inputs |
| Inputs | |||
|
| (Level 1) |
| (Level 2) |
| (Level 3) | |||
Interest rate swap asset | $ | — | $ | | $ | — | |||
Interest rate swap liabilities | $ | — | $ | | $ | — |
|
| December 31, 2021 | |||||||
|
| Quoted Prices in |
| Significant |
| Significant | |||
|
| Active Markets for |
| Observable |
| Unobservable | |||
|
| Identical Assets |
| Inputs |
| Inputs | |||
|
| (Level 1) |
| (Level 2) |
| (Level 3) | |||
Interest rate swap assets | $ | — | $ | | $ | — | |||
Interest rate swap liabilities | $ | — | $ | | $ | — |
The amounts included in the consolidated financial statements for cash and cash equivalents, leasing receivables from tenants, accounts payable and accrued liabilities and interest rate swap assets and liabilities approximate their fair values because of the short-term maturities of these instruments. The fair values of the interest rate swaps (used for purposes other than trading) are determined based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current Overnight Index Swap Rate and swap curve along with other market data, taking into account current interest rates and the credit worthiness of the counterparty for assets and the credit worthiness of INDUS for liabilities.
The fair values of the mortgage loans and construction loan, net of debt issuance costs, are estimated based on current rates offered to INDUS for similar debt of the same remaining maturities and, additionally, INDUS considers its credit worthiness in determining the fair value of its mortgage loans. At March 31, 2022 and December 31, 2021, the carrying values of the mortgage loans and construction loan were $
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4. Real Estate Assets and Discontinued Operations
Real estate assets consist of:
Estimated | ||||||||
Useful Lives | March 31, 2022 | December 31, 2021 | ||||||
Land |
|
| $ | |
| $ | | |
Land improvements | | | ||||||
Buildings and improvements | | | ||||||
Tenant improvements | Shorter of useful life or terms of related lease | | | |||||
Construction in progress | | | ||||||
Development costs | | | ||||||
Accumulated depreciation | ( | ( | ||||||
$ | | $ | |
Total depreciation expense related to real estate assets was as follows:
For the Three Months Ended | |||||
| March 31, 2022 |
| March 31, 2021 | ||
Depreciation expense | $ | | $ | |
On January 19, 2022, INDUS closed on the purchase of 782 Paragon Way (“782 Paragon”), an approximately
In March 2022, the Company announced its intention to sell its Office/Flex Portfolio (see Note 1). The Office/Flex Portfolio is comprised of
Real estate assets in discontinued operations consist of:
March 31, 2022 | December 31, 2021 | |||||
Land | $ | | $ | | ||
Land improvements | | | ||||
Buildings and improvements | | | ||||
Tenant improvements | | | ||||
Construction in progress | | | ||||
| | |||||
Accumulated depreciation | ( | ( | ||||
| | |||||
Other assets | | | ||||
Total assets associated with real estate assets held for sale | $ | | $ | | ||
Accounts payable and accrued liabilities | $ | | $ | | ||
Deferred revenue | | | ||||
Other liabilities | | | ||||
Total liabilities associated with real estate assets held for sale | $ | | $ | |
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5. Mortgages Loans, Construction Loan and Interest Rate Swaps
INDUS’ nonrecourse mortgage loans and construction loan consist of:
Mortgage loans: |
| March 31, 2022 |
| December 31, 2021 | ||
$ | | $ | | |||
| | |||||
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| | |||||
| | |||||
| | |||||
| | |||||
| | |||||
| | |||||
| | |||||
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Mortgage loans | | | ||||
Debt issuance costs | ( | ( | ||||
Mortgage loans, net of debt issuance costs | | | ||||
Construction loan: | ||||||
One-month LIBOR plus | | | ||||
Debt issuance costs | ( | ( | ||||
Construction loan, net of debt issuance costs | | | ||||
Mortgage loans and construction loan, net of debt issuance costs | $ | | $ | |
*Variable rate loans for which INDUS entered into interest rate swap agreements to effectively fix the interest rates on these loans to the rates reflected above.
INDUS’ weighted average interest rate on its mortgage loans and its construction loan, including the effect of its interest rate swap agreements, was
12
The following table summarizes the notional and fair value of our interest rate swaps designated as cash flow hedges at March 31, 2022 and December 31, 2021:
Fair Value of Interest Rate | ||||||||||||
Current Notional Value | Derivative Assets/(Liabilities) | |||||||||||
LIBOR | (in thousands) | (in thousands) | ||||||||||
Effective | Maturity | Interest | March 31, | December 31, | March 31, | December 31, | ||||||
Date | Date | Strike Rate | 2022 | 2021 | 2022 | 2021 | ||||||
September 1, 2013 | September 1, 2023 | (a) | $ | $ | ($ | ($ | ||||||
January 1, 2015 | January 1, 2025 | (a) | | | | ( | ||||||
January 1, 2016 | January 1, 2025 | (a) | | | | ( | ||||||
September 1, 2015 | September 1, 2025 | (b) | | | | ( | ||||||
December 10, 2015 | September 1, 2025 | (b) | | | | ( | ||||||
November 17, 2016 | November 17, 2026 | (b) | | | | ( | ||||||
May 3, 2016 | May 1, 2026 | | | | ( | |||||||
March 15, 2017 | March 1, 2027 | (c) | | | ( | ( | ||||||
February 1, 2018 | February 1, 2028 | (c) | | | ( | ( | ||||||
July 14, 2017 | August 1, 2027 | | | ( | ( | |||||||
January 2, 2020 | January 1, 2030 | | | | ( | |||||||
July 1, 2020 | July 1, 2030 | | | | | |||||||
$ | $ | $ | ($ | |||||||||
(a) (b) and (c) represent multiple interest rate swap agreements against a single mortgage |
In July 2017, the Financial Conduct Authority in the United Kingdom, which regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after June 30, 2023. INDUS currently expects LIBOR-indexed rates to be available through that date, however, it is possible that they will become unavailable prior to that time. The interest rate on INDUSs floating rate debt under nonrecourse mortgage loans is based on LIBOR, however, INDUS entered into interest rate swap agreements whereby the floating LIBOR rates under all mortgage loans are hedged, effectively fixing the interest rate on those loans. INDUS’ loan documents contain provisions that contemplate alternative methods to determine the base rate applicable to our LIBOR-indexed debt to the extent LIBOR-indexed rates are not available. INDUS will continue to monitor and evaluate the impact, if any, on debt payments and the value of the Company’s floating rate debt.
On April 21, 2022, INDUS entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) for a $
6. Revolving Credit Agreements
On April 21, 2022, the Credit Agreement was amended and restated to provide for, among other things: (1) the addition of the DDTL Facility of $
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incremental facility, which, as amended, would enable the Company to increase the New Credit Facility by up to $
Borrowings under the New Credit Facility will continue to bear interest subject to a pricing grid for changes in the Company’s total leverage. Based on the Company’s current leverage, the initial annual interest rates under the New Credit Facility would be (i) SOFR plus
Under the terms of the New Credit Facility, INDUS must maintain: (i) a consolidated tangible net worth of $
As of March 31, 2022, the Company was in compliance with the covenants of the Existing Credit Facility. Based on the collateral in place as of March 31, 2022, $
The Existing Credit Facility replaced INDUS’ $
7. Stockholders’ Equity
Per Share Results
Basic and diluted per share results were based on the following:
|
| For the Three Months Ended | ||||
|
| March 31, 2022 |
| March 31, 2021 | ||
Net income (loss) | $ | | $ | ( | ||
Weighted average shares outstanding for computation of basic per share results |
| |
| |||
Incremental shares from assumed exercise of stock options and warrants and the grant of restricted stock units (a) |
| |
| — | ||
Adjusted weighted average shares for computation of diluted per share results |
| |
| |
(a) | Incremental shares from the assumed exercise of INDUS stock options are not included in periods where the inclusion of such shares would be anti-dilutive. The incremental shares from the assumed exercise of stock options for the first quarter of 2021 would have been |
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