UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED May 31, 2020June 30, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 1-12879
GRIFFIN INDUSTRIALINDUS REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
| | | |
| | | 06-0868496 |
(State or other jurisdiction of incorporation or organization) | | | (IRS Employer Identification No.) |
| | | |
641 Lexington Avenue, New York, New York | | | 10022 |
(Address of principal executive offices) | | | (Zip Code) |
Registrant’s Telephone Number, Including Area Code (212) (212) 218-7910
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value per share |
| The Nasdaq Stock Market LLC |
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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | |
Large accelerated filer ☐ | | Accelerated filer | | |||
Non-accelerated filer | | Smaller reporting company ☒ | Emerging growth company ☐ | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of Common Stock outstanding at July 7, 2020: 5,131,147August 6, 2021: 7,722,437
GRIFFIN INDUSTRIALINDUS REALTY TRUST, INC.
FORM 10-Q
Index
| | ||
PART I - | | | |
| | | |
| | ||
| | | |
| | 3 | |
| | | |
| | 4 | |
| | | |
| | 5 | |
| | | |
| | 6 | |
| | | |
| | 7 | |
| | | |
| | 8 | |
| | | |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
| | | |
|
| ||
| | | |
|
| ||
| | | |
| | ||
| | | |
| ITEM 1 | Not Applicable | |
| | | |
|
| ||
| | | |
|
| ||
| | | |
| ITEMS | Not Applicable | |
| | | |
| 44 | ||
| | | |
|
| ||
| | | |
| |
|
PART I FINANCIAL INFORMATION
GRIFFIN INDUSTRIALINDUS REALTY TRUST, INC.
(dollars in thousands, except per share data)
(unaudited)
| | | | | | |
| | May 31, 2020 | | Nov. 30, 2019 | ||
ASSETS | | | | | | |
Real estate assets at cost, net | | $ | 247,157 | | $ | 238,614 |
Cash and cash equivalents | | | 4,027 | | | 5,874 |
Short-term investments | | | — | | | 1,011 |
Deferred income taxes | |
| 4,785 | |
| 3,281 |
Real estate assets held for sale | | | 6,940 | | | 2,137 |
Other assets | | | 17,813 | | | 17,578 |
Total assets | | $ | 280,722 | | $ | 268,495 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
Mortgage loans, net of debt issuance costs | | $ | 158,375 | | $ | 142,575 |
Deferred revenue | | | 8,886 | | | 10,918 |
Revolving lines of credit | | | 4,100 | | | 5,875 |
Accounts payable and accrued liabilities | |
| 4,237 | |
| 4,318 |
Dividend payable | |
| — | |
| 2,538 |
Other liabilities | | | 17,460 | | | 11,509 |
Total liabilities | |
| 193,058 | |
| 177,733 |
Commitments and Contingencies (Note 9) | | | | | | |
Stockholders' Equity | | | | | | |
Common stock, par value $0.01 per share, 10,000,000 shares authorized, 5,724,070 and 5,668,043 shares issued, respectively, and 5,131,147 and 5,075,120 shares outstanding, respectively | |
| 57 | |
| 57 |
Additional paid-in capital | |
| 116,096 | |
| 113,256 |
(Deficit) Retained earnings | |
| (94) | |
| 919 |
Accumulated other comprehensive loss, net of tax | |
| (8,066) | |
| (3,141) |
Treasury stock, at cost, 592,923 shares | |
| (20,329) | |
| (20,329) |
Total stockholders' equity | |
| 87,664 | |
| 90,762 |
Total liabilities and stockholders' equity | | $ | 280,722 | | $ | 268,495 |
| | | | | | | |
| | June 30, 2021 | | Dec. 31, 2020 | | ||
ASSETS | | | | | | | |
Real estate assets at cost, net | | $ | 315,292 | | $ | 242,321 | |
Cash and cash equivalents | | | 66,200 | | | 28,124 | |
Real estate assets held for sale, net | | | 6,380 | | | 6,802 | |
Other assets | | | 22,362 | | | 22,137 | |
Total assets | | $ | 410,234 | | $ | 299,384 | |
| | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
Mortgage loans, net of debt issuance costs | | $ | 157,724 | | $ | 160,655 | |
Deferred revenue | | | 7,028 | | | 9,586 | |
Warrant liability | | | 10,165 | | | 8,790 | |
Accounts payable and accrued liabilities | |
| 13,328 | |
| 3,669 | |
Other liabilities | | | 17,041 | | | 17,567 | |
Total liabilities | |
| 205,286 | |
| 200,267 | |
Commitments and Contingencies (Note 10) | | | | | | | |
Stockholders' Equity | | | | | | | |
Common stock, par value $0.01 per share, 50,000,000 and 10,000,000 shares authorized, respectively, 8,339,487 and 6,280,856 shares issued, respectively, and 7,721,671 and 5,663,040 shares outstanding, respectively | |
| 83 | |
| 63 | |
Additional paid-in capital | |
| 255,588 | |
| 138,413 | |
Accumulated deficit | |
| (24,144) | |
| (9,817) | |
Accumulated other comprehensive loss, net of tax | |
| (4,892) | |
| (7,855) | |
Treasury stock, at cost, 617,816 shares | |
| (21,687) | |
| (21,687) | |
Total stockholders' equity | |
| 204,948 | |
| 99,117 | |
Total liabilities and stockholders' equity | | $ | 410,234 | | $ | 299,384 | |
See Notes to Consolidated Financial Statements.
3
GRIFFIN INDUSTRIALINDUS REALTY TRUST, INC.
Consolidated Statements of Operations
(dollars in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | |
| | For the Three Months Ended | | For the Six Months Ended | ||||||||
|
| May 31, 2020 |
| May 31, 2019 |
| May 31, 2020 |
| May 31, 2019 | ||||
Rental revenue | | $ | 9,214 | | $ | 8,421 | | $ | 18,128 | | $ | 16,858 |
Revenue from property sales | |
| 101 | |
| 8,660 | |
| 851 | |
| 9,526 |
Total revenue | |
| 9,315 | |
| 17,081 | |
| 18,979 | |
| 26,384 |
| | | | | | | | | | | | |
Operating expenses of rental properties | |
| 2,470 | |
| 2,419 | |
| 5,326 | |
| 5,084 |
Depreciation and amortization expense | |
| 3,359 | |
| 2,939 | |
| 6,594 | |
| 5,881 |
General and administrative expenses | |
| 2,438 | |
| 1,809 | |
| 4,495 | |
| 3,899 |
Costs related to property sales | |
| 19 | |
| 1,009 | |
| 185 | |
| 1,823 |
Total expenses | |
| 8,286 | |
| 8,176 | |
| 16,600 | |
| 16,687 |
| | | | | | | | | | | | |
Gain on insurance recovery | | | — | | | 126 | | | — | | | 126 |
Operating income | |
| 1,029 | |
| 9,031 | |
| 2,379 | |
| 9,823 |
| | | | | | | | | | | | |
Interest expense | |
| (1,899) | |
| (1,618) | |
| (3,691) | |
| (3,268) |
Investment income | |
| 2 | |
| 89 | |
| 28 | |
| 181 |
(Loss) income before income tax benefit (provision) | |
| (868) | |
| 7,502 | |
| (1,284) | |
| 6,736 |
Income tax benefit (provision) | |
| 175 | |
| (1,683) | |
| 271 | |
| (1,503) |
Net (loss) income | | $ | (693) | | $ | 5,819 | | $ | (1,013) | | $ | 5,233 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Basic net (loss) income per common share | | $ | (0.14) | | $ | 1.15 | | $ | (0.20) | | $ | 1.03 |
| | | | | | | | | | | | |
Diluted net (loss) income per common share | | $ | (0.14) | | $ | 1.14 | | $ | (0.20) | | $ | 1.03 |
| | | | | | | | | | | | | |
| | For the Three Months Ended | | For the Six Months Ended | | ||||||||
|
| June 30, 2021 |
| June 30, 2020 | | June 30, 2021 |
| June 30, 2020 |
| ||||
Rental revenue | | $ | 9,836 | | $ | 9,270 | | $ | 19,923 | | $ | 18,132 | |
| | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | |
Operating expenses of rental properties | |
| 1,132 | |
| 1,080 | |
| 2,765 | |
| 2,252 | |
Real estate taxes | | | 1,454 | | | 1,416 | | | 2,901 | | | 2,797 | |
Depreciation and amortization expense | |
| 3,424 | |
| 3,509 | |
| 6,767 | |
| 6,815 | |
General and administrative expenses | |
| 2,724 | |
| 2,413 | |
| 5,694 | |
| 4,556 | |
Total operating expenses | |
| 8,734 | |
| 8,418 | |
| 18,127 | |
| 16,420 | |
| | | | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | | | |
Interest expense | |
| (1,711) | |
| (1,836) | |
| (3,460) | |
| (3,676) | |
Change in fair value of financial instruments | | | (979) | | | — | | | (719) | | | — | |
Gain on sales of real estate assets | | | 322 | | | 115 | | | 342 | | | 699 | |
Investment and other income | | | 115 | | | 1 | |
| 122 | |
| 26 | |
| | | (2,253) | | | (1,720) | |
| (3,715) | |
| (2,951) | |
| |
| | | | | | | | | | | |
Loss before income tax benefit | | | (1,151) | | | (868) | |
| (1,919) | |
| (1,239) | |
Income tax benefit | |
| — | |
| 174 | |
| — | |
| 259 | |
Net loss | | $ | (1,151) | | $ | (694) | | $ | (1,919) | | $ | (980) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Basic and diluted net loss per common share | | $ | (0.15) | | $ | (0.14) | | $ | (0.27) | | $ | (0.19) | |
See Notes to Consolidated Financial Statements.
4
GRIFFIN INDUSTRIALINDUS REALTY TRUST, INC.
Consolidated Statements of Comprehensive Income (Loss)(Loss)
(dollars in thousands)
(unaudited)
| | | | | | | | | | | | |
| | For the Three Months Ended | | For the Six Months Ended | ||||||||
|
| May 31, 2020 |
| May 31, 2019 |
| May 31, 2020 |
| May 31, 2019 | ||||
Net (loss) income | | $ | (693) | | $ | 5,819 | | $ | (1,013) | | $ | 5,233 |
| | | | | | | | | | | | |
Other comprehensive loss, net of tax: | | | | | | | | | | | | |
Reclassifications included in net loss | | | 244 | | | 26 | | | 339 | | | 68 |
Unrealized loss on cash flow hedges | |
| (2,740) | |
| (2,754) | |
| (5,264) | |
| (4,254) |
Total other comprehensive loss, net of tax | |
| (2,496) | |
| (2,728) | |
| (4,925) | |
| (4,186) |
Total comprehensive (loss) income | | $ | (3,189) | | $ | 3,091 | | $ | (5,938) | | $ | 1,047 |
| | | | | | | | | | | | |
| | For the Three Months Ended | | For the Six Months Ended | ||||||||
|
| June 30, 2021 |
| June 30, 2020 |
| June 30, 2021 |
| June 30, 2020 | ||||
Net loss | | $ | (1,151) | | $ | (694) | | $ | (1,919) | | $ | (980) |
| | | | | | | | | | | | |
Other comprehensive (loss) income, net of tax: | | | | | | | | | | | | |
Reclassifications included in net loss | | | 506 | | | 331 | | | 994 | | | 434 |
Unrealized (loss) gain on cash flow hedges | |
| (1,022) | |
| (1,115) | |
| 1,969 | |
| (6,079) |
Total other comprehensive (loss) income, net of tax | |
| (516) | |
| (784) | |
| 2,963 | |
| (5,645) |
Total comprehensive (loss) income | | $ | (1,667) | | $ | (1,478) | | $ | 1,044 | | $ | (6,625) |
See Notes to Consolidated Financial Statements.
5
GRIFFIN INDUSTRIALINDUS REALTY TRUST, INC.
Consolidated Statements of Changes in Stockholders’ Equity
For the Six Months Ended May 31, 2020 and 2019
(dollars in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | |
|
| Shares of |
|
|
|
| Additional |
| (Deficit) |
| Accumulated Other |
|
|
|
|
|
| |||
|
| Common Stock |
| Common |
| Paid-in |
| Retained |
| Comprehensive |
| Treasury |
|
|
| |||||
|
| Issued |
| Stock |
| Capital |
| Earnings |
| Income (Loss) |
| Stock |
| Total | ||||||
Balance at November 30, 2018 |
| 5,635,706 | | $ | 56 | | $ | 112,071 | | $ | (211) | | $ | 2,395 | | $ | (19,483) | | $ | 94,828 |
Stock-based compensation expense |
| — | |
| — | |
| 184 | |
| — | |
| — | |
| — | |
| 184 |
Exercise of stock options, including shares tendered related to stock options exercised and tax withholdings | | 29,838 | | | 1 | | | 856 | | | — | | | — | | | (846) | | | 11 |
Net income |
| — | |
| — | |
| — | |
| 5,233 | |
| — | |
| — | |
| 5,233 |
Total other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | (4,186) | | | — | | | (4,186) |
Balance at May 31, 2019 |
| 5,665,544 | | $ | 57 | | $ | 113,111 | | $ | 5,022 | | $ | (1,791) | | $ | (20,329) | | $ | 96,070 |
| | | | | | | | | | | | | | | | | | | | |
Balance at November 30, 2019 |
| 5,668,043 | | $ | 57 | | $ | 113,256 | | $ | 919 | | $ | (3,141) | | $ | (20,329) | | $ | 90,762 |
Stock-based compensation expense |
| — | |
| — | |
| 260 | |
| — | |
| — | |
| — | |
| 260 |
Exercise of stock options | | 2,734 | | | — | | | 80 | | | — | | | — | | | — | | | 80 |
Sale of common stock | | 53,293 | | | — | | | 2,500 | | | — | | | — | | | — | | | 2,500 |
Net loss |
| — | |
| — | |
| — | |
| (1,013) | |
| — | |
| — | |
| (1,013) |
Total other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | (4,925) | | | — | | | (4,925) |
Balance at May 31, 2020 |
| 5,724,070 | | $ | 57 | | $ | 116,096 | | $ | (94) | | $ | (8,066) | | $ | (20,329) | | $ | 87,664 |
| | | | | | | | | | | | | | | | | | | | |
For the Three Months Ended June 30, 2021 and 2020 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | Shares of |
|
|
|
| Additional |
| (Deficit) |
| Accumulated Other |
|
|
|
|
|
| |||
|
| Common Stock |
| Common |
| Paid-in |
| Retained |
| Comprehensive |
| Treasury |
|
|
| |||||
|
| Issued |
| Stock |
| Capital |
| Earnings |
| Loss |
| Stock |
| Total | ||||||
Balance at March 31, 2021 |
| 8,333,350 | | $ | 83 | | $ | 255,135 | | $ | (21,835) | | $ | (4,376) | | $ | (21,687) | | $ | 207,320 |
Stock-based compensation expense |
| — | |
| — | |
| 291 | |
| — | |
| — | |
| — | |
| 291 |
Exercise of stock options | | 6,137 | | | — | | | 162 | | | — | | | — | | | — | | | 162 |
Common stock dividend, $0.15 per share | | — | | | — | | | — | | | (1,158) | | | — | | | — | | | (1,158) |
Net loss |
| — | |
| — | |
| — | |
| (1,151) | |
| — | |
| — | |
| (1,151) |
Total other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | (516) | | | — | | | (516) |
Balance at June 30, 2021 |
| 8,339,487 | | $ | 83 | | $ | 255,588 | | $ | (24,144) | | $ | (4,892) | | $ | (21,687) | | $ | 204,948 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2020 | | 5,721,336 | | $ | 57 | | $ | 115,897 | | $ | 378 | | $ | (7,401) | | $ | (20,329) | | $ | 88,602 |
Stock-based compensation expense |
| — | |
| — | |
| 160 | |
| — | |
| — | |
| — | |
| 160 |
Exercise of stock options | | 2,734 | | | — | | | 80 | | | — | | | — | | | — | | | 80 |
Net loss |
| — | |
| — | |
| — | |
| (694) | |
| — | |
| — | |
| (694) |
Total other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | (784) | | | — | | | (784) |
Balance at June 30, 2020 |
| 5,724,070 | | $ | 57 | | $ | 116,137 | | $ | (316) | | $ | (8,185) | | $ | (20,329) | | $ | 87,364 |
| | | | | | | | | | | | | | | | | | | | |
For the Six Months Ended June 30, 2021 and 2020 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | Shares of |
|
|
|
| Additional |
| (Deficit) |
| Accumulated Other |
|
|
|
|
|
| |||
|
| Common Stock |
| Common |
| Paid-in |
| Retained |
| Comprehensive |
| Treasury |
|
|
| |||||
|
| Issued |
| Stock |
| Capital |
| Earnings |
| Income (Loss) |
| Stock |
| Total | ||||||
Balance at December 31, 2020 |
| 6,280,856 | | $ | 63 | | $ | 138,413 | | $ | (9,817) | | $ | (7,855) | | $ | (21,687) | | $ | 99,117 |
Stock-based compensation expense |
| — | |
| — | |
| 505 | |
| — | |
| — | |
| — | |
| 505 |
Exercise of stock options | | 6,370 | | | — | | | 168 | | | — | | | — | | | — | | | 168 |
Sale of common stock, net | | 1,927,049 | | | 19 | | | 108,657 | | | — | | | — | | | — | | | 108,676 |
Special dividend | | 125,212 | | | 1 | | | 7,845 | | | (11,250) | | | — | | | — | | | (3,404) |
Common stock dividend, $0.15 per share | | — | | | — | | | — | | | (1,158) | | | — | | | — | | | (1,158) |
Net loss |
| — | |
| — | |
| — | |
| (1,919) | |
| — | |
| — | |
| (1,919) |
Total other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | 2,963 | | | — | | | 2,963 |
Balance at June 30, 2021 |
| 8,339,487 | | $ | 83 | | $ | 255,588 | | $ | (24,144) | | $ | (4,892) | | $ | (21,687) | | $ | 204,948 |
| | | | | | | | | | ��� | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2019 |
| 5,668,043 | | $ | 57 | | $ | 113,275 | | $ | 664 | | $ | (2,540) | | $ | (20,329) | | $ | 91,127 |
Stock-based compensation expense |
| — | |
| — | |
| 282 | |
| — | |
| — | |
| — | |
| 282 |
Exercise of stock options | | 2,734 | | | — | | | 80 | | | — | | | — | | | — | | | 80 |
Sale of common stock, net | | 53,293 | | | — | | | 2,500 | | | — | | | — | | | — | | | 2,500 |
Net loss |
| — | |
| — | |
| — | |
| (980) | |
| — | |
| — | |
| (980) |
Total other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | (5,645) | | | — | | | (5,645) |
Balance at June 30, 2020 |
| 5,724,070 | | $ | 57 | | $ | 116,137 | | $ | (316) | | $ | (8,185) | | $ | (20,329) | | $ | 87,364 |
See Notes to Consolidated Financial Statements.
6
GRIFFIN INDUSTRIALINDUS REALTY TRUST, INC.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
| | | | | | | |
|
| For the Six Months Ended |
| ||||
|
| May 31, 2020 |
| May 31, 2019 |
| ||
Operating activities: | | | | | | | |
Net (loss) income | | $ | (1,013) | | $ | 5,233 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | | |
Depreciation and amortization | |
| 6,594 | |
| 5,881 | |
Noncash rental revenue including straight-line rents | | | (1,052) | | | (1,008) | |
Gain on sales of properties | |
| (666) | |
| (7,703) | |
Deferred income taxes | |
| (271) | |
| 1,503 | |
Stock-based compensation expense | |
| 260 | |
| 184 | |
Amortization of debt issuance costs | |
| 211 | |
| 146 | |
Gain on insurance recovery | | | — | | | (126) | |
Payment of employee withholding taxes on options exercised | | | — | | | (87) | |
Amortization of terminated swap agreement | | | — | | | 31 | |
Changes in assets and liabilities: | | | | | | | |
Other assets | | | 1,904 | | | 987 | |
Accounts payable and accrued liabilities | |
| (34) | |
| (683) | |
Deferred revenue | |
| (1,282) | |
| (946) | |
Other liabilities | |
| (1,827) | |
| 61 | |
Net cash provided by operating activities | | | 2,824 | | | 3,473 | |
| | | | | | | |
Investing activities: | | | | | | | |
Acquisition of land and buildings | | | (13,670) | | | — | |
Additions to real estate assets | |
| (6,330) | |
| (7,549) | |
Changes in short-term investments, net | | | 1,011 | | | 5,000 | |
Proceeds from sales of properties, net of expenses | | | 828 | | | 9,188 | |
Deferred leasing costs and other | | | (439) | | | (293) | |
Proceeds from sales of properties deposited in escrow | | | — | | | (7,628) | |
Net cash used in investing activities | |
| (18,600) | |
| (1,282) | |
| | | | | | | |
Financing activities: | | | | | | | |
Proceeds from mortgage and construction loans | |
| 21,500 | | | 288 | |
Principal payments on mortgage loans | |
| (5,445) | |
| (1,924) | |
Dividends paid to stockholders | |
| (2,538) | |
| (2,279) | |
Sale of common stock | | | 2,500 | | | — | |
Net repayments on revolving lines of credit | | | (1,775) | | | — | |
Payment of debt issuance costs | |
| (393) | |
| — | |
Proceeds from exercise of stock options | |
| 80 | |
| 98 | |
Net cash provided by (used in) financing activities | |
| 13,929 | |
| (3,817) | |
Net decrease in cash and cash equivalents | |
| (1,847) | |
| (1,626) | |
Cash and cash equivalents at beginning of period | |
| 5,874 | |
| 8,592 | |
Cash and cash equivalents at end of period | | $ | 4,027 | | $ | 6,966 | |
| | | | | | | |
|
| For the Six Months Ended | | ||||
|
| June 30, 2021 |
| June 30, 2020 | | ||
Operating activities: | | | | | | | |
Net loss | | $ | (1,919) | | $ | (980) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | |
Depreciation and amortization | |
| 6,767 | |
| 6,815 | |
Noncash rental revenue including straight-line rents | | | (856) | | | (1,118) | |
Change in fair value of financial instruments | | | 719 | | | — | |
Stock-based compensation expense | |
| 505 | |
| 282 | |
Amortization of debt issuance costs | |
| 407 | |
| 212 | |
Gain on sales of real estate assets | |
| (342) | |
| (699) | |
Deferred income taxes | |
| — | |
| (259) | |
Changes in assets and liabilities: | | | | | | | |
Other assets | | | 1,569 | | | 2,223 | |
Accounts payable and accrued liabilities | |
| (505) | |
| (581) | |
Deferred revenue | |
| (1,659) | |
| (1,111) | |
Other liabilities | |
| 685 | |
| (330) | |
Net cash provided by operating activities | | | 5,371 | | | 4,454 | |
| | | | | | | |
Investing activities: | | | | | | | |
Acquisitions of land and buildings | | | (60,100) | | | (13,670) | |
Additions to real estate assets | |
| (10,388) | |
| (5,825) | |
Proceeds from sales of real estate assets, net of expenses | | | 3,141 | | | 880 | |
Deferred leasing costs and other | | | (883) | | | (958) | |
Changes in short-term investments, net | | | — | | | 1,011 | |
Net cash used in investing activities | |
| (68,230) | |
| (18,562) | |
| | | | | | | |
Financing activities: | | | | | | | |
Proceeds from sale of common stock | | | 108,676 | | | 2,500 | |
Dividends paid to stockholders | |
| (4,562) | |
| — | |
Principal payments on mortgage loans | |
| (2,540) | |
| (5,483) | |
Payment of debt issuance costs | |
| (807) | |
| (362) | |
Net repayment on revolving lines of credit | | | — | | | (3,000) | |
Proceeds from mortgage loans | |
| — | | | 20,100 | |
Proceeds from exercise of stock options | |
| 168 | |
| 80 | |
Net cash provided by financing activities | |
| 100,935 | |
| 13,835 | |
Net increase (decrease) in cash and cash equivalents | |
| 38,076 | |
| (273) | |
Cash and cash equivalents at beginning of period | |
| 28,124 | |
| 4,837 | |
Cash and cash equivalents at end of period | | $ | 66,200 | | $ | 4,564 | |
See Notes to Consolidated Financial Statements.
7
GRIFFIN INDUSTRIALINDUS 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”) (f/k/a Griffin Industrial Realty, Inc. ("Griffin") is a real estate business principally engaged in developing, acquiring, managing and leasing industrial/warehouse properties. Griffinhigh-quality industrial and logistics properties in select supply-constrained markets in the United States. INDUS seeks to add to its industrial/warehouse property portfolio through the acquisition and development of land or the purchaseacquisition of modern, market-appropriate logistics buildings in selectthe markets targeted by Griffin. Griffinit targets, all of which can serve multiple drivers of demand in the modern supply chain. Although the Company’s real estate holdings primarily consist of industrial/logistics properties, it also owns severala limited number of office/flex properties and undeveloped land. Periodically, Griffin may sellland parcels. INDUS periodically sells certain office/flex properties or portions of its real estate assetsundeveloped land that it has owned for an extended time period and the use of which is not consistent with Griffin'sthe Company’s core developmentindustrial and leasinglogistics strategy.
Griffin’sOn December 30, 2020, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), by and among INDUS, Griffin Industrial Realty, Inc., a Delaware corporation, and Griffin Industrial Maryland, LLC, a Maryland limited liability company and a wholly-owned subsidiary of INDUS, the Company completed an internal merger to reincorporate in Maryland. On December 30, 2020, following this merger, the Company changed its name to INDUS Realty Trust, Inc. On February 5, 2021, Griffin Industrial Maryland, LLC changed its name to INDUS Realty Trust, LLC and on June 28, 2021, was converted to INDUS RT, LP, a Maryland limited partnership.
On January 4, 2021, the Company announced that it intends to elect to be taxed as a real estate investment trust (“REIT”) under sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) for its taxable year ending December 31, 2021 (see Note 9). This decision was based on the Company’s consideration of ways to maximize stockholder value and generate growth opportunities as the Company continues to expand its industrial/logistics portfolio. On March 8, 2021, INDUS paid a special dividend to distribute the Company’s estimated accumulated earnings and profits (the “E&P Distribution”) based on the Company’s estimated taxable income through December 31, 2020 (see Note 7).
Through November 30, 2020, INDUS reported on a twelve month fiscal year that ended on November 30. On November 17, 2020, in connection with the anticipated election to become a REIT, the Company’s Board of Directors approved a change in the Company’s fiscal year from November 30 to December 31, effective beginning with the Company’s next fiscal year, which began on January 1, 2021 and will end on December 31, 2021 (“fiscal 2021”). As a result of this change, INDUS had a one-month transition period (the “Transition Period”) that began on December 1, 2020 and ended on December 31, 2020. The results of the Transition Period were reported in the Company’s Form 10-Q for the three months ended March 31, 2021, filed with the United States Securities and Exchange Commission (the “SEC”) on May 10, 2021.
The results of operations for the three months ended June 30, 2021 (the “2021 second quarter”) and the six months ended June 30, 2021 (the “2021 six month period”) are not necessarily indicative of the results to be expected for the full year. The three months and six months ended June 30, 2020 are referred to herein as the “2020 second quarter” and “2020 six month period,” respectively. The months included in the Company’s 2020 second quarter and 2020 six month period have been presented to conform to the months reflected in the 2021 second quarter and 2021 six month period.
INDUS’s consolidated financial statements reflect its accounts and its consolidated subsidiaries. GriffinINDUS consolidates the subsidiaries it controls through (i) voting rights or similar rights or (ii) by means other than voting rights if GriffinINDUS is the primary beneficiary of a variable interest entity (“VIE”). There arehave been no VIEs in which GriffinINDUS is not a primary beneficiary.
GriffinINDUS may acquire property using a reverse like-kind exchange structure (a “Reverse 1031 Like-Kind Exchange”) under Section 1031 of the Internal Revenue Code, of 1986, as amended, to defer taxable gains on the subsequent sale of real estate property. As
8
such, the acquired property (the “Parked Property”) is in the possession of a VIE whose legal equity interests are owned by a qualified intermediary engaged to execute the Reverse 1031 Like-Kind Exchange until the subsequent sale transaction and the Reverse 1031 Like-Kind Exchange are completed. GriffinAlthough the VIE is owned by the qualified intermediary, INDUS retains essentially all of the legal and economic benefits and obligations related to the VIE (which holds the legal title to the Parked Property prior to the completion of the Reverse 1031 Like-Kind Exchange.Exchange) and, as its designated manager, has the key decision-making power over the Parked Property. As such, adiscussed in Note 4, the VIE (including the Parked PropertyProperty) is included in Griffin’sINDUS’s consolidated financial statements as a consolidated VIE until legal title is transferred to Griffinthe Company upon completion of the Reverse 1031 Like-Kind Exchange. There were two consolidated VIEs on INDUS's consolidated balance sheet as of June 30, 2021.
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 Griffin’sINDUS’s audited consolidated financial statements for the fiscal year ended November 30, 20192020 (“fiscal 2019”2020”) included in Griffin’sINDUS’s Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission (the “SEC”)SEC on February 13, 2020.18, 2021. 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 consolidated balance sheet data aspreparation of November 30, 2019 was derived from Griffin’s audited financial statements but does not include all disclosures required byin accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The preparation of financial statements in accordance with 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. GriffinINDUS regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation expense deferred income tax asset valuations and the valuation of derivative financial instruments. GriffinINDUS bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by GriffinINDUS may differ materially and adversely from Griffin’sINDUS’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Griffin considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. At May 31, 2020 and November 30, 2019, $2,637 and $4,299, respectively, of the cash and cash equivalents included on Griffin’s consolidated balance sheets were held in cash equivalents. Griffin’s short-term investments at November 30, 2019 were comprised of repurchase agreements with Webster Bank, N.A. (“Webster
8
Bank”) that were collateralized with securities issued by the United States Government or its sponsored agencies and were accounted for as held-to-maturity securities under FASB ASC 320, “Investments – Debt and Equity Securities” (“ASC 320”). The repurchase agreements were carried at their resell amounts, which approximated fair value due to their short-term nature. Interest on repurchase agreements was reflected as interest receivable that was included in other assets.
As of May 31, 2020, Griffin was a party to twelve interest rate swap agreements to hedge its interest rate exposures. Griffin does not use derivatives for speculative purposes. Griffin applies FASB ASC 815-10, “Derivatives and Hedging,” (“ASC 815-10”) as amended, which establishes accounting and reporting standards for derivative instruments and hedging activities. ASC 815-10 requires Griffin to recognize all derivatives as either assets or liabilities on its consolidated balance sheet and measure those instruments at fair value. The changes in the fair values of the interest rate swap agreements are measured in accordance with ASC 815-10 and reflected in the carrying values of the interest rate swap agreements on Griffin’s consolidated balance sheet. The estimated fair values are based primarily on projected future swap rates.
Griffin applies cash flow hedge accounting to its interest rate swap agreements that are designated as hedges of the variability of future cash flows from floating rate liabilities based on benchmark interest rates. The changes in the fair values of Griffin’s interest rate swap agreements are recorded as components of Accumulated Other Comprehensive Income (Loss) (“AOCI”) in stockholders’ equity to the extent they are effective. Any ineffective portions of the changes in the fair values of these instruments would be recorded as interest expense or interest income.
The results of operations for the three months ended May 31, 2020 (the “2020 second quarter”) and the six months ended May 31, 2020 (the “2020 six month period”) are not necessarily indicative of the results to be expected for the full year. The three months and six months ended May 31, 2019 are referred to herein as the “2019 second quarter” and “2019 six month period,” respectively. Certain amounts from the 2019 six month period have been reclassified to conform to the current fiscal period’s presentation.
COVID-19
During and subsequent to theSince March 2020, six month period, the world has been impacted by the spread of the coronavirus (COVID-19),(“COVID-19”) pandemic, which has created significant economic uncertainty and volatility. The full extent to which the coronavirus pandemic further impacts Griffin’sthe Company’s business or impacts the Company’s operations, liquidity and financial results will depend on numerous evolving factors that Griffinthe Company is not able to predict at this time, including: the duration and scope of the pandemic; development and spread of new variants of the virus; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the availability, adoption and effectiveness of vaccines to combat COVID-19; the impact on economic activity from the pandemic and actions taken in response;response, including ongoing travel restrictions; the impact on the availability and pricing of certain materials and supplies; the effect on Griffin’sthe Company’s tenants and their businesses; the ability of tenants to make their rental payments; any closures of tenants’ facilities; the ability of existing or prospective tenants to evaluate or enter into leases; and Griffin’sthe Company’s ability to complete property sales.sales and acquisitions of real estate assets or planned construction and development. Any of these events could materially adversely impact Griffin’sthe Company’s business, financial condition, results of operations or stock price.
Griffin collected essentially 100% COVID-19 has also disrupted the availability, supply and costs of April 2020 rentraw materials, particularly the increased cost of steel bar joists, insulation materials and 99%PVC piping used in sitework, which has resulted in an increase in the Company’s cost of rentconstruction and a delay in eachcompletion of Maythe Company’s construction projects. If these disruptions and June 2020. In March and April 2020, Griffin received aggregate rent relief requests from tenants representing 22% of total monthly rent. Griffin has not received any new requests for rent relief subsequent to April 30, 2020. Griffin has not finalized agreements with the three tenants whose rent relief requests remain outstanding. Basedhigher costs worsen, it could have material adverse impacts on the current discussions, the anticipated amount of rent relief granted to the three tenants whose requests remain outstanding would equate to less than 1% of Griffin's total annual rental revenue. All other requests for rent relief were either denied by Griffin or the tenants withdrew their requests.
Recent Accounting Pronouncements Adopted
In February 2016, the FASB issued Accounting Standards Update (“ASU” or “Update”) No. 2016-02, “Leases,” which establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU assetCompany’s business, financial results and a lease liability on the balance sheet for all leases with terms longer than twelve months. The accounting applied by lessors under ASU No. 2016-02 is largely unchanged from that applied under current U.S. GAAP. Leases are either classified as finance or operating, with classification affecting the pattern of expense recognitionfinancial position in the income statement. ASU No. 2016-02 also requires significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases,” which provides narrow amendments to clarify how to apply certain aspects of the new lease standard and ASU No. 2018-11,
9
“Leases (Topic 842): Targeted Improvements,” which provides an alternative transition method that permits an entity to use the effective date of ASU No. 2016-02 as the date of initial application through the recognition of a cumulative effect adjustment to the opening balance of retained earnings upon adoption. An entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease standard will continue to be in accordance with current U.S. GAAP under FASB ASC Topic 840, “Leases.” In December 2018, the FASB issued ASU No. 2018-20, “Leases (Topic 842): Narrow Scope Improvements for Lessors,” which provides clarification on implementation issues associated with adopting ASU No. 2016-02. In March 2019, the FASB issued ASU No. 2019-01, “Leases (Topic 842): Codification Improvements,” which clarifies the determination of fair value of an underlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows for sales-type and direct financing leases and transition issues related to Topic 250, Accounting Changes and Error Corrections.future.
Griffin used the modified retrospective method upon adoption of ASU No. 2016-02, ASU No. 2018-10, ASU No. 2018-11, ASU No. 2018-20 and ASU No. 2019-01 when they became effective for Griffin on December 1, 2019, and, therefore, Griffin did not restate any comparative periods. Upon adoption, Griffin elected the package of practical expedients permitted under the transition guidance, which permits Griffin to not reassess its prior conclusions about lease identification, lease classification and initial direct costs. Griffin elected to combine the non-lease components of common area maintenance charges with the related lease components. Griffin did not elect the practical expedient to use hindsight in determining the lease term and in assessing impairment of right-of-use assets. Griffin did elect the practical expedient pertaining to land easements that allows an entity to choose to not apply ASC 842 to certain existing land easements at transition. Griffin made an accounting policy election to keep leases with an initial term of twelve months or less off of the balance sheet. Griffin’s leases with its tenants were classified as operating leases under previous guidance and remained operating leases upon the adoption of ASC 842, therefore, as a lessor there was no significant impact upon adoption. As a lessee, Griffin has two operating leases that resulted in the recognition of ROU assets of $858 and lease liabilities of $858 related to Griffin’s executive office in New York City at the time of adoption. The adoption of ASC 842COVID-19 did not have a material impact on Griffin’s consolidated statementsthe Company’s rent collections in the 2021 six month period as over 99% of operations or cash flows.
rent due each month in the 2021 six month period, inclusive of rent relief agreements, was collected. In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements2021 first quarter, the Company entered into an agreement with a tenant that leased an approximately 7,000 square foot restaurant building that would have provided rent relief of approximately $20 over the remainder of that tenant’s lease term. Subsequent to Accounting for Hedging Activities,” which is intended to improvethat agreement, the financial reporting for hedging relationships to better represent the economic results ofbuilding was sold. As a company’s risk management activities in its financial statements and make certain targeted improvements to simplify the applicationresult of the hedge accounting guidance. ASU No. 2017-12 makes more financial and nonfinancial hedging strategies eligible for hedge accounting, amendspandemic there could be future reductions in the presentation and disclosure requirements and changes how entities assess effectiveness. In April 2019, the FASB issued ASU No. 2019-04, “Codification ImprovementsCompany’s rental revenue, particularly with respect to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which provides clarification on implementation issues associated with adopting ASU No. 2017-12. ASU No. 2017-12 and ASU No. 2019-04 each became effective for Griffin on December 1, 2019. The application of ASU No. 2017-12 and ASU No. 2019-04 did not have an impact on Griffin’s consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” to include share-based payment transactions for acquiring goods and services from nonemployees. ASU No. 2018-07 simplifies the accounting for nonemployee share-based payments by aligning it more closely with the accounting for employee awards. ASU No. 2018-07 became effective for Griffin on December 1, 2019. The application of ASU No. 2018-07 did not have an impact on Griffin’s consolidated financial statements.
In October 2018, the FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes.” ASU No. 2018-16 permits the use of the Swap OIS Rate (“OIS Rate”) based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. The amendments in ASU No. 2018-16 were required to be adopted concurrently with the amendments in ASU No. 2017-12, therefore, ASU No. 2018-16 became effective for Griffin on December 1, 2019. The application of ASU No. 2018-16 did not have an impact on Griffin’s consolidated financial statements.
its office/flex properties.
109
Recent Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.”Measurement” (“ASU No. 2018-13”). ASU No. 2018-13 removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively in the year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU No. 2018-13 will becomebecame effective for GriffinINDUS in the fiscal year ending November 30, 2021 (“fiscal 2021”). Early adoption is permitted upon issuance for any removed or modified disclosures. Griffin does not expect theTransition Period. The application of ASU No. 2018-13 todid not have an impact on itsINDUS’s consolidated financial statements.
In
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 $500,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, units or any combination of such securities during the three year period that commenced on February 22, 2021. Under the Universal Shelf, the Company may periodically offer one or more types of securities in amounts, at prices and on terms announced. When INDUS obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If the Company incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict INDUS’s operations.
On March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation5, 2021, under its Universal Shelf, INDUS completed an underwritten public offering of the Effects1,750,000 shares of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in ASU No. 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. Griffin is currently assessing the impact of ASU No. 2020-04 and the LIBOR transition on its consolidated financial statements.
There are various other Updates recently issued which represent technical correctionsCommon Stock at a price to the accounting literature or applyunderwriters of $56.85 per share. On March 15, 2021, the underwriters exercised their option to specific industries. Griffin does not expectpurchase an additional 177,049 shares of common stock from INDUS at the applicationsame price. INDUS received net proceeds of any$108,676, after expenses of these$877, from the aggregate of 1,927,049 shares sold on March 5, 2021 and March 15, 2021. The Company intends to use the proceeds from the sale of its Common Stock to finance its development pipeline and acquisitions and for other Updatescorporate purposes.
As of June 30, 2021, the Company had approximately $384,377 available for issuance under its Universal Shelf. See Note 11 for the subsequent event related to have an impact on its consolidated financial statements.INDUS’s Universal Shelf.
2.3. Fair Value
GriffinINDUS 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 Griffin’sINDUS’s interest rate swap agreements (see Note 4)5). These inputs are readily available in public markets or can be derived from information available in publicly quoted
10
markets, therefore, GriffinINDUS has categorized these derivative instruments as Level 2 within the fair value hierarchy. Level 2 assets at November 30, 2019 also included Griffin’s short-term investments in repurchase agreements with Webster Bank (see Note 1). The repurchase agreements were carried at their resell amounts, which approximated fair value due to their short-term nature.
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. INDUS’s consolidated balance sheet includes the Warrant liability and Contingent Value Rights (“CVR”) liability related to the private placement on August 24, 2020 (see Note 9). INDUS derived these values based on the Cox-Ross-Rubenstein option-pricing model and a Monte Carlo simulation valuation methodology, respectively. Therefore, INDUS recognized these liabilities as Level 3 within the fair value hierarchy and they will be measured on a recurring basis.
11
During the 2020 six month period, Griffin did not transfer any assets or liabilities into or out of Levels 1 or 2. The following are Griffin’sINDUS’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | |
|
| May 31, 2020 |
| June 30, 2021 | ||||||||||||||
|
| Quoted Prices in |
| Significant |
| Significant |
| Quoted Prices in |
| Significant |
| Significant | ||||||
|
| Active Markets for |
| Observable |
| Unobservable |
| Active Markets for |
| Observable |
| Unobservable | ||||||
|
| Identical Assets |
| Inputs |
| Inputs |
| Identical Assets |
| Inputs |
| Inputs | ||||||
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||||
Interest rate swap asset | | $ | — | | $ | 134 | | $ | — | |||||||||
Interest rate swap liabilities | | $ | — | | $ | 10,210 | | $ | — | | $ | — | | $ | 5,937 | | $ | — |
Common stock warrant liability | | $ | — | | $ | — | | $ | 10,165 | |||||||||
Contingent value rights liability | | $ | — | | $ | — | | $ | — | |||||||||
| | | | | | | | | | | | | | | | | | |
|
| November 30, 2019 |
| Dec. 31, 2020 | ||||||||||||||
|
| Quoted Prices in |
| Significant |
| Significant |
| Quoted Prices in |
| Significant |
| Significant | ||||||
|
| Active Markets for |
| Observable |
| Unobservable |
| Active Markets for |
| Observable |
| Unobservable | ||||||
|
| Identical Assets |
| Inputs |
| Inputs |
| Identical Assets |
| Inputs |
| Inputs | ||||||
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||||
Interest rate swap liabilities | | $ | — | | $ | 4,052 | | $ | — | | $ | — | | $ | 8,766 | | $ | — |
Common stock warrant liability | | $ | — | | $ | — | | $ | 8,790 | |||||||||
Contingent value rights liability | | $ | — | | $ | — | | $ | 656 | |||||||||
The carrying and estimated fair values of Griffin’s financial instruments are as follows:
| | | | | | | | | | | | | | |
|
| Fair Value |
| May 31, 2020 |
| November 30, 2019 | ||||||||
|
| Hierarchy |
| Carrying |
| Estimated |
| Carrying |
| Estimated | ||||
|
| Level |
| Value |
| Fair Value |
| Value |
| Fair Value | ||||
Financial assets: |
| |
| | |
| | |
| | | | | |
Cash and cash equivalents |
| 1 | | $ | 4,027 | | $ | 4,027 | | $ | 5,874 | | $ | 5,874 |
Short-term investments | | 2 | | $ | — | | $ | — | | $ | 1,011 | | $ | 1,011 |
Financial liabilities: | | | | | | | | | | | | | | |
Mortgage loans, net of debt issuance costs |
| 2 | | $ | 158,375 | | $ | 161,842 | | $ | 142,575 | | $ | 145,235 |
Revolving lines of credit | | 2 | | $ | 4,100 | | $ | 4,100 | | $ | 5,875 | | $ | 5,875 |
Interest rate swap liabilities |
| 2 | | $ | 10,210 | | $ | 10,210 | | $ | 4,052 | | $ | 4,052 |
The amounts included in the consolidated financial statements for cash and cash equivalents, short-term investments, leasing receivables from tenants, and 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 amount included in the consolidated financial statements for the revolving lines of credit approximate their fair values because of their variable interest rates. The fair values of the mortgage loans, net of debt issuance costs, are estimated based on current rates offered to Griffin for similar debt of the same remaining maturities and, additionally, Griffin considers its credit worthiness in determining the fair value of its mortgage loans. 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 OISOvernight 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 GriffinINDUS for liabilities.
The fair values of the mortgage loans, 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 June 30, 2021 and December 31, 2020, the carrying values of the mortgage loans were $157,724 and $160,655, respectively, and the fair values of the mortgage loans were $161,335 and $163,906, respectively.
11
The fair value of the Warrant liability was estimated using the Cox-Ross-Rubenstein option-pricing model. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in determining fair value of the Warrant liability is as follows:
| | | | |
|
| | Warrant Liability |
|
Expected volatility |
| | 46.63 | % |
Risk free interest rate |
| | 0.28 | % |
Expected term (in years) |
| | 2.15 | |
Annual dividend yield |
| | 0.93 | % |
| | | | |
| | | Fair Value of Derivative Warrant Liability | |
Fair value at December 31, 2020 | | $ | 8,790 | |
Change in fair value | | | 1,375 | |
Fair value at June 30, 2021 | | $ | 10,165 | |
Although the fair value of the Warrant was $10,165 as of June 30, 2021, the maximum amount that INDUS would be required to pay if the Warrant were to be settled in cash is $2,018. On August 24, 2021, the cash settlement feature of the Warrant liability terminates and the fair value of the Warrant liability on that date will be reclassified to equity on INDUS’s consolidated balance sheet.
The fair value of the CVR liability (see Note 9) was estimated using a Monte Carlo simulation valuation methodology. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in determining fair value of the CVR liability is as follows:
| | | | |
| | | Contingent Value Rights Liability | |
Expected volatility | | | 24.15 | % |
Risk free interest rate | | | 0.05 | % |
Expected term (in years) | | | 0.15 | |
Annual dividend yield | | | — | % |
| | | | |
| | | Fair Value of Contingent Value Rights Liability | |
Fair value at December 31, 2020 | | $ | 656 | |
Change in fair value | | | (656) | |
Fair value at June 30, 2021 | | $ | — | |
12
3.4. Real Estate Assets
Real estate assets consist of:
| | | | | | | | | | | | | | | | |
|
| Estimated |
|
| | |
| Estimated |
|
| | | ||||
|
| Useful Lives |
| May 31, 2020 | | Nov. 30, 2019 |
| Useful Lives |
| June 30, 2021 | | Dec. 31, 2020 | ||||
Land | | | | $ | 32,753 | | $ | 30,750 | | | | $ | 45,464 | | $ | 33,084 |
Land improvements | | 10 to 30 years | |
| 45,508 | |
| 40,992 | | 10 to 30 years | |
| 47,074 | |
| 45,827 |
Buildings and improvements | | 10 to 40 years | |
| 236,621 | |
| 220,086 | | 10 to 40 years | |
| 279,235 | |
| 233,250 |
Tenant improvements | | Shorter of useful life or terms of related lease | |
| 32,939 | |
| 30,318 | | Shorter of useful life or terms of related lease | |
| 35,249 | |
| 34,899 |
Machinery and equipment | | 3 to 20 years | | | 10,958 | | | 7,557 | | 3 to 20 years | | | 10,958 | | | 10,958 |
Construction in progress | | | | | 3,745 | | | 3,542 | | | | | 22,306 | | | 4,036 |
Development costs | | | |
| 5,169 | |
| 10,404 | | | |
| 3,856 | |
| 5,106 |
| | | |
| 367,693 | |
| 343,649 | | | |
| 444,142 | |
| 367,160 |
Accumulated depreciation | | | |
| (120,536) | |
| (105,035) | | | |
| (128,850) | |
| (124,839) |
| | | | $ | 247,157 | | $ | 238,614 | | | | $ | 315,292 | | $ | 242,321 |
Total depreciation expense and capitalized interest related to real estate assets were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended | | For the Six Months Ended | | | For the Three Months Ended | | For the Six Months Ended | ||||||||||||||||
| | May 31, 2020 |
| May 31, 2019 |
| May 31, 2020 |
| May 31, 2019 | | | June 30, 2021 |
| June 30, 2020 | | June 30, 2021 |
| June 30, 2020 | ||||||||
Depreciation expense | | $ | 2,967 | | $ | 2,599 | | $ | 5,830 | | $ | 5,190 | | | $ | 2,987 | | $ | 3,049 | | $ | 5,903 | | $ | 5,950 |
| | | | | | | | | | | | | | ||||||||||||
Capitalized interest | | $ | — | | $ | 87 | | $ | — | | $ | 129 | | ||||||||||||
Real estate assets held for sale consist of:
| | | | | | |
|
| May 31, 2020 |
| Nov. 30, 2019 | ||
Land | | $ | 508 | | $ | 323 |
Land improvements | | | 269 | | | 388 |
Buildings and improvements | | | — | | | 417 |
Development costs | | | 6,163 | | | 1,009 |
| | $ | 6,940 | | $ | 2,137 |
On March 9, 2020, Griffin,June 28, 2021, INDUS, through a consolidated VIE, purchased 170 Sunport Lane7800 Tuckaseegee Road (“170 Sunport”7800 Tuckaseegee”), an approximately 68,000395,000 square foot industrial/warehouselogistics building in Orlando, FloridaCharlotte, North Carolina for $5,749,$42,514, including acquisition costs. GriffinOn May 12, 2021, INDUS, through a consolidated VIE, purchased 6355 Farm Bureau Road (“6355 Farm Bureau”), an approximately 128,000 square foot industrial/logistics building in the Lehigh Valley of Pennsylvania for $11,928, including acquisition costs. For both acquisitions, INDUS provided all of the funding to the VIE to purchase 170 SunportVIEs for the purchases and determined that the fair value of the assets acquired approximated the purchase price. The $5,749 purchase price, represented the cost of the assets which werewas allocated to the real estate assets and intangible assets (see Note 9) on a relative fair value basis. The real estate assets primarily reflect the building and land improvements that are being depreciated principally over forty years and building and land improvements that are being depreciated over a period of fifteen years.
On February 18, 2020, Griffin, through a consolidated VIE, purchased 3320 Maggie Boulevard (“3320 Maggie”), an approximately 108,000 square foot industrial/warehouse building in Orlando, Florida for $7,921, including acquisition costs. Griffin provided all of the funding to the VIE to purchase 3320 Maggie and determined that the purchase price represented the cost of the assets which were allocated to the real estate assets on a relative fair value basis. Of the $7,921 purchase price, $7,941 represented the relative fair value of real estate assets, $770 represented the relative fair value of the acquired intangible asset and $790 represented the relative fair value of the acquired intangible liability, comprised of the value of the below market lease at the time of acquisition (see Notes 2 and 8). The intangible asset is included in other assets and the intangible liability is included in other liabilities on Griffin’s consolidated balance sheet. The real estate assets primarily reflect the building and land improvements that are being depreciated principally over forty years and building and tenant improvements that are being depreciated over a period of seven years. The intangible liability is being amortized over the term of the lease.
The acquisitions of 170 Sunport7800 Tuckaseegee and 3320 Maggie6355 Farm Bureau were made utilizing Reverse 1031 Like-Kind Exchanges that were entered into at the time the properties were acquired. As such, as of May 31, 2020, 170 Sunport and 3320 Maggie
13
June 30, 2021, these properties are in the possession of a qualified intermediary engaged to execute the Reverse 1031 Like-Kind Exchanges until the potential real estate sales transactions and the Reverse 1031 Like-Kind Exchanges are completed. Griffin retains essentially all
On April 13, 2021, INDUS closed on the purchase of an approximately 14 acre parcel of undeveloped land in Orlando, Florida (the “Jetport Land”) for a purchase price of $5,658, after transaction and entitlement costs. The Jetport Land is a replacement property as part of a Section 1031 Like-Kind Exchange (“1031 Like-Kind Exchange”) under the Internal Revenue Code. INDUS acquired the Jetport Land utilizing $1,993 of proceeds from the sales of one of its office/flex buildings and two smaller land parcels in November 2020. The balance of the legal and economic benefits and obligationspurchase price for the Jetport Land was paid from the Company’s cash on hand. INDUS plans to construct 2 industrial/logistics buildings totaling approximately 195,000 square feet on the Jetport Land.
The purchase prices for acquisitions in the 2021 six month period were allocated as follows:
| | | | | | | | | | | | |
| | 7800 Tuckaseegee | | 6355 Farm Bureau | | Jetport Land | | Total | ||||
Land | | $ | 4,606 | | $ | 2,163 | | $ | 5,658 | | $ | 12,427 |
Land improvements | | | 927 | | | 388 | | | — | | | 1,315 |
Buildings and improvements | | | 35,959 | | | 10,036 | | | — | | | 45,995 |
Tenant improvements | | | 200 | | | 132 | | | — | | | 332 |
Value of in-place lease | | | 1,462 | | | 918 | | | — | | | 2,380 |
Value of below market lease | | | (640) | | | (1,709) | | | — | | | (2,349) |
| | $ | 42,514 | | $ | 11,928 | | $ | 5,658 | | $ | 60,100 |
13
See Note 11 for subsequent events related to 170 Sunport and 3320 Maggie prior to the completion or termination of the Reverse 1031 Like-Kind Exchanges. Accordingly, 170 Sunport and 3320 Maggie are includedINDUS’s real estate assets.
Real estate assets held for sale consist of:
| | | | | | | |
|
| June 30, 2021 |
| Dec. 31, 2020 |
| ||
Land | | $ | 522 | | $ | 505 | |
Land improvements | | | 269 | | | 269 | |
Development costs | | | 5,589 | | | 6,028 | |
| | $ | 6,380 | | $ | 6,802 | |
The decrease in Griffin’s consolidated financial statements as consolidated VIEs until legal title is transferred to Griffin upon completion of the Reverse 1031 Like-Kind Exchanges.
In the 2020 six month period, real estate assets held for sale increasedin the 2021 six month period reflected $771 for sales of real estate assets that closed partially offset by $4,803, reflecting: (a) an increase of $5,987$349 that was reclassified from real estate assets transferred into real estate assets held for sale as a result of entering into agreements to sell such real estate; partially offset by (b) a decrease of $1,084 fromestate. The amounts remaining in real estate assets held for sale being transferred back into real estate assets, as a result ofare related to sales currently under contract which INDUS expects to close within the termination of agreementsnext six to sell such real estate assets;nine months.
5. Mortgages Loans, Construction Loan and (c) a reduction of $100 for a property sale that closed. The real estate assets held for sale that were returned to real estate assets, in the 2020 six month period were Griffin’s farm in Quincy, Florida and the approximately 7,200 square foot restaurant building in Griffin Center in Windsor, Connecticut.Interest Rate Swaps
4. Mortgage Loans
Griffin’sINDUS’s mortgage loans and construction loansloan consist of:
| | | | | | | |
Mortgage loans: |
| June 30, 2021 |
| Dec. 31, 2020 |
| ||
4.72%, due October 3, 2022 * | | $ | 4,007 | | $ | 4,061 | |
4.39%, due January 2, 2025 * | | | 18,140 | | | 18,453 | |
4.17%, due May 1, 2026 * | | | 12,495 | | | 12,696 | |
3.79%, due November 17, 2026 * | | | 23,535 | | | 23,911 | |
4.39%, due August 1, 2027 * | | | 9,614 | | | 9,750 | |
3.97%, due September 1, 2027 | | | 11,298 | | | 11,419 | |
4.57%, due February 1, 2028 * | | | 17,375 | | | 17,601 | |
5.09%, due July 1, 2029 | | | 4,968 | | | 5,214 | |
5.09%, due July 1, 2029 | | | 3,481 | | | 3,653 | |
3.60%, due January 2, 2030 * | | | 6,267 | | | 6,350 | |
3.48%, due February 1, 2030 | | | 14,486 | | | 14,682 | |
3.50%, due July 1, 2030 * | | | 4,981 | | | 5,046 | |
4.33%, due August 1, 2030 | | | 16,057 | | | 16,244 | |
4.51%, due April 1, 2034 | | | 13,524 | | | 13,688 | |
Nonrecourse mortgage loans | | | 160,228 | | | 162,768 | |
Debt issuance costs | | | (1,964) | | | (2,113) | |
Nonrecourse mortgage loans, net of debt issuance costs | | | 158,264 | | | 160,655 | |
| | | | | | | |
Construction loan: | | | | | | | |
LIBOR plus 1.65% | | | — | | | — | |
Debt issuance costs | | | (540) | | | — | |
Construction loan, net of debt issuance costs | | | (540) | | | — | |
| | | | | | | |
Mortgage loans and construction loan, net of debt issuance costs | | $ | 157,724 | | $ | 160,655 | |
| | | | | | | |
| |
| May 31, 2020 |
| Nov. 30, 2019 | ||
4.72%, due October 3, 2022 * | | | $ | 4,122 | | $ | 4,174 |
4.39%, due January 2, 2025 * | | | | 18,804 | | | 19,101 |
4.17%, due May 1, 2026 * | | | | 12,923 | | | 13,115 |
3.79%, due November 17, 2026 * | | | | 24,341 | | | 24,701 |
4.39%, due August 1, 2027 * | | | | 9,904 | | | 10,034 |
3.97%, due September 1, 2027 | | | | 11,557 | | | 11,673 |
4.57%, due February 1, 2028 * | | | | 17,855 | | | 18,069 |
5.09%, due July 1, 2029 | | | | 5,492 | | | 5,725 |
5.09%, due July 1, 2029 | | | | 3,848 | | | 4,011 |
3.60%, due January 2, 2030 * | | | | 6,446 | | | — |
3.48%, due February 1, 2030 | | | | 14,906 | | | — |
4.33%, due August 1, 2030 | | | | 16,456 | | | 16,634 |
4.51%, due April 1, 2034 | | | | 13,874 | | | 14,030 |
3.91%, due January 27, 2020 * | | | | — | | | 3,206 |
Nonrecourse mortgage loans | | | | 160,528 | | | 144,473 |
Debt issuance costs | | | | (2,153) | | | (1,898) |
Nonrecourse mortgage loans, net of debt issuance costs | | | | 158,375 | | | 142,575 |
| | | | | | | |
*Variable rate loans. Griffin hasloans for which INDUS entered into interest rate swap agreements to effectively fix the interest rates on these loans to the rates reflected above.
Griffin’sINDUS’s weighted average interest rate on its mortgage loans, including the effect of its interest rate swap agreements, was 4.21% and 4.31%4.18% as of MayJune 30, 2021 and December 31, 2020 and November 30, 2019, respectively.2020. As of May 31, 2020, GriffinJune 30, 2021, INDUS was a party to twelve13 interest rate swap agreements with notional amounts totaling $96,414 and $97,868 at June 30, 2021 and December 31, 2020, respectively, related to its variable rate nonrecourse mortgage loans on certain of its real estate assets. GriffinThe Company accounts for its interest rate swap agreements as effective cash flow hedges (see Note 2)3). No ineffectiveness on the cash flow hedges was recognized as of May 31, 2020, and none is anticipated over the term of the agreements. Amounts in AOCIaccumulated other comprehensive income (“AOCI”) will be reclassified into interest expense over the term of the swap agreements to achieve fixed interest rates on each variable rate mortgage. NoneNaN of the interest rate swap agreements
14
contain any credit risk related contingent features. In the 2020 and 20192021 six month periods, Griffinperiod, INDUS recognized losses,a gain, included in other comprehensive income,loss, of $2,963 on its interest rate swap agreements. In the 2020 six month period, INDUS recognized a loss, included in other comprehensive loss, of $7,091, before taxes, of $6,158 and $5,365, respectively, on its interest rate swap agreements. As of May 31, 2020, $1,963June 30, 2021, $1,964 was expected to be reclassified over the next twelve months to AOCI from interest expense. As of May 31, 2020,June 30, 2021, the net fair value of Griffin’sINDUS’s interest rate swap agreements was a liability of $10,210, which is$5,803, with $134 included in other assets and $5,937 included in other liabilities on Griffin’sINDUS’s consolidated balance sheet. Interest expense related to INDUS’s interest rate swap agreements in the 2021 and 2020 six month periods was $994 and $549 (before tax), respectively.
On December 20, 2019, two wholly-owned subsidiariesMay 7, 2021, a subsidiary of GriffinINDUS entered into a nonrecourse mortgageconstruction loan agreement (the “2019 Webster Mortgage”“2021 JPM Construction Loan”) with WebsterJPMorgan Chase Bank for $6,500. The 2019 Webster Mortgage is collateralized by
14
7466 Chancellor Drive (“7466 Chancellor”), an approximately 100,000 square foot industrial/warehouse building in Orlando, Florida, that was acquired on October 25, 2019. The 2019 Webster Mortgage has a ten-year term with monthly principal payments based on a twenty-five-year amortization schedule. The interest rate for the 2019 Webster Mortgage is a floating rate of the one month LIBOR rate plus 1.75%. At the time the 2019 Webster Mortgage closed, Griffin entered into an interest rate swap agreement with Webster Bank that effectively fixes the interest rate of the 2019 Webster Mortgage at 3.60% for the entire loan term. $5,875 of the proceeds from the 2019 Webster Mortgage were usedN.A. to repay Webster Bank for the borrowing under Griffin’s Acquisition Credit Line (as defined below) that was used to finance a portion of the purchase price of 7466 Chancellor (see Note 5).
On January 23, 2020, two wholly-owned subsidiaries of Griffin closed on a nonrecourse mortgage loan (the “2020 State Farm Mortgage”) with State Farm Life Insurance Company for $15,000. The 2020 State Farm Mortgage is collateralized by two industrial/warehouse buildings in the Lehigh Valley of Pennsylvania, 6975 Ambassador Drive and 871 Nestle Way, that aggregate approximately 254,000 square feet. The 2020 State Farm Mortgage has a ten-year term with monthly principal payments based on a twenty-five-year amortization schedule. The interest rate for the 2020 State Farm Mortgage is 3.48%. $3,191 of the proceeds from the 2020 State Farm Mortgage were used to repay the mortgage loan on 871 Nestle Way that was scheduled to mature on January 27, 2020.
On June 30, 2020, a wholly-owned subsidiary of Griffin (the “Borrower”) closed on a nonrecourse mortgage loan (the “2020 Webster Mortgage”) with Webster Bank for $5,100. The 2020 Webster Mortgage is collateralized by 3320 Maggie, which was acquired on February 18, 2020. The 2020 Webster Mortgage has a ten-year term with monthly principal payments based on a twenty-five year amortization schedule. The interest rate for the 2020 Webster Mortgage is a floating rate of the one month LIBOR rate plus 2.56%. At the time the 2020 Webster Mortgage closed, Griffin entered into an interest rate swap agreement with Webster Bank that effectively fixes the interest rate of the 2020 Webster Mortgage at 3.50% for the entire loan term. $4,100 of the proceeds from the 2020 Webster Mortgage were used to repay Webster Bank for the borrowing under Griffin’s Acquisition Credit Line that was used to finance a portion of the purchase price of 3320 Maggie (see Note 5).
Under the terms of the 2020 Webster Mortgage, the Borrower must maintain a minimum debt service coverage ratio (the “DSCR”), calculated by dividing the trailing twelve months net operating income of 3320 Maggie by the debt service on the 2020 Webster Mortgage for the DSCR test period, as further described under the terms of the 2020 Webster Mortgage, equal to or greater than 1.25 times, and the Loan to Value Ratio (as defined and further described under the 2020 Webster Mortgage) may not exceed 65%. The terms of the 2020 Webster Mortgage require that commencing on January 1, 2024, an annual amount equal to a total of $1.00 per square foot shall be deposited by the Borrower into an escrow account with Webster Bank until such escrow account balance reaches $300. Subject to certain terms and conditions under the 2020 Webster Mortgage, (i) the funds in the escrow account may be released by Webster Bank upon extension of 3320 Maggie’s existing lease, or entry into any other Approved Lease (as defined and further described under the 2020 Webster Mortgage) on terms and conditions acceptable to Webster Bank, in each case for a term that runs for a minimum of one year beyond the maturity date of the 2020 Webster Mortgage, or (ii)provide a portion of the funds for the site work and development costs of an approximately 141,000 square foot industrial/logistics building in Charlotte, North Carolina (the “Charlotte Build-to-Suit”). Total borrowings under the JPM Construction Loan will be the lesser of $28,400 or 67.5% of the project cost (as defined in the escrow account may2021 JPM Construction Loan) of the Charlotte Build-to-Suit. The term of the 2021 JPM Construction Loan is two years, with a one-year extension at the Company’s option. Interest under the 2021 JPM Construction Loan, to be releasedadjusted 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 Webster Bank forthe tenant improvements and lease commissions relatedin the Charlotte Build-to-Suit. There were 0 borrowings against the 2021 JPM Construction Loan as of June 30, 2021. Subsequent to Approved Leases.June 30, 2021, the Company borrowed $9,594 under the 2021 JPM Construction Loan.
5.6. Revolving Credit Agreements
Griffin hasSubsequent to the end of the 2021 second quarter, on August 5, 2021, INDUS, as parent guarantor, INDUS RT, LP, as borrower, certain subsidiaries of INDUS RT, LP as guarantors, JPMorgan Chase Bank, N.A. (“JPMorgan”) as Administrative Agent, Joint Lead Arranger and Joint Bookrunner, CITIBANK, N.A. as Joint Lead Arranger, Joint Bookrunner and Syndication Agent and the other parties thereto entered into an agreement for a $19,500new secured revolving credit facility of up to $100,000 (the “New Credit Facility”) with several banks that replaced the Company’s existing revolving credit line (the “Webster Credit Line”)and acquisition credit line with Webster Bank, that is scheduledN.A. (“Webster Bank”) (see below). The New Credit Facility has a three year term with 2 one-year extensions at the Company’s option. The New Credit Facility also includes an uncommitted incremental facility, which would enable the New Credit Facility to expire on September 30, 2021, with an optionbe increased up to extend for an additional year through September 30, 2022. Interest on borrowings$250,000 in the aggregate. Borrowings under the WebsterNew Credit Line are atFacility will 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 rate under the New Credit Facility is the 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 immediately prior to entering into the New Credit Facility. In the event that Webster BankJPMorgan determines that LIBOR is no longer available, the Amended WebsterNew Credit LineFacility contemplates that Webster BankJPMorgan shall transition to a comparable rate of interest to the LIBOR rate. Under the terms of the RevolvingNew Credit Facility, INDUS must maintain: (i) a consolidated tangible net worth of 75% of the consolidated tangible net worth as of the last day of the most-recent fiscal quarter ending on or prior to the closing date plus 75% of the aggregate increases in stockholders’ equity of the Company by reason of issuance or sale of equity of the Company; (ii) a fixed charge coverage ratio of (a) 1.25 to 1.0 through March 31, 2022, and (b) 1.50 to 1.0 on and after June 30, 2022; (iii) a maximum leverage ratio of total indebtedness to total assets of less than 60% on the last day of any fiscal quarter; (iv) a maximum secured leverage ratio of total secured indebtedness to total asset value of (a) 50% through December 31, 2022, and (b) 40% on and after March 31, 2023; (v) a minimum borrowing base of (a) $30,000 through December 30, 2022, (b) $50,000 from December 31, 2022 through December 30, 2023, and (c) $100,000 on and after December 31, 2023; and (vi) a minimum of (a) 5 industrial unencumbered properties from June 30, 2021 through December 30, 2023, and (b) 8 industrial unencumbered properties on and after December 31, 2023.
On March 17, 2021, INDUS executed an amendment (the “Revolving Credit Line Amendment, Griffin must maintain: (a) a maximum loanAmendment”) to value ratio of 72%; (b) a minimum liquidity,its $19,500 revolving credit line (the “Webster Credit Line” and, as defined inamended by the Revolving Credit Line Amendment, the “Amended Webster Credit Line”) with Webster Bank that was scheduled to expire on September 30, 2021. The Revolving Credit Line Amendment increased the amount of $5,000; and (c) a fixed charge coverage ratio, defined as EBITDA minus cash income taxes and dividends paid divided by debt service (the “Fixed Charge Coverage Ratio”),the Amended Webster Credit Line from $19,500 to $35,000, while adding 2 industrial/logistics buildings totaling approximately 283,000 square feet in the Charlotte, North Carolina area, to the collateral for the Amended Webster Credit Line. Interest on borrowings under the Amended Webster Credit Line remained the same at the one-month LIBOR rate plus 2.50%. In addition to the 2 industrial/logistics properties in the Charlotte area, the collateral pool for the Amended Webster Credit Line consisted of at least 1.1 to 1.0.
15
The Webster Credit Line is collateralized by Griffin’s properties in Griffin Center South in Bloomfield, Connecticut,the Company’s 8 office/flex buildings aggregating approximately 235,000224,000 square feet and 2 industrial/logistics buildings aggregating approximately 50,000 square feet in Connecticut and 170 Sunport Lane, an approximately 48,000 square foot single-story office building in Griffin Center in Windsor, Connecticut and an approximately 31,00068,000 square foot industrial/warehouselogistics building in Bloomfield, Connecticut. As of May 31, 2020,Orlando, Florida, acquired in fiscal 2020. At June 30, 2021, there were no0 borrowings againstoutstanding under the Amended Webster Credit Line, however, the Amended Webster Credit Line secured certain unused standby letters of credit aggregating $484$3,097 that arewere related to Griffin'sINDUS's development activities.
On June 30, 2020, in connection with the 2020 Webster Mortgage, Griffin and Webster Bank entered into a letter agreement (the “Side Note”) amending the Webster Credit Line. Under the terms of the Side Note, an amount equal to one year’s debt service ($306) on the 2020 Webster Mortgage will be carved out and not available to be borrowed (the “Holdback”) under the Line of Credit. If the debt service is not paid on the 2020 Webster Mortgage, Webster Bank would be able to advance funds from the The Amended Webster Credit Line as needed to make monthly payments of debt service underwas replaced by the 2020 Webster Mortgage. The provisions regarding the Holdback expire on September 30, 2021, the maturity date of the WebsterNew Credit Line, and any extension to the maturity date of the Webster Credit Line will not apply to the Holdback.Facility (see above).
GriffinINDUS also hashad a credit line of $15,000 with Webster Bank that is to bewas used to finance property acquisitions (the “Acquisition Credit Line”). The Acquisition Credit Line iswas unsecured expiresand scheduled to expire on September 30, 2021 with an option to extend for an additional year through September 30, 2022, and may becould have been used to fund up to 65% of the purchase price of real estate acquisitions. Interest on advances under the Acquisition Credit Line arewere at the one-month LIBOR rate plus 2.75%. In the event that LIBOR is no longer readily determinable or available, the Acquisition Credit Line contemplates that Webster Bank shall transition to an alternate rate of interest to the LIBOR rate taking into account then prevailing standards in the market for determining interest rates for commercial loans made by financial institutions in the United States at such time. Amounts borrowed under the Acquisition Credit Line are expected to be repaid with proceeds from long-term financing of the property acquired. If amounts borrowed under the Acquisition Credit Line are not repaid within 135 days from the date the properties are acquired, Griffin has agreed to either (a) repay the portion of the Acquisition Credit Line allocable to such advance or (b) execute a first-lien mortgage in favor of Webster Bank. Under the terms of the Acquisition Credit Line, Griffin must maintain (i) a minimum debt service coverage ratio of the aggregate acquired property (as defined in the Acquisition Credit Line) equal to or greater than 1.25 times; (ii) a minimum net worth of not less than $80,000; (iii) a minimum liquidity, as defined in the Acquisition Credit Line, of $5,000; (iv) a ratio of total debt plus preferred stock, to total assets not to exceed 50% of the total fair market value of Griffin’s assets; and (v) a Fixed Charge Coverage Ratio of at least 1.1 to 1.0.
At NovemberJune 30, 2019, $5,875 was2021, there were 0 borrowings outstanding under the Acquisition Credit Line for the purchase in October 2019 of 7466 Chancellor, which was repaid on December 20, 2019 using the proceeds from the 2019 Webster Mortgage (see Note 4). As of May 31, 2020, $4,100 was outstanding under theLine. The Acquisition Credit Line forwas replaced by the purchase of 3320 Maggie at an interest rate of 3.12%. Subsequent to May 31, 2020, the outstanding balance of $4,100 was repaid using the proceeds from the 2020 Webster MortgageNew Credit Facility (see Note 4)above).
6.
7. Stockholders’ Equity
Per Share Results
Basic and diluted per share results were based on the following:
| | | | | | | | | | | | |
|
| For the Three Months Ended | | For the Six Months Ended | ||||||||
|
| June 30, 2021 |
| June 30, 2020 | | June 30, 2021 |
| June 30, 2020 | ||||
Net loss | | $ | (1,151) | | $ | (694) | | $ | (1,919) | | $ | (980) |
| | | | | | | | | | | | |
Weighted average shares outstanding for computation of basic per share results | |
| 7,718,000 | |
| 5,130,000 | |
| 6,981,000 | |
| 5,109,000 |
Incremental shares from assumed exercise of stock options and warrants (a) | |
| — | |
| — | |
| — | |
| — |
Adjusted weighted average shares for computation of diluted per share results | |
| 7,718,000 | |
| 5,130,000 | |
| 6,981,000 | |
| 5,109,000 |
| | | | | | | | | | | | | |
|
| For the Three Months Ended | | For the Six Months Ended |
| ||||||||
|
| May 31, 2020 |
| May 31, 2019 | | May 31, 2020 |
| May 31, 2019 |
| ||||
Net (loss) income | | $ | (693) | | $ | 5,819 | | $ | (1,013) | | $ | 5,233 | |
| | | | | | | | | | | | | |
Weighted average shares outstanding for computation of basic per share results | |
| 5,125,000 | |
| 5,067,000 | |
| 5,100,000 | |
| 5,066,000 | |
Incremental shares from assumed exercise of Griffin stock options (a) | |
| — | |
| 40,000 | |
| — | |
| 31,000 | |
Adjusted weighted average shares for computation of diluted per share results | |
| 5,125,000 | |
| 5,107,000 | |
| 5,100,000 | |
| 5,097,000 | |
16
| (a) | Incremental shares from the assumed exercise of |
Sale of Common Stock
On March 3, 2020, Gordon F. DuGan was appointed to serve as a Director of Griffin, effective immediately. Mr. DuGan was also appointed as Chairman of the Board of Directors. Mr. DuGan and Griffin entered into a Chairmanship and Advisory Agreement ( the “Advisory Agreement”), on March 3, 2020, whereby Mr. DuGan agreed to also serve as a non-employee advisor to Griffin on, amongst other things, growth strategy, including identifying markets, acquisitions and other transactions, recruitment of key personnel, potential capital raising efforts and general management advice (collectively the “Advisory Services”). As compensation to Mr. DuGan for providing such Advisory Services, Mr. DuGan received: (i) a non-qualified stock option to acquire 48,000 shares of Griffin Common Stock at an exercise price of $45.98 per share under the 2009 Stock Option Plan (see Griffin Stock Option Plans below) and (ii) a non-qualified stock option (the “Supplemental Advisor Option”) to acquire 52,000 shares of Griffin Common Stock at an exercise price of $46.91 per share under the 2020 Incentive Award (see Griffin Stock Option Plans below).
On March 9, 2020, Griffin completed the sale of 53,293 shares of Griffin’s Common Stock at a price per share of $46.91, for cash proceeds of $2,500, in accordance with the Advisory Agreement and pursuant to a Stock Purchase Agreement, dated as of March 5, 2020, between Mr. DuGan and Griffin.
Universal Shelf Filing/At-the-Market Equity Offering Program
On April 11, 2018, Griffin filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”) with the SEC. Under the Universal Shelf, Griffin may offer and sell up to $50,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, units or any combination of such securities during the three year period that commenced upon the Universal Shelf becoming effective on April 25, 2018. Under the Universal Shelf, Griffin may periodically offer one or more types of securities in amounts, at prices and on terms announced, if and when the securities are ever offered. On May 10, 2018, Griffin filed a prospectus supplement with the SEC under which it may issue and sell, from time to time, up to an aggregate of $30,000 of its common stock (“Common Stock”) under an “at-the-market” equity offering program (the “ATM Program”) through Robert W. Baird & Co. Incorporated (“Baird”), as sales agent. Under a sales agreement with Baird, Griffin will set the parameters for the sales of its Common Stock under the ATM Program, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum price below which sales of shares may not be made. Sales of Common Stock, if any, under the ATM Program would be made in offerings as defined in Rule 415 of the Securities Act of 1933, as amended. In addition, with the prior consent of Griffin, Baird may also sell shares in privately negotiated transactions. Griffin expects to use net proceeds, if any, from the ATM Program for acquisitions of target properties consistent with Griffin’s investment strategies, repayment of debt and general corporate purposes. If Griffin obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If Griffin incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict Griffin’s operations.
Griffin Stock OptionCompensation Plans
Through March 3, 2020,Stock Options
There were 0 stock options were granted by Griffin under the Griffin Industrial Realty, Inc. 2009 Stock Option Plan (as amended, the “2009 Stock Option Plan”). Options granted under the 2009 Stock Option Plan were either incentive stock options or non-qualified stock options issued at an exercise price not less than fair market value on the date approved by Griffin’s Compensation Committee. Vesting of all of Griffin's stock options is solely based upon service requirements and does not contain market or performance conditions.
Stock options issued expire ten years from the grant date. In accordance with the 2009 Stock Option Plan, stock options issued to non-employee directors upon their initial election to the board of directors were fully exercisable immediately upon the date of the option grant. Stock options issued to non-employee directors upon their re-election to the board of directors vest on the second anniversary from the date of grant. Stock options issued to employees vest in
17
equal installments on the third, fourth and fifth anniversaries from the date of grant. None of the stock options outstanding at May 31, 2020 may be exercised as stock appreciation rights.
On March 3, 2020, Griffin’s Board of Directors adopted and approved the Griffin Industrial Realty, Inc. and Griffin Industrial, LLC 2020 Incentive Award Plan (the “2020 Incentive Award Plan”). The 2020 Incentive Award Plan was effective as of the date it was adopted by the Board, subject to stockholder approval, which was received at Griffin’s 2020 Annual Meeting of Stockholders on May 7, 2020. The 2020 Incentive Award Plan replaced the 2009 Stock Option Plan and authorizes for grant a total of 300,000 shares (plus any shares subject to awards under the 2009 Stock Option Plan, as of the date of stockholder approval of the 2020 Incentive Award Plan, that are forfeited, expire, are converted to shares of another person or are settled for cash), subject to certain adjustments in the 2020 Incentive Award Plan. In addition to granting stock options, the 2020 Incentive Award Plan also enables Griffin to grant stock appreciation rights, restricted stock awards, restricted stock unit awards, partnership interests, other equity or cash based awards and dividend equivalents. No new awards will be granted under the 2009 Stock Option Plan; however, all outstanding awards under the 2009 Stock Option Plan remain outstanding in accordance with their terms.
2021 six month period. The following options were granted by GriffinINDUS in the 2020 six month period under the 2020 Incentive Award Plan and the 2009 Stock Option Plan:
| | | | | | | | | | |
| | For the Six Months Ended | ||||||||
| | May 31, 2020 | | May 31, 2019 | ||||||
|
| |
| Fair Value per |
| |
| Fair Value per | ||
| | Number of | | Option at | | Number of | | Option at | ||
| | Shares | | Grant Date | | Shares | | Grant Date | ||
Non-employee directors | | 111,258 | | $ | 11.00 - 14.17 | | 5,946 | | $ | 12.87 |
| | | | | |
| | Fair Value per | |||
| | Number of | | Option at | |
| | Shares | | Grant Date | |
Non-employee directors | | 111,258 | | $ | 11.00 - 14.17 |
The fair values of all options granted were estimated as of the grant date using the Black-Scholes option-pricing model. Assumptions used in determining the fair value of the stock options granted were as follows:
| | | | | |
| | For the Six Months Ended | |||
|
| May 31, 2020 |
| May 31, 2019 | |
Expected volatility |
| 29.7 - 30.3 | % | 30.9 | % |
Risk free interest rates |
| 0.5 - 0.9 | % | 2.3 | % |
Expected option term (in years) |
| 8.5 | | 8.5 | |
Annual dividend yield |
| 1.3 | % | 1.2 | % |
| | |
Number of option holders at |
|
|
Compensation expense and related tax benefits for stock options were as follows:
| | | | | | | | | | | | | |
| | For the Three Months Ended |
| For the Six Months Ended |
| ||||||||
|
| May 31, 2020 |
| May 31, 2019 |
| May 31, 2020 |
| May 31, 2019 |
| ||||
Compensation expense | | $ | 203 | | $ | 94 | | $ | 260 | | $ | 184 | |
| | | | | | | | | | | | | |
Related tax benefit | | $ | 34 | | $ | 13 | | $ | 43 | | $ | 26 | |
1816
For all periods presented, the forfeiture rate for directors ranged from 0% to 2%, the forfeiture rate for executives was 17.9% and the forfeiture rate for employees was 38.3%. The rates utilized were based on the historical activity of the grantees.
As of May 31, 2020,June 30, 2021, the unrecognized compensation expense related to nonvestedunvested stock options that will be recognized during future periods is as follows:
| | | | | | |
Balance of Fiscal 2020 |
| $ | 249 | |||
Fiscal 2021 | | $ | 442 | |||
Balance of Fiscal 2021 |
| $ | 199 | |||
Fiscal 2022 | | $ | 377 | | $ | 372 |
Fiscal 2023 | | $ | 244 | | $ | 231 |
Fiscal 2024 | | $ | 120 | | $ | 111 |
Fiscal 2025 | | $ | 23 | | $ | 15 |
A summary of Griffin’sINDUS’s stock option activity is as follows:
| | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended | | For the Six Months Ended | ||||||||||||||||
| | May 31, 2020 | | May 31, 2019 | | June 30, 2021 | | June 30, 2020 | ||||||||||||
| | Number of | | | Weighted Avg. | | Number of | | | Weighted Avg. | | Number of | | | Weighted Avg. | | Number of | | | Weighted Avg. |
| | Shares | | | Exercise Price | | Shares | | | Exercise Price | | Shares | | | Exercise Price | | Shares | | | Exercise Price |
Outstanding at beginning of period |
| 189,822 | | $ | 28.23 |
| 224,001 | | $ | 28.20 |
| 246,150 | | $ | 36.06 |
| 189,822 | | $ | 28.23 |
Adjustment for stock dividend | | 5,413 | | $ | 34.29 | | — | | $ | — | ||||||||||
Granted |
| 111,258 | | $ | 45.72 |
| 5,946 | | $ | 36.99 |
| — | | $ | — |
| 111,258 | | $ | 45.72 |
Exercised |
| (2,734) | | $ | 29.25 |
| (29,838) | | $ | 28.71 |
| (6,370) | | $ | 26.46 |
| (2,734) | | $ | 29.25 |
Forfeited |
| — | | $ | — |
| (2,788) | | $ | 35.86 |
| (1,067) | | $ | 37.49 |
| — | | $ | — |
Outstanding at end of period |
| 298,346 | | $ | 34.74 |
| 197,321 | | $ | 28.28 |
| 244,126 | | $ | 35.50 |
| 298,346 | | $ | 34.74 |
| | | | | | | | | | |
|
|
|
|
|
|
| Weighted Avg. |
|
|
|
|
|
|
|
|
|
| Remaining |
|
|
|
Range of Exercise Prices for |
| Outstanding at |
| Weighted Avg. |
| Contractual Life |
| Total Intrinsic | ||
Outstanding Options |
| June 30, 2021 |
| Exercise Price |
| (in years) |
| Value | ||
$23.00 - $28.00 |
| 105,176 | | $ | 26.25 |
| 4.8 |
| $ | 4,144 |
$28.00 - $32.00 |
| 14,073 | | $ | 29.84 |
| 4.0 |
| | 504 |
$32.00 - $47.00 |
| 124,877 | | $ | 43.93 |
| 8.5 |
| | 2,712 |
|
| 244,126 | | $ | 35.50 |
| 6.6 | | $ | 7,360 |
| | | | | | | | | | |
Vested options | | 134,447 | | $ | 27.82 |
| 4.9 |
| $ | 5,087 |
Restricted Stock Units
Under the 2020 Incentive Award Plan, INDUS granted the following restricted stock units of Common Stock (“RSUs”) in the 2021 six month period;
| | | | | | | | | | |
| | Time-based vesting | | Performance-based vesting | ||||||
|
| |
| Fair Value per |
| |
| Fair Value per | ||
| | Number of | | Unit at | | Number of | | Option at | ||
| | Units | | Grant Date | | Shares | | Grant Date | ||
Employees | | 8,508 | | $ | 63.15 | | 8,508 | | $ | 79.33 |
Non-employee directors | | 4,682 | | $ | 67.28 | | - | | | |
| | 13,190 | | | |
| 8,508 | | | |
The time-based RSUs granted to employees were effective February 1, 2021 and, subject to the recipient’s continued employment, will vest over three years in equal installments on February 1 of each year beginning in 2022. The performance based RSUs granted in fiscal 2021 will vest after a period of three years and be measured over the three-year period on pre-established goals. The time-based RSUs granted to non-employee directors were effective on June 17, 2021 and will vest over one year. The holders of RSUs will receive credit for dividends, but do not have voting rights. The RSUs may not be sold, assigned, transferred, pledged or otherwise disposed of and are subject to a risk of forfeiture prior to the expiration of the applicable vesting period.
| | | | | | | | | | |
|
|
|
|
|
|
| Weighted Avg. |
|
|
|
|
|
|
|
|
|
| Remaining |
|
|
|
Range of Exercise Prices for |
| Outstanding at |
| Weighted Avg. |
| Contractual Life |
| Total Intrinsic | ||
Vested and Nonvested Options |
| May 31, 2020 |
| Exercise Price |
| (in years) |
| Value | ||
$23.00 - $28.00 |
| 112,638 | | $ | 26.76 |
| 5.7 |
| $ | 1,536 |
$28.00 - $32.00 |
| 62,478 | | $ | 29.21 |
| 2.1 |
| | 698 |
$32.00 - $47.00 |
| 123,230 | | $ | 44.84 |
| 9.6 |
| | 61 |
|
| 298,346 | | $ | 34.74 |
| 6.6 | | $ | 2,295 |
17
As of June 30, 2021, the unrecognized compensation expense related to RSUs that will be recognized during future periods is as follows:
| | | |
Balance of Fiscal 2021 |
| $ | 425 |
Fiscal 2022 | | $ | 521 |
Fiscal 2023 | | $ | 282 |
Fiscal 2024 | | $ | 23 |
Compensation expense and related tax benefits for stock options and restricted stock units were as follows:
| | | | | | | | | | | | |
| | For the Three Months Ended | | For the Six Months Ended | ||||||||
|
| June 30, 2021 |
| June 30, 2020 | | June 30, 2021 |
| June 30, 2020 | ||||
Compensation expense | | $ | 291 | | $ | 160 | | $ | 505 | | $ | 282 |
| | | | | | | | | | | | |
Related tax benefit | | $ | — | | $ | 34 | | $ | — | | $ | 62 |
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive loss, net of tax, comprised of unrealized gains on cash flow hedges is as follows:
| | | | | | | | | | | | | |
| | For the Six Months Ended | | | For the Six Months Ended | ||||||||
| | May 31, 2020 | | | May 31, 2019 | | | June 30, 2021 | | | June 30, 2020 | ||
Balance at beginning of period |
| $ | (3,141) |
| $ | 2,395 | |
| $ | (7,855) |
| $ | (2,540) |
Other comprehensive loss before reclassifications | |
| (5,264) | |
| (4,254) | | ||||||
Other comprehensive gain (loss) before reclassifications | |
| 1,969 | |
| (6,079) | |||||||
Amounts reclassified | |
| 339 | |
| 68 | | |
| 994 | |
| 434 |
Net activity for other comprehensive loss | |
| (4,925) | |
| (4,186) | | ||||||
Net activity for other comprehensive gain (loss) | |
| 2,963 | |
| (5,645) | |||||||
Balance at end of period |
| $ | (8,066) |
| $ | (1,791) | |
| $ | (4,892) |
| $ | (8,185) |
19
Changes in accumulated other comprehensive lossincome (loss), net are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| For the Three Months Ended |
| For the Three Months Ended | ||||||||||||||||||||||||||||||||
| | May 31, 2020 |
| May 31, 2019 | | June 30, 2021 |
| June 30, 2020 | ||||||||||||||||||||||||||||
|
|
|
|
| Tax |
|
|
|
|
|
|
| Tax |
|
|
|
|
|
|
| Tax |
|
|
|
|
|
|
| Tax |
|
|
| ||||
|
|
|
|
| (Expense) |
| Net-of |
|
|
|
| (Expense) |
| Net-of |
|
|
|
| (Expense) |
| Net-of |
|
|
|
| (Expense) |
| Net-of | ||||||||
|
| Pre-Tax |
| Benefit |
| Tax |
| Pre-Tax |
| Benefit |
| Tax |
| Pre-Tax |
| Benefit |
| Tax |
| Pre-Tax |
| Benefit |
| Tax | ||||||||||||
Reclassification included in net (loss) income: | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Reclassification included in net loss: | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Loss on cash flow hedges (interest expense) | | $ | 304 |
| $ | (60) |
| $ | 244 |
| $ | 33 |
| $ | (7) |
| $ | 26 | | $ | 506 |
| $ | — |
| $ | 506 |
| $ | 414 |
| $ | (83) |
| $ | 331 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in other comprehensive loss: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Decrease in fair value of Griffin’s cash flow hedges | |
| (3,186) | |
| 446 | |
| (2,740) | |
| (3,530) | |
| 776 | |
| (2,754) | ||||||||||||||||||
Decrease in fair value of cash flow hedges | |
| (1,022) | |
| — | |
| (1,022) | |
| (1,038) | |
| (77) | |
| (1,115) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive loss | | $ | (2,882) |
| $ | 386 |
| $ | (2,496) |
| $ | (3,497) |
| $ | 769 |
| $ | (2,728) | | $ | (516) |
| $ | — |
| $ | (516) |
| $ | (624) |
| $ | (160) |
| $ | (784) |
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
18
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| For the Six Months Ended |
| For the Six Months Ended | ||||||||||||||||||||||||||||||||
|
| May 31, 2020 |
| May 31, 2019 |
| June 30, 2021 |
| June 30, 2020 | ||||||||||||||||||||||||||||
|
|
|
|
| Tax |
|
|
|
|
|
|
| Tax |
|
|
|
|
|
|
| Tax |
|
|
|
|
|
|
| Tax |
|
|
| ||||
|
|
|
|
| (Expense) |
| Net-of |
|
|
|
| (Expense) |
| Net-of |
|
|
|
| (Expense) |
| Net-of |
|
|
|
| (Expense) |
| Net-of | ||||||||
|
| Pre-Tax |
| Benefit |
| Tax |
| Pre-Tax |
| Benefit |
| Tax |
| Pre-Tax |
| Benefit |
| Tax |
| Pre-Tax |
| Benefit |
| Tax | ||||||||||||
Reclassification included in net (loss) income: | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Reclassification included in net loss: | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Loss on cash flow hedges (interest expense) | | $ | 429 |
| $ | (90) |
| $ | 339 |
| $ | 88 |
| $ | (20) |
| $ | 68 | | $ | 994 |
| $ | — |
| $ | 994 |
| $ | 549 |
| $ | (115) |
| $ | 434 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in other comprehensive loss: | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Decrease in fair value of Griffin’s cash flow hedges | |
| (6,587) | |
| 1,323 | |
| (5,264) | |
| (5,453) | |
| 1,199 | |
| (4,254) | ||||||||||||||||||
Change in other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Increase (decrease) in fair value of cash flow hedges | |
| 1,969 | |
| — | |
| 1,969 | |
| (7,640) | |
| 1,561 | |
| (6,079) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive loss | | $ | (6,158) |
| $ | 1,233 |
| $ | (4,925) |
| $ | (5,365) |
| $ | 1,179 |
| $ | (4,186) | ||||||||||||||||||
Other comprehensive income (loss) | | $ | 2,963 |
| $ | — |
| $ | 2,963 |
| $ | (7,091) |
| $ | 1,446 |
| $ | (5,645) | ||||||||||||||||||
Cash DividendDividends
GriffinOn January 13, 2021, INDUS declared a special dividend to distribute the E&P Distribution, which was based on the Company’s estimated taxable income through December 31, 2020. The E&P Distribution was made on March 8, 2021 in the amount of $11,250 or $1.99 per share to holders of record as of January 22, 2021. The E&P Distribution was paid in a combination of cash and shares of the Company’s Common Stock. The cash portion of the E&P Distribution paid to stockholders was $3,404 and 125,212 shares of Common Stock were issued.
INDUS declared a cash dividend on its common stock on May 7, 2021, of $0.15 per share. INDUS paid $1,158 for this dividend on June 30, 2021. INDUS did not declare or pay a cash dividend in the 2020 six month period or the 2019 six month period. During the 2020 six month period, Griffin paid $2,538 for the cash dividend declared in the fiscal 2019 fourth quarter. During the 2019 six month period, Griffin paid $2,279 for the cash dividend declared in the fiscal 2018 fourth quarter.
7.
8. Leases
As lessor, all of Griffin’s leases with its tenants were classified as operating leases under previous guidance and remained operating leases upon the adoption of ASC 842, therefore, as a lessor there was no significant impact upon adoption. Griffin’sThe Company’s rental revenue reflects the leasing of industrial/warehouselogistics and, to a lesser extent, office/flex space and certain land parcels. GriffinINDUS does not have any variable payment leases with its tenants. All of INDUS’s leases with its tenants are classified as operating leases.
The following is a schedule of minimum future minimum rental payments, including expected tenant reimbursements, to be received under noncancelable operatingcash rentals on leases as of May 31, 2020 are as follows:June 30, 2021. The schedule does not reflect future rental revenues from the renewal or replacement of existing leases or for leases on facilities not yet in service and excludes real estate taxes and property operating expense reimbursements:
| | | | |
Balance of fiscal 2021 |
| $ | 14,579 | |
2022 | | | 29,136 | |
2023 | |
| 25,626 | |
2024 | |
| 22,826 | |
2025 | |
| 19,343 | |
Later years | |
| 34,484 | |
| | $ | 145,994 | |
| | | | |
Balance of fiscal 2020 |
| $ | 17,430 | |
2021 | | | 33,916 | |
2022 | |
| 27,769 | |
2023 | |
| 22,684 | |
2024 | |
| 19,665 | |
Later years | |
| 45,374 | |
| | $ | 166,838 | |
Griffin currently leases an entire 165,000 square foot industrial/warehouse building (“1985 Blue Hills”) in Windsor, Connecticut to a single tenant under a lease that expires on March 31, 2024. Such lease contains an option whereby the tenant could purchase 1985 Blue Hills at a purchase price equal to the greater of $11,500 or fair market value as determined under the terms of the lease. The tenant did not exercise its purchase option before it expired on June 1, 2020.
20
In fiscal 2016, GriffinINDUS entered into a ten-year sublease (the “New York Office Lease”) for approximately 1,920 square feet in New York City for its executive offices. The sublease is with Bloomingdale Properties, Inc., an entity that is controlled by certain members of the Cullman and Ernst Group, which is considered a related party to Griffin.
Upon adoption of ASC 842 on December 1, 2019, Griffin, as lessee, recognized two ROU assets aggregating $858 and lease liabilities aggregating $858 for operating leases it had previously entered into, the Company. The New York Office Lease was approved by the Audit Committee of INDUS’s Board of Directors and athe lease for office equipment. Griffin adoptedrates under the practical expedient for not separating lease components from non-lease components. ROU assets and lease liabilities are included in other assets and other liabilities, respectively, on Griffin’s consolidated balance sheet. ROU assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets. These lease agreements do not provide a readily determinable implicitsublease were at market rate nor is it available to Griffin from its lessors, therefore, Griffin utilized its incremental borrowing rate of 3.5% at the time of adoption in order to discount lease payments to present value. These lease agreements do not contain any significant residual value guarantees or restrictive covenants. The lease costs are allocated over the remaining lease terms on a straight-line basis. Expensesublease was signed.
Expenses related to operating leases waswere $69 in each of the 2021 and 2020 six month period.periods. The weighted average remaining lease term for Griffin’sINDUS’s operating leases as of May 31, 2020,June 30, 2021, was 6.45.3 years.
19
Maturities of lease liabilities as of May 31, 2020June 30, 2021 are as follows:
| | | | | | |
Balance of Fiscal 2020 |
| $ | 68 | |||
Fiscal 2021 | | | 136 | |||
Balance of Fiscal 2021 |
| $ | 69 | |||
Fiscal 2022 | | | 143 | | | 143 |
Fiscal 2023 | | | 141 | | | 140 |
Fiscal 2024 | | | 140 | | | 141 |
Thereafter | | | 269 | |||
Fiscal 2025 | | | 140 | |||
Fiscal 2026 | | | 117 | |||
Total undiscounted payments | | $ | 897 | | | 750 |
Less: imputed interest | | | (95) | | | (66) |
Present value of minimum lease payments | | $ | 802 | | $ | 684 |
8.9. Supplemental Financial Statement Information
Short-Term Investments
As of May 31, 2020, Griffin did not have any short-term investments. As of November 30, 2019, Griffin’s short-term investments of $1,011 consisted of repurchase agreements accounted for as held-to-maturity securities under ASC 320 on its consolidated balance sheet. The repurchase agreements were with Webster Bank and were collateralized by securities issued by the United States Government or its sponsored agencies. The repurchase agreements were carried at their resell amounts, which approximated fair value due to their short-term nature.
21
Other Assets
Griffin'sINDUS's other assets are comprised of the following:
| | | | | | | | | | | | |
|
| May 31, 2020 |
| Nov. 30, 2019 |
| June 30, 2021 |
| Dec. 31, 2020 | ||||
Deferred rent receivable | | $ | 6,061 | | $ | 5,740 | ||||||
Deferred leasing costs, net | | | 5,146 | | | 4,468 | | $ | 6,810 | | $ | 5,352 |
Straight-line rents | | | 6,623 | | | 6,700 | ||||||
Intangible assets, net | |
| 2,438 | |
| 1,907 | |
| 4,228 | |
| 2,126 |
Prepaid expenses | |
| 966 | |
| 2,926 | ||||||
Deposits | | | 1,017 | | | 1,163 | ||||||
Mortgage escrows | | | 801 | | | 515 | |
| 882 | |
| 558 |
Right-of-use assets | | | 772 | | | — | | | 650 | | | 707 |
Accounts receivable (primarily leases) | |
| 630 | |
| 904 | | | 568 | | | 254 |
Furniture, fixtures and equipment, net | | | 368 | | | 181 | ||||||
Prepaid expenses | |
| 367 | |
| 2,618 | ||||||
Registration statement costs | | | 281 | | | 281 | | | 172 | | | — |
Furniture, fixtures and equipment, net | | | 195 | | | 193 | ||||||
Deferred financing costs related to revolving lines of credit | | | 183 | | | 256 | | | 171 | | | 162 |
Deposits | | | 36 | | | 234 | ||||||
Interest rate swap asset | | | 134 | | | — | ||||||
Proceeds from sales of real estate assets held in escrow | | | — | | | 1,993 | ||||||
Other | |
| 304 | |
| 154 | |
| 372 | |
| 323 |
Total other assets | | $ | 17,813 | | $ | 17,578 | | $ | 22,362 | | $ | 22,137 |
Accounts Payable and Accrued Liabilities
Griffin'sINDUS's accounts payable and accrued liabilities are comprised of the following:
| | | | | | |
|
| June 30, 2021 |
| Dec. 31, 2020 | ||
Accrued construction costs and retainage | | $ | 8,861 | | $ | 94 |
Accrued lease commissions | | | 1,630 | | | 233 |
Accrued interest payable | | | 588 | | | 580 |
Trade payables | | | 586 | | | 1,093 |
Accrued salaries, wages and other compensation | | | 578 | | | 1,027 |
Other | | | 1,085 | | | 642 |
Total accounts payable and accrued liabilities | | $ | 13,328 | | $ | 3,669 |
| | | | | | |
|
| May 31, 2020 |
| Nov. 30, 2019 | ||
Accrued construction costs and retainage | | $ | 1,105 | | $ | 1,849 |
Accrued lease commissions | | | 920 | | | 223 |
Accrued interest payable | | | 615 | | | 568 |
Accrued salaries, wages and other compensation | | | 446 | | | 863 |
Trade payables | | | 271 | | | 295 |
Other | | | 880 | | | 520 |
Total accounts payable and accrued liabilities | | $ | 4,237 | | $ | 4,318 |
20
Other Liabilities
Griffin'sINDUS's other liabilities are comprised of the following:
| | | | | | | | | | | | |
|
| May 31, 2020 |
| Nov. 30, 2019 |
| June 30, 2021 |
| Dec. 31, 2020 | ||||
Interest rate swap liabilities | | $ | 10,210 | | $ | 4,052 | | $ | 5,937 | | $ | 8,766 |
Deferred compensation plan | | | 3,522 | | | 5,593 | | 4,791 | | | 4,335 | |
Intangible liability, net | | 2,969 | | | 695 | |||||||
Prepaid rent from tenants | | | 1,163 | | | 1,013 | | 1,483 | | | 1,345 | |
Security deposits of tenants | | 856 | | | 710 | |||||||
Lease liabilities | | | 802 | | | — | | 684 | | | 739 | |
Intangible liability, net | | | 762 | | | — | ||||||
Security deposits of tenants | | | 727 | | | 538 | ||||||
Conditional asset retirement obligations | | | 171 | | | 171 | ||||||
Land sale deposits | | | 50 | | | — | ||||||
Contingent value rights liability | | — | | | 656 | |||||||
Other | | | 53 | | | 142 | | | 321 | | | 321 |
Total other liabilities | | $ | 17,460 | | $ | 11,509 | | $ | 17,041 | | $ | 17,567 |
Supplemental Cash Flow Information
Accounts payable and accrued liabilities related to additions to real estate assets decreasedincreased by $744$8,767 and $515 in the 2021 six month period and 2020 six month period, respectively.
Interest payments were as follows:
| | | | | | | | | | |
For the Three Months Ended | | For the Six Months Ended | ||||||||
June 30, 2021 |
| June 30, 2020 | | June 30, 2021 |
| June 30, 2020 | ||||
$ | 1,699 |
| $ | 1,762 | | $ | 3,390 |
| $ | 3,446 |
Capitalized interest related to real estate assets was as follows:
| | | | | | | | | | |
For the Three Months Ended | | For the Six Months Ended | ||||||||
June 30, 2021 |
| June 30, 2020 | | June 30, 2021 |
| June 30, 2020 | ||||
$ | 223 | | $ | 33 | | $ | 345 | | $ | 33 |
Warrants and Contingent Value Rights
On August 24, 2020, pursuant to the Securities Purchase Agreement, INDUS: (i) sold 504,590 shares of its Common Stock; and (ii) issued a warrant (the “Warrant”) to Conversant to acquire 504,590 additional shares of Common Stock (subject to adjustment as set forth therein) at an exercise price of $60.00 per share (the “Exercise Price”). Conversant paid $50.00 per share of Common Stock and $4.00 per Warrant Share for the Warrant for total proceeds of $27,248, before expenses of $449. Pursuant to the Securities Purchase Agreement, for so long as Conversant owns shares of Common Stock constituting more than 4.9% of INDUS’s Common Stock issued and outstanding, Conversant will have the right to designate one member (the “Purchaser Nominee”) to INDUS’s Board of Directors (subject to certain terms and conditions set forth therein) and such Purchaser Nominee shall be nominated by the Board for re-election as a director at each subsequent meeting of the Company’s stockholders. Until the one-year anniversary of the date of the Securities Purchase Agreement, Conversant may not transfer any of the shares of Common Stock without INDUS’s prior written consent.
On August 24, 2020, INDUS and Conversant also entered into a Contingent Value Rights Agreement (the “Contingent Value Rights Agreement”), pursuant to which Conversant is entitled to a one-time cash payment in the event that INDUS’s volume weighted average share price per share of Common Stock for the thirty trading day period ending on the date of the one-year anniversary of the date of the Securities Purchase Agreement (the “30-Day VWAP”) is less than the purchase price paid by Conversant in respect of each common share (the “Common Shares Purchase Price”), subject to adjustment as described therein. If the 30-Day VWAP is less than the Common Shares Purchase Price, Conversant is entitled to a one-time cash payment per CVR calculated on a linear basis relative to the difference between the 30-Day VWAP and the Common Shares Purchase Price. Such payment will in no event exceed $2,523, which is 10% of the total paid by Conversant to purchase the Common Stock.
21
The Warrant is exercisable from the date of issuance and has a term of three years. The Exercise Price and the number of shares of Common Stock issuable upon exercise of the Warrant is subject to appropriate adjustments in the event of certain stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock. Upon a Fundamental Transaction (as defined in the Warrant) in which the consideration consists solely of cash, solely of marketable securities or a combination thereof, the remaining unexercised portion of the Warrant will automatically be deemed to be exercised or the Warrant will be terminated, depending on whether the purchase price per share of one share of Common Stock in such fundamental transaction is greater or less than the Exercise Price. In addition, if such Fundamental Transaction occurs prior to the one-year anniversary of the date of the Warrant, and the price per share of one share of Common Stock in such Fundamental Transaction is less than the Exercise Price, or if it is greater than the Exercise Price but less than the purchase price paid by the holder per Warrant Share, then the holder will be entitled to receive a cash payment up to an amount equal to the purchase price paid by the holder per Warrant Share in respect of any unexercised portion of the Warrant.
Both the Warrant and the CVRs are derivative financial instruments and reported as liabilities at their fair values on INDUS’s consolidated balance sheet as of June 30, 2021 (see Note 3). Although the fair value of the Warrant was $10,165 as of June 30, 2021, the maximum amount that INDUS would be required to pay if the Warrant were to be settled in cash is $2,018. On August 24, 2021, the cash settlement feature of the Warrant liability terminates and the fair value of the Warrant liability on that date will be reclassified to equity on INDUS’s consolidated balance sheet.
Income Taxes
As discussed above (see Note 1), INDUS intends to elect to be taxed as a REIT for the taxable year ending December 31, 2021. To qualify as a REIT, INDUS is required (among other things) to distribute at least 90% of its REIT taxable income to its stockholders and meet various other organization and operating requirements. Provided the Company qualifies for taxation as a REIT, it generally will not be subject to federal income taxes if it distributes 100% of its taxable income for each year to its stockholders. However, any taxable income from a taxable REIT subsidiary will be subject to federal, state and local income taxes. If INDUS fails to qualify as a REIT in any taxable year, and it is unable to avail itself of certain savings provisions set forth in the Code, all of its taxable income will be subject to regular federal corporate income tax, and it may not be able to qualify as a REIT for four subsequent taxable years. Additionally, even if INDUS qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property and to federal income taxes and excise taxes on its undistributed taxable income. INDUS may also be subject to a corporate income tax on any gains recognized during a five-year period following the REIT conversion that are attributable to built-in gains with respect to assets that were owned on January 1, 2021.
In connection with the election to be taxable as a REIT for the taxable year ending December 31, 2021, INDUS reassessed its deferred tax assets and deferred tax liabilities during the fourth quarter of fiscal 2020, which resulted in de-recognizing all of its deferred tax assets and deferred tax liabilities prior to December 31, 2020. Accordingly, there is no income tax benefit reflected in the Company’s results of operations for the 2021 second quarter and 2021 six month period. INDUS’s income tax benefit was $259 in the 2020 six month period and increased by $2,777 in the 2019 six month period.
Griffin maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for certain of its highly compensated employees. In the 2020 six month period, the liability for the Deferred Compensation Plan was reduced by approximately $1,900 for a payment made to Frederick M. Danziger, Griffin’s former Executive Chairman, as a result of his retirement in fiscal 2019.
22
In the 2019 six month period, Griffin received 22,390 shares of its Common Stock in connection with the exercise of stock options as consideration for the exercise price and for reimbursement of incomereflecting an effective tax withholdings related to those stock option exercises. The shares received were recorded as treasury stock, which resulted in an increase in treasury stock of $846, and did not affect Griffin’s cash.
Interest payments were as follows:
| | | | | | | | | | |
For the Three Months Ended | | For the Six Months Ended | ||||||||
May 31, 2020 |
| May 31, 2019 | | May 31, 2020 |
| May 31, 2019 | ||||
$ | 1,756 |
| $ | 1,600 | | $ | 3,433 |
| $ | 3,219 |
Income Taxes
Griffin’s income tax benefit rate was 21.1% for the 2020 six month period, as compared to an income tax provision rate of 22.3% for the 2019 six month period.20.9%. The effective tax benefit rate for the 2020 six month period reflected the federal statutory income tax rate of 21% adjusted for the effects of permanent differences and state income taxes. The effective tax rate in the 2020 six month period is based on management’s projections of pretax results and permanent differences for the balance of the year. To the extent that actual results differ from current projections, the effective income tax rate may change.
Griffin’sINDUS’s federal income tax returns for fiscal 2016,2017, fiscal 20172018 and fiscal 20182019 are open to examination by the Internal Revenue Service.
9.
10. Commitments and Contingencies
As of May 31, 2020, Griffin had committed purchase obligations of approximately $2,424, principally related to the development of its real estate assets.
On December 10, 2019, Griffin entered into an Option Purchase Agreement (the “East Granby/Windsor Option Agreement”) whereby Griffin granted the buyer an exclusive one year option, in exchange for a nominal fee, to purchase approximately 280 acres of undeveloped land in East Granby and Windsor, Connecticut. The purchase price has a range of a minimum of $6,000 to a maximum of $7,950 based upon the final approved use of the land. The buyer may extend the option period for another two years upon payment of additional option fees. The land subject to the East Granby/Windsor Option Agreement does not have any of the approvals that would be required for the buyer’s planned use of the land. A closing on the land sale contemplated by the East Granby/Windsor Option Agreement is subject to several significant contingencies, including the buyer securing contracts under a competitive bidding process that would require changes in the use of the land and obtaining local and state approvals for that planned use. There is no guarantee that the sale of land as contemplated under the East Granby/Windsor Option Agreement will be completed under its current terms, or at all.
On February 3, 2020, Griffin entered into an option agreement (the “Meadowood Option Agreement”) with a national land conservation organization (the “Conservation Organization”) to sell the approximate 277 acres (the “Meadowood Land”) of Griffin’s approved but unbuilt residential development, Meadowood, in Simsbury, Connecticut. For a minimal fee, the Meadowood Option Agreement grants the Conservation Organization the right to purchase the Meadowood Land for open space and farmland preservation whereby Griffin would receive net proceeds of approximately $5,400, if the purchase option is exercised. The Meadowood Option Agreement grants the Conservation Organization an initial term of twelve months, with one six-month extension, to exercise its option and acquire the Meadowood Land. Completion of a sale of the Meadowood Land contemplated under the Meadowood Option Agreement is subject to several contingencies, including the satisfactory outcome of due diligence by the Conservation Organization and the Conservation Organization securing funding from several public and private sources to acquire the Meadowood Land. There is no guarantee that a sale of the Meadowood Land contemplated under the Meadowood Option Agreement will be completed under its current terms, or at all.
From time to time, GriffinINDUS is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters is not expected to be material, individually or in the aggregate, to Griffin’sthe Company’s consolidated financial position, results of operations or cash flows.
2322
10.11. Subsequent Events
In accordance with FASB ASC 855, “Subsequent Events,” GriffinINDUS has evaluated all events or transactions occurring after May 31, 2020,June 30, 2021, the balance sheet date, and noted that there have been no such events or transactions which would require recognition or disclosure in the consolidated financial statements as of and for the period ended May 31, 2020,June 30, 2021, other than the disclosures herein.
See Notes 4 andOn August 5, for disclosure of the subsequent event related to the closing2021, INDUS closed on the 2020 Webster Mortgage on June 30, 2020 and repaymentpurchase of the outstanding balance on the Acquisition Credit Line.
On June 24, 2020, Griffin entered into a Purchase and Sale Agreement (the “Allentown Purchase Agreement”) to acquire,an approximately 139,500 square foot fully leased industrial/logistics building in Lakeland, Florida for a purchase price of $3,100,$17,800, before transaction costs.
On July 9, 2021, INDUS and INDUS RT, LP filed an approximately 18 acre site inupdated universal shelf registration statement on Form S-3 (the “Updated Universal Shelf”) with the Lehigh ValleySEC. Under the Updated Universal Shelf, the Company may offer and sell up to $500,000 of Pennsylvania for the intended developmenta variety of an approximately 150,000 square foot industrial/warehouse building. A closing on the land acquisition contemplatedsecurities including common stock, preferred stock, debt securities, warrants, depositary shares, rights or units, INDUS RT, LP’s debt securities or guarantees thereof by the Allentown Purchase Agreement is subject to significant contingencies, including Griffin obtaining all governmental approvals for its planned developmentCompany, or any combination of such securities during the three year period that will commence with the effective date, which has not yet occurred. Under the Updated Universal Shelf, which adds debt securities of the land that would be acquired. There is no guaranteeCompany and of INDUS RT, LP that the land acquisition as contemplated underUniversal Shelf did not include, the Allentown Purchase AgreementCompany may periodically offer one or more types of securities in amounts, at prices and on terms announced. When INDUS obtains additional capital by issuing equity, the interests of its existing stockholders will be completed under its current terms, or at all.diluted. If the Company incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict INDUS’s operations.
See Note 6 on INDUS entering into the New Credit Facility subsequent to June 30, 2021.
2423
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
INDUS Realty Trust, Inc. (f/k/a Griffin Industrial Realty, Inc.) (“Griffin”INDUS” or the “Company”) is a real estate business principally engaged in developing, acquiring, managing and leasing high-quality industrial/warehouse properties. Griffinlogistics properties in select supply-constrained and high growth markets in the United States. The Company seeks to add to its industrial/warehouse property portfolio through the acquisition and development of land or the purchaseacquisition of modern, market-appropriate logistics buildings in selectthe markets targeted by Griffin. Griffinit targets, all of which can serve multiple drivers of demand in the modern supply chain. Although the Company’s real estate holdings primarily consist of industrial/logistics properties, INDUS also owns severala limited number of office/flex properties and undeveloped land. Periodically, Griffinland parcels. The Company may sell certain office/flex properties or portions of its real estate assetsundeveloped land that it has owned for an extended time period and the use of which is not consistent with Griffin’sthe Company’s core focusindustrial and logistics strategy.
On December 31, 2020, INDUS changed its name from Griffin Industrial Realty, Inc. INDUS intends to elect to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) for the taxable year ending December 31, 2021. In connection with the anticipated REIT election, the Company changed its fiscal year end from November 30 to December 31, effective for the fiscal year that started on industrial/warehouse properties.January 1, 2021, and will end on December 31, 2021 (“fiscal 2021”). As a result of the change in fiscal year, there was a one-month transition period of December 1, 2020, through December 31, 2020 (the “Transition Period”). The Company’s unaudited consolidated financial statements for the Transition Period were reported in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, as filed with the United States Securities and Exchange Commission (the “SEC”) on May 10, 2021.
The significant accounting policies and methods used in the preparation of Griffin’sINDUS’s unaudited consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q are consistent with those used in the preparation of Griffin’sINDUS’s audited consolidated financial statements for its fiscal year ended November 30, 20192020 (“fiscal 2019”2020”) included in Griffin’sINDUS’s Annual Report on Form 10-K (“Form 10-K”) as filed with the United States Securities and Exchange Commission (the “SEC”)SEC on February 13, 2020.18, 2021. The three months ended June 30, 2021, are referred to as the “2021 second quarter” and the six months ended June 30, 2021, are referred to as the “2021 six month period.” The three months ended June 30, 2020, are referred to as the “2020 second quarter” and the six months ended June 30, 2020, are referred to as the “2020 six month period.”
Summary
The preparationCompany incurred a net loss of approximately $1.2 million in the 2021 second quarter, as compared to a net loss of approximately $0.7 million for the 2020 second quarter. The higher net loss in the 2021 second quarter, as compared to the 2020 second quarter, principally reflected a loss in the 2021 second quarter of approximately $1.0 million from the change in the fair value of financial statementsinstruments that were issued on August 24, 2020, in accordanceconnection with the sale of the Company’s common stock, par value $0.01 per share (“Common Stock”). The higher net loss in the 2021 second quarter also reflected an increase of approximately $0.3 million in general and administrative expenses in the 2021 second quarter, as compared to the 2020 second quarter, and the inclusion of an approximately $0.2 million income tax benefit in the 2020 second quarter, versus no income tax benefit in the 2021 second quarter as a result of the Company’s decision to be taxed as a real estate investment trust (the “REIT Conversion”) effective at the start of fiscal 2021. Partially offsetting these items were an approximately $0.6 million increase in rental revenue, an approximately $0.2 million increase in gain on sales of real estate assets, an approximately $0.1 million decrease in interest expense and an approximately $0.1 million increase in investment and other income in the 2021 second quarter, as compared to the 2020 second quarter.
The Company’s net operating income (“NOI”), which is defined as rental revenue less operating expenses of rental properties and real estate taxes, increased to approximately $7.3 million in the 2021 second quarter from approximately $6.8 million in 2020 second quarter, reflecting the increase in rental revenue partially offset by an increase in operating expenses of rental properties. NOI is not a financial measure in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates. See below under “Non-GAAP Reconciliations” for information regarding why the Company believes NOI and assumptions that affect the reported amountsother non-GAAP measures are
24
meaningful supplemental measures of its financial statements for the three monthsperformance and six months ended May 31, 2020 are consistentreconciliations of these measures from net income (loss), presented in accordance with those used by Griffin to prepare its consolidated financial statements for fiscal 2019.U.S. GAAP.
Summary
For the three months ended May 31, 2020 (the “2020 second quarter”), GriffinThe Company incurred a net loss of approximately $0.7$1.9 million in the 2021 six month period, as compared to a net incomeloss of approximately $5.8$1.0 million for the three months ended May 31, 2019 (the “2019 second quarter”).2020 six month period. The higher net loss in the 2020 second quarter, as compared to net income in the 2019 second quarter, principally reflected an approximately $8.0 million decrease in operating income, an approximately $0.3 million increase in interest expense and an approximately $0.1 million decrease in investment income in the 2020 second quarter,2021 six month period, as compared to the 2019 second quarter, partially offset by an approximately $0.2 million income tax benefit in the 2020 second quarter, as compared to an approximately $1.7 million income tax expense in the 2019 second quarter.
The approximately $8.0 million decrease in operating income in the 2020 second quarter, as compared to the 2019 second quarter,six month period, principally reflected: (a) a decrease of approximately $7.6 million of gain on property sales (revenue from property sales less costs related to property sales) in the 2020 second quarter, as compared to the 2019 second quarter; (b)reflected increases of approximately $0.6$1.1 million and approximately $0.4$0.5 million in general and administrative expenses and depreciation and amortization expense, respectively, in the 2020 second quarter, as compared to the 2019 second quarter; and (c) an approximately $0.1 million gain from an insurance recovery in the 2019 second quarter; partially offset by (d) an approximately $0.7 million increase in net operating income from leasing (“Leasing NOI”)1, which Griffin defines as rental revenue less operating expenses of rental properties, in the 2020 second quarter, as compared to the 2019 second quarter.
1Leasing NOI is notrespectively, and a financial measure in conformity with U.S. GAAP. It is presented because Griffin believes it is a useful financial indicator for measuring resultsdecrease of its real estate leasing activities. However, it should not be considered as an alternative to operating income as a measure of operating results in accordance with U.S. GAAP.
25
The increase in Leasing NOI in the 2020 second quarter, as compared to the 2019 second quarter, principally reflected higher rental revenue as a result of more space being under lease in the 2020 second quarter than the 2019 second quarter, driven by rental revenue from three industrial/warehouse buildings in Orlando, Florida acquired subsequent to May 31, 2019, an industrial/warehouse building in the Charlotte, North Carolina area that was completed subsequent to May 31, 2019 and, to a lesser extent, improved occupancy in Griffin’s other existing industrial/warehouse properties. The gain from property sales in the 2020 second quarter reflected the sale, to a local utility company, of an easement (the “Florida Easement Sale”) on a small area of Griffin’s nursery farm in Quincy Florida (the “Florida Farm”). The gain from property sales in the 2019 second quarter principally reflected a pretax gain of approximately $7.4 million from the sale of approximately 280 acres of undeveloped land in Simsbury, Connecticut (the “Simsbury Land Sale”). The higher depreciation and amortization expense in the 2020 second quarter, as compared to the 2020 second quarter, principally reflected depreciation and amortization expense on the buildings that were added to Griffin’s real estate portfolio subsequent to May 31, 2019. The higher general and administrative expenses in the 2020 second quarter, as compared to the 2019 second quarter, principally reflected expenses incurred in connection with Griffin’s potential conversion to a real estate investment trust (“REIT”), as previously announced. The higher interest expense in the 2020 second quarter, as compared to the 2019 second quarter, principally reflected the higher amount of mortgage loans outstanding and higher borrowings under Griffin’s credit lines in the 2020 second quarter, as compared to the 2019 second quarter. The income tax benefit in the 2020 second quarter, as compared to the income tax expense in the 2019 second quarter, reflected the pretax loss of approximately $0.9 million in the 2020 second quarter, as compared to pretax income of approximately $7.5 million in the 2019 second quarter.
For the six months ended May 31, 2020 (the “2020 six month period”), Griffin incurred a net loss of approximately $1.0 million, as compared to net income of approximately $5.2 million for the six months ended May 31, 2019 (the “2019 six month period”). The net loss in the 2020 six month period, as compared to net income in the 2019 six month period, principally reflected an approximately $7.4 million decrease in operating income, an approximately $0.4 million increase in interest expense and an approximately $0.2 million decrease in investment incomegain on sales of real estate assets in the 20202021 six month period, as compared to the 20192020 six month period. The higher net loss in the 2021 six month period also reflected:
| ● | a loss of approximately $0.7 million from the change in the fair value of financial instruments that were issued on August 24, 2020, in connection with the sale of the Company’s Common Stock; |
| ● | the inclusion in the 2020 six month period of an approximately $0.3 million income tax benefit versus no income tax benefit in the 2021 six month period as a result of the REIT Conversion effective at the start of fiscal 2021; |
partially offset by:
| ● | an approximately $1.8 million increase in rental revenue; and |
| ● | an approximately $0.2 million decrease in interest expense in the 2021 six month period, as compared to the 2020 six month period. |
The Company’s NOI increased to approximately $14.3 million in the 2021 six month period from approximately $13.1 million in 2020 six month period, reflecting the increase in rental revenue partially offset by an approximately $0.3 million income tax benefit in the 2020 six month period, as compared to an approximately $1.5 million income tax expense in the 2019 six month period.
The approximately $7.4 million decreaseincrease in operating income in the 2020 six month period, as compared to the 2019 six month period, principally reflected: (a) a decreaseexpenses of approximately $7.0 million of gain on property sales in the 2020 six month period, as compared to the 2019 six month period; (b) increases of approximately $0.7 million and approximately $0.6 million in depreciation and amortization expense and general and administrative expenses, respectively, in the 2020 six month period, as compared to the 2019 six month period; and (c) the effect of an approximately $0.1 million gain from an insurance recovery in the 2019 six month period; partially offset by (d) an approximately $1.0 million increase in Leasing NOI in the 2020 six month period, as compared to the 2019 six month period.rental properties.
The increase in Leasing NOI in the 2020 six month period, as compared to the 2019 six month period, principally reflected higher rental revenue as a result of more space being under lease in the 2020 six month period than the 2019 six month period, driven by rental revenue from three industrial/warehouse buildings in Orlando, Florida acquired subsequent to May 31, 2019, an industrial/warehouse building in the Charlotte, North Carolina area that was completed subsequent to May 31, 2019 and , to a lesser extent, improved occupancy in Griffin’s other existing industrial/warehouse properties. The gain from property sales in the 2020 six month period reflected a total of approximately $0.7 million from the sale of approximately seven acres of undeveloped land in Windsor, Connecticut (the “2020 Windsor Land Sale”) that was completed in the three months ended February 29, 2020 (the “2020 first quarter”) and the Florida Easement Sale. The gain from property sales in the 2019 six month period principally reflected a pretax gain of approximately $7.4 million from the Simsbury Land Sale. The higher depreciation and amortization expense in the 2020 six month period, as compared to the 2019 six month period, principally reflected depreciation and amortization expense on the buildings that were added to Griffin’s real estate portfolio subsequent to May 31, 2019. The higher general and administrative expenses in the 2020 six month period, as compared to the 2019 six month period, principally reflected expenses incurred in connection with Griffin’s potential conversion to a REIT, as previously announced. The gain from an insurance recovery in the 2019 six month period reflected the settlement of an insurance claim for storm damage to the Florida Farm. The higher interest expense in the 2020 six month period, as compared to the 2019 six month period, principally reflected the higher amount of mortgage loans outstanding in the 2020 six month period, as compared to the 2019 six month period. The income tax benefit in the 2020 six month period, as compared to
26
the income tax expense in the 2019 six month period, reflected the pretax loss of approximately $1.3 million in the 2020 six month period, as compared to pretax income of approximately $6.7 million in the 2019 six month period.
Results of Operations
Impact of Covid-19
During and subsequent to theSince March 2020, six month period, the world has been impacted by the spread of the coronavirus (COVID-19), pandemic, which has created significant economic uncertainty and volatility. The full extent to which the coronavirus pandemic further impacts Griffin’sthe Company’s business or impacts the Company’s operations, liquidity and financial results will depend on numerous evolving factors that Griffinthe Company is not able to predict at this time, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; development and spread of new variants of the virus; the availability, adoption and effectiveness of vaccines to combat COVID-19; the impact on economic activity from the pandemic and actions taken in response;response, including ongoing travel restrictions; the impact on the availability and pricing of certain materials and supplies; the effect on Griffin’sthe Company’s tenants and their businesses; the ability of tenants to make their rental payments; any closures of tenants’ facilities; the ability of existing or prospective tenants to evaluate or enter into leases; and Griffin’sthe Company’s ability to complete property sales.sales and acquisitions of real estate assets or planned construction and development. Any of these events could materially adversely impact Griffin’sthe Company’s business, financial condition, results of operations or stock price. Recently, COVID-19 has disrupted the availability, supply and costs of raw materials, particularly the increased cost and decreased availability of steel bar joists, insulation materials and PVC piping used in sitework, which has resulted in an increase in the Company’s cost of construction and a delay in the completion of the Company’s projects. If these disruptions and higher costs worsen, it could have material adverse impacts on the Company’s business, financial results and financial position in the future. Additionally, as a result of the pandemic there could be a reduction in the Company’s rental revenue, particularly with respect to its office/flex portfolio.
Griffin collected essentially 100% of April 2020COVID-19 did not have a material impact on the Company’s rent andcollections in the 2021 six month period as over 99% of cash rent due each month in each of May and June 2020. In March and April 2020, Griffin received aggregate rent relief requests from tenants representing 22% of total monthly rent. Griffin has not received any new requests for rent relief subsequent to April 30, 2020. Griffin has not finalized agreements with the three tenants whose rent relief requests remain outstanding. Based on the current discussions, the anticipated amount2021 six month period, inclusive of rent relief granted toagreements, was collected. In the three tenants whose requests remain outstanding2021 first quarter, the Company entered into an agreement with a tenant that leased an approximately 7,000 square foot restaurant building that would equate to less than 1% of Griffin's total annual rental revenue. All other requests forhave provided rent relief were either denied by Griffin orof approximately $20,000 over the tenants withdrew their requests.remainder of that tenant’s lease term. Subsequent to that agreement, the building was sold. As a result of the pandemic there could be future reductions in the Company’s rental revenue, particularly with respect to its office/flex properties.
See Part II,I, Item 1A "Risk Factors" in the Company’s fiscal 2020 Form 10-K for further discussiondiscussions of the possible impact of the COVID-19 pandemic on Griffin’sthe Company’s business.
25
Real Estate Portfolio
Changes in the Company’s total square footage and leased square footage of its industrial/logistics properties and its total real estate portfolio from December 31, 2020, through June 30, 2021, were as follows:
| | | | | | |
| | Total |
| Leased |
|
|
| | Square |
| Square |
| Percentage |
Industrial/Logistics Properties | | Footage |
| Footage |
| Leased |
As of December 31, 2020 | | 4,206,000 | | 3,972,000 | | 94.5% |
Buildings acquired | | 523,000 | | 325,000 | | |
Leasing of first generation space (1) | | — | | 202,000 | | |
Leasing of second generation space (2) | | — | | 5,000 | | |
As of June 30, 2021 | | 4,729,000 | | 4,504,000 | | 95.3% |
| | | | | | |
Total Portfolio | | | | | | |
As of December 31, 2020 | | 4,599,000 | | 4,252,000 | | 92.5% |
Buildings acquired | | 523,000 | | 325,000 | | |
Building sold | | (7,000) | | (7,000) | | |
Leasing of first generation space | | — | | 202,000 | | |
Leasing of second generation space | | — | | 16,000 | | |
Leases expired | | — | | (11,000) | | |
As of June 30, 2021 | | 5,115,000 | | 4,777,000 | | 93.4% |
| (1) | INDUS defines first generation space as newly constructed space that has not previously been leased and unleased space in acquired buildings that is refurbished upon acquisition and prior to leasing. |
| (2) | INDUS defines second generation space as previously leased space. |
As of June 30, 2021, the Company’s industrial/logistics square footage comprised 92.5% of its total square footage.
The increase in industrial/logistics total square footage as a result of acquisitions from December 31, 2020, through June 30, 2021, reflected:
| ● | approximately 128,000 square feet from the acquisition on May 12, 2021, of 6355 Farm Bureau Road (“6355 Farm Bureau”), in the Lehigh Valley of Pennsylvania, that was fully leased when acquired; and |
| ● | approximately 395,000 square feet from the acquisition on June 28, 2021, of 7800 Tuckaseegee Road (“7800 Tuckaseegee”), in Charlotte, North Carolina, that was 50% leased when acquired. |
The increase in industrial/logistics square footage leased from December 31, 2020, through June 30, 2021, reflected:
| ● | the space in 6355 Farm Bureau and 7800 Tuckaseegee that was under lease at the time those buildings were acquired; |
| ● | three leases aggregating approximately 178,000 square feet of first generation space in 160 International Drive (“160 International”) and 180 International Drive (“180 International”), two buildings built on speculation in the Charlotte market that were completed in the fiscal 2019 fourth quarter and fully leased as of June 30, 2021; |
| ● | an approximately 24,000 square foot lease of recently renovated first generation space in 170 Sunport Lane (“170 Sunport”) in Orlando, Florida; and |
| ● | an approximately 5,000 square foot lease of second generation space. |
The increase in total portfolio square footage reflects the two industrial/logistics buildings acquired, partially offset by the sale of 1936 Blue Hills Avenue (“1936 Blue Hills”), a fully leased approximately 7,000 square foot restaurant building that the Company included in its office/flex portfolio. The increase in the total portfolio’s leased
26
square footage reflected the leasing of industrial/logistics space described above partially offset by the reduction of leased space from the sale of 1936 Blue Hills. The vacancy that resulted from the expiration of an approximately 11,000 square foot lease of office/flex space was offset by the tenant in the adjoining building leasing the newly vacated space in connection with a lease extension of its existing office/flex space.
2021 Second Quarter Compared to 20192020 Second Quarter
Rental revenue increased to approximately $9.2$9.8 million in the 2021 second quarter from approximately $9.3 million in the 2020 second quarter. The approximately $0.5 million increase in rental revenue in the 2021 second quarter, as compared to the 2020 second quarter, was principally due to:
| ● | approximately $0.2 million from first generation leases and approximately $0.2 million from second generation leases in the 2021 second quarter that were either not in place or in place for only a portion of the 2020 second quarter; |
| ● | approximately $0.1 million from the industrial/logistics buildings acquired in the 2021 second quarter; |
| ● | approximately $0.1 million from increases in rental rates on leases renewed subsequent to June 30, 2020; and |
| ● | approximately $0.1 million from an increase in expense reimbursements received from tenants; |
partially offset by:
| ● | an approximately $0.2 million decrease from lease expirations. |
One of the three new leases of first generation space in 160 International and 180 International and a first generation lease in 170 Sunport became effective in the 2021 second quarter. The other two new leases of first generation space in 160 International and 180 International and the second generation lease in 170 Sunport will become effective upon completion of tenant improvements, expected to be in the second half of fiscal 2021.
Operating expenses of rental properties and real estate taxes of approximately $1.1 million and approximately $1.4 million, respectively, in the 2021 second quarter were essentially unchanged as compared to the 2020 second quarter.
The Company’s NOI and NOI on a cash basis (“Cash NOI”)1 for industrial/logistics properties (“Cash NOI of Industrial/Logistics Properties”) and for its total real estate portfolio for the 2021 second quarter and the 2020 second quarter were as follows:
| | | | | | | |
| Industrial/Logistics Properties | | Total Portfolio | ||||
(dollars in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Second | | Second | | Second | | Second |
| Quarter | | Quarter | | Quarter | | Quarter |
Rental revenue | $ 8,366 | | $ 7,737 | | $ 9,836 | | $ 9,270 |
Operating expenses of rental properties | (651) | | (655) | | (1,132) | | (1,080) |
Real estate taxes | (1,257) | | (1,198) | | (1,454) | | (1,416) |
NOI | 6,458 | | 5,884 | | 7,250 | | 6,774 |
Noncash rental revenue including | | | | | | | |
straight-line rents | (403) | | (486) | | (419) | | (586) |
Cash NOI | $ 6,055 | | $ 5,398 | | $ 6,831 | | $ 6,188 |
The increases in NOI and Cash NOI principally reflected the increase in rental revenue as described above. See below for information regarding why the Company believes NOI and Cash NOI are meaningful supplemental measures of its performance and reconciliations of these measures from net income (loss), presented in accordance with U.S. GAAP.
1INDUS defines “Cash NOI” as rental revenue less operating expenses of rental properties, real estate taxes and non-cash rental revenue, including straight-line rents and “Cash NOI of Industrial/Logistics Properties” as rental revenue less operating expenses of rental properties, real estate taxes and non-cash rental revenue, including straight-line rents, for industrial/logistics properties. Cash NOI and Cash NOI of Industrial/Logistics Properties are not financial measures in conformity with U.S. GAAP. See below under “Non-GAAP Reconciliations” for information regarding why the Company believes these are meaningful supplemental measures of its performance and reconciliations of these measures from net income (loss), presented in accordance with U.S. GAAP.
27
Depreciation and amortization expense decreased to approximately $3.4 million in the 2021 second quarter from approximately $8.4$3.5 million in the 20192020 second quarter. The approximately $0.1 million decrease in depreciation and amortization expense in the 2021 second quarter, whereas revenueas compared to the 2020 second quarter, reflected lower depreciation expense on tenant improvements as certain assets became fully depreciated and lower amortization expense on certain intangible assets became fully amortized in fiscal 2020.
General and administrative expenses increased to approximately $2.7 million in the 2021 second quarter from propertyapproximately $2.4 million in the 2020 second quarter. The approximately $0.3 million increase in general and administrative expenses in the 2021 second quarter, as compared to the 2020 second quarter, principally reflected increases of employee compensation expenses, maintenance expense on undeveloped land and all other general and administrative expenses of approximately $0.3 million, $0.1 million and $0.1 million, respectively, partially offset by an approximate $0.2 million expense decrease related to INDUS’s non-qualified deferred compensation plan. The increase in employee compensation expenses reflected higher payroll costs for employees added in the areas of acquisitions, capital markets and investor relations and the addition of general legal counsel and the noncash compensation expense for the grant of restricted stock units in the 2021 first quarter. The maintenance expense on undeveloped land reflected the cost of removing certain old structures primarily used in the agricultural operations of INDUS’s former parent company. The lower expense related to INDUS’s non-qualified deferred compensation plan reflected the effect on participant balances of lower stock market performance in the 2021 second quarter, as compared to the 2020 second quarter, that resulted in a smaller increase in the non-qualified deferred compensation plan liability in the 2021 second quarter, as compared to the increase in the non-qualified deferred compensation plan liability in the 2020 second quarter.
INDUS’s gain from real estate sales was approximately $0.3 million in the 2021 second quarter, as compared to approximately $0.1 million in the 2020 second quarter as compared to approximately $8.7quarter. Approximately $0.2 million of the gain in the 20192021 second quarter. Accordingly, total revenue decreased toquarter was from the sale of 1936 Blue Hills and approximately $9.3$0.1 million of the gain was from two small sales of undeveloped land. The gain from real estate sales in the 2020 second quarter from approximately $17.1 million in the 2019 second quarter.
Revenue from property sales of approximately $0.1 million in the 2020 second quarter reflected proceeds from the Florida Easement Sale. As costs related to that transaction were minimal, the pretax gain from the Florida Easement Sale was approximately $0.1 million. Revenue from property sales of approximately $8.7 million in the 2020 second quarter principally reflected approximately $7.7 million from the Simsbury Land Sale, which generated a pretax gain of approximately $7.4 million, and approximately $0.7 million from the sale, to a local utility company, of approximately 116 acres of undevelopedan easement (the “Florida Easement Sale”) on land in East Windsor, ConnecticutQuincy, Florida, that previously had been used as a nursery farm (the “East Windsor Land”“Florida Farm”). Property salesSales of real estate assets occur periodically and year to year changes in revenue from property salessuch transactions may not be indicative of any trends in Griffin’sthe Company’s real estate business.
The 2021 second quarter charge of approximately $0.8$1.0 million increasefrom the change in rental revenuethe fair value of financial instruments reflected the change in fair value of the Warrant (as defined below) and the CVR (as defined below) that were issued on August 24, 2020. Because the Warrant and the CVR each contain cash settlement provisions, they are reported as liabilities at their fair values on INDUS’s consolidated balance sheet as of June 30, 2021 (see Note 3 to the Company’s consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q). Although the fair value of the Warrant liability was approximately $10.2 million as of June 30, 2021, the maximum amount the Company would be required to pay if the Warrant were to be settled in cash is approximately $2.0 million. The CVR and the cash settlement feature of the Warrant expire on August 24, 2021, one year from the issuance date of each.
Interest expense decreased to approximately $1.7 million in the 2021 second quarter from approximately $1.8 million in the 2020 second quarter. The approximately $0.1 million decrease in interest expense in the 2021 second quarter, as compared to the 20192020 second quarter, principally reflected rental revenue of approximately $0.5 million from industrial/warehouse buildings that were added to Griffin’s portfolio subsequent to May 31, 2019, rental revenue ofan approximately $0.2 million from leasing first generation spaceincrease in 6975 Ambassador Drive (“6975 Ambassador”), an approximately 134,000 square foot building in the Lehigh Valley of Pennsylvania, which was completed in the three months ended November 30, 2018, and an increase of approximately $0.1 million of rental revenue from tenant expense reimbursements.
27
Summaries of the total square footage and leased square footage of Griffin’s industrial/warehouse buildings and Griffin’s total real estate portfolio are as follows:
| | | | | | |
|
| Total |
| Leased |
|
|
| | Square |
| Square |
| Percentage |
Industrial/Warehouse Properties |
| Footage |
| Footage |
| Leased |
As of May 31, 2019 |
| 3,645,000 |
| 3,441,000 |
| 94.4% |
As of November 30, 2019 |
| 4,029,000 | | 3,732,000 | | 92.6% |
As of May 31, 2020 | | 4,206,000 |
| 3,966,000 |
| 94.3% |
| | | | | | |
Total Portfolio | | | | | | |
As of May 31, 2019 | | 4,078,000 |
| 3,751,000 |
| 92.0% |
As of November 30, 2019 | | 4,462,000 | | 4,034,000 | | 90.4% |
As of May 31, 2020 | | 4,639,000 |
| 4,249,000 |
| 91.6% |
The industrial/warehouse buildings added to Griffin’s portfolio subsequent to May 31, 2019 reflected the acquisition of three buildings aggregating approximately 277,000 square feet in Orlando, Florida and the completion of construction of two buildings aggregating approximately 283,000 square feet in the Charlotte, North Carolina area. Of the three industrial/warehouse buildings acquired in Orlando, Florida, 7466 Chancellor Drive (“7466 Chancellor”), an approximately 100,000 square foot building acquired in the 2019 fourth quarter and 3320 Maggie Boulevard (“3320 Maggie”), an approximately 108,000 square foot building acquired in the three months ended February 29, 2020 (the “2020 first quarter”), were both fully leased at the time of their acquisition, whereas 170 Sunport Lane (“170 Sunport”), an approximately 68,000 square foot building acquired in the 2020 second quarter, was mostly vacant when acquired and remained as such as of May 31, 2020. Construction of the two industrial/warehouse buildings in the Charlotte, North Carolina area, 160 International Drive (“160 International”) and 180 International Drive (“180 International”), was completed in the 2019 fourth quarter. 160 International is approximately 147,000 square feet and was 71% leased as of May 31, 2020, whereas 180 International is approximately 136,000 square feet and was not leased as of May 31, 2020.
In the 2020 second quarter, Griffin entered into three new leases aggregating approximately 283,000 square feet of industrial/warehouse space and renewed two leases aggregating approximately 126,000 square feet of industrial/warehouse space. An existing industrial/warehouse tenant in the Lehigh Valley of Pennsylvania entered into both an early renewal of approximately 101,000 square feet and a new lease for an additional approximately 201,000 square feet, replacing a tenant that vacated as a result of an expiring lease. Additionally, an existing tenant in New England Tradeport (“NE Tradeport”), Griffin’s industrial park in Windsor and East Granby, Connecticut, entered into a lease to expand into an additional 59,000 square feet to replace a tenant vacating that space as a result of an expiring lease. The other new lease reflects a tenant that will relocate from approximately 11,000 square feet in one of Griffin’s office/flex buildings into approximately 22,000 square feet in NE Tradeport that was vacated on February 29, 2020 as a result of a lease expiration. Also in the 2020 second quarter, a lease aggregating approximately 24,000 square feet of industrial/warehouse space in NE Tradeport was renewed. As of May 31, 2020, Griffin’s thirty industrial/warehouse buildings comprised of approximately 2,052,000 square feet in the north submarket of Hartford, Connecticut, approximately 1,317,000 square feet in the Lehigh Valley, approximately 560,000 square feet in the Charlotte, North Carolina area and approximately 277,000 square feet in Orlando, Florida represented 91% of Griffin’s total real estate portfolio and were 94.3% leased. The percentage leased for stabilized2 industrial/warehouse properties was 99.7% as of May 31, 2020, as compared to 99.1% leased for stabilized industrial/warehouse properties as of February 29, 2020.
For Griffin’s office/flex portfolio, two leases aggregating approximately 17,000 square feet expired in the 2020 second quarter and were not renewed and a tenant that leased approximately 11,000 square feet of office/flex space agreed to relocate into an industrial/warehouse building in NE Tradeport, as discussed above. Griffin’s twelve office/flex buildings, which aggregate approximately 433,000 square feet and represent 9% of Griffin’s total real estate portfolio, were 65.2% leased as of May 31, 2020. Griffin’s total real estate portfolio of approximately 4,639,000 square feet was 91.6% leased as of May 31, 2020 (96.2% leased for stabilized properties), as compared to a portfolio of 4,570,000 square feet that was 92.7% leased as of February 29, 2020 (96.4% leased for stabilized properties).
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. Stabilized properties exclude 160 and 180 International Drive and 170 Sunport Lane.
28
Operating expenses of rental properties increased to approximately $2.5 million in the 2020 second quarter from approximately $2.4 million in the 2019 second quarter. Operating expenses of approximately $0.2 million related to the properties added to Griffin’s portfolio subsequent to May 31, 2019 were partially offset by a decrease of approximately $0.1 million in operating expenses for all other properties. The decrease in operating expenses for all properties in the portfolio in the 2020 second quarter reflected approximately $0.2 million from lower snow removal expenses in the 2020 second quarter, as compared to the 2019 second quarter,capitalized interest partially offset by an increase of approximately $0.1 million in real estate taxesamortization of debt issuance costs in the 20202021 second quarter, as compared to the 20192020 second quarter.
Leasing NOI Investment and Leasing NOI on a cash basis (“Cash Leasing NOI”)3 for Griffin’s industrial/warehouse properties and for Griffin’s total portfolio for the 2020 and 2019 second quarters were as follows:
| | | | | | | |
| Industrial/Warehouse Properties | | Total Portfolio | ||||
| 2020 | | 2019 | | 2020 | | 2019 |
| Second | | Second | | Second | | Second |
| Quarter | | Quarter | | Quarter | | Quarter |
Rental revenue | $ 7,665 | | $ 6,928 | | $ 9,214 | | $ 8,421 |
Operating expenses of rental properties | (1,807) | | (1,658) | | (2,470) | | (2,419) |
Leasing NOI | 5,858 | | 5,270 | | 6,744 | | 6,002 |
Noncash rental revenue including straight-line rents | (387) | | (346) | | (540) | | (378) |
Cash Leasing NOI | $ 5,471 | | $ 4,924 | | $ 6,204 | | $ 5,624 |
The increases in Leasing NOI and Cash Leasing NOI principally reflected the increases in rental revenue as a resultother income of more space under lease in the 2020 second quarter, as compared to the 2019 second quarter, due mostly to the industrial/warehouse buildings added to Griffin’s portfolio subsequent to May 31, 2019, and to a lesser extent, from improved occupancy and increases in rental rates in Griffin’s other industrial/warehouse properties. See below for a reconciliation of Leasing NOI and Cash Leasing NOI to net income/(loss) reported in the Consolidated Financial Statements.
Depreciation and amortization expense increased to approximately $3.4 million in the 2020 second quarter from approximately $2.9 million in the 2019 second quarter principally reflecting depreciation and amortization expense on properties added to Griffin’s portfolio subsequent to the 2019 second quarter.
General and administrative expenses increased to approximately $2.4 million in the 2020 second quarter from approximately $1.8 million in the 2019 second quarter principally reflecting increases in legal and consulting fees, stock option expenses and all other general and administrative expenses of approximately $0.4 million, $0.1 million and $0.1 million, respectively. The increase in legal and consulting fees principally reflected expenses related to Griffin’s efforts to pursue conversion to a REIT. The increase in stock option expenses principally reflects the options granted to Gordon F. DuGan under the Chairmanship and Advisory Agreement (the “Advisory Agreement”) upon Mr. DuGan’s appointment as Chairman of the Board of Directors on March 3, 2020.
Operating income in the 2019 second quarter included a gain on an insurance recovery of approximately $0.1 million, which related solely to proceeds, net of expenses, from the settlement of an insurance claim for storm damage to the Florida Farm.
Interest expense increased to approximately $1.9 million in the 2020 second quarter from approximately $1.6 million in the 2019 second quarter principally reflecting an approximately $0.2 million increase as a result of a higher amount of debt outstanding in the 2020 second quarter, as compared to the 2019 second quarter, and an approximately $0.1 million increase from lower capitalized interest in the 2020 second quarter, as compared to the 2019 second quarter.
Investment income was minimal in the 2020 second quarter, as compared to approximately $0.1 million in the 20192021 second quarter which reflects having fewer short-term investments (repurchase agreementsprincipally reflected a payment received from a third party in connection with Webster Bank,
3 Cash Leasing NOI is not a financial measure in conformity with U.S. GAAP. It is presented because Griffin believes it is a useful financial indicator for measuring resultssettlement of its real estate leasing activities. However, it should notpotential claims.
As the Company intends to elect to be considered as an alternative to operating incometaxed as a measureREIT under Sections 856 through 860 of operating resultsthe Code for the taxable year ending December 31, 2021, the Company did not record an income tax benefit in accordance with U.S. GAAP.
29
N.A. (“Webster Bank”) that are collateralized with securities issued by the United States Government or its sponsored agencies) inapproximately $1.2 million. In the 2020 second quarter, as compared to the 2019 second quarter.
TheCompany had an income tax benefit of approximately $0.2 million inthat reflected the 2020 second quarter, as comparedfederal statutory rate of 21% (applicable to an income tax provision of approximately $1.7 million in the 2019 second quarter, principally reflected aCompany at that time) on the pretax loss of approximately $0.9 million inadjusted for the 2020 second quarter versus pretaxeffects of permanent differences and state income tax benefits.
28
20202021 Six Month Period Compared to 20192020 Six Month Period
Rental revenue increased to approximately $19.9 million in the 2021 six month period from approximately $18.1 million in the 2020 six month period fromperiod. The approximately $16.9$1.8 million increase in rental revenue in the 2019 six month period, whereas revenue from property sales was approximately $0.9 million in the 20202021 six month period, as compared to approximately $9.5 million in the 2019 six month period. Accordingly, total revenue decreased to approximately $19.0 million in the 2020 six month period, from approximately $26.4 million in the 2019 six month period.was principally due to:
| ● | approximately $0.6 million from first generation leases and approximately $0.4 million from second generation leases that were either not in place or in place for only a portion of the 2020 six month period; |
| ● | approximately $0.1 million from leases in industrial/logistics buildings acquired during the 2020 six month period that were in effect the entire 2021 six month period; |
| ● | approximately $0.1 million from the industrial/logistics buildings acquired in the 2021 six month period; |
| ● | approximately $0.3 million from increases in rental rates on leases renewed subsequent to June 30, 2020; and |
| ● | approximately $0.6 million from an increase in expense reimbursements received from tenants; |
Revenue from property sales of approximately $0.9 million in the 2020 six month period reflected approximately $0.8 million from the 2020 Windsor Land Sale and approximately $0.1 million from the Florida Easement Sale. The 2020 Windsor Land Sale resulted in a pretax gain of approximately $0.6 million and the pretax gain on the Florida Easement Sale was approximately $0.1 million. Revenue from property sales of approximately $9.5 million in the 2019 six month period principally reflected approximately $7.7 million from the Simsbury Land Sale, which generated a pretax gain of approximately $7.4 million, and a total of approximately $1.6 million from the sales of the East Windsor Land and its development rights in two separate transactions. Property sales occur periodically and year to year changes in revenue from property sales may not be indicative of any trends in Griffin’s real estate business.partially offset by:
| ● | an approximately $0.3 million decrease from lease expirations. |
Rental revenue increased to approximately $18.1 million in the 2020 six month period from approximately $16.9 million in the 2019 six month period principally reflecting rental revenue of approximately $0.7 million from the industrial/warehouse buildings that were added to Griffin’s portfolio subsequent to May 31, 2019, rental revenue of approximately $0.3 million from leasing first generation space in 6975 Ambassador and rental revenue of approximately $0.2 million from leasing other previously vacant space.
Operating expenses of rental properties increased to approximately $5.3$2.8 million in the 2021 six month period from approximately $2.3 million in the 2020 six month period fromperiod. The approximately $5.1$0.5 million increase in the 2019 six month period principally reflecting operating expenses of the industrial/warehouse buildings addedrental properties was principally due to Griffin’s portfolio subsequent to May 31, 2019.
Leasing NOI and Leasing NOI on a cash basis for Griffin’s industrial/warehouse properties and for Griffin’s total portfolio for the 2020 and 2019 six month periods were as follows:
| | | | | | | |
| Industrial/Warehouse Properties | | Total Portfolio | ||||
| 2020 | | 2019 | | 2020 | | 2019 |
| Six Month | | Six Month | | Six Month | | Six Month |
| Period | | Period | | Period | | Period |
Rental revenue | $ 15,042 | | $ 13,847 | | $ 18,128 | | $ 16,858 |
Operating expenses of rental properties | (3,817) | | (3,466) | | (5,326) | | (5,084) |
Leasing NOI | 11,225 | | 10,381 | | 12,802 | | 11,774 |
Noncash rental revenue including straight-line rents | (707) | | (959) | | (1,052) | | (1,008) |
Cash Leasing NOI | $ 10,518 | | $ 9,422 | | $ 11,750 | | $ 10,766 |
The increases in Leasing NOI and Cash Leasing NOI principally reflected the increases in rental revenue as a result of more space under leasehigher snow removal expenses in the 20202021 six month period, as compared to the 20192020 six month period. Most of the increase in snow removal expenses was reimbursed by tenants in the industrial/logistics buildings under the terms of their leases. Real estate taxes increased to approximately $2.9 million in the 2021 six month period due mostly to the industrial/warehouse buildings added to Griffin’s portfolio subsequent to May 31, 2019, and to a lesser extent, from improved occupancy and increases in rental rates in Griffin’s other industrial/warehouse properties. See below for a
30
reconciliation of Leasing NOI and Cash Leasing NOI to net income/(loss) reported in the Consolidated Financial Statements.
Depreciation and amortization expense increased to approximately $6.6$2.8 million in the 2020 six month period. The approximately $0.1 million increase in real estate taxes was due to tax increases on all properties throughout the portfolio in the 2021 six month period, as compared to the 2020 six month period.
The Company’s NOI, Cash NOI and Cash NOI for industrial/logistics properties for the 2021 six month period and the 2020 six month period were as follows:
| | | | | | | |
| Industrial/Logistics Properties | | Total Portfolio | ||||
(dollars in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Six Month | | Six Month | | Six Month | | Six Month |
| Period | | Period | | Period | | Period |
Rental revenue | $ 17,010 | | $ 15,064 | | $ 19,923 | | $ 18,132 |
Operating expenses of rental properties | (1,717) | | (1,288) | | (2,765) | | (2,252) |
Real estate taxes | (2,506) | | (2,361) | | (2,901) | | (2,797) |
NOI | 12,787 | | 11,415 | | 14,257 | | 13,083 |
Noncash rental revenue including | | | | | | | |
straight-line rents | (799) | | (795) | | (856) | | (1,118) |
Cash NOI | $ 11,988 | | $ 10,620 | | $ 13,401 | | $ 11,965 |
The increases in NOI and Cash NOI reflected the increase in rental revenue as described above, partially offset by increased operating expenses of rental properties and real estate taxes. See below for information regarding why the Company believes NOI and Cash NOI are meaningful supplemental measures of its performance and reconciliations of these measures from net income (loss), presented in accordance with U.S. GAAP.
Depreciation and amortization expense of approximately $5.9$6.8 million in the 20192021 six month period principally reflectingwas essentially unchanged from the 2020 six month period. An increase in depreciation and amortization expense of approximately $0.3 million in the 2021 six month period related to the industrial/warehouse properties addedlogistics buildings recently acquired and tenant improvements related to Griffin’s portfolio subsequent to May 31, 2019.new leases was offset by a reduction in depreciation and amortization expense of approximately $0.3 million as certain tenant improvements became fully depreciated as leases expired and lower amortization expense on certain intangible assets that became fully amortized in fiscal 2020.
29
General and administrative expenses increased to approximately $4.5$5.7 million in the 2021 six month period from approximately $4.6 million in the 2020 six month period fromperiod. The approximately $3.9$1.1 million increase in the 2019 six month period principally reflecting increases in legal and consulting fees, stock option expenses and all other general and administrative expenses of approximately $0.5 million, $0.2 million and $0.2 million, respectively, in the 2021 six month period, as compared to the 2020 six month period, was principally due to:
| ● | approximately $0.6 million in employee compensation expenses; |
| ● | approximately $0.5 million related to INDUS’s non-qualified deferred compensation plan; |
| ● | approximately $0.1 million of maintenance expense on undeveloped land; |
partially offset by decreasesby:
| ● | an approximately $0.1 million decrease all other general and administrative expenses. |
The increase in employee compensation expenses principally reflected approximately $0.3 million for employees added in the areas of acquisitions, capital markets and investor relations and the addition of a general legal counsel and approximately $0.2 million of noncash compensation expense for the grant of restricted stock units in the 2021 first quarter. The higher expense related to Griffin’s non-qualified deferred compensation plan and approximately $0.1 million due to lower compensation expense. The increase in legal and consulting fees principally reflected expenses related to Griffin’s efforts to pursue conversion to a REIT. The increase in stock option expenses principally reflects the options granted to Gordon F. DuGan under the Advisory Agreement upon Mr. DuGan’s appointment as Chairman of the Board of Directors on March 3, 2020. The decrease in expenses related to theINDUS’s non-qualified deferred compensation plan reflected the effect on participant balances of lowerhigher stock market performance on a lower level of participant balances in the 20202021 six month period, as compared to the 20192020 six month period, whichthat resulted in an increase in the non-qualified deferred compensation plan liability in the 2021 six month period, as compared to a decrease in the non-qualified deferred compensation plan liability in the 2020 six month period. The maintenance expense on undeveloped land reflected the cost of removing certain old structures previously used in the agricultural operations of INDUS’s former parent company.
INDUS’s gain from real estate sales was approximately $0.3 million in the 2021 six month period, as compared to an increaseapproximately $0.7 million in the non-qualified deferred compensation plan liability in the 20192020 six month period. The lower compensation expense principally reflected the retirement of Frederick M. Danziger as Griffin’s Executive Chairman and the resignation of Griffin’s Director of Acquisitionsgain from real estate sales in the three months ended August 31, 2019. Mr. Danziger remained as Non-executive Chairman through March 3, 2020, when Mr. DuGan was appointed as Chairman. Mr. Danziger remains a director on Griffin’s Board.
Operating income in the 20192021 six month period also included a gain on insurance recoveryreflected approximately $0.2 million from the sale of 1936 Blue Hills and approximately $0.1 million which related solely to proceeds, netfrom two small sales of expenses,undeveloped land. The sale of nine of the remaining sixteen residential lots from the settlementCompany’s residential subdivision (“Stratton Farms”) in Suffield, Connecticut, for net proceeds of approximately $0.5 million in the 2021 six month period was essentially break-even. The gain from real estate sales in the 2020 six month period principally reflected approximately $0.6 million from the sale of undeveloped land in Windsor, Connecticut and approximately $0.1 million from the Florida Easement Sale. Sales of real estate assets occur periodically and year to year changes in such transactions may not be indicative of any trends in the Company’s real estate business.
The 2021 six month period charge of approximately $0.7 million from the change in the fair value of financial instruments reflected the change in fair value of the insurance claim for storm damagewarrant liability (the “Warrant”) and the contingent value rights (“CVR”) liability that were issued on August 24, 2020. Because the Warrant and the CVR each contain cash settlement provisions, they are reported as liabilities at their fair values on INDUS’s consolidated balance sheet as of June 30, 2021 (see Note 3 to the Florida Farm.Company’s consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q). Although the fair value of the Warrant liability was approximately $10.2 million as of June 30, 2021, the maximum amount the Company would be required to pay if the Warrant were to be settled in cash is approximately $2.0 million. The CVR and the cash settlement feature of the Warrant expire on August 24, 2021, one year from the issuance date of each.
Interest expense increaseddecreased to approximately $3.5 million in the 2021 six month period from approximately $3.7 million in the 2020 six month period fromperiod. The approximately $3.3$0.2 million decrease in interest expense in the 2019 six month period reflecting approximately $0.3 million as a result of a higher amount of debt outstanding in the 20202021 six month period, as compared to the 20192020 six month period, principally reflected an approximately $0.3 million increase in capitalized interest and an approximately $0.1 million decrease in interest expense across all mortgage loans from lower capitalized interestrecurring principal payments, partially offset by an increase of approximately $0.2 million in amortization of debt issuance costs in the 20202021 six month period, as compared to the 20192020 six month period. Investment and other income of approximately $0.1 million in the 2021 six month period principally reflected a payment received from a third party in connection with a settlement of potential claims.
InvestmentAs the Company intends to elect to be taxed as a REIT under Sections 856 through 860 of the Code for the taxable year ending December 31, 2021, the Company did not record an income was minimaltax benefit in the 2021 six month period on its pretax loss of approximately $1.9 million. In the 2020 six month period, as compared to approximately $0.2 million in the 2019 six month period reflecting having fewer short-term investments in the 2020 six month period, as compared to the 2019 six month period.
TheCompany had an income tax benefit of approximately $0.3 million inthat reflected the 2020 six month period, as comparedfederal statutory rate of 21% (applicable to an income tax provision of approximately $1.5 million in the 2019 six month period, principally reflected aCompany at that time) on the pretax loss of approximately $1.3$1.2 million in the 2020 six month period versus pretax income of approximately $6.7 million in the 2019 six month period. The effective tax rate of 21.1% for the 2020 six month period reflected the federal statutory income tax rate adjusted for the effects of permanent differences and state income taxes. tax benefits.
30
Non-GAAP Reconciliations
The effectiveCompany uses NOI, Cash NOI, NOI of Industrial/Logistics Properties, Cash NOI of Industrial/Logistics Properties, Funds from Operations (“FFO”), Core Funds from Operations (“Core FFO”), Cash Core Funds from Operations (“Cash Core FFO”), Adjusted Funds from Operations (“Adjusted FFO”), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”) and Adjusted EBITDAre as supplemental non-GAAP performance measures. Management believes that the use of these measures combined with net (loss) income (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 most comparable U.S. GAAP measure to FFO, Core FFO, Cash Core FFO, Adjusted FFO, EBITDAre and Adjusted EBITDAre is net income (loss).
These measures exclude expenses that materially impact the Company’s overall results of operations and, therefore, should not be considered as substitute measures derived in accordance with U.S. GAAP. Furthermore, these metrics may not be comparable to other similarly titled measures of other companies.
Certain of these measures may be calculated based on or substantially in accordance with definitions set forth by The National Association of Real Estate Investment Trusts (“Nareit”). Nareit is widely recognized as a representative organization for REITs and real estate companies with an interest in U.S. real estate. Nareit’s members are REITs and other real estate companies throughout the world that own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service those businesses. For periods prior to the Company’s conversion to a REIT, the Company further adjusts Nareit definitions to remove the impact of income tax ratebenefits or provisions in order to enhance the comparability of the Company’s performance prior to its conversion to a REIT with its performance following its conversion to a REIT. This tax adjustment was not required for the 2021 six month period.
NOI, Cash NOI, NOI of Industrial/Logistics Properties and Cash NOI of Industrial/Logistics Properties
NOI is a non-GAAP measure that includes the rental revenue, operating expenses and real estate taxes directly attributable to the Company’s real estate properties. The Company uses NOI as a supplemental performance measure because, in excluding real estate depreciation and amortization expense, general and administrative expenses, interest expense, gains (or losses) on the sale of real estate assets, investment income 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 will be useful to investors as a basis to compare its operating performance with that of other REITs. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the 2020 six month period is based on management’s projections of pretax results and permanent differences for the balancevalue of the year. ToCompany’s properties that result from use or market conditions, nor the extentlevel of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties (all of which have real economic effect and could materially impact the Company’s results from operations), the utility of NOI as a measure of the Company’s performance is limited. Other equity REITs may not calculate NOI in a similar manner and, as such, the Company’s NOI may not be comparable to such other REITs’ NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of the Company’s performance. NOI 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 should not be used as a substitute for cash flow from operating activities in accordance with U.S. GAAP.
Cash NOI is a non-GAAP measure that actual results differthe Company calculates by adding or subtracting non-cash rental revenue, including straight-line rental revenue, from current projections,NOI. The Company uses Cash NOI, together with NOI, as supplemental performance measures. Cash NOI should not be used as a measure of the effective income tax rate may change.Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs. Cash NOI should not be used as a substitute for cash flow from operating activities computed in accordance with U.S. GAAP.
The Company presents NOI and Cash NOI for its industrial/logistics properties by subtracting the NOI and Cash NOI attributable to its non-industrial/logistics properties from the NOI and Cash NOI, as applicable, for its total real estate portfolio.
31
Below is a reconciliation of Leasing NOI, Cash NOI, NOI of Industrial/Logistics Properties and Cash Leasing NOI of Industrial/Logistics Properties to net income (loss) as reported in the Company’s consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q:
| | | | | | | |
| 2021 | | 2020 | | 2021 | | 2020 |
| Second | | Second | | Six Month | | Six Month |
| Quarter | | Quarter | | Period | | Period |
Net loss | ($ 1,151) | | ($ 694) | | ($ 1,919) | | ($ 980) |
Income tax benefit | - | | (174) | | - | | (259) |
Pretax loss | (1,151) | | (868) | | (1,919) | | (1,239) |
Exclude: | | | | | | | |
Depreciation and amortization expense | 3,424 | | 3,509 | | 6,767 | | 6,815 |
General and administrative expenses | 2,724 | | 2,413 | | 5,694 | | 4,556 |
Interest expense | 1,711 | | 1,836 | | 3,460 | | 3,676 |
Change in fair value of financial instruments | 979 | | - | | 719 | | - |
Gain on sales of real estate assets | (322) | | (115) | | (342) | | (699) |
Investment and other income | (115) | | (1) | | (122) | | (26) |
NOI | 7,250 | | 6,774 | | 14,257 | | 13,083 |
Noncash rental revenue including straight-line rents | (419) | | (586) | | (856) | | (1,118) |
Cash NOI | $ 6,831 | | $ 6,188 | | $ 13,401 | | $ 11,965 |
| | | | | | | |
NOI | $ 7,250 | | $ 6,774 | | $ 14,257 | | $ 13,083 |
Exclude: | | | | | | | |
Rental revenue from non-industrial/logistics properties | (1,470) | | (1,533) | | (2,913) | | (3,068) |
Operating expenses of non-industrial/logistics properties | 481 | | 425 | | 1,048 | | 964 |
Real estate taxes of non-industrial/logistics properties | 197 | | 218 | | 395 | | 436 |
NOI of Industrial/Logistics Properties | 6,458 | | 5,884 | | 12,787 | | 11,415 |
Noncash rental revenue including straight-line rents of industrial/logistics properties | (403) | | (486) | | (799) | | (795) |
Cash NOI of Industrial/Logistics Properties | $ 6,055 | | $ 5,398 | | $ 11,988 | | $ 10,620 |
In an effort to improve the understanding of the Company’s operating results as compared to its operating results in a prior period and that of other REITs, 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 FFO as Nareit FFO, plus an adjustment to remove the impact of an income tax benefit or provision in the periods prior to January 1, 2021. The Company includes the adjustment for income taxes because, beginning with the taxable year ending December 31, 2021, the Company intends to elect to be taxed as a REIT and believes including this adjustment enhances the comparability of the Company’s results for periods prior to this tax election. The Company believes it is useful to investors to have enhanced transparency into the way in which its management evaluates operating performance to prior comparable periods and with that of other REITs. This tax adjustment was not required for the 2021 six month period.
Core Funds from Operations
The Company defines Core FFO as FFO excluding (a) costs related to the REIT Conversion, (b) change in fair value of financial instruments, and (c) gains or losses on insurance recoveries and/or extinguishment of debt or derivative instruments and (d) the write-off of non-recurring items.
32
Cash Core Funds from Operations
The Company defines Cash Core FFO as Core FFO less (a) non-cash rental revenue including straight-line rents, plus (b) amortization of debt issuance costs, (c) non-cash compensation expenses included in general and administrative expenses and (d) non-real estate depreciation & amortization expense.
Adjusted Funds from Operations
The Company defines Adjusted FFO as Cash Core FFO less tenant improvements and leasing commissions of second generation space and maintenance capital expenditures needed to maintain the Company’s existing buildings.
Below is a reconciliation of FFO, Core FFO, Cash Core FFO and Adjusted FFO to net (loss) income as reported in the Company’s consolidated financial statements:statements included in Item 1 of this Quarterly Report on Form 10-Q:
| | | | | | | |
(dollars in thousands) | For the Three Months Ended | | For the Six Months Ended | ||||
| June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
Net loss | ($ 1,151) | | ($ 694) | | ($ 1,919) | | ($ 980) |
Exclude: | | | | | | | |
Depreciation and amortization expense | 3,424 | | 3,509 | | 6,767 | | 6,815 |
Non-real estate depreciation & amortization expense | (22) | | (21) | | (38) | | (41) |
Gain on sales of real estate assets | (322) | | (115) | | (342) | | (699) |
Income tax (benefit) | - | | (174) | | - | | (259) |
FFO | 1,929 | | 2,505 | | 4,468 | | 4,836 |
Exclude: | | | | | | | |
General and administrative expenses related to REIT conversion (1) | 56 | | 216 | | 263 | | 325 |
Change in fair value of financial instruments | 979 | | - | | 719 | | - |
Core FFO | 2,964 | | 2,721 | | 5,450 | | 5,161 |
Exclude: | | | | | | | |
Noncash rental revenue including straight-line rents | (419) | | (586) | | (856) | | (1,118) |
Amortization of debt issuance costs | 241 | | 107 | | 407 | | 212 |
Noncash compensation expenses | 535 | | 651 | | 925 | | 161 |
Non-real estate depreciation & amortization expense | 22 | | 21 | | 38 | | 41 |
Cash Core FFO | 3,343 | | 2,914 | | 5,964 | | 4,457 |
Tenant improvements & leasing commissions (2nd generation space) | (156) | | (1,870) | | (702) | | (2,406) |
Maintenance capital expenditures | (294) | | (177) | | (296) | | (442) |
Adjusted FFO | $ 2,893 | | $ 867 | | $ 4,966 | | $ 1,609 |
| (1) | For the three months ended June 30, 2021, includes legal fees of $15 and consulting costs of $41. For the three months ended June 30, 2020, includes legal fees of $124 and consulting costs related to compensation and recruitment of personnel of $92. |
For the six months ended June 30, 2021, includes legal fees of $216 and consulting costs of $47. For the six months ended June 30, 2020, includes legal fees of $124 and consulting costs related to compensation and recruitment of personnel of $201.
| | | | | | | |
| 2020 | | 2019 | | 2020 | | 2019 |
| Second | | Second | | Six Month | | Six Month |
| Quarter | | Quarter | | Period | | Period |
Net (loss) income | $ (693,000) | | $ 5,819,000 | | $ (1,013,000) | | $ 5,233,000 |
Income tax benefit (provision) | 175,000 | | (1,683,000) | | 271,000 | | (1,503,000) |
Pretax (loss) income | (868,000) | | 7,502,000 | | (1,284,000) | | 6,736,000 |
Exclude: | | | | | | | |
Investment income | (2,000) | | (89,000) | | (28,000) | | (181,000) |
Interest expense | 1,899,000 | | 1,618,000 | | 3,691,000 | | 3,268,000 |
Operating income | 1,029,000 | | 9,031,000 | | 2,379,000 | | 9,823,000 |
Exclude: | | | | | | | |
Gain on insurance recovery | - | | (126,000) | | - | | (126,000) |
Costs related to property sales | 19,000 | | 1,009,000 | | 185,000 | | 1,823,000 |
Depreciation and amortization expense | 3,359,000 | | 2,939,000 | | 6,594,000 | | 5,881,000 |
General and administrative expenses | 2,438,000 | | 1,809,000 | | 4,495,000 | | 3,899,000 |
Revenue from property sales | (101,000) | | (8,660,000) | | (851,000) | | (9,526,000) |
Leasing NOI | 6,744,000 | | 6,002,000 | | 12,802,000 | | 11,774,000 |
Noncash rental revenue including straight-line rents | (540,000) | | (378,000) | | (1,052,000) | | (1,008,000) |
Cash Leasing NOI | $ 6,204,000 | | $ 5,624,000 | | $ 11,750,000 | | $ 10,766,000 |
| | | | | | | |
Leasing NOI | $ 6,744,000 | | $ 6,002,000 | | $ 12,802,000 | | $ 11,774,000 |
Exclude: | | | | | | | |
Rental revenue from non-industrial/warehouse properties | (1,549,000) | | (1,493,000) | | (3,086,000) | | (3,011,000) |
Operating expenses of non-industrial/warehouse properties | 663,000 | | 761,000 | | 1,509,000 | | 1,618,000 |
Leasing NOI of industrial/warehouse properties | 5,858,000 | | 5,270,000 | | 11,225,000 | | 10,381,000 |
Noncash rental revenue including straight-line rents of industrial/warehouse properties | (387,000) | | (346,000) | | (707,000) | | (959,000) |
Cash Leasing NOI for industrial/warehouse properties | $ 5,471,000 | | $ 4,924,000 | | $ 10,518,000 | | $ 9,422,000 |
33
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate
The Company defines EBITDAre in accordance with standards established by Nareit. EBITDAre represents net income (loss) (computed in accordance with U.S. GAAP) excluding (a) interest expense, (b) income tax expense, (c) depreciation and amortization expense, (d) gains and losses on the disposition of real estate assets (including gains or losses on change of control), (e) impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and (f) adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. INDUS does not currently have any unconsolidated properties or joint ventures.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate
The Company defines Adjusted EBITDAre as EBITDAre adjusted for (a) general and administrative expenses related to the REIT Conversion, (b) non-cash stock-based compensation expense and expenses or credits related to the Company’s non-qualified deferred compensation plan that are included in general and administrative expenses, (c) change in fair value of financial instruments, and (d) gains or losses on the extinguishment of debt or derivative instruments.
A reconciliation of net (loss) income to EBITDAre and Adjusted EBITDAre is as follows:
| | | | | | | |
(dollars in thousands) | For the Three Months Ended | | For the Six Months Ended | ||||
| June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
Net loss | ($ 1,151) | | ($ 694) | | ($ 1,919) | | ($ 980) |
| | | | | | | |
Interest expense | 1,711 | | 1,836 | | 3,460 | | 3,676 |
Depreciation and amortization expense | 3,424 | | 3,509 | | 6,767 | | 6,815 |
Gain on sales of real estate assets | (322) | | (115) | | (342) | | (699) |
Income tax benefit | - | | (174) | | - | | (259) |
EBITDAre | 3,662 | | 4,362 | | 7,966 | | 8,553 |
| | | | | | | |
General and administrative expenses related to REIT Conversion (1) | 56 | | 216 | | 263 | | 325 |
Noncash compensation expenses | 535 | | 651 | | 925 | | 161 |
Change in fair value of financial instruments | 979 | | - | | 719 | | - |
Adjusted EBITDAre | $ 5,232 | | $ 5,229 | | $ 9,873 | | $ 9,039 |
| (1) | For the three months ended June 30, 2021, includes legal fees of $15 and consulting costs of $41. For the three months ended June 30, 2020, includes legal fees of $124 and consulting costs related to compensation and recruitment of personnel of $92. |
For the six months ended June 30, 2021, includes legal fees of $216 and consulting costs of $47. For the six months ended June 30, 2020, includes legal fees of $124 and consulting costs related to compensation and recruitment of personnel of $201.
Off Balance Sheet Arrangements
GriffinINDUS does not have any material off balance sheet arrangements.
Liquidity and Capital Resources
Net cash provided by operating activities was approximately $2.8$5.4 million in the 20202021 six month period, as compared to approximately $3.5$4.5 million in the 20192020 six month period. The approximately $0.7$0.9 million decreaseincrease in net cash provided by operating activities was principally due to the increase in NOI in the 20202021 six month period, as compared to the 2019 six month period, principally reflected an increase of approximately $0.7 million in cash used as a result of changes in assets and liabilities. The higher cash usage from changes in assets and liabilities was driven by a payment of approximately $1.9 million under Griffin’s non-qualified deferred compensation plan to Mr. Danziger in the 2020 six month period as a resultperiod.
34
Net cash used in investing activities was approximately $68.2 million in the 2021 six month period, as compared to approximately $18.6 million in the 2020 six month period, as compared to approximately $1.3 millionperiod. The net cash used in investing activities in the 20192021 six month period. period reflected:
| ● | cash payments of approximately $60.1 million for the acquisition of two industrial/logistics buildings and undeveloped land; |
| ● | cash payments of approximately $10.4 million for additions to real estate assets; and |
| ● | cash payments of approximately $0.9 million for deferred leasing costs and other uses (mostly lease commissions paid to brokers); |
partially offset by:
| ● | cash proceeds of approximately $3.1 million from the sales of real estate assets. |
The approximately $60.1 million of cash payments used for the acquisition of industrial/logistics buildings and undeveloped land reflected approximately $42.5 million and $11.9 million for the purchases of 7800 Tuckaseegee and 6355 Farm Bureau, respectively, and approximately $5.7 million for the purchase of an approximately 14 acre parcel of undeveloped land in Orlando, Florida (the “Jetport Land”).
The approximately $10.4 million of cash payments for additions to real estate assets in the 2021 six month period reflected approximately $8.9 million for new building construction (including site work), approximately $1.2 million for tenant and building improvements related to leasing and approximately $0.3 million for the maintenance of the Company’s buildings.
Cash payments for new building construction (including site work) reflected:
| ● | approximately $7.4 million for a build-to-suit project (the “Charlotte Build-to-Suit”) on the Company’s 44 acre parcel of land in Charlotte, North Carolina (the “Charlotte Land”); |
| ● | approximately $1.3 million for the speculative construction of an approximately 103,000 square foot industrial/logistics building on the Company’s 14 acre parcel of land (“Chapmans Road”) in the Lehigh Valley of Pennsylvania; and |
| ● | approximately $0.2 million for the start of construction of a 67% pre-leased approximately 234,000 square foot industrial/logistics building at 110 Tradeport Drive (“110 Tradeport”) in New England Tradeport (“NE Tradeport”), the Company’s industrial park in Windsor and East Granby, Connecticut. |
The cash payments for tenant and building improvements related to leasing reflects approximately $0.8 million for first generation space, primarily the recently completed leases in 160 and 180 International and a lease for the renovated space in 170 Sunport and approximately $0.4 million for tenant and building improvements related to leasing second generation space.
The approximately $3.1 million of proceeds from sales of real estate in the 2021 six month period reflected the sales of 1936 Blue Hills, nine residential lots at Stratton Farms, two small sales of undeveloped land and the return of proceeds, that had been deposited in escrow for the purchase of a replacement property for a like-kind exchange under Section 1031 of the Code, from three sales of real estate completed in November 2020.
The net cash used in investing activities in the 2020 six month period reflected: (a) cash payments of approximately $13.7 million for the acquisitions of 3320 Maggie and 170 Sunport; (b) cash payments of approximately $6.3 million for additions to real estate assets; and (c) cash payments of approximately $0.4 million for deferred leasing costs and other uses;
| ● | cash payments totaling approximately $13.7 million for the acquisitions of 3320 Maggie Boulevard (“3320 Maggie”), an approximately 108,000 square foot industrial/logistics building in Orlando, Florida, and 170 Sunport; |
| ● | cash payments of approximately $5.8 million for additions to real estate assets; and |
| ● | cash payments of approximately $1.0 million for deferred leasing costs and other uses (mostly lease commissions paid to brokers); |
partially offset by (d) cash proceeds of approximately $1.0 million from a decrease in short-term investments; and (e) cash proceeds of approximately $0.8 million from propertyby:
| ● | cash proceeds of approximately $1.0 million from a decrease in short-term investments; and |
| ● | cash proceeds of approximately $0.9 million from real estate sales. |
3235
The acquisitions of 3320 Maggie and 170 Sunport were each made utilizing a reverse like-kind exchange structure (a “Reverse 1031 Like-Kind Exchange”) under Section 1031 of the Internal Revenue Code of 1986, as amended. As such, as of May 31, 2020, 3320 Maggie and 170 Sunport were in the possession of a qualified intermediary engaged to execute the Reverse 1031 Like-Kind Exchanges until subsequent sale transactions and the Reverse 1031 Like-Kind Exchanges are completed. Griffin retains essentially all of the legal and economic benefits and obligations related to 3320 Maggie and 170 Sunport prior to the completion of each of the Reverse 1031 Like-Kind Exchanges. Accordingly, 3320 Maggie and 170 Sunport are included in Griffin’s consolidated financial statements as a consolidated variable interest entities until the legal title of each is transferred to Griffin upon completion of the Reverse 1031 Like-Kind Exchanges.
The approximately $6.3 million of cash payments for additions to real estate assets in the 2020 six month period reflected the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments in the 2020 six month period for tenant and building improvements related to new leases signed in the latter part of fiscal 2019leasing, approximately $1.2 million for development costs and the 2020 six month period, withinfrastructure improvements and approximately $2.2$0.4 million of tenant and building improvements in the 2020 six month period related to leases of first generation space. Cash payments for new building construction (including site work). The cash payments for tenant and building improvements related to leasing reflected approximately $2.2 million for leasing first generation space, primarily leases in the 2020 six month period reflected final payments of the construction costs for 160 International and 180 International, which were completed in the 2019 fourth quarter. Cash payments in the 2020 six month period for development costs and infrastructure improvements principally reflected planning and design costs related to: (i) the planned development of three industrial/warehouse buildings aggregating approximately 520,000 square feet on6975 Ambassador Drive, an approximately 44 acre parcel of undeveloped land in Charlotte, North Carolina that was purchased in fiscal 2019; and (ii) the planned development of an approximately 103,000134,000 square foot industrial/warehouselogistics building on an approximately 14 acre parcel of undeveloped land in the Lehigh Valley, approximately $1.3 million for leasing second generation space and approximately $0.7 million for the maintenance of Pennsylvania that was purchased in fiscal 2019.the Company’s buildings.
Cash payments of approximately $0.4 million in the 2020 six month period for deferred leasing costs and other uses principally reflected lease commissions paid to real estate brokers for new leases.
The $1.0 million of cash from the decrease in short-term investments in the 2020 six month period reflected the maturity of Griffin’sthe Company’s repurchase agreement that was collateralized with securities issued by the United States Government or its sponsored agencies, with Webster Bank, N.A. (“Webster Bank”). The approximately $0.8 million of cash proceeds from property sales in the 2020 six month period reflected the 2020 Windsor Land Sale and the Florida Easement Sale.
The net cash used in investing activities of approximately $1.3 million in the 2019 six month period reflected: (a) cash payments of approximately $7.5 million for additions to real estate assets; and (b) cash payments of approximately $0.3 million for deferred leasing costs and other uses; partially offset by (c) $5.0 million of cash from a decrease in short-term investments; and (d) net cash proceeds of approximately $9.2 million from property sales, partially offset by approximately $7.6 million of proceeds from property sales deposited into escrow at closing for the purchase of a replacement property for a 1031 Like-Kind Exchange.
The approximately $7.5 million of cash payments for additions to real estate assets in the 2019 six month period reflected the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for new building construction (including site work) in the 2019 six month period included approximately $5.7 million for construction, on speculation, of 160 and 180 International. Cash payments for new building construction in the 2019 six month period also included a total of approximately $0.4 million for two industrial/warehouse buildings that were completed in the three months ended November 30, 2018. Cash payments for tenant and building improvements in the 2019 six month period were related to leases signed in the latter part of fiscal
33
2018 and fiscal 2019, with approximately $0.5 million of tenant and building improvements in the 2019 six month period related to leases of first generation space.
Cash payments of approximately $0.3 million for deferred leasing costs and other uses in the 2019 six month period reflected approximately $0.4 million of cash payments for lease commissions and other costs related to new and renewed leases, partially offset by approximately $0.1 million of cash received from the insurance settlement for storm damage to the Florida Farm.
Net cash provided by financing activities was approximately $13.9$100.9 million in the 2021 six month period, as compared to approximately $13.8 million in the 2020 six month period, as compared toperiod. The net cash used inprovided by financing activities in the 2021 six month period principally reflected approximately $108.7 million from the sale of Common Stock, partially offset by (x) approximately $4.6 million of dividend payments; (y) approximately $2.5 million of principal payments on mortgage loans; and (z) approximately $0.8 million of payments of debt issuance costs.
On February 2, 2021, INDUS filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”) with the SEC whereby the Company could offer and sell up to $500 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, units or any combination of such securities during the three year period that commenced upon the effective date of the Universal Shelf. Under the Universal Shelf, the Company could periodically offer one or more types of securities in amounts, at prices and on terms announced. When INDUS obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If the Company incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict INDUS’s operations. It is possible that the Company will not obtain additional capital under the Universal Shelf on favorable terms, or at all. See “Risk Factors-Risks Related to the Real Estate Industry-Volatility in the capital and credit markets could materially adversely impact the Company” and “Risk Factors-Risks Related to the Company’s Common Stock-Issuances or sales of the Company’s Common Stock or the perception that such issuances or sales might occur could adversely affect the per share trading price of the Company’s Common Stock” included in Part I, Item 1A “Risk Factors” of the Company’s Form 10-K for fiscal 2020.
In the 2021 six month period, under its Universal Shelf, INDUS completed an underwritten public offering of 1,927,049 shares of its Common Stock at a price to the underwriters of $56.85 per share. INDUS received net proceeds, after expenses, of approximately $3.8$108.7 million. The Company has used a portion of the proceeds from the sale of its Common Stock to finance its development pipeline and acquisitions and for other corporate purposes, and expects to use the balance of the proceeds for that purpose.
On May 7, 2021, a subsidiary of INDUS entered into a construction loan agreement (the “2021 JPM Construction Loan”) with JPMorgan Chase Bank N.A. to provide a portion of the funds for the development costs of the Charlotte Build-to-Suit. Total borrowings under the JPM Construction Loan will be the lesser of $28.4 million or 67.5% of the total cost (as defined in the 2019 six month period. 2021 JPM Construction Loan) of the Charlotte Build-to-Suit. The term of the 2021 JPM Construction Loan is two years, with a one-year extension at the Company’s option. Interest under the 2021 JPM 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 in the Charlotte Build-to-Suit.
The net cash provided by financing activities in the 2020 six month period reflected: (a) $21.5$20.1 million of proceeds from mortgage loans; (b) $2.5 million of proceeds from the sale of common stock under an agreement with Griffin’s newly electedINDUS’s Chairman (see below); and (c) approximately $0.1 million of proceeds from the exercise of stock options; partially offset by (d) approximately $5.4$5.5 million of principal payments on mortgage loans; (e) an approximately $2.5 million dividend payment on Griffin’s common stock that was declared in the 2019 fourth quarter and paid in the 2020 six month period; (f) approximately $1.8$3.0 million for a net repayment under Griffin’sINDUS’s line of credit for acquisitions (the “Acquisition Credit Line”) with Webster Bank; and (g)(f) approximately $0.4 million of payments for debt issuance costs.
Proceeds from mortgage loans in the 2020 six month period reflected a $15.0 million nonrecourse mortgage loan (the “2020 State Farm Mortgage”) with State Farm Life Insurance Company (“State Farm”), and a $6.5$5.1 million nonrecourse mortgage loan (the “2019“2020 Webster Mortgage”) with Webster Bank. On December 20, 2019, two wholly owned subsidiaries
36
On January 23, 2020, two wholly owned subsidiaries of GriffinINDUS entered into the 2020 State Farm Mortgage, which is collateralized by two industrial/warehouselogistics buildings in the Lehigh Valley of Pennsylvania, 6975 Ambassador and 871 Nestle Way, that aggregate approximately 254,000 square feet. The 2020 State Farm Mortgage has a ten-year term with monthly principal payments based on a twenty-five-year amortization schedule. The interest rate for the 2020 State Farm Mortgage is 3.48%. Approximately $3.2 million of the proceeds from the 2020 State Farm Mortgage were used to repay the mortgage loan on 871 Nestle Way that was scheduled to mature on January 27, 2020. On June 30, 2020, a wholly owned subsidiary of INDUS entered into the 2020 Webster Mortgage, which is collateralized by 3320 Maggie, which was acquired on February 18, 2020. $4.1 million of the proceeds from the 2020 Webster Mortgage were used to repay Webster Bank for the borrowing under the Company’s Acquisition Credit Line that was used to finance a portion of the purchase price of 3320 Maggie (see below).
The approximately $5.4$5.5 million of principal payments on mortgage loans in the 2020 six month period reflected the repayment of the mortgage loan on 871 Nestle Way and a total of approximately $2.2$2.3 million of recurring principal payments on Griffin’sthe Company’s nonrecourse mortgage loans. The approximately $1.8$3.0 million net repayment on revolving lines of credit in the 2020 six month period reflected the repayment of the approximately $5.9 million that wasamount outstanding on the AcquisitionRevolving Credit Line as of November 30, 2019, representing the amount that was drawn to finance a portion of the purchase price of 7466 Chancellor, partially offset byDecember 31, 2019. $4.1 million borrowed on the Acquisition Credit Line in the 2020 first quarter that was used to finance a portion of the purchase price of 3320 Maggie.
The net cash usedMaggie in financing activities in the 2019 six month period reflected: (a) an approximately $2.3 million dividend payment on Griffin’s common stock that was declared in the 2018 fourth quarter and paid in the 2019 first quarter; and (b) approximately $1.9 million of recurring principal payments on mortgage loans; partially offset by (c) proceeds of approximately $0.1 million from the exercise of stock options; and (d) approximately $0.3 million of proceeds from the construction to permanent mortgage loan (the “2019 State Farm Loan”) with State Farm that provided a significant portion of the funds for the construction of 220 Tradeport Drive, an approximately 234,000 square foot industrial/warehouse building in NE Tradeport, and tenant improvements related to the full building lease of that building. On August 1, 2019, Griffin converted the 2019 State Farm Loan to a $14.1 million nonrecourse permanent
34
mortgage that matures on April 1, 2034. The interest rate on the 2019 State Farm Loan is 4.51% with monthly principal payments based on a twenty-five-year amortization schedule.
On April 11, 2018, Griffin filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”) with the SEC. Under the Universal Shelf, Griffin may offer and sell up to $50 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, units or any combination of such securities during the three year period that commenced upon the Universal Shelf becoming effective on April 25, 2018. Under the Universal Shelf, Griffin may periodically offer one or more types of securities in amounts, at prices and on terms announced, if and when the securities are ever offered. On May 10, 2018, Griffin filed a prospectus supplement with the SEC under which it may issue and sell, from time to time, up to an aggregate of $30 million of its Common Stock under an “at-the-market” equity offering program (the “ATM Program”) through Robert W. Baird & Co. Incorporated (“Baird”), as sales agent. Under the sales agreement with Baird, Griffin sets the parameters for the sales of its Common Stock under the ATM Program, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum price below which sales of shares may not be made. Sales of Common Stock, if any, under the ATM Program would be made in offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). In addition, with the prior consent of Griffin, Baird may also sell shares in privately negotiated transactions. Griffin expects to use the net proceeds, if any, from the ATM Program for acquisitions of target properties consistent with Griffin’s investment strategies, repayment of debt and general corporate purposes. If Griffin obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If Griffin incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict Griffin’s operations. Griffin cannot give assurance that it could issue Common Stock under the ATM Program or obtain additional capital under the Universal Shelf on favorable terms, or at all. See “Risk Factors-Risks Related to the Real Estate Industry-Volatility in the capital and credit markets could materially adversely impact Griffin” and “Risk Factors-Risks Related to Griffin’s Common Stock-Issuances or sales of Griffin’s common stock or the perception that such issuances or sales might occur could adversely affect the per share trading price of Griffin’s common stock” included in Part I, Item 1A “Risk Factors” of Griffin’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended November 30, 2019.
On December 10, 2019, Griffin entered into an Option Purchase Agreement (the “East Granby/Windsor Option Agreement”) whereby Griffin granted the buyer an exclusive one-year option, in exchange for a nominal fee, to purchase approximately 280 acres of undeveloped land in East Granby and Windsor, Connecticut. The purchase price has a range of a minimum of $6.0 million to a maximum of $7.95 million based upon the final approved use of the land. The buyer may extend the option period for an additional two years upon payment of additional option fees. The land subject to the East Granby/Windsor Option Agreement does not have any of the approvals that would be required for the buyer’s planned use of the land. A closing on the land sale contemplated by the East Granby/Windsor Option Agreement is subject to several significant contingencies, including the buyer securing contracts under a competitive bidding process that would require changes in the use of the land and obtaining local and state approvals for that planned use. There is no guarantee that the land sale contemplated under the East Granby/Windsor Option Agreement will be completed under its current terms, or at all.
On February 3, 2020, Griffin entered into an option agreement (the “Meadowood Option Agreement”) with a national land conservation organization (the “Conservation Organization”) to sell the approximate 277 acres (the “Meadowood Land”) of Griffin’s approved but unbuilt residential development, Meadowood, in Simsbury, Connecticut. For a minimal fee, the Meadowood Option Agreement grants the Conservation Organization the right to purchase the Meadowood Land for open space and farmland preservation whereby Griffin would receive net proceeds of approximately $5.4 million, if the purchase option is exercised. The Meadowood Option Agreement grants the Conservation Organization an initial term of twelve months, with one six-month extension, to exercise its option to acquire the Meadowood Land. Completion of a sale of the Meadowood Land contemplated under the Meadowood Option Agreement is subject to several contingencies, including the satisfactory outcome of due diligence by the Conservation Organization and the Conservation Organization securing funding from several public and private sources to acquire the Meadowood Land. There is no guarantee that a sale of the Meadowood Land contemplated under the Meadowood Option Agreement will be completed under its current terms, or at all.
In the 2020 six month period Griffin’s Boardwas subsequently repaid in that same period using a portion of Directors approvedthe proceeds from the 2020 Webster Mortgage.
Proceeds of approximately $2.5 million from the sale, on March 9, 2020, of Common Stock in the 2020 six month period reflected the sale of 53,293 shares of Common Stock at a plan for Griffinprice per share of $46.91, to pursue conversionGordon DuGan in accordance with an Advisory Agreement (see below) and pursuant to a real estate investment trust (“REIT”) for federal income tax purposes. At Griffin’sStock Purchase Agreement, dated as of March 5, 2020, Annual Meeting of Stockholders (the “2020 Annual Meeting”), amendments to Griffin’s bylawsbetween Mr. DuGan and Griffin’s reincorporation from Delaware to Maryland were approved by Griffin’s stockholders, essentially enabling Griffin to continue to pursue its conversion to a REIT. If
35
successful in the conversion process, Griffin may elect REIT status for federal income tax purposes commencing with the taxable year beginning January 1, 2021. In connection with the REIT conversion, Griffin would be required to distribute its accumulated earnings and profits (the “E&P Distribution”) to stockholders. Griffin currently estimates the range of its required E&P Distribution to be approximately $14.0 million to $19.0 million. Griffin’s actual E&P Distribution may vary depending on a number of items, including the occurrence and timing of certain transactions and Griffin’s actual results through December 31, 2020. Griffin intends for the E&P Distribution to be paid out in a combination of at least 20% in cash and up to 80% in Griffin Common Stock. The Company continues to evaluate the appropriate timing for conversion to a REIT.
On March 4, 2020, Griffin announced its intention to offer for sale its two multi-story office buildings (“5 and 7 Waterside”) in Griffin Center in the greater Hartford, Connecticut area. However, as a result of the current market conditions caused by the COVID-19 pandemic, Griffin has suspended its efforts to sell 5 and 7 Waterside. Griffin expects to resume its efforts to sell 5 and 7 Waterside when Griffin believes that the market environment for such sale is more stable.
INDUS. On March 3, 2020, Gordon F.Mr. DuGan was appointed as Chairman of the Board of Directors. Mr. DuGanDirectors and Griffin entered into the Advisory Agreement with the Company whereby Mr. DuGan also agreed to serve as a non-employee advisor to Griffinthe Company on, amongst other things, growth strategy, including identifying markets, acquisitions and other transactions, recruitment of key personnel, potential capital raising efforts and general management advice (collectively the “Advisory Services”). As compensation to Mr. DuGan for providing such Advisory Services, Mr. DuGan received: (i) an non-qualified stock option to acquire 48,000 shares of Griffin Common Stock at an exercise price of $45.98 per share under the Griffin Industrial Realty, Inc. 2009 Stock Option Plan (the “2009 Plan”); and (ii) a non-qualified stock option (the “Supplemental Advisor Option”) to acquire 52,000 shares of Griffin Common Stock at an exercise price of $46.91 per share under the Griffin Industrial Realty, Inc. and Griffin Industrial, LLC 2020 Incentive Award Plan (the “2020 Incentive Award Plan”).
On MarchJuly 9, 2020, Griffin completed the sale of 53,293 shares of Griffin’s Common Stock at a price per share of $46.91, for cash proceeds of approximately $2.5 million, in accordance2021, INDUS and INDUS RT, LP filed an updated universal shelf registration statement on Form S-3 (the “Updated Universal Shelf”) with the Advisory AgreementSEC. Under the Updated Universal Shelf, the Company may offer and pursuantsell up to $500million of a Stock Purchase Agreement, dated asvariety of March 5, 2020, between Mr. DuGan and Griffin.
On June 30, 2020, a wholly-owned subsidiarysecurities including its common stock, preferred stock, debt securities, warrants, depositary shares, rights or units, INDUS RT, LP’s debt securities or guarantees thereof by the Company, or any combination of Griffin (the “Borrower”) closed on a nonrecourse mortgage loan (the “2020 Webster Mortgage”)such securities during the three year period that will commence with Webster Bank for $5.1 million. The 2020 Webster Mortgage is collateralized by 3320 Maggie,the effective date, which was acquired on February 18, 2020. The 2020 Webster Mortgage has a ten-year term with monthly principal payments based on a twenty-five-year amortization schedule. The interest rate fornot yet occurred. Under the 2020 Webster Mortgage is a floating rateUpdated Universal Shelf, which adds debt securities of the Company and of INDUS RT, LP, that which the Universal Shelf did not include, the Company may periodically offer one month LIBOR rate plus 2.56%. Ator more types of securities in amounts, at prices and on terms announced. When INDUS obtains additional capital by issuing equity, the timeinterests of its existing stockholders will be diluted. If the 2020 Webster Mortgage closed, GriffinCompany incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict INDUS’s operations.
On August 5, 2021, INDUS, as parent guarantor, INDUS RT, LP, as borrower, certain subsidiaries of INDUS RT, LP as guarantors, JPMorgan Chase Bank, N.A. (“JPMorgan”) as Administrative Agent, Joint Lead Arranger and Joint Bookrunner, CITIBANK, N.A. as Joint Lead Arranger, Joint Bookrunner and Syndication Agent and the other parties thereto entered into an interest rate swap agreement for a new secured revolving credit facility of up to $100 million (the “New Credit Facility”) with several banks that replaced the Company’s existing $35 million Revolving Credit Line and $15 million Acquisition Credit Line with Webster Bank that effectively fixeswere scheduled to expire on September 30, 2021. The New Credit Facility has a three-year term with two one-year extensions at the Company’s option. The New Credit Facility also includes an uncommitted incremental facility that would enable the New Credit Facility to be increased up to $250 million in the aggregate. Borrowings under the New Credit Facility will 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 rate under the New Credit Facility is the one-month LIBOR plus 1.20% compared to a rate of the 2020 Webster Mortgage at 3.50% for the entire loan term. $4.1 million of the proceeds from the 2020 Webster Mortgage were used to repay Webster Bank for the borrowingone-month LIBOR plus 2.50% and one-month LIBOR plus 2.75% under Griffin’sits current Revolving Credit Line and Acquisition Credit Line, respectively, with Webster Bank immediately prior to entering into the New Credit Facility. In the event that was usedJPMorgan determines that LIBOR is no longer available, the New Credit Facility contemplates that JPMorgan shall transition to finance a portioncomparable rate of interest to the LIBOR rate. Under the terms of the purchase priceNew Credit Facility, INDUS must maintain: (i) a consolidated tangible net worth of 3320 Maggie.75% of the consolidated tangible net worth as of the last day of the most-recent fiscal quarter ending on or prior to the closing date plus 75% of the aggregate increases in stockholders’ equity of the Company by reason of issuance or sale of equity of the Company; (ii) a fixed charge coverage ratio of (a) 1.25 to 1.0 through March 31, 2022, and (b) 1.50 to 1.0 on and after June 30, 2022; (iii) a maximum leverage ratio of total indebtedness to
37
total assets of less than 60% on the last day of any fiscal quarter; (iv) a maximum secured leverage ratio of total secured indebtedness to total asset value of (a) 50% through December 31, 2022, and (b) 40% on and after March 31, 2023; (v) a minimum borrowing base of (a) $30 million through December 30, 2022, (b) $50 million from December 31, 2022 through December 30, 2023, and (c) $100 million on and after December 31, 2023; and (vi) a minimum of (a) five industrial unencumbered properties from June 30, 2021 through December 30, 2023, and (b) eight industrial unencumbered properties on and after December 31, 2023.
OnSubsequent to June 24, 2020, Griffin entered into a Purchase and Sale Agreement (the “Allentown Purchase Agreement”) to acquire,30, 2021, the Company: (a) purchased an approximately 139,500 square foot fully leased industrial/logistics building in Lakeland, Florida for a purchase price of $3.1$17.8 million, before transaction costs; (b) sold approximately 34 acres of undeveloped land in Bloomfield, Connecticut for $0.6 million; and (c) entered into a site lease agreement for a small area of land with a cell tower in Southwick, Massachusetts, for a term 65 years for a one-time payment of $1 million. Also subsequent to June 30, 2021, an agreement for the sale of three office/flex buildings in Windsor, Connecticut for approximately $6.6 million and an agreement for the sale of approximately 91 acres of undeveloped land in Southwick, Massachusetts, for approximately $5.3 million were terminated by the respective buyers.
On April 29, 2021, the Company entered into an agreement (the “Blue Hills Sale Agreement”) with the full-building tenant in 1985 Blue Hills Avenue (“1985 Blue Hills”), an approximately 18 acre site in the Lehigh Valley of Pennsylvania for the intended development of an approximately 150,000165,000 square foot industrial/warehouse building. A closing onlogistics building in Windsor, Connecticut, to sell 1985 Blue Hills and two adjacent parcels of undeveloped land aggregating approximately 39 acres to the land acquisitiontenant for a purchase price of $18.0 million. The completion of the sale contemplated byunder the Allentown PurchaseBlue Hills Sale Agreement is subject to significant contingencies, including Griffin obtaining all governmental approvals for its planned developmentsatisfactory completion of due diligence by the buyer. Under the terms of the land that wouldBlue Hills Sale Agreement, closing on the sale is to take place upon 30 days written notice from INDUS to the buyer, but in no event shall it be acquired.later than December 15, 2021. There is no guarantee that the land acquisition assale contemplated underby the Allentown PurchaseBlue Hills Sale Agreement will be completed under its current terms, or at all.
The Company also has several agreements in place for the sales of certain of its non-core real estate assets, which includes undeveloped land and a former nursery farm. The total proceeds from these potential sales would be approximately $23.2 million if these transactions were completed under their current terms. There is no guarantee that any of these transactions will be completed under their current terms, or at all. The potential sales of non-core real estate assets currently under agreement reflect the following:
| ● | On December 10, 2019, the Company entered into an option agreement (the “East Granby/Windsor Option Agreement”) whereby the Company granted the buyer an exclusive option, in exchange for a nominal fee, to purchase approximately 280 acres of undeveloped land in East Granby and Windsor, Connecticut for use as a solar farm. The option has been extended through December 10, 2021. The purchase price has a range from a minimum of $6.0 million to a maximum of $7.95 million based upon the projected amount of electricity to be generated from the site. The land subject to the East Granby/Windsor Option Agreement does not have any of the approvals that would be required for the buyer’s planned use of the land. A closing on the land sale contemplated by the East Granby/Windsor Option Agreement is subject to several significant contingencies, including the buyer securing contracts under a competitive bidding process and obtaining local and state approvals for that planned use of the land. Given these contingencies, it is possible that the land sale contemplated under the East Granby/Windsor Option Agreement will not be completed under its current terms, or at all. |
| ● | On February 3, 2020, the Company entered into an option agreement (the “Meadowood Option Agreement”) with a national land conservation organization (the “Conservation Organization”) to sell the approximate 277 acres of Meadowood (the “Meadowood Land”). For a nominal fee, the Meadowood Option Agreement grants the Conservation Organization the right to purchase the Meadowood Land for open space and farmland preservation whereby the Company would receive net proceeds of approximately $5.4 million if the purchase option is exercised. The Meadowood Option Agreement granted the Conservation Organization an initial term of twelve months, with one six-month extension, to exercise its option to acquire the Meadowood Land. On February 3, 2021, the Conservation Organization exercised that six-month extension. Completion of a sale of the Meadowood Land contemplated under the Meadowood Option Agreement is subject to several contingencies, including the Conservation Organization securing funding from several public and private sources to acquire the Meadowood Land. Given these contingencies, it is possible that a sale of |
38
| the Meadowood Land will not be completed under the current terms of the Meadowood Option Agreement, or at all. |
| ● | On March 31, 2021, the Company entered into an agreement (the “Florida Farm Sale Agreement”) to sell, for a purchase price of $1.1 million, before transaction costs, all of the real estate assets of the Florida Farm previously used by Imperial Nurseries, Inc. prior to being shut down in fiscal 2009. Completion of this transaction is subject to the satisfactory outcome of the buyer’s due diligence. There is no guarantee that the transaction contemplated under the Florida Farm Sale Agreement will be completed under its current terms, or at all. |
| ● | On June 1, 2021, the Company entered into an agreement (the “Connecticut Farm Sale Agreement”) to sell approximately 670 acres of land in Granby and East Granby, Connecticut that comprise the Connecticut Nursery Farm for approximately $10.3 million, before transaction costs. Completion of this transaction is subject to significant contingencies, including the buyer’s completion of due diligence. There is no guarantee that the transaction contemplated under the Connecticut Farm Sale Agreement will be completed under its current terms, or at all. |
| ● | On November 24, 2020 (subsequently amended on January 12, 2021, and February 5, 2021), the Company entered into an agreement (the “Stratton Agreement”) to sell, for a purchase price of $0.9 million, before transaction costs, its remaining sixteen lots in Stratton Farms. The Stratton Agreement, as amended, provides for the sale to take place in two phases: (i) nine lots were sold on February 19, 2021, for a purchase price of approximately $0.5 million, before transaction costs; and (ii) the remaining seven lots are scheduled to be sold for a purchase price of approximately $0.4 million, before transaction costs, with the closing to take place in the 2021 third quarter. There is no guarantee that the second phase of sales of this transaction will be completed under its current terms, or at all. |
In the near-term, Griffinthe Company plans to continue to invest in its real estate business, including the construction of additional buildings on its undeveloped land, expenditures for tenant improvements as new leases and lease renewals are signed, infrastructure improvements required for future development of its real estate holdings and the potential acquisition of additional properties and/or undeveloped land parcels in the Middle Atlantic, Northeast and Southeast regions to expand the industrial/warehouselogistics portion of its real estate portfolio. portfolio, construction of additional buildings on its undeveloped land, expenditures for tenant improvements as new leases and lease renewals are signed, and infrastructure improvements required for future development of its real estate holdings. The following are the current projects in the Company’s acquisition and development pipeline:
| ● | In the 2021 six month period, the Company entered into a fifteen-year lease agreement and a development agreement with Amazon for the Charlotte Build-to-Suit, a last-mile industrial/logistics facility. The Charlotte Build-to-Suit will utilize all of the development potential of the Charlotte Land and includes an approximately 141,000 square foot industrial/logistics building. The Company estimates that the total development cost for the Charlotte Build-to-Suit will be approximately $33.0 million (excluding initial land cost) and expects to complete this facility by September 30, 2021. The 2021 JPM Construction Loan will fund a portion of the development costs. |
| ● | In the 2021 six month period, the Company entered into a seven-year lease agreement with a leading global shipping and logistics company for approximately 156,000 square feet of 110 Tradeport. Under the terms of the lease agreement, the tenant will relocate from its existing approximately 74,000 square foot space in one of the Company’s existing NE Tradeport industrial/logistics buildings into 110 Tradeport upon its completion, which is expected by June 30, 2022. The Company estimates that it will spend approximately $17.5 million on the construction of 110 Tradeport and tenant improvements for the pre-leased space in this building. |
| ● | In the 2021 six month period, the Company commenced construction, on speculation, of an approximately 103,000 square foot industrial/logistics building on an approximately 14 acre parcel of undeveloped land (“Chapmans Road”) in the Lehigh Valley of Pennsylvania that was purchased in fiscal 2019. The Company expects construction of this building to be completed by December 31, 2021; and estimates that construction costs for the building (excluding the cost of land and tenant improvements) will be approximately $9.0 million. |
39
| ● | The Company plans speculative construction of two industrial/logistics buildings totaling approximately 195,000 square feet on the Jetport Land acquired in the 2021 six month period. The Company estimates that construction costs (excluding the cost of land and tenant improvements) for the two buildings expected to be built on the Jetport Land will be approximately $15.8 million. |
| ● | On June 24, 2020, the Company entered into an agreement (the “First Allentown Purchase Agreement”) to acquire, for a purchase price of $3.1 million, an approximately 18 acre parcel of undeveloped land in the Lehigh Valley. On August 27, 2020, the Company entered into an agreement (the “Second Allentown Purchase Agreement”) to acquire, for a purchase price of $1.1 million, approximately 5 acres of undeveloped land that abuts the 18 acre parcel to be acquired under the First Allentown Purchase Agreement. Closings on the land acquisitions contemplated under the First Allentown Purchase Agreement and the Second Allentown Purchase Agreement are subject to significant contingencies, including the Company obtaining all governmental approvals for its planned speculative development of an approximately 206,000 square foot industrial/logistics building on the land parcels that would be acquired. The Company estimates that construction costs for the building (excluding the cost of land and tenant improvements) expected to be developed on the land to be acquired under the First Allentown Purchase Agreement and the Second Allentown Purchase Agreement will be approximately $17.1 million. Given these contingencies, it is possible that the land acquisitions, as contemplated under the First Allentown Purchase and the Second Allentown Purchase Agreement, will not be completed under their current terms, or at all. |
| ● | On August 5, 2021, the Company entered into an agreement (the “Forward Purchase Agreement”) to acquire, for a purchase price of approximately $31.5 million before transaction costs, an under-construction, approximately 184,000 square foot industrial/logistics portfolio in Nashville, Tennessee (the “Nashville Acquisition”). The Nashville Acquisition is being developed on speculation by the seller and, upon completion, will be comprised of two buildings located in close proximity to downtown Nashville. Closing on the purchase of the Nashville Acquisition is subject to a number of contingencies including the satisfactory completion of due diligence by INDUS. There can be no guarantee that the Nashville Acquisition will be completed under its current terms, or at all. |
| ● | On August 6, 2021, the Company entered into an agreement (the “Lehigh Valley Purchase Agreement”) to acquire, for a purchase price of approximately $2.3 million before transaction costs, approximately 11 acres of undeveloped land in the Lehigh Valley. The Company expects to construct an approximately 90,000 square foot industrial/logistics building on the land to be acquired. The Company estimates that construction costs for such a building (excluding the cost of land and tenant improvements) would be approximately $7.5 million. A closing on the land to be acquired under the Lehigh Valley Purchase Agreement, is subject to the satisfactory completion of due diligence and receipt of all of the requisite entitlements from local governmental authorities to construct the building as contemplated. There is no guarantee that the purchase contemplated under the Lehigh Valley Purchase Agreement will be completed under its current terms, or at all. |
Real estate acquisitions may or may not occur based on many factors, including real estate pricing. GriffinThe Company may commence speculative construction projects on its undeveloped land that is either currently owned or acquired in the future if it believes market conditions are favorable for such development. GriffinThe Company may also construct build-to-suit facilities on its undeveloped land if lease terms are favorable.
36
Table The total estimated spending for INDUS’s current and planned development and acquisition activities described above is approximately $138.0 million, with approximately $21.0 million spent through June 30, 2021. Real estate acquisitions and planned construction projects may or may not occur or reach completion based on many factors, including, without limitation, real estate pricing and the impacts of Contentsthe COVID-19 pandemic (see “Risk Factors-The COVID-19 pandemic has caused and could continue to cause disruptions to INDUS’s business, and its financial condition, results of operations or stock price may be adversely impacted by the COVID-19 pandemic” included in Part I, Item 1A “Risk Factors” of the Company’s Form 10-K for fiscal 2020).
As of May 31, 2020, GriffinJune 30, 2021, the Company had cash and cash equivalents of approximately $4.0$66.2 million. Management believes that its cash and cash equivalents as of May 31, 2020,June 30, 2021, cash generated from leasing operations and property sales andof real estate assets (if any), borrowing capacity under the WebsterNew Credit LineFacility and availability under the Acquisition Credit Line2021 JPM Construction Loan will be sufficient to meet its working capital requirements, tofund planned construction of
40
industrial/logistics buildings, close on real estate acquisitions currently under agreement, make other investments in real estate assets, pay obligations, if any, under the Contingent Value Rights Agreement and tothe Warrant liability and pay regular dividends on its Common Stock, when and if declared by the Board of Directors, for at least the next twelve months.
Supplemental Guarantor Information
In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule became effective January 4, 2021. In July 2021, the Company and INDUS RT, LP filed the Updated Universal Shelf with the SEC registering, among other securities, debt securities of INDUS RT, LP, which will be fully and unconditionally guaranteed by the Company.
As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of INDUS RT, LP have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for INDUS RT, LP as the assets, liabilities and results of operations of the Company and INDUS RT, LP are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.
Forward-Looking Information
The above information in Management’s Discussion and Analysis of Financial Condition and Results of Operations includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to the possibility of property sales of real estate assets pursuant to certain option agreements; completion of property sales of real estate assets under agreement; anticipated closing dates of such sales and Griffin’sthe Company’s plans with regard to the foregoing properties; the potential sale of 5 and 7 Waterside; potential vacancies in Griffin’sthe Company’s buildings; the acquisition and development of additional properties and/or undeveloped land parcels; construction of additional buildings, estimated construction costs and completion dates of buildings under construction and expected to be built; tenant improvements and infrastructure improvements; expectations regarding any potential issuance of securities under the ATM Program orUpdated Universal Shelf; the Universal Shelf and anticipated use of any future proceeds from the ATM program; Griffin’sCompany’s anticipated future liquidity and capital expenditures; completionexpectations regarding the Company’s REIT tax status; expectations regarding the payment of a sale ofdividends on the Meadowood Land; conversion to a REIT, the estimated range of the E&P Distribution,Company’s Common Stock; expectations and uncertainties related to COVID-19 and other statements with the words “believes,” “anticipates,” “plans,” “expects” or similar expressions. Although Griffinthe Company 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 forward-looking statements made herein are based on assumptions and estimates that, while considered reasonable by Griffinthe Company 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 Griffin. Griffin’sthe Company. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth under the headingin Part I, Item 1A “Risk Factors” in Griffin’s Annual Report onthe Company’s Form 10-K for the fiscal year ended November 30, 2019 filed with the SEC on February 13, 2020 and under the heading Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q. 2020.
3741
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
GriffinINDUS maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Griffin’sINDUS’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), GriffinINDUS carried out an evaluation, under the supervision and with the participation of Griffin’sINDUS’s management, including Griffin’sINDUS’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of Griffin’sINDUS’s disclosure controls and procedures as of the end of the fiscal period covered by this report. Based on the foregoing, Griffin’sINDUS’s Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective at the reasonable assurance level.level as of the end of the fiscal period covered by this report.
Changes in Internal Control over Financial Reporting
There has been no change in Griffin’sINDUS’s internal control over financial reporting during Griffin’sINDUS’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Griffin’sINDUS’s internal control over financial reporting.
3842
PART II OTHER INFORMATION
With the exception ofOther than the following, there have been no other material changes in ourthe Company’s risk factors from those disclosed in Part I, Item 1A, of ourthe Company’s Form 10-K.
Griffin’s business, financial condition, resultsConflicts of operationsinterest exist or stock pricecould arise in the future with INDUS RT, LP or its partners.
Conflicts of interest exist or could arise in the future as a result of the relationships between the Company and its affiliates, on the one hand, and INDUS RT, LP or any partner thereof, on the other. The Company’s directors and officers have duties to the Company under applicable Maryland law in connection with their direction of the management of the Company. At the same time, the Company, as general partner of INDUS RT, LP, have duties to the INDUS RT, LP and to the limited partners under Maryland law in connection with the management of INDUS RT, LP. Under Maryland law, the general partner of a Maryland limited partnership has fiduciary duties of care and loyalty, and an obligation of good faith, to the partnership and its partners. While these duties and obligations cannot be eliminated entirely in the limited partnership agreement, Maryland law permits the parties to a limited partnership agreement to specify certain types or categories of activities that do not violate the general partner’s duty of loyalty and to modify the duty of care and obligation of good faith, so long as such modifications are not unreasonable. These duties as general partner of INDUS RT, LP to the partnership and its partners may be impactedcome into conflict with the interests of the Company. Under the Limited Partnership Agreement, the limited partners of INDUS RT, LP expressly agree that the general partner of INDUS RT, LP is acting for the benefit of INDUS RT, LP, the limited partners of INDUS RT, LP and the Company’s stockholders, collectively. The general partner is under no obligation to give priority to the separate interests of the limited partners in deciding whether to cause INDUS RT, LP to take or decline to take any actions. If there is a conflict between the interests of the Company or the Company’s stockholders, on the one hand, and the interests of the limited partners of INDUS RT, LP, on the other, the Limited Partnership Agreement provides that any action or failure to act by the outbreak of COVID-19 and such impact could be materially adverse.
In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in Wuhan, China. During and subsequentgeneral partner that gives priority to the 2020 six month period,separate interests of the worldCompany or the Company’s stockholders that does not result in a violation of the contractual rights of the limited partners of INDUS RT, LP under the Limited Partnership Agreement will not violate the duties that the general partner owes to INDUS RT, LP and its partners.
Additionally, the Limited Partnership Agreement provides that the Company generally will not be liable to INDUS RT, LP or any partner for any action or omission taken in the Company’s capacity as general partner, for the debts or liabilities of INDUS RT, LP or for the obligations of INDUS RT, LP under the Limited Partnership Agreement, except for liability for the Company’s fraud, willful misconduct or gross negligence, pursuant to any express indemnity the Company may give to INDUS RT, LP or in connection with a redemption. INDUS RT, LP must indemnify the Company, the Company’s directors and officers, officers of INDUS RT, LP and the Company’s designees from and against any and all claims that relate to the operations of INDUS RT, LP, unless (1) an act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active and deliberate dishonesty, (2) the person actually received an improper personal benefit in violation or breach of the Limited Partnership Agreement or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful. INDUS RT, LP must also pay or reimburse the reasonable expenses of any such person in advance of a final disposition of the proceeding upon its receipt of a written affirmation of the person’s good faith belief that the standard of conduct necessary for indemnification has been impactedmet and a written undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the standard of conduct for indemnification. INDUS RT, LP is not required to indemnify or advance funds to any person with respect to any action initiated by the spreadperson seeking indemnification without the Company’s approval (except for any proceeding brought to enforce such person’s right to indemnification under the Limited Partnership Agreement) or if the person is found to be liable to INDUS RT, LP on any portion of this virus, whichany claim in the action.
No reported decision of a Maryland appellate court has caused global business disruptions and significant volatility in U.S. and international debt and equity markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy. Like many other companies, due to government mandates, we have instructed our employees to work from home, where possible, or not report to work, which, especially if this persists for a prolonged period of time, may have an adverse impact on our employees, operations and systems. The extent to which the coronavirus pandemic ultimately impacts our business, results of operations, financial condition and stock price will depend on numerous evolving factorsinterpreted provisions that are highly uncertain and which we may not be ablesimilar to predict, including: the duration and scopeprovisions of the pandemic; governmental, businessLimited Partnership Agreement that modify the fiduciary duties of the general partner of INDUS RT, LP, and individuals’ actionsthe Company has not obtained an opinion of counsel regarding the enforceability of the provisions of the Limited
43
Partnership Agreement that have beenpurport to waive or modify the fiduciary duties and continue to be taken in response toobligations of the pandemic; the impact on economic activity from the pandemic and actions taken in response; the impact on our employees; any other operational disruptions or difficulties we may face; the effect on our tenants and their businesses; the abilitygeneral partner of tenants to pay their rent; any closures of our tenants’ facilities, including, without limitation, due to shutdowns that may be requested or mandated by governmental authorities; the ability of prospective tenants to inspect vacant space in our buildings; and Griffin’s ability to complete property sales. Any of these events could materially adversely impact our business, financial condition, results of operations or stock price.INDUS RT, LP.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSPROCEEDS.
Use of Proceeds
On February 2, 2021, INDUS filed a universal shelf registration statement on Form S-3 (File No. 333-252662) (the “Universal Shelf”) with the SEC that was declared effective by the SEC on February 22, 2021.
On March 5, 2021, under its Universal Shelf, INDUS completed an underwritten public offering of 1,750,000 shares of its Common Stock at a price to the underwriters of $56.85 per share. On March 15, 2021, the underwriters exercised their option to purchase an additional 177,049 shares of common stock from INDUS at the same offering price. INDUS received net proceeds of approximately $108.7 million, after expenses, from the underwritten public offering completed in the 2021 first quarter. There has been no material change in the planned use of proceeds from the offering as described in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
ITEM 5. OTHER INFORMATION.
Previously reported.On August 5, 2021, INDUS, as parent guarantor, INDUS RT, LP, as borrower, certain subsidiaries of INDUS RT, LP as guarantors, JPMORGAN CHASE BANK, N.A. (“JPMorgan”) as Administrative Agent, Joint Lead Arranger and Joint Bookrunner, CITIBANK N.A. as Joint Lead Arranger, Joint Bookrunner and Syndication Agent and the other parties thereto entered into an agreement (the “New Credit Agreement”) for a new secured revolving credit facility of up to $100 million (the “New Credit Facility”) that replaced both its existing revolving credit line and acquisition credit line with Webster Bank, N.A. The New Credit Facility has a three year term with two one-year extensions at the Company’s option. The New Credit Facility also includes an uncommitted incremental facility, which would enable the New Credit Facility to be increased up to $250 million in the aggregate. Borrowings under the New Credit Facility will 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 rate under the New Credit Facility is the 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, immediately prior to entering into the New Credit Facility. In the event that JPMorgan determines that LIBOR is no longer available, the New Credit Facility contemplates that JPMorgan shall transition to a comparable rate of interest to the LIBOR rate. Under the terms of the New Credit Facility, INDUS must maintain: (i) a consolidated tangible net worth of 75% of the consolidated tangible net worth as of the last day of the most-recent fiscal quarter ending on or prior to the closing date plus 75% of the aggregate increases in stockholders’ equity of the Company by reason of issuance or sale of equity of the Company; (ii) a fixed charge coverage ratio of (a) 1.25 to 1.0 through March 31, 2022, and (b) 1.50 to 1.0 on and after June 30, 2022; (iii) a maximum leverage ratio of total indebtedness to total assets of less than 60% on the last day of any fiscal quarter; (iv) a maximum secured leverage ratio of total secured indebtedness to total asset value of (a) 50% through December 31, 2022, and (b) 40% on and after March 31, 2023; (v) a minimum borrowing base of (a) $30 million through December 30, 2022, (b) $50 million from December 31, 2022 through December 30, 2023, and (c) $100 million on and after December 31, 2023; and (vi) a minimum of (a) five industrial unencumbered properties from June 30, 2021 through December 30, 2023, and (b) eight industrial unencumbered properties on and after December 31, 2023.
This description of the New Credit Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the full text of the New Credit Agreement, which is filed as Exhibit 10.81 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
44
EXHIBIT INDEX
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
2.1 | | | 8-K | | 001-12879 | | 2.1 | | 1/14/14 | | | |
2.2 | | | 8-K | | 001-12879 | | 2.2 | | 1/14/14 | | | |
2.3 | | | 8-K12G3 | | 001-12879 | | 2.1 | | 1/4/21 | | | |
3.1 | | Articles of Amendment and Restatement of INDUS Realty Trust, Inc., as amended | | S-3POS | | 333-224229 | | 3.1 | | 1/4/21 | | |
3.2 | | | 8-K | | 001-12879 | | 3.1 | | 3/1/21 | | | |
3.3 | | | 8-K12G3 | | 001-12879 | | 3.4 | | 1/4/21 | | | |
3.4 | | Agreement of Limited Partnership of INDUS RT, LP dated as of June 28, 2021 | | 8-K | | 001-12879 | | 99.1 | | 6/30/21 | | |
4.1 | | | 8-K | | 001-12879 | | 4.1 | | 8/28/20 | | | |
4.2 | | | S-8 | | 333-170857 | | 4.4 | | 12/30/20 | | | |
10.1† | | | 10-K | | 001-12879 | | 10.2 | | 2/13/14 | | | |
10.2† | | Form of Stock Option Agreement under INDUS Realty Trust, Inc.) 2009 Stock Option Plan | | 10-K | | 001-12879 | | 10.3 | | 2/13/14 | | |
10.3 | | | 10-Q | | 001-12879 | | 10.21 | | 10/11/02 | | | |
10.4 | | | 10-K | | 001-12879 | | 10.24 | | 2/28/03 | | | |
10.5 | | | 10-Q | | 001-12879 | | 10.28 | | 7/13/04 | | | |
10.6 | | | 10-Q | | 001-12879 | | 10.29 | | 11/3/05 | | | |
10.7 | | | 10-Q | | 001-12879 | | 10.30 | | 11/3/05 | | | |
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
2.1 | | | 8-K | | 001-12879 | | 2.1 | | 1/14/14 | | | |
2.2 | | | 8-K | | 001-12879 | | 2.2 | | 1/14/14 | | | |
3.1 | | | 10-Q | | 001-12879 | | 3.1 | | 10/10/13 | | | |
3.2 | | | 8-K | | 001-12879 | | 3.1 | | 5/13/15 | | | |
45
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.8 | | | 10-Q | | 001-12879 | | 10.31 | | 11/3/05 | | | |
10.9 | | | 10-K | | 001-12879 | | 10.32 | | 2/15/07 | | | |
10.10 | | Amended and Restated Promissory Note dated November 15, 2006 | | 10-K | | 001-12879 | | 10.33 | | 2/15/07 | | |
10.11 | | | 10-K | | 001-12879 | | 10.34 | | 2/15/07 | | | |
10.12 | | | 10-Q | | 001-12879 | | 10.36 | | 10/6/10 | | | |
10.13 | | | 10-Q | | 001-12879 | | 10.37 | | 4/9/09 | | | |
10.14 | | | 10-Q | | 001-12879 | | 10.40 | | 10/8/09 | | | |
10.15 | | | 10-Q | | 001-12879 | | 10.41 | | 10/8/09 | | | |
10.16 | | | 10-Q | | 001-12879 | | 10.42 | | 10/6/10 | | | |
10.17 | | | 10-Q | | 001-12879 | | 10.43 | | 4/8/10 | | | |
10.18 | | | 10-K | | 001-12879 | | 10.44 | | 2/10/11 | | | |
10.19 | | | 10-Q | | 001-12879 | | 10.49 | | 7/11/13 | | | |
10.20 | | | 10-Q | | 001-12879 | | 10.50 | | 7/11/13 | | | |
10.21 | | Revolving Line of Credit Loan Agreement with Webster Bank, N.A. dated April 24, 2013 | | 10-Q | | 001-12879 | | 10.51 | | 7/11/13 | | |
10.22 | | | 10-Q | | 001-12879 | | 10.53 | | 10/10/13 | | | |
10.23 | | | 10-Q | | 001-12879 | | 10.54 | | 10/10/13 | | | |
10.24 | | | 8-K | | 001-12879 | | 10.1 | | 6/9/14 | | | |
10.25 | | | 8-K | | 001-12879 | | 10.2 | | 6/9/14 | | | |
46
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.26 | | | 8-K | | 001-12879 | | 10.3 | | 6/9/14 | | | |
10.27 | | | 8-K | | 001-12879 | | 10.4 | | 6/9/14 | | | |
10.28 | | | 10-K | | 001-12879 | | 10.35 | | 2/13/15 | | | |
10.29 | | | 10-K | | 001-12879 | | 10.36 | | 2/13/15 | | | |
10.30 | | | 10-K | | 001-12879 | | 10.37 | | 2/13/15 | | | |
10.31 | | | 10-Q | | 001-12879 | | 10.38 | | 10/9/15 | | ||
10.32 | | | 10-Q | | 001-12879 | | 10.39 | | 10/9/15 | | | |
10.33 | | | 10-Q | | 001-12879 | | 10.40 | | 10/9/15 | | ||
10.34 | | | 10-Q | | 001-12879 | | 10.41 | | 10/9/15 | | ||
10.35† | | Letter Agreement by and between INDUS Realty Trust, Inc. and David M. Danziger dated March 8, 2016 | | 10-Q | | 001-12879 | | 10.42 | | 4/8/16 | | |
10.36 | | | 10-Q | | 001-12879 | | 10.44 | | 7/8/16 | | | |
10.37 | | | 10-Q | | 001-12879 | | 10.45 | | 7/8/16 | | | |
10.38 | | | 10-Q | | 001-12879 | | 10.47 | | 10/7/16 | | | |
10.39 | | Amended and Restated Revolving Line of Credit Note with Webster Bank, N.A. dated July 22, 2016 | | 10-Q | | 001-12879 | | 10.48 | | 10/7/16 | | |
10.40 | | | 10-K | | 001-12879 | | 10.49 | | 2/10/17 | | | |
10.41 | | | 10-K | | 001-12879 | | 10.50 | | 2/10/17 | | | |
47
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.42 | | | 10-K | | 001-12879 | | 10.51 | | 2/10/17 | | | |
10.43† | | | 10-Q | | 001-12879 | | 10.52 | | 4/7/17 | | | |
10.44 | | | 10-Q | | 001-12879 | | 10.53 | | 4/7/17 | | | |
10.45 | | | 10-Q | | 001-12879 | | 10.54 | | 4/7/17 | | | |
10.46 | | | 10-Q | | 001-12879 | | 10.56 | | 10/10/17 | | | |
10.47 | | | 10-Q | | 001-12879 | | 10.57 | | 10/10/17 | | | |
10.48 | | | 10-Q | | 001-12879 | | 10.58 | | 10/10/17 | | | |
10.49 | | | 10-Q | | 001-12879 | | 10.59 | | 10/10/17 | | | |
10.50 | | | 10-K | | 001-12879 | | 10.60 | | 2/8/18 | | | |
10.51 | | | 10-K | | 001-12879 | | 10.61 | | 2/8/18 | | | |
10.52 | | | 10-Q | | 001-12879 | | 10.62 | | 7/10/18 | | | |
10.53 | | | 10-Q | | 001-12879 | | 10.63 | | 7/10/18 | | | |
10.54 | | | 10-Q | | 001-12879 | | 10.64 | | 7/10/18 | | | |
10.55 | | | 8-K | | 001-12879 | | 1.1 | | 5/10/18 | | | |
10.56† | | First Amendment to INDUS Realty Trust, Inc. 2009 Stock Option Plan | | 8-K | | 001-12879 | | 10.1 | | 5/17/19 | | |
10.57† | | | 10-Q | | 001-12879 | | 10.67 | | 7/9/19 | | | |
48
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.58 | | | 8-K | | 001-12879 | | 10.1 | | 9/24/19 | | | |
10.59 | | | 8-K | | 001-12879 | | 10.2 | | 9/24/19 | | | |
10.60 | | | 8-K | | 001-12879 | | 10.1 | | 12/23/19 | | | |
10.61 | | | 8-K | | 001-12879 | | 10.2 | | 12/23/19 | | | |
10.62 | | | 8-K | | 001-12879 | | 10.1 | | 1/28/20 | | | |
10.63 | | | 8-K | | 001-12879 | | 10.2 | | 1/28/20 | | | |
10.64 | | | 8-K | | 001-12879 | | 10.3 | | 1/28/20 | | | |
10.65† | | | 8-K | | 001-12879 | | 10.1 | | 3/4/20 | | | |
10.66† | | Stock Purchase Agreement between INDUS Realty Trust, Inc. and Gordon DuGan dated as of March 5, 2020 | | 10-Q | | 001-12879 | | 10.76 | | 4/9/20 | | |
10.67† | | | 8-K | | 001-12879 | | 10.1 | | 5/12/20 | | | |
10.68 | | | 8-K | | 001-12879 | | 10.1 | | 7/6/20 | | | |
10.69 | | | 8-K | | 001-12879 | | 10.2 | | 7/6/20 | | | |
10.70 | | Letter Agreement between Webster Bank, N.A. and INDUS Realty Trust, Inc. dated June 30, 2020 | | 8-K | | 001-12879 | | 10.3 | | 7/6/20 | | |
10.71 | | | 8-K | | 001-12879 | | 10.1 | | 8/28/20 | | | |
10.72 | | | 8-K | | 001-12879 | | 10.2 | | 8/28/20 | | | |
49
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.73 | | | 8-K | | 001-12879 | | 10.3 | | 8/28/20 | | | |
10.74† | | | 8-K12G3 | | 001-12879 | | 10.1 | | 1/4/21 | | | |
10.75 | | | 8-K | | 001-12879 | | 10.1 | | 3/22/21 | | | |
10.76 | | | 8-K | | 001-12879 | | 10.1 | | 5/10/21 | | | |
10.77 | | | | | | | | | | | * | |
10.78 | | INDUS Realty Trust, Inc. Director Deferred Compensation Plan effective June 3, 2021 | | | | | | | | | | * |
10.79† | | | | | | | | | | | * | |
10.80† | | | | | | | | | | | * | |
10.81 | | | | | | | | | | | * | |
31.1 | | | | | | | | | | | * | |
31.2 | | | | | | | | | | | * | |
32.1 | | Certifications of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | | | | | | | | | | ** |
32.2 | | Certifications of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | | | | | | | | | | ** |
101.INS | | Inline XBRL Instance Document | | | | | | | | | | * |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | | | * |
101.CAL | | Inline XBRL Taxonomy Calculation Linkbase Document | | | | | | | | | | * |
101.LAB | | Inline XBRL Taxonomy Label Linkbase Document | | | | | | | | | | * |
101.PRE | | Inline XBRL Taxonomy Presentation Linkbase Document | | | | | | | | | | * |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | * |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | | | * |
3950
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
3.3 | | Amended and Restated By-laws of Griffin Industrial Realty, Inc. | | 8-K | | 001-12879 | | 3.1 | | 3/6/19 | | |
4.1 | | | 10-K | | 001-12879 | | 4.1 | | 2/13/20 | | | |
10.2† | | Griffin Industrial Realty, Inc. (f/k/a Griffin Land & Nurseries, Inc.) 2009 Stock Option Plan | | 10-K | | 001-12879 | | 10.2 | | 2/13/14 | | |
10.3† | | | 10-K | | 001-12879 | | 10.3 | | 2/13/14 | | | |
10.4 | | | 10-Q | | 001-12879 | | 10.21 | | 10/11/02 | | | |
10.5 | | | 10-K | | 001-12879 | | 10.24 | | 2/28/03 | | | |
10.6 | | | 10-Q | | 001-12879 | | 10.28 | | 7/13/04 | | | |
10.7 | | | 10-Q | | 001-12879 | | 10.29 | | 11/2/05 | | | |
10.8 | | | 10-Q | | 001-12879 | | 10.30 | | 11/2/05 | | | |
10.9 | | | 10-Q | | 001-12879 | | 10.31 | | 11/2/05 | | | |
10.10 | | | 10-K | | 001-12879 | | 10.32 | | 2/15/07 | | | |
10.11 | | Amended and Restated Promissory Note dated November 15, 2006 | | 10-K | | 001-12879 | | 10.33 | | 2/15/07 | | |
10.12 | | | 10-K | | 001-12879 | | 10.34 | | 2/15/07 | | | |
10.13 | | | 10-Q | | 001-12879 | | 10.36 | | 10/6/10 | | | |
10.14 | | | 10-Q | | 001-12879 | | 10.37 | | 4/9/09 | | | |
40
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.15 | | | 10-Q | | 001-12879 | | 10.40 | | 10/8/09 | | | |
10.16 | | | 10-Q | | 001-12879 | | 10.41 | | 10/8/09 | | | |
10.17 | | | 10-Q | | 001-12879 | | 10.42 | | 10/6/10 | | | |
10.18 | | | 10-Q | | 001-12879 | | 10.43 | | 4/8/10 | | | |
10.19 | | | 10-K | | 001-12879 | | 10.44 | | 2/10/11 | | | |
10.24 | | | 10-Q | | 001-12879 | | 10.49 | | 7/11/13 | | | |
10.25 | | | 10-Q | | 001-12879 | | 10.50 | | 7/11/13 | | | |
10.26 | | Revolving Line of Credit Loan Agreement with Webster Bank, N.A. dated April 24, 2013 | | 10-Q | | 001-12879 | | 10.51 | | 7/11/13 | | |
10.28 | | | 10-Q | | 001-12879 | | 10.53 | | 10/10/13 | | | |
10.29 | | | 10-Q | | 001-12879 | | 10.54 | | 10/10/13 | | | |
10.31 | | | 8-K | | 001-12879 | | 10.1 | | 6/9/14 | | | |
10.32 | | | 8-K | | 001-12879 | | 10.2 | | 6/9/14 | | | |
10.33 | | | 8-K | | 001-12879 | | 10.3 | | 6/9/14 | | | |
10.34 | | | 8-K | | 001-12879 | | 10.4 | | 6/9/14 | | | |
10.35 | | | 10-K | | 001-12879 | | 10.35 | | 2/13/15 | | | |
10.36 | | | 10-K | | 001-12879 | | 10.36 | | 2/13/15 | | | |
10.37 | | | 10-K | | 001-12879 | | 10.37 | | 2/13/15 | | | |
41
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.38 | | | 10-Q | | 001-12879 | | 10.38 | | 10/9/15 | | ||
10.39 | | | 10-Q | | 001-12879 | | 10.39 | | 10/9/15 | | | |
10.40 | | | 10-Q | | 001-12879 | | 10.40 | | 10/9/15 | | ||
10.41 | | | 10-Q | | 001-12879 | | 10.41 | | 10/9/15 | | ||
10.42† | | | 10-K | | 001-12879 | | 10.41 | | 2/12/16 | | ||
10.43† | | | 10-Q | | 001-12879 | | 10.42 | | 4/8/16 | | ||
10.44† | | | 10-Q | | 001-12879 | | 10.43 | | 7/8/16 | | | |
10.45 | | | 10-Q | | 001-12879 | | 10.44 | | 7/8/16 | | | |
10.46 | | | 10-Q | | 001-12879 | | 10.45 | | 7/8/16 | | | |
10.48 | | | 10-Q | | 001-12879 | | 10.47 | | 10/7/16 | | | |
10.49 | | Amended and Restated Revolving Line of Credit Note with Webster Bank, N.A. dated July 22, 2016 | | 10-Q | | 001-12879 | | 10.48 | | 10/7/16 | | |
10.50 | | | 10-K | | 001-12879 | | 10.49 | | 2/10/17 | | | |
10.51 | | | 10-K | | 001-12879 | | 10.50 | | 2/10/17 | | | |
10.52 | | | 10-K | | 001-12879 | | 10.51 | | 2/10/17 | | | |
10.53† | | | 10-Q | | 001-12879 | | 10.52 | | 4/7/17 | | | |
10.54 | | | 10-Q | | 001-12879 | | 10.53 | | 4/7/17 | | | |
42
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.55 | | | 10-Q | | 001-12879 | | 10.54 | | 4/7/17 | | | |
10.56 | | | 10-Q | | 001-12879 | | 10.56 | | 10/10/17 | | | |
10.57 | | | 10-Q | | 001-12879 | | 10.57 | | 10/10/17 | | | |
10.58 | | | 10-Q | | 001-12879 | | 10.58 | | 10/10/17 | | | |
10.59 | | | 10-Q | | 001-12879 | | 10.59 | | 10/10/17 | | | |
10.60 | | | 10-K | | 001-12879 | | 10.60 | | 2/8/18 | | | |
10.61 | | | 10-K | | 001-12879 | | 10.61 | | 2/8/18 | | | |
10.62 | | | 10-Q | | 001-12879 | | 10.62 | | 7/10/18 | | | |
10.63 | | | 10-Q | | 001-12879 | | 10.63 | | 7/10/18 | | | |
10.64 | | | 10-Q | | 001-12879 | | 10.64 | | 7/10/18 | | | |
10.65 | | | 8-K | | 001-12879 | | 1.1 | | 5/10/18 | | | |
10.66 | | First Amendment to Griffin Industrial Realty, Inc. 2009 Stock Option Plan | | 8-K | | 001-12879 | | 10.1 | | 5/17/19 | | |
10.67† | | | 10-Q | | 001-12879 | | 10.67 | | 7/9/19 | | | |
10.68 | | | 8-K | | 001-12879 | | 10.1 | | 9/24/19 | | | |
10.69 | | | 8-K | | 001-12879 | | 10.2 | | 9/24/19 | | | |
10.70 | | | 8-K | | 001-12879 | | 10.1 | | 12/23/19 | | | |
43
| | | | Incorporated by Reference | | Filed/ | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Furnished |
10.71 | | | 8-K | | 001-12879 | | 10.2 | | 12/23/19 | | | |
10.72 | | | 8-K | | 001-12879 | | 10.1 | | 1/28/20 | | | |
10.73 | | | 8-K | | 001-12879 | | 10.2 | | 1/28/20 | | | |
10.74 | | | 8-K | | 001-12879 | | 10.3 | | 1/28/20 | | | |
10.75† | | | 8-K | | 001-12879 | | 10.1 | | 3/4/20 | | | |
10.76 | | | 10-Q | | 001-12879 | | 10.76 | | 4/9/20 | | | |
10.77 | | Griffin Industrial Realty, Inc. and Griffin Industrial, LLC 2020 Incentive Award Plan | | 8-K | | 001-12879 | | 10.1 | | 5/12/20 | | |
10.78 | | | 8-K | | 001-12879 | | 10.1 | | 7/6/20 | | | |
10.79 | | | 8-K | | 001-12879 | | 10.2 | | 7/6/20 | | | |
10.80 | | Letter Agreement between Webster Bank, N.A. and Griffin Industrial Realty, Inc. dated June 30, 2020 | | 8-K | | 001-12879 | | 10.3 | | 7/6/20 | | |
31.1 | | | | | | | | | | | * | |
31.2 | | | | | | | | | | | * | |
32.1 | | Certifications of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | | | | | | | | | | ** |
32.2 | | Certifications of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | | | | | | | | | | ** |
101.INS | | XBRL Instance Document | | | | | | | | | | * |
101.SCH | | XBRL Taxonomy Extension Schema Document | | | | | | | | | | * |
101.CAL | | XBRL Taxonomy Calculation Linkbase Document | | | | | | | | | | * |
101.LAB | | XBRL Taxonomy Label Linkbase Document | | | | | | | | | | * |
101.PRE | | XBRL Taxonomy Presentation Linkbase Document | | | | | | | | | | * |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | * |
44
| |
† | A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 6 of Form 10-Q. |
* | Filed herewith. |
** |
51
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
|
| |
| | |
| | |
| BY: | /s/ MICHAEL S. GAMZON |
DATE: | Michael S. Gamzon | |
| President and Chief Executive Officer | |
| | |
| | |
| BY: | /s/ ANTHONY J. GALICI |
DATE: | Anthony J. Galici | |
| Executive Vice President and Chief Financial Officer | |
| Principal Accounting Officer | |
4552