SCHEDULE: Sixth Street Proposes $24.10/Share Buyout of Plymouth REIT

Sixth Street Partners, an affiliate of major shareholder TSSP Sub-Fund HoldCo, LLC, has proposed to acquire Plymouth Industrial REIT, Inc. for $24.10 per share in cash.

Summary

• Sixth Street Partners, an affiliate of TSSP Sub-Fund HoldCo, LLC and Alan Waxman, has submitted a non-binding proposal to acquire 100% of the outstanding Common Stock and common equity interests of Plymouth Industrial Operating Partnership, L.P. for $24.10 per share.
• The proposal assumes ordinary dividends of approximately $0.24 per share per quarter would continue to be paid, providing additional value to shareholders.
• The Reporting Persons currently beneficially own 4,944,921 shares of Plymouth Industrial REIT's Common Stock, representing 9.99% of the class.
• Sixth Street intends to finance the proposed acquisition through a combination of cash from its affiliated investment vehicles and approximately $1.5 billion in new debt financing.
• The Reporting Persons previously acquired 140,000 Series C Cumulative Perpetual Preferred Units and Warrants exercisable for up to 11,760,000 common partnership units (OP Units) for an aggregate cash purchase price of $140 million.
• The Warrants have initial strike prices of $25.25, $26.25, and $27.25 per share, are exercisable on a net settlement basis, and expire on August 26, 2029, subject to a two-year extension.
• Isosceles, an entity related to the Reporting Persons, holds these securities and has a Board Observer right and customary registration rights for the underlying Common Stock.

Sentiment

Score: 7

Explanation: The filing indicates a significant acquisition proposal at a specific price, which is generally positive for common shareholders. However, the non-binding nature and the fact that the proposed price is below the warrant strike prices for the reporting entity introduce some uncertainty and a potential negative for their specific warrant investment, balancing the overall sentiment to moderately positive.

Positives

• A non-binding acquisition proposal at $24.10 per share has been made, potentially offering a premium to current shareholders.
• The proposal includes an assumption of continued ordinary dividends of approximately $0.24 per share per quarter, which could provide additional value.
• Sixth Street's significant existing investment, including 9.99% beneficial ownership and preferred units/warrants, indicates strong interest and commitment to the Issuer.
• The proposed financing structure, including approximately $1.5 billion in new debt, suggests a clear path to funding the acquisition if accepted.

Negatives

• The acquisition proposal is non-binding, meaning there is no guarantee it will be accepted or consummated.
• The proposal is subject to approval by Sixth Street's investment committee and execution of definitive documentation, as well as customary closing conditions.
• The proposed acquisition price of $24.10 per share is lower than the initial strike prices of the Warrants held by the Reporting Persons, which range from $25.25 to $27.25 per share, indicating a potential loss on that specific investment if the acquisition proceeds at the proposed price.

Risks

• The non-binding nature of the proposal means there is no assurance that the Proposed Transaction will be accepted by the Issuer or ultimately consummated.
• The Proposed Transaction is subject to customary closing conditions, which may not be met, preventing its completion.
• Sixth Street may explore other strategic alternatives, including different corporate transactions, sales or acquisitions of shares/assets, or engaging with third parties, which may not align with the interests of all shareholders.
• There is no guarantee that Sixth Street will make any such proposal, or successfully consummate any proposed transaction.
• The Series C Preferred Units have a penalty rate of an additional 4.0% per annum if full distributions are not paid, which could increase the Issuer's financial burden.
• Certain actions, such as amending the Issuer's charter or partnership agreement, incurring significant debt, or effecting a Fundamental Change, require the vote or consent of Series C Preferred Unit holders, potentially limiting the Issuer's operational flexibility.

Future Outlook

Sixth Street Partners intends to continue reviewing its investment in Plymouth Industrial REIT and may consider various alternative courses of action. These include revised or different proposals for a full acquisition, sales or acquisitions of shares, assets, or businesses by the Issuer, engaging with third parties for strategic transactions, or other business combinations like mergers or reorganizations. There is no guarantee any such proposal will be made or consummated.

Industry Context

This filing indicates a potential consolidation within the industrial REIT sector, driven by a major investment firm seeking to acquire a publicly traded REIT. This reflects ongoing interest in industrial real estate assets, potentially due to strong fundamentals or perceived undervaluation in the market.

Management Changes

Corporate Governance

Related Party Transactions

• The Securities Purchase Agreement, Warrant Agreement, Certificate of Designations, Registration Rights Agreement, and Board Observer Agreement were entered into between the Issuer/Operating Partnership and Isosceles, an entity affiliated with the Reporting Persons (TSSP Sub-Fund HoldCo, LLC and Alan Waxman).

Stakeholder Impact

• Shareholders: Potential for a significant premium if the acquisition proposal is accepted and consummated at $24.10 per share, though uncertainty remains due to the non-binding nature.
• Preferred Unit Holders (Isosceles/Sixth Street): Gain significant protective voting rights and a senior position in the capital structure, along with a Board observer right.
• Creditors: The proposed $1.5 billion in new debt financing for the acquisition would significantly alter the company's capital structure and leverage profile if the deal closes.
• Management/Employees: A full acquisition could lead to changes in management or operational structure, though not explicitly stated.

Next Steps

• The Issuer's board of directors will consider the non-binding acquisition proposal.
• Sixth Street's investment committee must approve the Proposed Transaction.
• Negotiation and execution of definitive documentation for the Proposed Transaction.
• Fulfillment of customary closing conditions for the Proposed Transaction.
• Sixth Street and its representatives may engage in further discussions and negotiations with the Issuer.
• Sixth Street may explore other strategic alternatives, including revised proposals, asset sales/acquisitions, or other business combinations.

Key Dates

Recommendation

The non-binding acquisition proposal at $24.10 per share presents a potential upside for common shareholders, but its consummation is uncertain. The existing significant stake and preferred unit/warrant holdings by the acquirer suggest a strong interest, but the proposed price is below the warrant strike prices, indicating complexity. Investors should hold to see how negotiations progress and if a definitive agreement materializes, as the current proposal is not guaranteed.

Keywords

Plymouth Industrial REIT, REIT, Industrial Real Estate, Sixth Street Partners, Acquisition Proposal, Schedule 13D, Beneficial Ownership, Preferred Units, Warrants, Corporate Takeover, Real Estate Investment Trust